EDUCATION: The “Fake” Engulfing Candle: A SNEAKY TRAPAs traders, we’re often taught to look for classic price action patterns, and one of the most well-known is the Engulfing Candle. It's that strong reversal pattern where the body of the second candle completely engulfs the body of the first, signaling potential trend reversals or continuations. But what happens when that engulfing candle shows up in the "wrong" place? That’s what I like to call a "Fake" Engulfing Candle.
A "Fake" Engulfing Candle is one that paints on the chart but in a location that doesn’t align with the market context or trend. For example, if you’re in a strong, established trend, an engulfing candle that appears in the middle of the trend (without any supporting structure or context) could be a false signal. This kind of engulfing candle might look great on the chart, but it's not telling you the full story—it’s a signal with poor timing.
Understanding the Importance of Location
The location of an engulfing candle is key. A "real" engulfing candle typically forms after a clear trend exhaustion or at a key support or resistance level. These are areas where price is likely to reverse, and that’s where an engulfing pattern becomes meaningful. However, when the engulfing candle appears in random locations—without any clear structure around it—it’s often just noise in the market.
Fake signals, like this, can lead traders to make impulsive decisions, chasing trades that aren’t supported by solid market structure or context. Think of it like walking into a room full of noise—you may hear words, but they’re not telling you anything meaningful.
How to Spot a Fake Engulfing Candle
Context is King: Look for the engulfing candle to form after a trend exhaustion or near a key support or resistance level. If it pops up in the middle of a strong trend with no visible reason for reversal, chances are it’s a fake.
Volume Confirmation: Is the engulfing candle supported by volume? A strong engulfing candle should have an increase in volume, confirming the strength of the move. If volume is absent or weak, the signal may be unreliable.
Previous Market Structure: The best signals often come from patterns that align with previous market structure, such as previous highs or lows. If the engulfing candle doesn’t respect any major levels or swing points, it might not be worth trading.
Practical Takeaway: Don't Fall for the Fake
The takeaway here is simple: don’t let the appearance of a "perfect" engulfing candle fool you. Just because it looks good on the chart doesn’t mean it’s the right signal for the current market conditions. Always pay attention to the context around the pattern and confirm it with volume and other technical indicators. Remember, location matters when it comes to identifying valid trade setups.
Have you ever been caught by a "Fake" Engulfing Candle? What’s your process for distinguishing real signals from fake ones? Drop your thoughts in the comments—I'd love to hear how you handle these tricky setups!
Community ideas
Trade Execution on EURNZD|PRZ Area of Interest Simplified I hope you got value from the video, more to come, and wishing you all a more profitable trading opportunity.
Becoming a Respected Vendor on TradingViewBecoming a Respected Vendor on TradingView: What it Means and How to Excel.
If you're reading this, you’re probably on TradingView.com, a thriving hub for technical traders, market enthusiasts, and creators of tools that support trading success. TradingView is home to two main groups: those who offer paid indicators and those who share ideas and tools for free, contributing to the community’s growth.
With so many options available, the question arises: Should people pay for technical indicators? And what distinguishes a quality vendor from one who’s just following trends? Here’s a guide on what makes a vendor worth your attention—and how they can establish legitimacy and trustworthiness in a sometimes oversaturated market.
🞛 Why Pay for Technical Indicators?
Investing in a paid indicator can sometimes be invaluable, as these tools often go beyond what’s available for free, providing deeper insights or unique approaches. Generally, a vendor will decide to sell a product if they believe it has some sort of edge. However, paying for an indicator requires careful evaluation: understanding the tool’s unique value and assessing the vendor’s commitment to creating quality products. When considering whether an indicator is worth your money, the focus should be on its utility, originality, and the support structure behind it.
🞛 Key Qualities of a Good Vendor
Originality and Innovation
At the heart of any high-quality technical indicator is robust mathematical groundwork. While visuals are helpful, they come secondary to solid foundational math and advanced techniques, like Digital Signal Processing (DSP). A vendor with a genuine passion for indicator creation will have refined, creative tools, rather than simply repackaging or rebranding existing ideas. Look for originality and a clear differentiation in the product. Vendors who aim to elevate the field contribute to the TradingView library, sharing open-source content that adds genuine value. This process can of course be assisted via the Editor Picks award where the TradingView team will select excellent creations awards.
Community Engagement
This means responding to questions, implementing meaningful suggestions, and generally showing a vested interest in user success. The largest vendors may not be able to respond to every comment, but they should have systems in place to track and log feedback consistently.
Comprehensive Educational Support
A quality vendor ensures you understand how to get the most out of their tools, whether through documentation, recorded courses, or live classes. This support is particularly important for complex products, where a little guidance can go a long way in helping users fully utilize the tool’s capabilities.
Humility and Honesty
Some of the best tools come from lesser-known creators who prioritize their craft over marketing. Scouting out promising indicators on the trending page can reveal gems created by individuals who may lack big budgets but offer real, innovative value. Also, beware of grandiose claims—vendors who truly believe in their work allow the product to speak for itself. Ego is dangerous especially in a field like technical analysis where nothing is assured or guaranteed. Any vendors asserting themselves as leaders or the best could be disingenuous as generally speaking every product will have a unique quality set.
How to Assess a Vendor’s Legitimacy
With so many options on TradingView, it can be challenging to determine which vendors are truly worth your time. Here are some ways to evaluate them:
Research Their History and Contributions
Have they released any open-source scripts or tutorials? Vendors who contribute freely to the community often demonstrate a higher level of expertise and integrity.
Review Customer Feedback and Engagement
Look through comments, reviews, and responses to see how well the vendor interacts with customers. Vendors who consistently receive positive feedback and follow up on user input are often more reliable.
Test Their Free Indicators First
Trying these tools before making a financial commitment can give you a sense of their quality, ease of use, and how well they align with your trading goals.
🞛Premium or Free indicators?
While both free and paid indicators rely on mathematical foundations, paid indicators may incorporate more advanced or refined techniques. For instance, they might leverage proprietary algorithms, signal processing methods, or unique data combinations that aren’t as accessible in free indicators. This doesn't mean they will automatically yield higher profits, but these advanced techniques can provide unique insights that a trader may not find in simpler tools.
Rather than promising financial gains, these indicators aim to enhance a trader’s analytical capability.
Paid indicators often come with dedicated customer support, documentation, and even a community of users who actively share insights and strategies. This support can be extremely valuable for traders at any experience level, as it allows them to troubleshoot issues, learn from others, and get guidance on how to maximize the tool's potential.
🞛 Final Thoughts
The TradingView ecosystem is a dynamic environment, filled with talented individuals who push the boundaries of technical analysis. By seeking out vendors who prioritize originality, community engagement, and user support, traders can make informed choices about which indicators add real value to their toolkit. Remember, a responsible vendor doesn’t just sell a product—they cultivate an experience, one that ultimately supports you in becoming a more confident, successful trader.
When choosing a vendor, look for those who stand behind their product, foster transparency, and create tools that are rooted in genuine innovation.
By doing so, you’ll contribute to a marketplace that encourages quality, integrity, and growth for traders everywhere.
Thank you for reading!
- Alex Friend / ChartPrime
What Happened Thanks To Elections
Bitcoin recently hit a new all-time high after the election of pro-crypto President Donald Trump. This surge followed a period of volatility and market anticipation around the election.
On October 31st, Bitcoin showed signs of weakness after a pre-election price spike, moving down toward a CME gap. This gap, a price difference created between CME’s Friday close and Sunday open, often acts as a magnet for price movement since Bitcoin trades continuously, unlike traditional markets. As expected, Bitcoin filled this CME gap by November 4th and formed a hammer candle pattern, typically suggesting a potential price reversal and momentum shift.
In the days leading up to the election, buyers began taking control around the 100 EMA (gray line), signaling potential upward movement. This initial buying pressure hinted at a bullish outlook, likely tied to expectations surrounding Trump’s favorable stance toward cryptocurrency.
Finally, on November 5th, after Trump’s win was confirmed, Bitcoin’s price saw a significant jump, reaching a new all-time high. This response reflected strong market optimism about potential crypto-friendly policies and added momentum for Bitcoin as a favored asset among investors.
Swallow Team
ALT Analysis request for November 2024Dear all,
We are thrilled to announce that your special extensive ALTCOIN ANALYSIS REQUEST is now open for the month of November 2024.
REQUEST Deadline: November 10TH, 2024.
In order to ensure efficiency and accuracy in our analysis, we kindly request each member to submit only ONE (1) Altcoin request.
Please follow the format samples provided, such as ETHBTC, ETHUSDT, or ETHUSD, and include the exchange name of the coin. This will greatly streamline our analysis process. Our goal is to provide insights for a maximum of 30 Altcoins based on the requests received.
Let's work together to navigate the market and uncover potential opportunities.
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Never HODL at the highest point even if the profit is small
Hello, traders.
If you "Follow", you can always get new information quickly.
Please click "Boost" as well.
Have a nice day today.
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I used TradingView's INDEX chart to see the overall flow of BTC.
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Let's take a look at the section that showed a big movement.
(1M chart)
- 13888.32
- 57789.06
- 71320.68
The three points above are where the BW(100) line was created.
The fact that the BW(100) line was created means that a high point section has been formed, so there is a high possibility of a decline.
Therefore, based on the previous two experiences and looking at the current movement, we can see how important the 71320.68 point is as a support and resistance point.
Therefore, we should sell when it falls below 71320.68 in order not to HODL in the high range.
In the big picture, the stop loss point has been confirmed.
-
(1W chart)
From the 1W chart, we can see that the 68376.06 point is an important stop loss point.
Therefore, we should decide to sell depending on whether there is support in the 68376.06-71320.68 range.
-
If the BW(0) line is created after the price falls, then it is a strong buying period.
Therefore, we should check whether there is support and see if we can buy.
The reason is that after buying at the 37929.90 point, there is a possibility that it will fail to rise above the MS-Signal indicator and continue to decline.
Therefore, you should not forget that you need to cut your loss when it falls below 37929.90 after buying.
If you have a lot of cash left after distributing your investment weight well, you can buy more when the next BW(0) line is created to lower the average purchase price.
However, since it is a 1W chart, such a transaction is not easy, so I think it is better to buy again after cutting your loss.
-
(1D chart)
Since BW(0) and BW(100) lines are often created on the 1D chart, it is recommended to use the BW(0) and BW(100) lines created at the current price position for trading.
As mentioned earlier or in the chart, you can see that the BW(100) and BW(0) lines appear after the arrows are created, and there is a decline and rise.
Therefore, since the arrows are created near the current price, you can see that the BW(100) line is likely to be created soon.
Therefore, if you are trying to make a new purchase now, I think it would be better to lower the investment ratio or not to make a transaction at all.
In any case, when the BW(100) line is created, you have to stop the transaction in progress or sell some of it.
-
It is not much, but I think it can be a good reference for trading.
If you look at the StErr Line, HA-High, HA-Low, BW(0), and BW(50) indicators together to make this judgment, I think it will be a great help in your trading strategy.
Since these indicators can be used on all time frame charts, I think they can help you get an eye for selecting support and resistance points.
If you use too many indicators, you can trade incorrectly.
Therefore, you should think about how to use the indicators, which indicators to apply to which trading strategy, and think about how to use them accordingly.
I hope that this time, you will trade without HODLing at the high point.
-
Have a good time.
Thank you.
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Interpreting Long/Short Ratios in Futures Trading█ Interpreting Long/Short Ratios in Futures Trading: Beyond Bullish and Bearish
For beginner traders, the long/short ratio in futures markets can seem like a clear-cut indicator of market sentiment. Many assume that a high ratio of longs to shorts means the market is bullish, while more shorts than longs signals a bearish outlook. But in reality, this interpretation is oversimplified and can lead to misguided trading decisions.
In this article, we'll break down the nuances of the long/short ratio in futures trading, explaining why positions on the “short side” don’t always indicate a bearish stance and how traders can better interpret these ratios for a well-rounded perspective.
█ Understanding the Basics: Futures Trading Is Not Spot Trading
In the futures market, every trade requires a buyer (long position) and a seller (short position). For each person going long, there’s a counterpart going short. This zero-sum structure means that, by definition, there’s always a balance between longs and shorts. However, the reasons why traders take long or short positions vary widely—and not all of them are directional bets on price movement.
█ Why Not All Shorts Are Bearish (And Not All Longs Are Bullish)
Let’s dig into why a trader might take the short side without actually betting on a price drop:
⚪ Hedging: Some traders go short to hedge an existing position. For instance, if they already hold a large amount of Bitcoin in the spot market, they might take a short position in Bitcoin futures to protect against potential downside risk. This doesn’t mean they’re bearish on Bitcoin; they’re just managing risk.
⚪ Arbitrage: Some traders take short positions for arbitrage purposes. For example, they might go long in one market and short in another to profit from small price differences without having any directional view on Bitcoin’s future price. Their short position is purely for balancing and not a bet on falling prices.
⚪ Market Making: Market makers provide liquidity to the market by taking both long and short positions. Their goal isn’t to profit from price movements but to capture the spread between the bid and ask prices. They don’t have a directional view—they’re simply facilitating trades.
⚪ Closing Long Positions: When traders close long positions, they effectively create a new short transaction. For instance, if a trader decides to exit a long position by selling, they’re adding to the short side of the market. But this action doesn’t necessarily mean they expect prices to drop—it could just mean they’re taking profits or reallocating their portfolio.
█ Interpreting CoinGlass Long/Short Ratio Charts: Volume vs. Accounts
Let’s look at the long/short ratio charts on CoinGlass as an example. CoinGlass provides two main types of ratios:
⚪ Volume-Based Ratio: This chart shows the volume of capital in long vs. short positions. For example, a high volume in longs might suggest that large players are buying into Bitcoin. However, it’s important to remember that some of these long positions could be from market makers, hedgers, or arbitrageurs, who may not expect Bitcoin to rise. The volume itself doesn’t tell us why they’re in these positions.
⚪ Account-Based Ratio: This chart tracks the number of accounts on each side (long vs. short) on exchanges like Binance. A higher number of accounts on the short side doesn’t mean all those traders are bearish. Many could be taking short positions to balance other trades or hedge risks. They’re not necessarily expecting Bitcoin to decline; they’re just managing their positions.
█ Example Analysis: Misinterpreting Long/Short Ratios
Imagine you’re looking at a CoinGlass chart that shows an increase in long volume around November 5th. A beginner might see this and think, “Everyone’s bullish on Bitcoin!” But as we discussed, some of this long volume could be non-directional. It could include positions taken by market makers providing liquidity or hedgers who are long on Bitcoin futures but have a corresponding short in another market.
Similarly, if you see a spike in the number of short accounts, don’t automatically assume that everyone expects Bitcoin to fall. Some of those accounts might just be managing risk or taking advantage of arbitrage opportunities.
█ Avoiding the Pitfall of Overinterpreting the Long/Short Ratio
The biggest mistake traders make is interpreting the long/short ratio as a direct indicator of market sentiment. Remember, every trade has a counterparty. If there’s a high volume of longs, it simply means there’s an equal volume of shorts on the other side. The market’s overall sentiment isn’t always reflected in this ratio.
Instead of relying solely on the long/short ratio, consider these other factors to form a clearer market view:
Market Sentiment Indicators: Use sentiment tools, news, and social media sentiment to understand how traders are feeling beyond just positions.
Volume Trends: Look at overall market volume to see if there’s conviction behind the moves.
Context and Price Action: Interpret the ratio in the context of price action and recent events. If there’s a strong bullish trend, a higher long ratio might reflect confidence in the trend rather than simply volume.
█ Conclusion: A Balanced Perspective for Smarter Trading
Understanding the long/short ratio requires a more nuanced perspective. Just because the “longs” are up doesn’t mean everyone’s bullish—and just because the “shorts” are up doesn’t mean everyone’s bearish. The futures market is filled with diverse participants, each with unique motives, from hedging and arbitrage to liquidity provision.
By looking at these ratios with a balanced view, traders can avoid common pitfalls and interpret the data more accurately. Trading is about context and strategy, not just numbers on a chart. So, next time you’re checking the long/short ratio, remember: there’s more to it than meets the eye.
█ Final Takeaway: Focus on Context, Not Just Ratios
The long/short ratio can be a helpful tool, but it’s only one piece of the puzzle. Use it in combination with other market indicators, and always consider the motives behind trades. By doing so, you’ll make better-informed trading decisions and avoid falling into the trap of oversimplifying complex market data.
-----------------
Disclaimer
This is an educational study for entertainment purposes only.
The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
5 Most Popular Momentum Indicators to Use in Trading in 20245 Most Popular Momentum Indicators to Use in Trading in 2024
Want to master the art of momentum trading? Look no further. In this FXOpen article, we’ll explore how to use momentum indicators, the signals they generate, and five most popular momentum indicators for trading in 2024.
What Is a Momentum Indicator?
Momentum in technical analysis refers to the rate at which an asset's price accelerates or decelerates, helping traders identify potential trend continuations or reversals.
A momentum indicator is a tool used in technical analysis to measure the speed and strength of an asset’s price movements. By analysing changes in price over a specific period, these indicators provide insights into the underlying force driving market trends.
Momentum indicators do not focus on the direction of the price movement itself, but rather the strength behind it. Traders use these tools to gauge whether the market is overbought, oversold, or losing momentum, which helps determine entry or exit points. A stock momentum indicator like the Relative Strength Index (RSI), for instance, may indicate that stocks are currently bought or sold too heavily and their price is due for a reversal.
The Significance of Momentum Technical Indicators
Momentum indicators do not focus on the direction of the price movement, but rather on the strength behind it. They’re able to quantify and represent hidden clues about the future market direction in an easily interpretable way. By learning to read momentum indicators, traders can develop effective trading strategies, identify potential opportunities, and manage risk more efficiently.
Momentum tools produce a range of signals that offer traders an edge over the markets. Let’s take a look at some of the most common momentum signals.
Overbought and Oversold Conditions
These signals indicate when an asset's price has moved too far in one direction without sufficient support from fundamental or technical factors and is likely to reverse. For example, RSI generates overbought signals when the reading rises above 70 and signals oversold conditions when the reading falls below 30.
Divergence
Divergence occurs when the price of an asset moves in the opposite direction of the indicator, suggesting an upcoming reversal. For instance, when the price is making higher highs, but RSI is making lower highs, this indicates a bearish divergence that increases the likelihood of a downward move.
Crossover
These signals are generated when the indicator's lines cross each other or a certain threshold. A common example is the MACD, where traders look for crossovers between the fast MACD line and the slower signal line to spot potential entry and exit points.
Top Five List of Momentum Indicators for Technical Analysis
Now that we understand the types of signals that momentum tools produce, let’s break down five of the most popular with a momentum indicators list. If you’d like to experiment with them yourself, you’ll find each tool waiting for you in the free TickTrader trading platform.
1. Relative Strength Index (RSI)
The RSI is one of the most popular and well-documented momentum indicators. It measures the speed and change of price movements by comparing the average gain to the average loss over a specified period, usually 14.
RSI is an oscillator, moving between 0 and 100. Values above 70 reflect overbought conditions, while values below 30 indicate oversold conditions. When the RSI moves out of overbought or oversold territory, many traders interpret this as a reversal confirmation. Sustained movements above or below the midpoint (50) can also be used to confirm a bullish or bearish trend, respectively. Moreover, traders look for divergence between the RSI and price to identify weakening trends and possible reversals.
2. Average Directional Index (ADX)
The ADX is a momentum indicator used to determine a trend’s strength. Unlike most other tools, its reading doesn’t move according to the direction of price action, i.e. it doesn’t move up if bullish or down when bearish. Instead, it ranges from 0 to 100, with values above 25 indicating a strong trend and below 25 suggesting a weak or non-trending market.
ADX is commonly used in combination with other tools, as it simply confirms the trendiness of a market. For example, traders might use a leading indicator like RSI to anticipate bullishness and confirm the trend when ADX crosses over 25.
3. Commodity Channel Index (CCI)
The CCI is a versatile momentum indicator. It uses a constant in its calculation to ensure that 75% of values fall between +/- 100, with moves outside of the range generally indicating a trend breakout or continuation. It can also show extreme overbought or oversold conditions when its value exceeds +/- 200.
The CCI requires a more nuanced approach than other tools and is typically used to confirm a trader’s directional bias and to identify potential opportunities. For instance, a visually identifiable bullish trend can be confirmed by looking at the CCI. If its value is skewed toward 100+, traders can be confident in their observation. When the market cools off, CCI will fall below 100. Traders can then confirm a pullback entry with a move back into the +/- 100 range.
4. Moving Average Convergence Divergence (MACD)
The MACD is a highly regarded trend-following momentum indicator that shows the relationship between two moving averages of an asset's price. It’s used in technical analysis to identify the relationship between two moving averages of a security’s price. It helps traders understand the trend’s strength, direction, and duration, as well as possible reversal points.
Traders use crossovers between the MACD and signal lines as potential entry and exit signals. Additionally, when the MACD histogram crosses above or below the zero line, it can indicate bullish or bearish momentum in the market. Lastly, it’s also possible to spot divergences between price and the indicator’s peaks and troughs, similar to how divergences are identified with RSI.
5. Momentum (Mom)
The Momentum indicator is a simple yet potentially effective tool that measures the rate of change in an asset's price over a specific period. The value of the Momentum depends on the market it’s applied to. For example, using the Momentum indicator in stocks will result in a fluctuating value typically between +/- 20, depending on the stock’s price. For forex pairs, its range may look more like +/- 0.02.
The common feature across all markets, however, is the zero line. Generally speaking, positive Momentum values indicate upward price movement, while negative values suggest downward movement. It can also show overbought and oversold conditions, but its lack of defined boundaries means this can be tricky. However, Momentum is especially useful for identifying divergences.
Advantages of Momentum Indicators
Momentum indicators are valuable tools in technical analysis, helping traders assess the strength and speed of price movements. They offer several benefits that enhance trading strategies and decision-making:
- Identify Trends Early: Market momentum indicators can reveal the start of a new trend and the end of the old trend, allowing traders to enter trades at opportune moments.
- Objective Analysis: They provide quantifiable data, reducing reliance on subjective analysis and emotional decision-making.
- Spot Overbought and Oversold Conditions: Momentum tools help traders identify when an asset is overbought or oversold, signalling potential reversals and exit points.
- Confirm Trade Signals: Combining momentum indicators with other technical tools enhances the accuracy of trade signals, providing stronger confirmation for trading decisions.
- Adaptable Across Markets: They can be applied to various assets, including stocks, forex, and commodities, making them versatile tools for traders.
Things to Consider When Trading Momentum Indicators
While momentum indicators can be an effective addition to any trader’s arsenal, there are a few things to be aware of:
- Trade with the Trend: Trends often last longer than you may think, and constantly looking for trend reversals will only end in frustration. Look for bullish signals during an uptrend and bearish signals in a downtrend.
- Use Multiple Indicators: Relying on a single tool can lead to false signals. Many traders combine a lagging indicator, like MACD, with a leading indicator, like RSI. Combining two or three tools can help confirm signals and improve trade accuracy.
- Beware of False Signals: Momentum indicators can sometimes generate false signals, especially in sideways or choppy markets. Being patient and waiting for confirmation before entering a trade is vital.
- Don’t Rely Too Heavily on Indicators: While momentum indicators can be helpful, relying solely on them without considering price action, market structure, or fundamental aspects can lead to poor trading decisions. Use these indicators alongside other tools for a momentum indicator strategy.
Final Thoughts
Now that you have a comprehensive overview of momentum indicators and the signals they produce, it’s time to put your knowledge into practice. After experimenting with a few tools and settling on your favourites, you can open an FXOpen account. You’ll be able to trade over 600+ markets with low costs and ultra-fast execution speeds while partnering with one of the world’s fastest-growing forex brokers. Good luck!
FAQ
How to Use Momentum Indicators?
With momentum indicators, traders monitor the rate of price changes to assess whether it is gaining or losing strength. Traders look for overbought or oversold conditions, divergences, and crossovers to determine potential entry and exit points.
What Is the Best Period for a Momentum Indicator?
If we are talking about the Momentum indicator, the best period depends on your trading style. For short-term traders, 7 and 10 periods are common, while long-term traders may prefer 14 and 21 periods. Testing various periods based on asset volatility can improve results.
What Is the Best Momentum Indicator for Scalping?
There is no best momentum indicator for scalping but the Relative Strength Index (RSI) is often favoured by scalpers due to its ability to quickly identify overbought or oversold conditions. Its responsiveness helps scalpers make rapid decisions in fast-moving markets.
What Is the Difference Between Momentum and Trend Indicators?
Momentum trading indicators measure the speed of price changes, while trend indicators assess the direction and persistence of price movements. To put it simply, momentum focuses on strength, while trend indicators focus on the overall direction.
Is MACD a Momentum Indicator?
Yes, the Moving Average Convergence Divergence (MACD) is one of the most popular momentum indicators, especially in stock trading. It reveals changes in momentum and helps identify potential trend reversals.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
The result of the analysis of 1 day of goldThe re-increase in the price of gold after the American elections and the result of this analysis
Always, the market excitement and fluctuations that arise according to the news will soon disappear and the price will return to the previous place.
Sasha Charkhchian
Gold Update: Post-Election WeaknessThe price of gold typically drops after U.S. elections, and this time is no different.
This weakness coincides with the expected wave count on the chart, as Wave 4 correction was anticipated. (see related)
Wave 3 is extended, and so is sub-Wave 5 within it, which is a common pattern for commodities.
Wave 4 has now begun, and there are two ways to measure its potential target:
1. Wave 4 typically retraces Wave 3 by around 38.2%.
2. The trend channel formed through the peaks of Wave 1 and Wave 3, and the valley of Wave 2, suggests a potential bottom for Wave 4.
This chart shows an amazing alignment of these two factors: the 38.2% Fibonacci retracement is at $2,428, and the bottom of the channel is around $2,450. These levels provide a strong double support for gold prices.
The final upward impulse should at least retest the all-time high of $2,802 (the peak of Wave 3).
The Cup & Handle pattern (see related ideas) has a target of $3,000.
This is all you need to get started: a paper trading account!Starting your trading journey wisely means utilizing a Paper Trading account, also known as a demo account. This account simulates the real trading experience by mirroring market movements and conditions, but operates without the risk of losing real money. It offers traders access to comprehensive market data just like a live account, enabling practice with real-world price fluctuations—if Gold (XAU/USD) experiences a 5% rise or fall, the same scenario reflects in the demo account. This provides an excellent opportunity to understand market dynamics without financial exposure.
A Beginner's Best Friend: The Demo Account
For novice traders, a demo account is an essential entry point into the financial markets. It allows individuals to familiarize themselves with various trading aspects and strategies. Many traders base their transition to live trading on the insights and performance gleaned from their demo accounts. The convenience of setting one up is straightforward—simply use the Paper Trading option on TradingView to practice with a simulated account.
Click on the Trading Panel of your chart, and you'll find the Paper Trading option on TradingView.
Advanced Applications for Experienced Traders
However, the utility of demo accounts isn’t confined to just beginners; seasoned traders also derive significant benefits.
Experimenting with New Strategies
Experienced traders frequently utilize demo accounts to try out and assess new trading strategies. This method serves as a safe way to test different approaches without putting their capital at risk.
Evaluating Automated Tools
Developers of trading bots and algorithms rely on demo accounts for comprehensive testing of their tools. These automated systems undergo rigorous backtesting in a zero-risk environment, ensuring they are ready for live trading scenarios.
Training and Development
Demo accounts serve as effective training platforms for both individual traders and those employed within financial institutions. Whether it’s a retail trader or a professional in a hedge fund, these accounts offer vital learning experiences that hone skills effectively.
Skill Development and Confidence Building
The benefits of demo accounts extend to enhancing both technical and soft skills. Fundamental competencies such as market analysis, strategy formation, and data interpretation can be improved in a low-stakes setting. Meanwhile, soft skills like patience, resilience, and adaptability receive a boost, ultimately shaping a well-rounded trader.
Moreover, the journey can build confidence. Since trading can be intricate and losing money can shake one's self-assurance, a demo account provides a haven for refining trading strategies without risking actual funds. This psychological support can significantly influence success in the live markets, where self-confidence is often linked to profitability.
How Long Should You Practice?
The duration one should spend in a demo account varies, influenced by personal factors. For those transitioning to full-time trading, a minimum of three months is advisable. Though this may seem lengthy, it is a small price to pay for a comprehensive understanding of market dynamics and a variety of trading conditions.
The Advantages of Practicing Day Trading in a Demo Account
1- Accelerated Learning
Utilizing non-market hours for practice enables traders to quickly accumulate experience, far exceeding what can be gained during regular market sessions.
2- Preparedness for Quick Decisions
Day trading requires rapid decision-making skills. Regular practice in a demo account equips traders to respond swiftly to market fluctuations.
3- Intuitive Market Recognition
Frequent practice encourages an instinctual grasp of market conditions, vital for timely and effective trading actions.
4- Confidence in Trading Decisions
Confidence plays a critical role in a day trader's success. Thorough practice in a risk-free environment allows traders to build confidence before they step into live trading.
5- Adaptability to Market Variability
Day traders often experience victories and losses. Practicing within a controlled environment fosters a clear mindset to tackle each trade, essential for adapting to shifting market scenarios.
6- Setting Realistic Income Expectations
Repeated practice enables traders to set achievable income expectations, cultivating a sensible outlook prior to committing to full-time trading.
7- Enhancing Chart Analysis Skills
A demo account encourages traders to develop chart reading abilities without becoming overly reliant on them, promoting a balanced analytical approach.
8- Personal Trading Style Development
The complexities of day trading call for personalized strategies. Regular practice in a demo account allows traders to foster their unique trading styles and embrace accountability for their decisions.
9- Effective Risk Management
Practicing with margin in a demo account allows traders to experiment with leverage while treating each trade seriously.
Also Read:
and now...
"Best Practices for Using Demo Accounts"
To ensure you maximize the benefits of a demo account, adopt the following strategies:
Serious Approach
Although no real money is at stake, treating the demo account with seriousness enhances realism and deepens the learning experience.
Realistic Capital Allocation
Even though demo accounts may offer unlimited capital, traders should simulate an amount similar to their intended live trading capital for a more accurate experience.
Maintain Consistent Leverage
Using the same leverage plan that you would apply during live trading ensures that your demo experience aligns closely with potential future outcomes.
Gradual Transition to Live Trading
Transitioning from a demo account to live trading should be done thoughtfully. Test your strategies extensively in the demo environment, simulating real trading amounts, to reduce the likelihood of mistakes once you start live trading.
In conclusion...
In summary, a demo account is a vital resource for both novice and experienced traders navigating the complexities of financial markets. For beginners, it provides a risk-free avenue to grasp market dynamics and develop essential trading techniques. For seasoned professionals, demo accounts are indispensable for strategy testing, evaluating automated tools, and enhancing both technical and psychological skills.
While the ideal duration in a demo account varies from trader to trader, committing to three months is recommended for anyone serious about entering full-time trading. Day traders particularly stand to gain by practicing within a demo setting, allowing them to accelerate skill acquisition, prepare for snap decisions, and foster a robust sense of confidence. The structured environment of a demo account promotes the crafting of personalized trading strategies, the establishment of effective risk management practices, and the ability to adapt to real-world market conditions.
Lastly I would like to add this previous lecture to this post, I'm sure will be useful for you...
The Psychology Of Trading How To Manage Your Emotions
and..
The Benefits of Keeping a Trading Journal for Your Psychology
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SWING TUTORIAL - ABSLAMCIn this tutorial, we analyze the stock NSE:ABSLAMC (Aditya Birla Sun Life AMC Limited) identifying a lucrative swing trading opportunity following its all-time high in Oct 2021. The stock declined by nearly 57%, forming a Lower Low Price Action Pattern, but subsequently reversed its trend.
At the same time, we can also observe the MACD Level making a contradictory Pattern of Higher Lows. This Higher Low Pattern of the MACD signaled the start of a Bullish Momentum, thereby also signaling a good Buying Opportunity.
The trading strategy yielded approximately 114% returns in 63 weeks. Technical analysis concepts used included price action analysis, MACD, momentum reversal, trend analysis and chart patterns. The MACD crossover served as the Entry Point, with the stock rising to its Swing High Levels of 720 and serving as our Exit too.
As of wiring this tutorial, we can also notice how the stock is making a breakout and retest of the Swing High levels and trying to continue its momentum further upward trying to make a new All Time High.
KEY OBSERVATIONS:
1. Momentum Reversal: The stock's price action shifted from a bearish to a bullish trend, indicating a potential reversal.
2. MACD Indicator: The Moving Average Convergence Divergence (MACD) line showed steady upward momentum, signaling increasing bullish pressure.
3. MACD Crossover: The successful crossover in May 2023 confirmed the bullish trend, creating an entry opportunity.
TRADING STRATEGY AND RESULTS:
1. Entry Point: MACD crossover in May 2023.
2. Exit Point: Swing High Levels - 720.
3. Return: Approximately 114%.
4. Trade Duration: 63 weeks.
TECHNICAL ANALYSIS CONCEPTS USED:
1. Price Action Analysis
2. MACD (Moving Average Convergence Divergence)
3. Momentum Reversal
4. Trend Analysis
5. Chart Patterns
NOTE: This case study demonstrates the effectiveness of combining technical indicators to identify bullish momentum. By recognizing Price Action, MACD movements, and Reversal patterns, traders can pinpoint potential entry and exit points.
Would you like to explore more technical analysis concepts or case studies? Share your feedback and suggestions in the comments section below.
Best Price Action Pattern For GOLD Trend Following Trading
This bullish pattern is very powerful .
Being spotted on a daily/4h/1h, any time frame, it will help you to accurately predict a strong bullish movement on Gold .
In this article, I will teach you to identify a buying volumes accumulation on Gold chart and as a bonus, I will show you how I predicted a recent bullish rally with this price action pattern.
The initial point of this pattern will be a completion point of a strong bullish impulse.
At some moment, the price finds a strong horizontal resistance, stops growing and retraces.
The second point of the pattern will be a completion of a retracement.
It should strictly be a higher low - it should be higher than the low of an initial bullish impulse.
After a retracement, the price should return to a horizontal resistance and set an equal high , that will be the third point of the pattern.
Then, the price should retrace AT LEAST one more time from a horizontal resistance and set a new higher low.
After that, the price should set one more equal high.
3 equal highs and 2 higher lows will compose a bullish accumulation pattern.
Please, note, that the price may easily set more equal highs and more consequent new higher lows and keep the pattern valid.
Above is the example of a bullish accumulation pattern on Gold on an hourly time frame. The price set 3 equal highs and 3 consequent higher lows.
This pattern will signify the weakness of sellers and the accumulation of buying volumes.
The point is that each consequent bearish price movement from a resistance is weaker than a previous one. It means that fewer sellers are selling from the resistance and more buyers start buying, not letting sellers go lower.
In our example, we can clearly see the consequent weakening, bearish price movements.
This pattern indicates a highly probable breakout attempt of the resistance. A candle close above that provides a strong bullish signal.
The broken resistance will turn into support and will provide a safe point to buy the market from.
In our example, the market broke the underlined horizontal resistance and closed above that. It indicates the completion of a bullish accumulation and a highly probable bullish trend continuation.
You can see that Gold retested a broken structure and then a strong bullish wave initiated.
In a strong bullish market that we currently contemplation on Gold, this bullish pattern will provide a lot of profitable trading opportunities.
No matter whether you are scalping, day trading or swing trading Gold, this bullish accumulation pattern will help you to predict long-term, mid-term and short-term bullish movements.
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Whyi can say "Pivot by morning" at R6I wanted to explain to people how this is possible... notice how todays pivots are calculated with yesterday in mind in such a way to get us to pivot easily.
I have said this, in similar situations many times, so far it has always worked.
This also means we don't have to only short from R6 (or maybe even R10 (TSLA) )... we can go higher because there is room now.
Algorithmic vs. Quantitative Trading: Which Path Should You TakeI’ve always wondered why anyone would stick to traditional trading methods when algorithms and mathematical models could do all the heavy lifting.
I started questioning everything:
• Why do so many mentors still swear by discretionary trading when algorithms could handle all the heavy lifting?
• Do they really have solid proof of their “own” success, or is it just talk?
• Or are they keeping things complex and discretionary on purpose, to confuse people and keep them as members longer?
• Why deal with the stress of emotions and decisions when an algorithm can take care of it all?
• Imagine how much further ahead you could be if you stopped wasting time on manual trades and instead focused on market research and developing your own models.
When I first got into trading, I thought Algorithmic Trading and Quantitative Trading were basically the same thing. But as I dug deeper, I realized they’re two completely different worlds.
Algorithmic Trading: It’s simple – you set the rules and the algorithm executes the trades. No more sitting in front of the screen “controlling your emotions” and trying to manage every little detail. Instead, you let the algorithm handle it, based on the rules you’ve set. It frees up your time to focus on other things rather than staring at price charts all day.
But here’s the thing – it’s not perfect. You’ll still need to test the rules to make sure the data and results you’re getting aren’t overfitted or just random.
Quantitative Trading: A whole different level. It’s not just about executing trades; it’s about understanding the data and math behind market movements. You analyze historical price, economic, and political data, using math and machine learning to predict the future. But it can be complex – techniques like Deep Learning can turn it into a serious challenge.
The upside? This is the most reliable way to trade, and it’s exactly what over 80% of hedge funds do. They rely on quant models to minimize risk and to outperform the market.
So, which path should you choose?
Quantitative Trading can feel overwhelming at first, I recommend starting with the basics. Begin with Pine Script coding in TradingView—start building a foundation with simple strategies and indicators. As you grow more confident, start coding your own ideas into rules and refining your approach to eventually automated your trading strategy.
TradingView is a great tool for this, and I’d highly suggest grabbing the Premium plan. This will give you access to more data and features to make your learning journey smoother.
Dive into the Pine Script documentation , and begin bringing your ideas to life.
I promise, the more you focus on this, the better and more independent you’ll become in trading.
Every day, aim to get just 1% better.
To Your success,
Moein
Understanding Trading Leverage and Margin.When you first dive into trading, you’ll often hear about leverage and margin . These two concepts are powerful tools that can amplify your profits, but they also come with significant risks. The image you've provided lays out the essentials of leverage and margin: Leverage allows traders to control larger positions, Margin acts as a security deposit, Profit Amplification boosts potential gains, and Risk Amplification warns of increased losses.
In this article, we’ll break down these terms and explore how leverage and margin work, their advantages and risks, and what to consider before using them in your trading strategy.
What is Leverage in Trading?
Leverage is essentially a loan provided by your broker that allows you to open larger trading positions than your actual account balance would otherwise allow. It’s a tool that can multiply the value of your capital, giving you the potential to make more money from market movements without needing to invest large sums of your own money.
Think of leverage as “financial assistance.” With leverage, even a small amount of capital can control a larger position in the market. This can lead to amplified profits if the trade goes your way. However, it’s a double-edged sword; leverage can also lead to amplified losses if the trade moves against you.
Example of Trading with Leverage
Suppose you have €100 in your trading account and your broker offers a leverage of 1:5. This means you can control a position worth €500 with your €100 investment. If the market moves in your favor, your profits will be calculated based on the €500 position, not just the €100 you originally invested. However, if the market moves against you, your losses will also be based on the larger amount.
What is Margin in Trading?
Margin is the amount of money you must set aside as collateral to open a leveraged trade. When you use leverage, the broker requires a deposit to cover potential losses—this is called margin. Margin essentially acts as a security deposit, ensuring that you can cover losses if the trade doesn’t go as planned.
Margin is usually expressed as a percentage of the total trade size. For example, if a broker requires a 5% margin to open a position, and you want to open a €1,000 trade, you would need to deposit €50 as margin.
How Does Margin Work?
Margin works together with leverage. The margin required depends on the leverage ratio offered by the broker. For instance, with a 1:10 leverage, you’d only need a 10% margin to open a position, while a 1:20 leverage would require a 5% margin.
If the market moves against your position significantly, your margin level can drop. If it falls too low, the broker may issue a **margin call**, requesting additional funds to maintain the trade. If you don’t add funds, the broker might close your position to prevent further losses, which could lead to a loss of the initial margin amount.
How Does Leveraged Trading Work?
Leveraged trading involves borrowing capital from the broker to increase the size of your trades. This allows you to open larger positions and potentially gain higher profits from favorable market movements.
Here’s a simplified process of how it works:
1. Deposit Margin: You set aside a portion of your own funds (margin) as a security deposit.
2. Leverage Ratio Applied: The broker provides you with additional capital based on the leverage ratio, increasing your trading power.
3. Open Larger Positions: You can now open larger trades than you could with just your capital.
4. Profit or Loss Magnified: Any profit or loss from the trade is amplified, as it’s based on the larger position rather than just your initial capital.
While leverage doesn’t change the direction of your trades, it affects how much you gain or lose on each trade. That’s why it’s essential to understand both the potential for profit amplification and the risk amplification that leverage brings.
The Benefits and Risks of Using Leverage
Benefits of Leverage
- Profit Amplification: With leverage, you can control larger trades, which means any favorable movement in the market can lead to greater profits.
- Capital Efficiency: Leverage allows you to gain exposure to the markets without needing to invest a large amount of your own money upfront.
- Flexibility in Trading: Leveraged trading gives traders more flexibility to diversify their positions and take advantage of multiple opportunities in the market.
Risks of Leverage
- Risk Amplification: Just as leverage can amplify profits, it also amplifies losses. If a trade moves against you, your losses can be substantial, even exceeding your initial investment.
- Margin Calls: If the market moves significantly against your leveraged position, you may face a margin call, requiring you to add more funds to your account to keep the position open.
- Rapid Account Depletion: High leverage means that small market moves can have a big impact on your account. Without careful management, you could deplete your account balance quickly.
Important Considerations for Leveraged Trading
1. Understand the Leverage Ratio: Different brokers offer various leverage ratios, such as 1:5, 1:10, or even 1:100. Choose a leverage ratio that aligns with your risk tolerance. Higher leverage ratios mean higher potential profits but also higher potential losses.
2. Know Your Margin Requirements: Always be aware of the margin requirements for your trades. Brokers may close your positions if your margin level drops too low, so it’s essential to monitor your margin balance regularly.
3. Risk Management is Key: Use risk management strategies like stop-loss orders to limit potential losses on each trade. Don’t risk more than a small percentage of your account balance on any single trade.
4. Avoid Overleveraging: One of the biggest mistakes new traders make is using too much leverage. Start with a lower leverage ratio until you’re more comfortable with the risks involved in leveraged trading.
5. Only Use Leverage if You Understand It: Leveraged trading is suitable primarily for experienced investors who understand the market and the risks involved. If you’re new to trading, practice with a demo account to learn how leverage works before applying it in a live account.
Final Considerations
Leverage and margin are powerful tools in trading that can amplify profits, but they come with considerable risk. Using leverage wisely and understanding margin requirements are essential to avoid unnecessary losses and protect your account. While the prospect of profit amplification is attractive, traders should always remember that leveraged trading is a double-edged sword—it can lead to significant gains, but it can also result in rapid account depletion if not managed carefully.
To summarize:
- Leverage allows you to control larger trades with a small investment, multiplying both potential profits and potential losses.
- Margin is the deposit required to open a leveraged trade and acts as a security against potential losses.
- Use leverage responsibly and only after understanding the risks involved.
Leverage can be a valuable tool in trading if used wisely, so make sure to educate yourself, practice with a demo account, and always approach leveraged trading with caution.
The U.S. Election: Why Investor Psychology Outweighs Politics?As the 2024 U.S. presidential election between Donald Trump and Kamala Harris draws to a close, discussions on its potential impact on the stock market are intensifying. The common belief is that elections like these have significant influence on market direction, with some expecting substantial shifts based on which candidate emerges victorious. Yet at Vital Direction, our perspective is that the market’s underlying forces—those stemming from social mood, collective psychology, and well-established cycles—play a far greater role than any singular political event.
The Market’s Independence from Political Events
There exists a widespread assumption that major political events, such as presidential elections, are central drivers of long-term market trends. This belief, though popular, fails to account for the market’s inherent self-direction. Stock markets don’t respond as simply as a cause-and-effect model would suggest; instead, they operate according to internal patterns and psychological shifts within the investor community.
The Elliott Wave Theory offers an invaluable lens into this perspective. Developed as a way to understand market movements, it proposes that markets progress in identifiable cycles driven by waves of investor optimism and pessimism. These waves transcend individual events and reflect broader, longer-term patterns. Whether in response to an election or any other newsworthy event, the market’s primary direction remains bound to these underlying cycles, not to short-lived political fluctuations.
Elections: Short-Term Volatility, Not Long-Term Direction
The 2024 election will no doubt introduce some degree of short-term volatility. Markets may experience fluctuations in response to immediate reactions, whether from policy expectations or from shifts in investor sentiment. However, such volatility is more indicative of temporary emotional responses than a change in the overall trend. Historically, markets have witnessed reactions to elections, but these are typically fleeting. A notable example is the 2016 election: though it spurred temporary market movement, the longer trend was driven by broader cyclical forces, unaffected by any one political outcome.
This view echoes what is outlined in Socionomic theory, which suggests that markets are less about reaction to events and more about reflecting the underlying social mood. This perspective implies that it is not political events but rather the collective psyche of investors that drives market cycles. In other words, while elections can spark volatility, they do not chart the course of long-term market movement.
The Role of Investor Psychology and Cycles
At Vital Direction, we place considerable emphasis on investor psychology as the core driver of market behaviour. Techniques such as Elliott Wave Theory and technical analysis allow us to understand this psychology in action, mapping market movements as a series of waves that reflect collective emotional shifts. Whether optimism, fear, or greed, these emotions unfold in repeating cycles, showcasing the natural rhythm of the market.
Likewise, Socionomics further reinforces the concept that social mood—bullish optimism or bearish fear—shapes markets from the ground up, regardless of political events. By viewing the market through this lens, we see that people’s collective psychology builds self-perpetuating cycles that continue regardless of transient events.
This view aligns with the insights of technical analysis, including the application of Fibonacci retracements and Hurst cycles, which help reveal recurring investor cycles. These analytical methods enable us to anticipate market behaviour based not on who wins an election but on how collective sentiment evolves over time. Tools like these reveal that the stock market has its own rhythm, largely impervious to the outcomes of political events.
Concluding Thoughts: The Market’s Own Path
To conclude, the U.S. presidential election, while undoubtedly an important social and political event, has a limited impact on the stock market’s overall direction. Political events might momentarily capture the headlines and trigger brief volatility, but the primary market trend persists, following its own inherent cycles. Whether Trump or Harris wins, we at Vital Direction expect the market to continue adhering to its established patterns, driven by the deeper forces of investor psychology.
For investors, understanding this can be a powerful tool amidst the noise of election speculation. By focusing on the patterns and cycles inherent to investor psychology, traders can engage the market with a clear view that looks beyond short-term fluctuations, aligning instead with the stable, cyclical forces that guide the market’s enduring direction.
In short, trust in the cycle, not the headlines. The market’s true course is set not by elections but by the collective sentiment of those who invest in it.
The Importance of Financial Discipline in TradingThe Importance of Financial Discipline in Trading: A Pathway to Lasting Success
Achieving consistent success hinges on one fundamental principle: financial discipline. This concept encompasses adherence to a well-structured trading strategy, effective risk management, and emotional control. Distinguishing successful traders from those who struggle, financial discipline empowers individuals to make informed decisions while navigating the often chaotic world of financial markets.
Understanding Financial Discipline
Financial discipline is about maintaining a methodical approach to trading. It requires traders to exercise patience in waiting for favorable market conditions, the courage to cut losses promptly, and the self-restraint to avoid impulsive risks. By establishing clear trading rules and sticking to them, traders can minimize errors, conserve capital, and foster long-term profitability. In contrast, a lack of discipline can lead to devastating consequences, derailing even the most promising strategies and exposing traders to significant financial setbacks.
Also Read:
The Critical Role of Emotional Control
Emotions can be one of the biggest hurdles in trading. Decisions driven by fear, greed, or overconfidence often lead to regrettable outcomes. For instance, fear may result in prematurely exiting a position, causing traders to miss out on potential gains when they could have held on longer. Conversely, the lure of quick profits might tempt traders to overtrade or take on excessive risk.
Disciplined traders minimize the impact of emotions by adhering to a comprehensive pre-planned strategy that emphasizes consistency. This approach includes specific criteria for trade entries and exits, pre-defined risk thresholds, and clear guidelines for position sizing. By operating within these parameters, traders can cope with the inevitable volatility of the market without succumbing to emotional reactions.
Moreover, having financial discipline allows traders to maintain composure during turbulent market periods, a time when many make ill-advised choices. The essence of financial discipline lies in its ability to keep traders focused on their long-term objectives, adapt strategies when needed, and ultimately achieve sustained profitability over time.
Also Read:
Setting Achievable Goals
Successful trading begins with the establishment of realistic, achievable goals. Traders should clarify their objectives—in both the short and long term—to facilitate strategic decision-making. Short-term goals, such as monthly profit targets, should remain specific yet attainable, fostering motivation and providing benchmarks for progress. For example, rather than aiming for excessively high returns, a trader might target a modest monthly gain, reducing the urge to engage in risky behavior.
However, flexibility is essential. Financial markets are dynamic, and goals may need adjustment in response to changing conditions. What may seem feasible during a bull market could become unrealistic in a downturn. Long-term goals, such as building wealth over several years, can help traders keep sight of their overarching aims without getting sidetracked by temporary setbacks.
By setting realistic expectations, traders can avoid the pitfalls of ambition that often lead to burnout or reckless decisions. These well-defined goals serve not only as performance indicators but also as tools to cultivate patience and resilience in the trading journey.
Risk Management: The Heart of Discipline
Effective risk management is paramount for survival in trading, and disciplined traders recognize that controlling risk is essential for long-term sustainability. Every trade carries a degree of uncertainty, and without a robust risk management strategy, even minor losses can escalate, jeopardizing a trader's financial health.
One fundamental risk management technique is the implementation of stop-loss orders. A stop-loss automatically closes a trade once it reaches a predetermined loss threshold, helping traders avoid the pitfall of holding onto losing positions in hopes of recovery. By defining acceptable limits, traders can mitigate risks and safeguard their accounts.
Position sizing is another critical component of a prudent risk management strategy. Traders should only risk a small percentage of their total capital on any single trade, ensuring that a series of losses will not have a devastating impact on their overall account balance. This approach encourages traders to diversify their risks rather than overexposing themselves to any one market or trade.
Additionally, understanding and applying a favorable risk-reward ratio is central to disciplined trading. Aiming for trades where the potential reward significantly surpasses the risk taken helps ensure that traders remain profitable in the long run. For example, a risk-reward ratio of 3:1 means risking $100 to potentially earn $300. By consistently identifying trades with such favorable ratios, traders can weather inevitable losses while maintaining a path to profitability.
Also Read:
Mastering Emotional Control
The psychological aspects of trading cannot be overlooked. Emotions such as fear and greed can markedly hinder progress. Fear may lead to hasty exits from positions, while greed could incite traders to exceed their risk limits in pursuit of greater profits. Both scenarios jeopardize a structured trading plan and can have dire financial consequences.
Long-term success in trading requires emotional control, allowing traders to base decisions on careful analysis rather than spontaneous reactions to the market. Fostering a disciplined routine is key. This starts with a thorough trading plan that outlines clear entry and exit strategies, risk management protocols, and position sizes. Consistently revisiting and adhering to this plan will help mitigate impulsive decision-making influenced by market mood swings or personal stressors.
Embracing losses as an inherent part of trading is also vital. Even the most adept traders experience losing trades, and it's crucial to avoid allowing recent losses to cloud future judgment. Focusing on the broader strategy and long-term performance instead of fixating on individual trades enhances a trader’s capacity to remain rational and composed.
Also Read:
and...
Conclusion: The Path to Consistency and Success
Financial discipline is not merely a concept; it's the bedrock of effective trading. By prioritizing structured strategies, managing risk diligently, and controlling emotions, traders can position themselves for sustained success in the financial markets. The journey to mastery involves setting realistic goals, crafting sound risk management plans, and cultivating emotional resilience. Ultimately, by embracing these principles, traders can improve their decision-making processes and enhance their chances for consistent, profitable outcomes in the exciting yet challenging world of trading.
Fundamentals and Strategy... The key.The result is clear and obvious, several factors had to be taken into account when operating this movement, first of all, the time had to be taken into account, it was still early to enter and I made them clear, then the fundamentals, the Yesterday I had announced in the morning that if Trump won, the movement would not only be upward but that we would break maximums and I had no doubts. and finally the fomo, where there was a sector divided between bulls and bears.
I simply analyzed those 3 factors and waited for my zone, the last one was at the lowest point of the SL. Now? corrections and up, does the bullrun start? We'll see, since that would consist of movements of more than 5k per day
Bearish continuation setups taken on Silver and WTI today explaiIn this video, I walk you through my entire thought process during today's trading session. You'll learn how I selected the pairs and executed three key trades:
* Silver Breakdown Retracement Continuation Short, R4,5
* WTI Breakdown Continuation Short, R3
I'll also provide a detailed explanation of the BD Continuation setup, helping you understand how to apply this strategy in your own trading. Breakdown Continuation is one of my personal A+ playbook setups. Don't miss out on these valuable insights and tips!
EURUSD map: Down to 1.04-1.00 Then Up to 1.16-1.21EURUSD is in the second leg down to complete a complex correction (red down arrows).
There are three crucial target points for drop to watch:
1) Valley of red leg 1 at 1.0448 and 50% Fib at 1.0406
2) 61.8% Fib at 1.0200
3) Touch point of the throwback to broken trendline around parity
Next is the reversal to upside within the large leg 2 up (blue up arrows).
The possible targets depend on the depth of the current drop, the deeper the lower the upside target.
From the first point of drop EURUSD could hit 1.21 area.
From the lowest valley of parity it could reach 1.16 handle.
Pulse of an Asset via Fibonacci: DAL Golden Genesis double top? This Concept is part of my study of Fibonacci Ratios applied to Assets.
This Chart captures the life of Delta Airlines ruled by the Golden Ratio.
This Post is to alert of possible double top and a reason for the last top.
The growth of anything in nature is choreographed by the Golden Ratio.
The growth of value or popularity of an asset is regulated by the same.
Imagine: "Each person that bought this, told on average 1.618 others".
The human collective as a whole must abide by the Golden Ratio.
The previous top was the top only because of the Golden Multiple.
The entire world is now very aware of this level, even the fib-blind.
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Part of my Idea series collecting samples of my Methodology: (click links)
Chapter 1: Introduction and numerous Examples
Chapter 2: Detailed views and Wave Analysis
Chapter 3: The Dreaded 9.618: Murderer of Moves
Chapter 4: Impulse Redux: Return to Birth place
Chapter 5: Golden Growth: Parabolic Expansions <= Current Example
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Ordered Chaos
every Wave is born from Impulse,
like a Pebble into Water.
every Pebble bears its own Ripples,
gilded of Ratio Golden.
every Ripple behaves as its forerunner,
setting the Pulse.
each line Gains its Gravity.
each line Tried and Tested.
each line Poised to Reflect.
every Asset Class behaves this way.
every Time Frame displays its ripples.
every Brain Chord rings these rhythms.
He who Understands will be Humble.
He who Grasps will observe the Order.
He who Ignores will behold only Chaos.
Ordered Chaos
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want to Learn a little More?
can you Spend a few Moments?
click the Links under Related.
Intra-Day Strategies: Part 1 – Mean ReversionWelcome to a three-part series on intra-day trading, a focused and fast-paced trading approach that, when executed with precision, can sharpen your trading skills and deepen your market understanding. We’re starting with mean reversion, a method centred on spotting price overextensions and profiting from quick corrections.
What is Intra-Day Trading?
Intra-day trading involves capturing small, rapid price movements through a series of trades opened and closed within the same day. Unlike swing traders or position traders who wait for larger price moves, intra-day traders zoom in on micro-movements around key levels in the market. They capitalize on the cyclical nature of price volatility, harnessing expansion phases that follow periods of contraction.
While this style can be rewarding, it demands quick decision-making, refined technical skills, and strict risk management. It offers the chance to gain valuable experience and refine trading accuracy through regular practice.
Pros and Cons of Intra-Day Trading
Before diving into the mean reversion strategy, it’s helpful to consider some unique aspects of intra-day trading.
Pros: Intra-day trading offers frequent trading opportunities, especially in volatile markets, providing the potential for steady profits. It also allows traders to refine their skills in real-time, building expertise at a faster pace than longer-term strategies.
Cons: This style requires intense focus and continuous monitoring, which can be mentally demanding. The frequency of trades can also increase transaction costs, which may impact profitability if trades aren’t carefully planned.
Mean Reversion Strategy
The Elastic Band Effect
Think of mean reversion like an elastic band. When a price is pushed too far from its “normal” level—perhaps by a sudden burst of buying or selling—the band stretches. Eventually, that tension snaps back, pulling the price toward its mean. Mean reversion traders aim to capture this snapback, profiting from the return to the average. The key is to spot when the band is overstretched and position yourself to capture the correction.
Spotting Mean Reversion Setups on the Chart
In mean reversion, timing and precision are essential. Here’s a three-step approach to identifying setups for this strategy:
Level Identification: Start by identifying a clear support or resistance level, like the previous day’s high or low. The more timeframes that confirm this level, the stronger the opportunity for an intra-day trade. Such levels attract price reactions, especially when volatility is high.
RSI Divergence: Use the Relative Strength Index (RSI) to spot divergences at overbought or oversold levels. If the price is pushing toward a key level while RSI diverges from the trend, this signals that the “elastic band” is overstretched. For example, if price reaches a strong resistance while RSI diverges downward, a pullback is likely.
Candlestick Patterns: When levels and RSI align, watch for candlestick patterns as entry signals. Key patterns include:
• Fakeout: When price briefly pierces a level before reversing, signalling that the trend might stall or reverse.
• Engulfing Pattern: A strong reversal sign where a candle “engulfs” the prior one, indicating momentum has shifted.
• Double Top/Bottom: A pattern where price hits a level twice before reversing, suggesting resistance or support is holding firm.
Combining these three elements creates a high-probability setup, allowing traders to capitalize on short-term corrections effectively.
Example: EUR/USD
In this example, we’re using the 5-minute chart for clarity, though trades can be executed on lower timeframes, depending on market conditions.
The first entry setup (labeled Fakeout 1) forms as the market tests the prior day’s high, with RSI divergence indicating a possible snapback. A second opportunity (Fakeout 2) appears on a retest, where both the price pattern and RSI continue to align for a high-confidence entry.
EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
Stop Placement and Trade Management
Intra-day traders must pay careful attention to stop placement and management, as short-term moves can quickly go against you. In a mean reversion setup, stops are generally placed just beyond the key level identified in step one. For example, if entering at resistance, place a stop just above that level to protect against a breakout.
For trade management, keep these principles in mind:
• Initial Target: Aiming for a 1:1 or 1:1.5 risk-to-reward ratio potentially allows for more frequent profit-taking, which can build up over time.
• Trailing Stops: As price moves in your favour, a trailing stop helps secure gains. This allows you to capture more profit while staying protected against a reversal.
• Exit Triggers: Be prepared to exit if the price quickly re-approaches your entry level or if RSI and candlestick patterns begin to weaken.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
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