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The Anti: A Super Powerful 1:1 SetupIn this video, I discuss The Anti a trade first mentioned by Linda Raschke in her 1996 book Street Smarts. Her version used a Stoch indicator but, I prefer a modified MACD indicator. To take this setup, you first need an indication of market reversal. In our case that will be climatic activity. So this trade has 4 parts: Climatic activity or other indication of possible market reversal First leg MACD or Stoch slow line change of trend MACD or Stoch fast line hooking back into the slow line (against the trend)
GEducation
by JoeRodTrades
3
Mind the Gap: How to Trade Price GapsThe Power and Beauty of Price Gaps Price gaps represent a clear imbalance in supply and demand, making them one of the purest representations of momentum in financial markets. These gaps occur when there is a significant disparity between the closing price of one period and the opening price of the next, indicating a sudden surge in buying or selling pressure. How to Trade Price Gaps: 3 Different Strategies 1. Gap & Go: Description: This strategy involves trading in the direction of the gap, anticipating that the momentum will continue. Execution: Enter trades as soon as the market opens, aiming to capture the initial momentum surge. Timeframe: Typically applied on shorter timeframes, such as intraday charts. Risk Management: The gap can be used for stop less shelter, hence stops can be placed above (below) the gap. Example: Tesla (TSLA) 5min Candle Chart In this example, Tesla gaps lower at the open – breaking below a key level of support and signalling the breakdown of a sideways range. The gap follows through to the downside during the remainder of the trading session. Past performance is not a reliable indicator of future results 2. Gap Fill: Description: In contrast to the Gap and Go strategy, this approach involves fading the initial price movement and trading in the opposite direction of the gap. Execution: Wait for price to retrace back to pre-gap levels before entering trades, anticipating that the gap will eventually be filled. Timeframe: Can be applied on various timeframes, depending on the magnitude of the gap and market conditions. Risk Management: Implement stop-loss orders to manage risk, as price may continue to move against the trade. Example: Barclays (BARC) Hourly Candle Chart Barclays gap above key resistance on the hourly candle chart. The gap is filled and broken resistance turns to support prior to the uptrend resuming. Past performance is not a reliable indicator of future results 3. First Pullback: Description: This strategy combines elements of both Gap and Go and Gap Fill, focusing on entering trades after the initial momentum surge but waiting for a pullback or consolidation before entry. Execution: Wait for the first pullback or consolidation after the gap before entering trades in the direction of the prevailing momentum. Timeframe: Suitable for both shorter and longer timeframes, depending on the magnitude of the gap and market dynamics. Risk Management: Utilise stop-loss orders to protect against adverse price movements and adjust position sizing based on volatility. Example: Arm Holdings (ARM) Hourly Candle Chart Arm’s share price puts in a large price gap which breaks decisively above a key level of resistance on the hourly candle chart. Given the size of the gap, optimal entry requires waiting for the market pullback. Past performance is not a reliable indicator of future results Additional Factors to Consider Catalyst Behind the Gap: Look for stock-specific news events that recalibrate market expectations, such as earnings surprises or changes in outlook. Mechanical events like dividends or corporate actions are less likely to sustain momentum. Size of the Gap: Larger gaps indicate stronger momentum but also carry a higher risk of mean reversion. Assess the magnitude of the gap relative to historical price action and volatility. Levels Broken: Consider the significance of key support and resistance levels broken by the gap, as they may influence the strength and direction of the price movement. Prevailing Trend: Analyse the prevailing trend before the gap and assess whether the gap aligns with the overall market direction. By incorporating these factors into your analysis and selecting the most suitable strategy based on market conditions, you can effectively trade price gaps and capitalise on momentum opportunities in the financial markets. Remember to exercise proper risk management and adapt your approach as market conditions evolve. 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. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
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NASDAQ:TSLAEducation
by Capitalcom
1
S&P 500 Bullish Percent Index, Cyclical behavior!The S&P 500 Bullish Percent Index is a breadth indicator that tracks the percentage of stocks in the S&P 500 that are on buy signals according to point and figure charting. Point and figure charting is a technical analysis method that focuses on price movements and ignores time. The Bullish Percent Index is thought to be a contrarian indicator, meaning that when it gets too high, it may be signaling that the stock market is overbought and due for a correction. Conversely, when the Bullish Percent Index gets too low, it may be signaling that the stock market is oversold and due for a rally. It's important to note that the Bullish Percent Index is just one indicator, and it should not be used in isolation to make investment decisions. Seasonality refers to predictable price movements over a specific time frame, typically a year. Cyclical behavior refers to price movements that repeat over time, but not necessarily on a yearly basis. Repeated patterns: Look for similar price movements at the same time each year or over a specific time. Predictable highs and lows: If the price tends to reach highs and lows at predictable times of the year, this could be a sign of seasonality. Length of cycles: Cyclical behavior can vary in length. Some cycles may be short-term, while others may be long-term.
BEducation
by Moshkelgosha
VIX Trading StrategyWhen the VIX is high, it typically indicates that investors are anticipating increased market volatility and potential downside risk. While this might seem counterintuitive, it can present opportunities for savvy investors. A high VIX often accompanies market sell-offs, which can lead to lower stock prices. For investors with a long-term perspective, high volatility can create attractive entry points to purchase quality stocks at discounted prices. Additionally, elevated volatility can offer opportunities for traders to profit from short-term price swings through strategies such as options trading or swing trading. However, it's important to conduct thorough research and analysis before investing during periods of high volatility, as market downturns can be unpredictable, and risk management is crucial. Overall, when the VIX is high, it can signal potential buying opportunities for investors who are prepared to weather short-term fluctuations in pursuit of long-term gains. TVC:VIX
TVC:VIXEducation
by MindOverMarket
Three Aspects of a Trade Entry, Risk Management, ExitWelcome to our discussion on the three vital aspects of a trade: Entry, Risk Management, and Exit. Mastering these components is crucial for successful trading. Let's delve into each aspect, understanding their significance and how they contribute to your trading strategy. Entry: The entry point marks the initiation of a trade. While it may seem straightforward, it sets the foundation for your entire trade. When choosing an entry point, consider factors such as market trends, support and resistance levels, and technical indicators. Your entry should align with your trading plan and signal a high probability of profitability. Remember, a well-timed entry can maximize your potential gains and minimize risks. Risk Management: Effective risk management is the cornerstone of trading success. This aspect requires careful consideration and planning. Assess the amount of capital you're willing to risk on each trade and set appropriate stop-loss levels to limit potential losses. Remember, preserving capital is paramount to long-term profitability. Exit: The exit point marks the closure of a trade and realization of profits or losses. While it's often considered the simplest aspect, it's equally critical. Establish clear exit criteria based on your trading strategy, whether it's a predetermined price target, trailing stop, or technical signal. Stick to your exit plan without succumbing to emotional impulses or market noise. A disciplined approach to exiting trades ensures that you capture profits while minimizing potential losses. Importance of Each Aspect: Entry: Sets the stage for the trade and influences its outcome. Risk Management: Protects your capital and ensures longevity in trading. Exit: Determines the realization of profits and mitigation of losses. In summary, prioritize each aspect of the trade process, giving due attention to entry, meticulous risk management, and disciplined exits. By mastering these fundamentals, you'll enhance your trading skills and improve your overall performance in the markets.
CBOT_MINI:YMM2024Education
by CFRN
No FOMO when you trade - 5 ReasonsSo you missed a trade. Or you are you often gripped by the fear of missing out (FOMO) in the trading world? It’s a common feeling. But let me tell you. You might miss a train, but the next one is always on the way. And the stock market will always be there for you to pump out more profit opportunities for you. Today, I want you to not worry to much about FOMO. And I don’t want you to kick yourself and here’s why… Impulsive Decisions: The Enemy of Rational Trading Ever jumped into a trade just because it ‘felt right’? It’s like grabbing a chocolate bar at the checkout – it’s tempting, but not always a good idea. You need to get rid of the idea of wanting to impulse trade (trade for the sake of it). Rather have your trading plan and stick to it by all means. If you miss a trade – LOOK for the next one. Not a low probability trade. Wait for the next high chance of success trade and you’ll be happy you did so. Research: Your Secret Weapon Trading without research is like driving with your eyes closed. You might get lucky and not crash, but it’s a risky gamble. You need to put in the time to research and analyse the markets accordingly. Understand the why behind your trades. Research is your crystal ball in the trading world. Chasing the Market: A Fool’s Errand Ever seen a stock skyrocket and felt like you’re missing the party? You might feel the same with Bitcoin or a stock that has underperformed in a while. The worse you can do, is try to chase the market. If you missed the trade. Move on and find the next perfect trade that is linin up. Patience is your ally. Precision analysis is also the key. Remember, markets move in cycles. Wait for your moment. Big Risks: Big Rewards or Big Regrets? It’s like betting all your chips on red. It can pay off, but it’s a rollercoaster ride. So you need to remember that risk and money management is key. Balance optimism with realism. Use stop-loss orders, adjust with trailing stop losses – get out with time stop losses. And most importantly – Protect your capital – it’s your trading lifeline. High Emotions: The Trader’s Kryptonite The infamous emotional rollercoaster might make you take the wrong trades. It will result in you making rash, quick and irresponsible decisions. So try to keep emotions at bay, stay calm to trade. Develop a mindset that is calm and collected. Remember, the market doesn’t care about your feelings. Final words: So you know that FOMO is another dangerous habit to develop as a trader. Rather, say to yourself this mantra. There is always another and better trade on the way, and I don’t have to catch every single trade that presents itself. Let’s sum up the reasons why FOMO is dangerous. Impulsive Decisions: The Enemy of Rational Trading Research: Your Secret Weapon Chasing the Market: A Fool’s Errand Big Risks: Big Rewards or Big Regrets? High Emotions: The Trader’s Kryptonite
JSE:J200Education
by Timonrosso
Options Blueprint Series: The Collar Strategy for Risk ReductionIntroduction to Nasdaq Futures Nasdaq Index Futures offer traders exposure to the Nasdaq-100 index, a benchmark for U.S. technology stocks, without directly investing in the index's component stocks. Trading on the Chicago Mercantile Exchange (CME), Nasdaq Futures provide a critical tool for managing market exposure on the future of technology and biotech sectors. Key Contract Specifications: Point Value: Each point of the index equates to $20 per contract. Margins: As determined by the CME, margins vary, reflecting the volatility and current market conditions. As of the time of this publication the CME website shows a maintenance margin of $17,700 per contract. Trading Hours: Nearly 24-hour trading capability, aligning with global market hours to provide continuous access for traders. It's important to note that similar strategies and benefits are available with Micro Nasdaq Futures , which are scaled down to a tenth of the standard Nasdaq Futures, making them accessible to a broader range of traders due to their lower margin requirements (Margin is 10 times less, point values are 10 times less, etc.) Basics of the Collar Strategy The Collar strategy is a risk management tool used by traders to protect against large losses in their investments while also capping potential gains. It is particularly useful in volatile markets or when significant price swings are expected but their direction is uncertain. Components of the Collar Strategy: Own the Asset: Typically involves owning the underlying asset, but in the case of futures, it involves holding a long position in the Nasdaq Futures contract. Buy a Protective Put: This put option gives the right to sell your futures contract at a predetermined strike price, serving as insurance against a significant drop in the market. Sell a Covered Call: This call option grants someone else the right to buy your futures contract at a set strike price, generating income that can offset the cost of the put option, but it limits the profit potential if the market rises sharply. This strategy forms a price collar around the current value of the futures contract, protecting against drastic movements in both directions. The use of this strategy in Nasdaq Futures trading can be especially effective given the index's exposure to high-growth, high-volatility sectors. Application to Nasdaq Futures Implementing the Collar strategy with Nasdaq Futures involves selecting the right put and call options to effectively hedge the position. Here's how you can set up this strategy: Choose the Underlying Contract: Decide whether to use standard E-mini Nasdaq-100 Futures or Micro mini Nasdaq-100 Futures based on your investment size and risk tolerance. Select the Put Option: Identify a put option with a strike price below the current market price of the Nasdaq Futures. This strike should represent the maximum loss you are willing to accept. The graphics of this article show UFO Support Price Levels below which accepting a larger loss could be seen as a form of hope. Using UFO Support Price Levels as a reference to select the Put strike could be an efficient manner to determine the desired risk. Choose the Call Option: Pick a call option with a strike price above the current market level, where you believe gains will be limited. The premium received from selling this call helps offset the cost of the put, reducing the overall expense of the setup. Selecting a call with its premium equal to the put price would allow for the Collar strategy to be cost-free (not risk-free). Risk Profile Visualization: A graphical representation of the risk profile will show a flat line of loss limited to the downside by the put and capped gains on the upper side by the call. This visualization helps traders understand the potential financial outcomes and their likelihood. Forward-Looking Trade Idea Considering the recent market dynamics, Nasdaq Futures have been experiencing a range-bound pattern after reaching all-time highs. With current geopolitical tensions such as the recent conflict between Iran and Israel, there's a potential for sudden market movements. Scenario Analysis: Continuation of Uptrend: If the market breaks above the range, selling the covered call may yield limited gains but will provide premium income. Significant Drop: If the market drops due to intensified conflicts, the protective put limits the potential loss, safeguarding the investment. That is knowing that if the market was to rebound after a significant drop, the strategy could end up as profitable as long such rebound would happen prior to the Options expiration date. Trade Setup: Entry Point: Current market price of Nasdaq Futures. Put Option: Select a put option below the current market price. The chart example uses the UFO Support Level located around 18,000. Premium paid for the 18,000 Put is estimated to be 511.79 points * $20 ($10,235.8). Call Option: Choose a call option above the current market price targeting the same level of premium as the premium paid for the put. The 18,300 Call is estimated to provide 522.65 points * $20 ($10,453). Expiration: Options with a 1-3 month expiration to balance cost and protection level. This trade example uses June Expiration which is 67 days away from expiration. As seen on the above screenshot, we are using the CME Options Calculator in order to generate fair value prices and Greeks for any options on futures contracts. This setup aims to utilize the Collar strategy to navigate through uncertain times with controlled risk, taking into account both the potential for continuation of the uptrend and a protective mechanism against a sharp decline. Risk Management Discussion Effective risk management is crucial when trading futures and options. The Collar strategy inherently incorporates risk management by design, but understanding and applying additional risk control measures is essential for successful trading. Key Risk Management Techniques: Limited Risk: By default, the Collar strategy is a limited risk strategy where the risk is calculated by looking at the current Nasdaq Futures price compared to the Put strike price and adding or subtracting the Collar execution price for a debit or credit respectively. Use of Stop-Loss Orders: Although the Collar strategy provides a natural hedge, setting stop-loss orders beyond the put option's strike can provide an extra safety net against gap risk and extraordinary market events. Regular Review and Adjustment: As market conditions change, the relevance of the chosen strike prices may alter. Regularly reviewing and adjusting the positions to ensure they still reflect your risk appetite and market outlook is advised. Diversification: While the Collar strategy protects an individual position, diversifying across different asset classes can further protect the portfolio from concentrated risks associated with any single market. Conclusion The Collar strategy offers Nasdaq Futures traders a structured way to manage risk while maintaining the potential for profit. By capping potential losses with a protective put and limiting gains with a covered call, traders can navigate uncertain markets with increased confidence. This strategy is particularly applicable in volatile markets or during periods of geopolitical tension, providing a buffer against significant fluctuations. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME_MINI:NQ1!Education
by traddictiv
How to Use the Best Klinger OscillatorHow to Use the Best Klinger Oscillator In the ever-evolving world of trading, finding the right tools and indicators to stay ahead of the game is crucial. One such tool that has withstood the test of time and continues to be popular among traders in 2023 is the Klinger oscillator. In this article, we will discuss what the Klinger oscillator is, how it works, and how to use it effectively. What Is the Klinger Volume Oscillator? The Klinger oscillator, also known as the Klinger volume oscillator, is a technical analysis tool used to measure the difference between two exponential moving averages (EMAs) of volume. It was created by Stephen Klinger in the 1980s to address the shortcomings of other tools that failed to capture changes in volume trends. The indicator can be used to identify bullish and bearish momentum, as well as potential trend reversals. It’s plotted as two lines on a chart, one called the “Klinger” and the other known as the “signal”. The Klinger line oscillates according to volume force – a measure of price and volume – while the signal line is typically a 13-period moving average of the Klinger. Klinger Volume Oscillator Formula The Klinger oscillator is calculated by working out an asset’s volume force, and then subtracting a short EMA of volume force from a long EMA. Finally, the signal line is created by determining an EMA of the Klinger. The formula for the indicator is as follows: Step 1: Compute the Volume Force (VF) The first step is determining the Volume Force (VF). To do this, you'll need to calculate the following components: 1.1 Trend: Calculate the difference between the current period's high and low prices (H-L). 1.2 Price Range (PR): Find the range of prices by calculating the maximum of these three values: The absolute value of the current high minus the previous close (H-Cn-1) The absolute value of the current low minus the previous close (L-Cn-1) The current high minus the current low (H-L) 1.3 Volume Multiplier (VM): Determine the Volume Multiplier by using this formula: VM = - 1 1.4 Calculate the Volume Force (VF): Finally, compute the Volume Force using the following formula: VF = VM x Volume Step 2: Calculate EMAs of VF Once you have the VF, you need to compute two EMAs of the Volume Force: A short-term EMA, typically 34 periods A long-term EMA, usually 55 periods Step 3: Determine the Klinger Oscillator Subtract the long-term EMA of VF from the short-term EMA of VF to obtain the indicator value: Klinger oscillator = short-term EMA of VF - long-term EMA of VF Step 4: Calculate the Signal Line To create the signal line, compute the 13-period moving average of the oscillator. The result is two lines: the faster Klinger oscillator and the slower signal. While this formula may seem complicated, the advent of trading software means you don’t need to try and calculate the Klinger oscillator in Excel. In FXOpen’s native TickTrader platform, you’ll find the Klinger indicator and dozens of other tools waiting for you. How to Trade the Klinger Oscillator The Klinger is a versatile tool that can be used in a variety of trading strategies. Here are two common ways to use the indicator while trading: Trading Divergences One way to use it is to look for divergences between the indicator and the price. A bullish divergence occurs when the price makes a new low, but the Klinger makes a higher low. This indicates that there is strong buying pressure despite the price being lower. Conversely, a bearish divergence occurs when the price makes a new high, but the indicator makes a lower high. This indicates substantial selling pressure even with a higher price. Traders could use these divergences to enter trades in the corresponding direction. You can learn more about regular and hidden bullish and bearish divergence here. Trading Crossovers The signal line is usually a 13-period moving average of the Klinger and serves to smooth out the Klinger and provide buy and sell opportunities. When the oscillator crosses above the signal line, it is a bullish sign, indicating that the momentum is shifting from bearish to bullish. Traders can use this sign to enter a long position. Similarly, when the Klinger crosses below the signal, it demonstrates that the momentum is moving from bullish to bearish. This provides an opportunity for traders to go short. How to Confirm Signals It's important to note that traders do not rely solely on the Klinger indicator. It's always a good idea to confirm the signals with other technical and fundamental analysis tools. For example, if the oscillator crosses above the signal line and the price of the security is also above its 200-day moving average (blue), this could be a sign to buy. On the other hand, a potential sell signal emerges if it falls below the slower line and the security's price is also below its 200-day moving average. One feature of the indicator not yet mentioned is the Klinger oscillator 0 line. The 0 level, while less important than divergences or crossovers, may be used to confirm the direction of the trend. While a move above or below 0 doesn’t necessarily precede a bullish or bearish trend, respectively, a bullish or bearish trend can be confirmed when the Klinger closes beyond 0. For instance, you could look for a bearish crossover (Klinger crosses below 0), then confirm the entry when the Klinger falls below 0, and vice versa. Doing so could help to reduce the number of false signals it generates. Limitations of the Klinger Oscillator While the Klinger is a handy tool for spotting trends and incoming trend reversals, it has its limitations. Here are some drawbacks of the indicator: It does give false signals, especially during periods of low or erratic volume. In trending markets, it may be unreliable and generate numerous false signals. The indicator can be affected by sudden spikes or drops in volume, which might distort the oscillator and the signal line. Final Thoughts In conclusion, the Klinger oscillator is an effective technical analysis tool that helps traders identify trends, momentum, and potential reversals in the market. By analysing volume and price data, it provides valuable insights into market dynamics and offers multiple signals, like divergences and crossovers. Now that you have an overview of how to read the Klinger oscillator and how to trade its different setups, it’s time to put your knowledge into practice. You can open an FXOpen account to gain access to over 600 markets alongside low trading fees and lightning-fast execution speeds in the advanced TickTrader platform. Good luck! 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.
Education
by FXOpen
2
3 Reasons Below On Why You Should Not "Bag Hold"Ico Investors are increasing this year Traders in crypto are in for a rude wake-up because there is so many opportunities in this market Watch out for Buying at the wrong time. Remember that too much Greed to keep profit for more than a day will destroy your profits if you buy at the wrong time you will lose all your money this is called bag holding Look for a way to learn more below Buy at the right time Dont follow the hype Jump on the rocket then parachute at the top while taking profits Rocket boost this content to learn more **Disclaimer:** The information provided above or below is for educational and informational purposes only. -- It does not constitute financial advice, and trading always involves -- a risk of substantial losses, regardless of the margin levels -- used. Before engaging in any trading activities, it is crucial to -- conduct thorough research, consider your financial situation, -- and, if necessary, consult with a qualified financial advisor. Past -- performance is not indicative of future results, and market -- conditions can change rapidly. Trading decisions should be made -- based on careful analysis and consideration of individual -- circumstances. The user is solely responsible for any decisions made -- and should be aware of the inherent risks associated with trading in -- financial markets.
OEducation
by lubosi
Swing Mapping Part 3: Trade Management StrategiesWelcome to Swing Mapping Part 3, where we delve into three different approaches to trade management using swing mapping methods. Trade management always represents a trade-off between taking profits early and letting winning trades run. There is no perfect solution, but by understanding different approaches, traders can tailor their strategies to their risk tolerance and market conditions. 1. Aggressive Approach: Exit on Failure at Swing High (Low) The aggressive approach involves exiting a trade when the market fails to hold above a swing high (swing low if short). Method: Once you’ve entered the trade (long), continue to map the swings highs as defined in Swing Mapping Part 1. Should the market fail to break and hold above the swing high, a trader using this strategy may close their trade. This strategy aims for quick profits without giving back gains, capitalising on short-term market movements. Traders employing this strategy often prioritise locking in profits swiftly, especially in volatile or uncertain market conditions. However, by exiting at the first sign of resistance, traders may miss out on potential larger gains if the market continues to move in their favour. Positives and Negatives: Positive: Quick profits may allow for rapid capitalisation on short-term price movements. Positive: Avoids giving back gains by exiting at the earliest indication of a potential reversal. Negative: Potential for leaving profits on the table if the market continues to trend favourably after the exit signal. Example: EUR/USD 1hr: Exit on Failure at Swing High This example on the hourly candle chart illustrates the active approach of taking small profits following failures at a swing high. The first entry takes a retest of support and exits as the market fails to break above prior swing resistance. The second entry then takes a breakout above the swing highs and the aggressive exit approach works well as the market fakes out at swing highs. Past performance is not a reliable indicator of future results 2. Passive Approach: Exit on a Break Below Swing Low Contrary to its name, the passive approach still requires active monitoring of the market. This strategy involves exiting a trade when the market breaks below a swing low, indicating a potential reversal or loss of momentum. Method: Once you’ve entered the trade (long), continue to map the swing lows as defined in Swing Mapping Part 1. Should the market break and close below a swing low, a trader using this strategy may close their trade. While this approach provides a more conservative exit compared to the aggressive approach, it may result in giving back some profits gained during the trade. Traders employing this strategy often prioritise running winning trades over taking quick profits – pairing well with trend following entry techniques. Positives and Negatives: Positive: Gives winning trades more time to run and allows for pullbacks. Positive: Provides a conservative exit strategy, minimising the risk of significant drawdowns. Negative: By definition this strategy will result in giving back profits as the market retraces. Example: S&P 500 5min: Exit on a Break Below Swing Low This example is an intra-day trend continuation trade on the S&P 500 5min candle chart. The entry setup was a simple breakout above a cluster of swing highs in-line with the prevailing trend. We can see that whilst we had several stalls at swing highs, taking a more passive approach and using mapped swing lows worked well when managing this trade. The trade was closed when the market broke and closed below a mapped swing low. Past performance is not a reliable indicator of future results 3. Predictive Approach: Place a Limit Order at Key Swing Resistance (Support) We mentioned in Swing Mapping Part 1 that not all swings are equal. The more bars either side of the swing high or low, the larger the peak or trough in the market – the more significant the turning point. These more significant swings can be used as profit targets. Method: Prior to entering your trade, identify a key swing on your chart – one that has not been broken for a large number of bars. A trader using this strategy would place a limit order to take profits at the highest close prior to the key swing. This strategy allows traders to set a predefined target for profit-taking, reducing the need for continuous monitoring of the market. By setting a fixed order, traders can automate their exit strategy and focus on other aspects of their trading plan. However, the challenge lies in accurately predicting price targets, as objectives may not always align with market movements. With this in mind, this approach can work in tandem with either the aggressive or passive swing exit methods outlined above. Positives and Negatives: Positive: Fixed order placement enables traders to "set and forget" their exit strategy, reducing emotional decision-making. Positive: Allows you to define your risk/reward prior to entering a trade. Negative: Objectives may not always align with market movements, leading to missed opportunities or premature exits if the target is not reached. Example: Tesla Daily: Place a Limit Order at Key Swing Support Here’s an example of the key swing limit order approach to managing trades. Each entry is a short fakeout entry setup that we discuss in depth in Swing Mapping Part 2. We identify the nearest key swing level that we believe the trade could reach. A limit order is then placed at the lowest close nearest the key swing level. Past performance is not a reliable indicator of future results Summary Swing mapping can help you gain a deep understanding of price action and reduces reliance on lagging indicators. It allows you to quickly analyse the strengths of different markets, pinpoint precise entry levels and manage trades in a dynamic way that quickly adapts to changing market conditions. Now you’ve reached the end of this mini-series on swing mapping, we hope you will feel confident enough to put some of the techniques into practice. Happy swing mapping! 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. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
NASDAQ:TSLAEducation
by Capitalcom
How to Use Fibonacci Retracements for CryptoHow to Use Fibonacci Retracements for Crypto Fibonacci retracements have long been used in traditional financial markets. However, with the advent of crypto trading, they’ve also found popularity amongst digital asset traders. In this article, we answer the question “What is Fibonacci in crypto?”, discuss how to trade retracements and offer some strategies you can get started with today. Understanding Fibonacci Retracements Fibonacci retracements are based on the Fibonacci sequence mathematical concept. This sequence was discovered by Leonardo Fibonacci, a 13th-century Italian mathematician, and consists of a series of digits where each number is the sum of the two preceding ones, starting from 0 and 1. The sequence is 0, 1, 1, 2, 3, 5, 8, and so on. The most interesting aspect of this sequence is the so-called Golden Ratio of 1.618. This ratio can be found throughout artificial and natural structures, including the Taj Mahal, tornadoes, and spiral galaxies. This ratio, and complementary ratios, also seem to significantly influence the financial markets. Fibonacci retracement levels are percentages derived from the Golden Ratio. The most widely used retracement levels are 38.2%, 50%, and 61.8%. These levels represent potential support and resistance areas where the price of an asset, like a cryptocurrency, might bounce back or reverse during a trend. Additional retracement levels, like 23.6% and 78.6%, are also sometimes used, although they are considered less significant. As traders, we can use the Fibonacci sequence in crypto trading to identify potential areas where a price may reverse or stall, allowing us to make informed decisions about when to enter and exit a position. The retracement levels can be applied to any timeframe, making them versatile tools for different trading styles, including day trading, swing trading, and position trading. What Does Fib Mean in Crypto? “Fib” is an abbreviated term describing Fibonacci retracements. While there are other types of Fibonacci tools, such as extensions, fans, and spirals, Fibs will almost always refer to retracements. How to Use Fibonacci Retracements for Crypto Trading Using Fibonacci levels in crypto has become increasingly popular in recent years, especially for the world’s largest and most popular digital asset, Bitcoin. The highly volatile nature of cryptocurrencies makes it crucial for traders to identify potential areas of support and resistance where prices may reverse. To find and use your own Bitcoin Fibonacci levels, follow these steps: Plot the Bitcoin Fibonacci retracement levels by selecting an extreme low and high in an uptrend and vice versa. This can be done using the Fibonacci retracement tool available in most charting software, including the TickTrader platform by FXOpen. Observe price action at the 38.2%, 50%, and 61.8% levels. Each level acts as an area that may prompt a reversal. If the price breaks through one level, it can be assumed the trend is continuing and that the asset will move to the next level. When drawing the Fibonacci retracement, it’s essential to follow these two rules: When looking to plot support levels, set the first point at a swing low and the second at a swing high. When looking to plot resistance levels, set the first point at a swing high and the second at a swing low. Optimising Entries and Exits While Fibonacci retracements can help traders pinpoint support and resistance levels, there are a few factors to consider to make the most out of Fibs for crypto trading. Trade with the Trend Like many technical tools, Fibonacci retracements are best applied in line with a broader trend. While you might be looking for a short-term reversal, the setup will have the highest probability of working as expected when it conforms to a higher timeframe trend. In other words, you would want to look for retracements in a larger uptrend and vice versa. Think of the Levels as Areas Like traditional support and resistance levels, Fibonacci retracement levels shouldn’t be treated as the exact point where the price will reverse. It happens occasionally, but the price will often move slightly beyond the level before reversing as expected. It may even stop just short of it. Instead, you can treat them as areas of interest and then wait for confirmation using other tools. Combine Fibs with Other Technical Tools When looking at a crypto Fibonacci chart, it can be tempting to simply set a limit order at one of the significant levels and call it a day. While this sometimes works, there’s no guarantee these areas will remain consistent. It’s better to evaluate the likelihood that the area will hold, or is holding, using other tools. For example, you could look for it to line up with a horizontal support/resistance level or a trendline. Momentum indicators, like the relative strength index (RSI), can also offer insights into whether the trend is weakening and is due for a reversal. Additionally, candlestick and chart patterns can provide extra confirmation. Strategies for Trading Bitcoin with Fibonacci Retracements Let’s take a look at some specific Fibonacci retracement strategies you can use to trade Bitcoin and other cryptocurrencies. Trend Trading with Support and Resistance This approach simply requires identifying a broader trend and waiting for a pullback to one of the key levels that lines up with the horizontal support and resistance level. Entry: Limit orders can be set at the level within the support/resistance area. Alternatively, you could wait for the area to show signs of reversal before entering with a market order. Stop Loss: Stop losses can be set just above (in an uptrend) or below (downtrend) the horizontal area. It should be somewhere that invalidates your idea without being unnecessarily wide. Take Profit: Traders often begin to take profits at the chosen high or low. In the example shown, we could start to take profit at the retracement’s swing low. Relative Strength Index (RSI) Divergences and Fibonacci This strategy combines the popular momentum indicator, the relative strength index (RSI), with the Fibonacci retracement tool. Specifically, we’re looking for divergences that indicate a potential reversal as the price moves to a Fib level. Entry: Wait for a regular divergence to appear at a significant Fibonacci level (right-hand trendline). When the price shows signs of reversal, validating both the retracement and the divergence, traders can enter with a market order. Stop Loss: A stop can be placed above or below the entry candle, depending on the direction of the trade. Take Profit: As with the previous strategy, a good place to consider taking profit is at the high or low of your plotted retracement. As a bonus here, we also have a hidden divergence (the left-hand trendline) that indicates that bullish momentum is likely to happen. Fibonacci and Chart Patterns In this strategy, we use chart patterns to confirm the level is holding. In the Bitcoin Fibonacci chart shown, we’ve used a bullish wedge (a common reversal pattern), but you can use any pattern you prefer. Entry: After observing a chart pattern at a retracement level, you could wait for the pattern to be confirmed with a breakout. Then, you may enter on the retest of the pattern’s trendline. In this example, we could wait for the upper trendline to be broken before waiting for a pullback and entering. Stop Loss: Stops can be placed above or below the pattern’s opposing trendline. Here, we’d place it below the wedge’s bottom trendline. Take Profit: You could take profit at the retracement tool's extreme points. This setup also had extra confirmation with the double bottom before the wedge broke out, providing a high-probability trade. Confirming Fibonacci with Other Technical Indicators Of course, RSI isn’t the only indicator you can combine with Fibonacci retracements. Here are some other popular indicators to use: Moving Averages: Moving averages can offer dynamic support and resistance levels that add extra confluence to a Fib setup. Longer-term averages, like a 50 or 200-period moving average, are often respected. Meanwhile, pairing two faster moving averages can help confirm reversals when they cross over. Bollinger Bands: Bollinger Bands are often used to spot potential reversals. Touches to the band that move away sharply can be a sign of a reversal and, when combined with a retracement level, can make for a decent entry. MACD: MACD is another momentum indicator that can help traders find reversals. When the MACD and signal lines cross at a Fibonacci level, this can indicate a reversal is inbound. Risk Management Techniques As with all trading strategies, risk management is critical to a sustainable system. However, there are a few techniques that are specific to Fib retracements. Look For High-Quality Setups The first step in managing your risk is to only trade the best setups. This means looking for Fibonacci trades that have multiple confirmation factors and waiting patiently to see what you want to see. You might miss some moves this way, but it’ll also keep you out of many losing trades. Set Logical Stop Losses When using Fibonacci retracements in crypto, it can be tricky knowing where to place your stop loss. It’s good practice to consider the wider context of your trade idea and how your stop-loss placement fits into it. If you’re confident that the retracement level will hold or are trading short-term price movements, setting a stop loss beyond the entry level is suitable. Likewise, if you’re less confident that the area will prompt a reversal or are taking a longer-term view of the market, then you may prefer to set your stop loss at the high or low of the Fibonacci retracement. Establish Take Profit Targets in Advance By knowing where you want to exit a profitable trade, you prevent yourself from giving up too much profit by holding on too long. Using the take-profit levels discussed is a good place to start, as are Fibonacci extensions. Develop a Rule-Based System Having clearly defined rules for Fibonacci entries will remove a lot of the guesswork that comes with discretionary trading. It helps you find the best quality setups, avoid impulsive decision-making, and means you can easily adjust your strategy as you progress. Common Mistakes to Avoid When using Fibonacci in crypto trading, traders can sometimes fall into pitfalls. Let’s examine some of the most common errors. Confusing Highs and Lows: As mentioned, selecting a high or low as your first point when plotting the retracement depends on whether you’re looking for support or resistance. Be sure to follow the rules described earlier to avoid any confusion. Confusing Fibonacci Retracements for Extensions: Retracements identify potential support and resistance levels during a price pullback, while extensions project potential target levels beyond the original high or low. Double-check the name of the tool you’re using to avoid getting the two mixed up. Ignoring the Bigger Picture: Always consider the overall market context and trend before making a trade. If the market is strongly trending in one direction, a reversal at a Fibonacci level might be less likely. Misidentifying Significant Price Points: Selecting the correct high and low points is essential for accurate retracement levels. This usually means selecting the most extreme swing highs and lows that are easily visible. Take your time to identify the most significant price points, and be prepared to adjust your points as the market progresses. Closing Thoughts In summary, Fibonacci retracements can make for an excellent addition to your crypto trading arsenal. While they shouldn’t be used in isolation, combining Fibs with other technical tools and indicators can make for an effective strategy. However, the tips, techniques, and strategies described here aren’t exclusive to crypto: they can be applied to whichever market you prefer to trade, like forex, stocks, and commodities. Want to see for yourself? You can open an FXOpen account to gain access to these markets and the advanced TickTrader platform, where you’ll find the Fibonacci retracement tool and the indicators discussed waiting for you. Good luck! *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. 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.
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MFI INDICATOR - STRATEGY FOR TRADINGIndicator MFI — model Incorporating technical indicators into your trading system requires a clear understanding of their fundamental principles. An innovative solution developed by Gene Cuong and Avrum Sudak allows the use of volumetric data in metric analysis. The Cash Flow Index serves as a graphical representation of the "cash ratio", requiring a preliminary derivation of the "cash ratio" and subsequent calculations, including the determination of typical price and cash flow. Similar to the relative strength index, the cash flow index is based on the concept of a “typical price,” calculated as the average of the high, low, and closing prices over a specified period of time. For example, if the daily time frame has a high of 70,000, a low of 65,000, and a closing price of 68,000, the typical daily price is calculated as follows: Typical daily price = (70000 + 65000 + 68000)/3 = 67666 Cash flow is then determined by multiplying typical price by volume: Cash Flow = Typical Daily Price * Volume. Comparing the resulting cash flow with the previous day's cash flow makes it easier to identify positive or negative trends. Positive cash flow indicates an increase, while a negative cash flow indicates a decrease. Cases of equivalent cash flow values are not taken into account. When positive and negative cash flows can be distinguished, the cash ratio is calculated by dividing the former by the latter: Cash Ratio = (Positive Cash Flow / Negative Cash Flow). Using this data, the cash flow index (MFI) can be calculated using the formula: MFI = 100 - (100/(1 + Money Factor)). Gene Cuong and Avrum Sudak have delineated three primary signals employed by the Cash Flow Index: Overbought or Oversold Levels: Traders strategically monitor for overbought or oversold conditions as indicators of unsustainable price extremes, signaling potential market corrections. Bullish and Bearish Divergences: Analysis of bullish and bearish divergences serves as a predictive tool for identifying potential trend reversals. Discrepancies between the direction of price movements and corresponding Cash Flow Index trends can offer valuable insights into shifting market dynamics. Fluctuations at 80 or 20 Levels: Observing fluctuations in the indicator readings around the 80 or 20 thresholds enables traders to discern potential market reversals. These pivotal levels serve as crucial points of reference, guiding traders in assessing market sentiment and making informed trading decisions. Determining overbought and oversold zones using the cash flow index While the relative strength index (RSI) and other oscillator-type technical indicators are capable of identifying overbought and oversold market conditions, the money flow index (MFI) stands out for its effectiveness in this area. Including additional volume information allows the MFI indicator to filter out false signals from overbought and oversold conditions, increasing its reliability, especially for traders looking to counter prevailing trends. Like most momentum indicators, the Money Flow Index ranges from 0 to 100. A Money Flow Index reading below 20 indicates an oversold signal. Conversely, a Cash Flow Index reading greater than 80 suggests an overbought scenario. One limitation of trading based solely on overbought and oversold signals is the inability to counter the current trend merely due to signals generated by the Money Flow Index (MFI). Optimal trading strategy involves exercising patience and waiting for a price action pattern to validate a shift in the prevailing trend before taking a position. By employing this approach, traders can make more informed decisions and reduce the risk of entering positions prematurely based solely on MFI signals. The MFI Indicator and Divergence Beyond its function in pinpointing overbought and oversold conditions, the Money Flow Index (MFI) indicator serves as a valuable tool for detecting divergence within the market. In essence, divergence manifests when the price moves in one direction while the indicator readings depict a contrary trend. Traders regard this occurrence as a strong indication that the price is poised to reverse in alignment with the technical indicator's trajectory. Utilizing the MFI indicator enables traders to readily recognize such signals, whether they manifest as bullish or bearish divergence. Bullish Divergence: Bearish divergence: What Should You Consider? By integrating volume into its mathematical framework, the Money Flow Index is adept at generating highly precise trading signals concerning overbought and oversold market conditions. Additionally, it demonstrates a notable ability to pinpoint emerging divergences within the market. However, like any technical indicator, it possesses inherent limitations. A primary constraint of the Money Flow Index is its propensity to persist in overbought or oversold states for extended durations, potentially leading to false signals. Yet, by crafting a trading strategy that incorporates price action signals, traders can harness the MFI indicator to identify potential reversal zones. Armed with this insight, traders can anticipate shifts in directional price movement with ease and strategize their trades accordingly. Summing It Up: The Money Flow Index stands out as a unique indicator amalgamating momentum and volume within the RSI formula. Its strength lies in its adeptness at identifying potential reversals through overbought or oversold levels, as well as bullish or bearish divergences. Nonetheless, prudent utilization of the Cash Flow Index entails supplementing its readings with additional technical indicators rather than relying solely on its signals.
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A Trader's Tapestry of Strategy, The Importance of DCAIn the grand Cosmic Ballet of Finance, where Celestial bodies of opportunity align in the vast expanse of the market universe, we navigate the Ethereum Vortex with a seasoned Trader’s Poise. Our chart, a Navigator's star map, is a chronicle of strategy, a testament to the art of Dollar-Cost Averaging (DCA), and an epic etched in the annals of digital commerce. Behold the Ethereum chart, now more complex with additional celestial markers, the Red and Green circles, constellations guiding our buying and selling strategies. Each circle, a planet on its orbit, represents a moment in time where we either fuel our rocket’s reserves or initiate a burn to propel profits into the void of realized gains. A deviation of 9%+ becomes our gravitational slingshot, harnessing the market's natural ebb and flow to catapult our portfolio through Space and Time. We acknowledge the cosmic law: Every action has an Equal and Opposite reaction. Thus, we place our DCA markers with precision, ensuring that each purchase, each sale, balances the forces of Risk and Reward. Ethereum, the Grand Monolith in the Cryptoverse, requires a Larger offering for its bounties compared to the more nimble Dogecoin. It demands a higher degree of commitment, yet the potential Edifice we construct with each DCA block could pierce the heavens, promising structures of wealth that stand the Test of Time. With the addition of new Buy and Sell points, our chart becomes a Saga of decision points, a series of If, Then propositions governed by the logic of Financial Prudence and the allure of Potential Prosperity. It is a bridge between the realms of patience and action. In this odyssey, we are reminded of the Alchemists of Yore, turning leaden patience into golden opportunity. We are not just Traders, we are Philosophers pondering the paradox of wealth, its transient nature, yet its potential to bestow lasting impact. Let us then cast our eyes upon this chart, our guide through the Ethereum Vortex, our compass through the storms of volatility. In DCA we trust, and with a 9%+ deviation our Steed, we ride through the valleys and peaks of price action, our course charted, our resolve Unwavering, our Spirits High. "Per Aspera Ad Astra" - Through Hardships to the Stars. May our journey be as Fortuitous as the Ancients who first charted the Constellations by which we now navigate. Happy Trading. T.
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