Forex Trader or Forex Gambler: Which One Are You?In Forex trading, it’s crucial to distinguish between a professional approach and a gambling mindset. Often, new traders unintentionally approach the market like gamblers, driven by emotion or the desire for fast profits. However, success in Forex is about being methodical and disciplined, rather than relying on chance.
Let’s explore the key differences between a Forex trader and a Forex gambler:
1. Mindset: Strategy vs. Chance
The Trader: A Forex trader works with a clear strategy, rooted in research and planning. They know that short-term market fluctuations are unpredictable, but over time, a sound strategy can generate positive results. Their approach is logical and systematic, focusing on probability and risk management.
The Gambler: A Forex gambler, by contrast, takes trades impulsively, without a clear plan. They rely on luck or gut feelings, hoping for quick profits. Their actions are often driven by emotion rather than analysis, leading to inconsistent and risky trades.
2. Risk Management: Controlled vs. Reckless
The Trader: Proper risk management is a defining trait of a successful trader. They always know how much they are willing to risk on a trade and use tools like stop-loss orders to limit their downside. They never gamble their entire capital on a single trade, aiming for sustainable, long-term growth.
The Gambler: A gambler often overexposes themselves to risk, betting large portions of their account on a single trade in hopes of a big win. They may also chase losses by increasing their trade sizes, which can result in large losses and a wiped-out account.
3. Emotion: Discipline vs. Impulsiveness
The Trader: Emotional discipline is key to a trader’s success. They stick to their plan and don’t let emotions like fear or greed dictate their actions. They understand that not every trade will be a winner and accept losses as part of the process.
The Gambler: A gambler is highly emotional, letting wins and losses affect their judgment. When they lose, they may become desperate and make rash decisions in an attempt to recover. When they win, they might get overconfident, taking riskier trades. This emotional rollercoaster leads to poor decision-making.
4. Time Horizon: Long-Term Growth vs. Quick Wins
The Trader: Traders focus on the long-term growth of their capital, understanding that consistent profits come with time. They aim for steady returns and have the patience to wait for the right trade setups.
The Gambler: A gambler is in it for quick wins. They’re often driven by the desire to get rich quickly, taking high-risk trades with no regard for long-term consequences. They don’t think about sustainability, and when things go wrong, they often face big losses.
5. Preparation: Research vs. Guesswork
The Trader: Traders spend significant time studying the market, using both technical and fundamental analysis. They understand the factors driving price movements and enter trades based on sound research.
The Gambler: A gambler doesn’t bother with in-depth research. Instead, they rely on guesswork, tips, or simply hope that the market will move in their favor. They don’t consider economic data or market trends, which leaves them exposed to high risks.
6. Patience: Waiting for Setups vs. Overtrading
The Trader: Successful traders know that not every market condition is ideal for trading. They wait for their strategy to signal a high-probability setup and don’t feel the need to be in the market at all times.
The Gambler: Gamblers tend to overtrade, feeling the need to always have an open position. They frequently chase market movements without a clear plan, leading to erratic and impulsive trades. Overtrading increases transaction costs and can erode their capital over time.
Moving Beyond the Gambler's Mentality
Now that you understand the key differences between a trader and a gambler, how can you ensure you’re approaching the Forex market as a trader?
1. Develop a Clear Strategy
A trader follows a well-defined plan based on technical or fundamental analysis. If you’re trading without a system, take the time to develop a strategy that suits your trading style. Your plan should include entry and exit points, risk management, and a clear set of rules to follow.
2. Embrace Risk Management
Risk management is not optional; it’s the foundation of long-term success. Always know how much you’re willing to risk on a trade and use stop-loss orders to protect your capital. As a rule of thumb, never risk more than 1-2% of your account on a single trade.
3. Keep Your Emotions in Check
One of the most challenging aspects of trading is controlling your emotions. Avoid emotional decision-making by sticking to your plan. If you find yourself making impulsive trades out of fear or greed, take a step back and reevaluate.
4. Focus on Long-Term Success
It’s easy to get caught up in the excitement of short-term wins, but remember, successful trading is a marathon, not a sprint. Focus on consistent, incremental gains over time rather than chasing quick profits.
5. Educate Yourself Continuously
The markets are always changing, and as a trader, you should be committed to continuous learning. Read books, follow market news, and study other successful traders. The more you know, the better equipped you’ll be to navigate the markets with confidence.
Conclusion: Which One Are You?
The main difference between a Forex trader and a gambler lies in discipline, preparation, and mindset. While a trader uses strategy, patience, and risk management to grow their capital sustainably, a gambler relies on luck, emotion, and impulsiveness, which leads to inconsistent and often damaging results.
If you find yourself trading on gut feelings, overtrading, or taking on too much risk, it might be time to reassess your approach and shift your mindset toward that of a disciplined trader.
Chart Patterns
Drop Base Drop Pattern: A Technical Analysis PerspectiveDefinition:
The Drop Base Drop pattern is a technical chart pattern that indicates a potential continuation of a downtrend. It consists of a sharp decline in price, followed by a period of consolidation or sideways movement (the base), and then a resumption of the downtrend.
Formation:
First Drop: A significant price decline.
Base Formation: A period of consolidation or sideways movement, often below the 0.5 Fibonacci retracement level of the previous decline.
Second Drop: A continuation of the downtrend, breaking below the base's low.
Trading Implications:
Sell Signal: If the Drop Base Drop forms below the 0.5 Fibonacci retracement level in a downtrend, it suggests a potential continuation of the bearish trend.
Risk Management: Employ stop-loss orders to mitigate potential losses.
Confirmation: Seek additional technical indicators or chart patterns to reinforce the bearish signal.
Key Considerations:
False Breakouts: Be cautious of false breakouts, where the price temporarily breaks below the base's low but then reverses.
Market Conditions: The effectiveness of the pattern may vary depending on overall market conditions and the specific characteristics of the underlying asset.
Individual Stocks: The pattern's reliability can differ between stocks. Analyze multiple timeframes and technical indicators for a more comprehensive assessment.
Conclusion:
The Drop Base Drop pattern can be a valuable tool for identifying potential downtrend continuations. However, it's essential to use it in conjunction with other technical analysis techniques and risk management strategies.
Trading EURUSD | Judas Swing Strategy 05/09/2024At 08:25 EST, we were at our trading desk, eager for opportunities the trading session might offer. We began our session by marking out our trading zones.
After an hour and a half, we observed a sweep of liquidity at the high of the zone, signaling potential selling opportunities in this trading session. Shortly after the liquidity sweep, there was a structural break to the downside, bolstering our confidence in the emerging setup. The next step was to wait for a retracement into the freshly formed Fair Value Gap (FVG).
We have finally seen price trade back into the Fair Value Gap (FVG). After the closure of the candle that retraced into the FVG, we can execute our trade since all the criteria on our checklist for trade entry have been fulfilled.
This trade experienced a drawdown for just five minutes before price began to move favorably in our anticipated direction. Patience is key as we await the trade's result. Whether it results in a win or a loss, we are prepared for either outcome since we have risked only 1% of our account, targeting a 2% return.
Upon reviewing the position, we found it had returned to our entry point. At such a juncture, traders who have risked more than they can afford may panic. However, our comprehensive backtesting data on this strategy reinforces our confidence in the strategy, risk management approach and the importance of trusting the process.
We were unlucky this time as the trade hit our stop loss and we lost 1% on this trade. The Judas Swing strategy is a simple strategy any trader can add to their arsenal. A trader simply needs to be present between 08:30 and 11:00 EST to look for trading setups. While not the "holy grail", this strategy boasts a win rate of approximately 50% and a risk-reward ratio of 1:2
Emerging markets (EEM) - Bear Flag targets $18Back in 2021, I posted about Emerging markets with a title "EEM. Emerging markets could drop within the last leg down"
The plan plays out well so far and I found another educational pattern for you on it today.
The Bear Flag appears in the chart as I spotted it on time. The price is still within the Flag
and breakdown below the downside of the pattern would trigger the continuation of the downtrend after this consolidation.
The target is located at the distance of the Pole subtracted from the downside of the Flag.
$18 is the bottom of the large range and the aim for the Bear Flag.
This is the beauty of the patterns as they match with other type of analysis.
Head & Shoulders pattern: 10 year yield could drop to 2.87%The series of tops shaped notorious Head & Shoulders pattern
on 10-Year Treasury yield (TNX).
The tallest peak is the Head and Shoulders are on both sides.
The Neckline is the support that is built through valleys of the Head.
The price has breached the Neckline this summer triggering the pattern bullish scenario.
The target is calculated by subtracting the height of the Head (from top to Neckline) from
breakdown point on the Neckline. It is located around 2.87%.
Almost 1% down from the current level
Why WAITING on XAU Will pay BIG TIME The charts cover different timeframes of the XAU/USD (Gold/US Dollar) pair, and they reveal several key technical structures and patterns that are useful for trading analysis.
1. Flag Pattern and Breakout (5-Minute and 15-Minute Charts)
- On the 5-minute and 15-minute charts, there is a visible **flag pattern** following a strong upward move (bullish flag). This pattern typically indicates a continuation of the prevailing trend after a consolidation phase.
- The flag's lower trendline (support) and upper trendline (resistance) are marked in yellow. The price consolidated between these lines, and the breakout occurred upwards, confirming the bullish continuation. This breakout could be a potential entry point for a long position, with the stop loss below the flag's lower trendline and a target based on the flagpole's length (the initial strong upward move preceding the flag).
2. Descending Channel and Potential Reversal (1-Hour and 4-Hour Charts)
- The 1-hour and 4-hour charts display a **descending channel** (marked with yellow trendlines). The price recently touched the lower trendline and bounced back, showing signs of a potential reversal.
- If the price continues to break above the upper trendline of the descending channel, it could signal a bullish reversal, providing a possible entry for a long trade. The risk management strategy should include placing a stop loss below the recent low (or the channel's lower trendline) and targeting previous resistance levels or the channel's upper boundary.
3. Broadening Wedge Formation (4-Hour Chart)
- The broader view on the 4-hour chart shows a **broadening wedge pattern**, where the price has been making higher highs and lower lows. This pattern is generally considered a sign of increasing volatility and potential trend reversal.
- If the price breaks above the broadening wedge's upper trendline, this could further confirm a bullish reversal. Conversely, a break below the lower trendline would suggest further downside potential.
4. Support and Resistance Zones (Highlighted on All Charts)
- Several horizontal lines mark significant **support and resistance levels** around $2,507 and $2,532.144, respectively. These levels could serve as potential entry or exit points based on how the price reacts when approaching them.
- Observing how the price interacts with these levels can provide clues for future price action. For example, a sustained move above $2,507 could confirm a bullish sentiment, whereas a rejection or false breakout might suggest the continuation of the bearish trend.
Trading Strategy Recommendations:
1. Flag Pattern (Short-Term Bullish) If looking for short-term trades, consider entering a long position on a confirmed breakout of the flag pattern, with a stop loss below the flag's lower trendline. Target a move equal to the height of the flagpole added to the breakout point.
2. Descending Channel (Potential Reversal):If trading based on the descending channel, a break above the upper trendline could signal a reversal and a potential buying opportunity. In contrast, if the price rejects the upper trendline, consider shorting with a stop above the recent highs and target the lower boundary.
3. Broadening Wedge (Cautious Approach): For traders cautious about volatility, wait for a confirmed breakout from the broadening wedge to determine the trend direction. Enter long if it breaks upwards and short if it breaks downwards, setting stop losses just beyond the breakout points.
4. Support and Resistance Levels (Decision Zones): Use the marked support and resistance zones as decision points. Enter trades based on confirmation signals near these levels, and manage risk by adjusting stop-loss orders accordingly.
By combining these observations with confluence factors such as higher time frame trends, candlestick patterns, and multi-touch confirmations, you can refine your entry and exit points and enhance your trading strategy.
BREAKDOWN & FREE TIPS FROM A PRO FOR ALL *TOWARDS BOTTOM*
Simple trade I flowed with market structure based on a transition that occured on july 8th 2024 that is evident per daily and weekly timeframe which is the momentum timeframe. (thats huge)
After this occured I utilized fibs and my understanding of candlestick structure and supp/res zones and awaited a certain area to break and retest and a beautiful lower high was created and we flowed to tp! brought sl into profit after 20 pips as usual to ensure this would be risk free but not too deep into profit to get stopped out and miss the overall move. IF YOU HAVE ANY QUESTIONS ABOUT ANYTHING ASK BELOW I GOT U! NOW FOR THE TIPS:
* THE MOST CONSISTENT ISSUE I'VE SEEN FROM TRADERS ARE THE FOLLOWING:
1. MARRYING PARTICULARLY TIMEFRAMES (ROBBING URSELF OF THE WHOLE PICTURE)
2. NOT BEING DETAILED AND LAZY. LAZY EFFORT = LAZY RESULTS.
3. NOT UNDERSTANDING WHERE THEY ARE IN MARKET STRUCTURE OR KNOWING PROPER BIAS AT ANY GIVEN POINT
4. TRADING MORE THAN (1 OR 2) PAIRS.
5. BEING UNADAPTABLE TO WHAT HAPPENS AND/OR ALWAYS GUESSING INSTEAD OF USING ACTUAL DATA PRESENTED IN REAL TIME
Forex Day Trading: Setting a Bias for the DayWhen day trading forex, it’s easy for traders to get caught up in the ebb and flow of intraday volatility. This is where setting a daily bias becomes crucial. Having a clear directional bias forms the bedrock of your trading plan, providing a compass to guide your trading decisions throughout the day. It helps maintain focus, reduce emotional trading, and improve consistency. However, it's essential to remember that no bias is infallible. There will be times when the market defies expectations, and recognising when your bias may be wrong is a critical skill for successful trading.
In this article, we’ll explore how to set a bullish or bearish bias for the day, particularly for traders focusing on European trading hours. We’ll use the 5-minute candle chart at 7 a.m. (GMT) as our reference point. By considering factors like prior day's price action, Asian session dynamics, and other technical indicators, you can form a well-rounded view of the market and make more informed trading decisions.
The Importance of Having a Daily Bias
A daily bias provides a structured approach to trading. It acts as a filter, helping you focus only on setups that align with your bias, thus avoiding unnecessary trades. For instance, if your bias is bullish, you’ll primarily look for buying opportunities and vice versa for a bearish bias. This focused approach not only helps in capitalising on the most promising trades but also minimizes losses by avoiding trades that go against your established bias.
Having a bias doesn’t mean sticking to it rigidly. Markets are dynamic, and price action can change quickly. The key is to have systems and checkpoints in place that help you recognise when your bias might be wrong, allowing you to adjust your strategy accordingly. Reassessing your bias before the start of key trading sessions, such as the US open, can also be a good practice to ensure you're aligned with the latest market developments.
Factors to Consider When Setting a Bias
1. Prior Day’s Price Action
Understanding the previous day’s price action provides context for today’s trading. Analyse the following factors:
• Predominant Trend: Was the trend bullish, bearish, or sideways? Identifying the trend helps you align your bias with the existing market momentum.
• Close in Relation to High and Low: Did the market close near the high or low of the day? A close near the high suggests buying strength, while a close near the low indicates selling pressure.
• Point of Control (POC): Using tools like the SVP HD indicator, observe the POC (the price level with the highest traded volume) of the prior day. Is it higher or lower than the previous day’s POC? A higher POC suggests bullish sentiment, while a lower POC indicates bearish sentiment.
2. Asian Session Price Action
The Asian trading session often sets the tone for the early European session. Monitoring the overnight price action provides insights into how market sentiment may have shifted. Consider the following:
• Price Relation to Prior Day’s High/Low: Did the price defend the prior day’s low (bullish) or break above the prior day’s high (bullish)? Conversely, did it reject the prior day’s high or break below the prior day’s low (bearish)?
• Asian Session Range: Identify the high and low of the Asian session. Has a range formed, and if so, is the current price above, below, or within this range? A price above the Asian range suggests bullish momentum, while below suggests bearish momentum.
• VWAP Position: The Volume Weighted Average Price (VWAP) is a key indicator for intraday bias. If the price is holding above the VWAP, it’s a bullish signal. If below, it’s bearish.
3. Bigger Picture Context
While day trading focuses on the short-term, it’s important to consider the broader market context:
• Daily Trend: Is there an established uptrend, downtrend, or sideways market in the daily time frame? While your intraday bias doesn’t need to align with the bigger picture, being aware of the overall market structure helps in making informed decisions.
• Market Structure: Are there key support and resistance levels nearby? Is the market in a breakout or consolidation phase?
Examples of Setting a Bias
Bullish Bias:
If, at the start of the European trading session, the EUR/USD shows a clear bullish trend from the prior day—holding above VWAP and closing near the intraday highs—this can suggest a bullish bias. Further confirmation might come from the Asian session price action showing prices holding above the prior day's high and maintaining a position above VWAP.
EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
Bearish Bias:
Conversely, if the EUR/USD exhibited a consistent bearish trend during the prior day—remaining below VWAP and closing near the lows—this indicates bearish sentiment. If the Asian session showed a brief retracement followed by a break below a key retracement line and VWAP, it would further reinforce a bearish bias.
EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
News Events and Economic Calendar
News events can dramatically affect market sentiment and price action, often causing volatility spikes. Always check the economic calendar before forming your bias. High-impact news, such as central bank announcements, employment data, or geopolitical events, can override technical signals. Be prepared for increased volatility around these times, and consider adjusting your bias or staying on the sidelines to avoid unnecessary risk.
Reassessing Your Bias During the Trading Day
Markets are continuously evolving, and a bias set early in the day may not hold as new information becomes available. It’s a good idea to reassess your bias before the start of the US trading session. The US session often brings a fresh wave of liquidity and can change the market’s direction. By reviewing price action, key levels, and any news events that have occurred, you can decide whether to stick with your initial bias or make adjustments to your trading plan.
Balancing Creativity and Discipline
Setting a daily bias is not an exact science; it’s a blend of art and strategy. Over time, experience will improve your ability to interpret market signals and adjust your bias. Thinking creatively within a structured framework and remaining flexible is a great mindset for day trading. Use your bias as a guide, but be ready to adapt when the market tells you otherwise.
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. 83.51% 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.
Pareidolia in Trading; or seeing what we want to seeIn trading, as in many areas of life, our perceptions are often shaped by our desires and expectations. This phenomenon, where we see patterns or signals that align with our preconceived notions, can be likened to pareidolia—a psychological tendency to perceive familiar shapes or patterns in random or ambiguous stimuli, like seeing faces in clouds or animals in rock formations. In the context of trading, pareidolia can manifest as the tendency to identify market patterns that confirm our biases, regardless of the objective data.
Understanding Pareidolia in Trading:
Pareidolia occurs when traders project their biases onto market charts, interpreting random price movements as meaningful patterns that align with their desired outcomes. For example, a trader might:
- See Patterns That Aren't There: A trader with a bullish outlook might interpret a random series of higher lows as an emerging uptrend, even if the overall market context doesn't support this view. Similarly, a trader expecting a downturn might see every minor pullback as the start of a major reversal.
- Misinterpret Neutral Data: In the desire to confirm a specific outlook, traders may interpret neutral or ambiguous data as supporting their position. This can lead to overconfidence and misguided trading decisions.
- Ignore Contradictory Evidence: Just as pareidolia in everyday life causes us to ignore the randomness of what we see, in trading, it can lead to ignoring data or signals that contradict our desired market outlook. This selective perception can be dangerous, as it prevents traders from making balanced, informed decisions.
The Importance of Objectivity
The key to successful trading is maintaining objectivity. While it's natural to have a market outlook—bullish, bearish, or otherwise—it's essential to base your decisions on the full spectrum of available data, not just the signals that support your bias. Objectivity in trading involves:
- Comprehensive Analysis: Always analyze the market from multiple angles. Use a variety of technical and fundamental tools to get a well-rounded view of the market. Avoid relying on a single indicator or pattern.
- Risk Management: Incorporate strict risk management practices. This includes setting stop-loss orders, managing position sizes, and not allowing one biased interpretation to dictate your entire strategy.
- Journaling and Reflection: Keep a trading journal to document your trades, including your reasoning for entering and exiting positions. Regularly review your journal to identify patterns in your thinking, particularly any tendencies to see what you want to see rather than what is actually there.
- Seeking Alternative Perspectives: Engage with other traders or seek out market analysis that challenges your view. This helps in broadening your perspective and reducing the influence of personal bias.
Overcoming Pareidolia in Trading
To counteract pareidolia and its effects on your trading, consider the following steps:
- Awareness: The first step in overcoming pareidolia is recognizing that it exists. Be aware of your own biases and how they might influence your interpretation of market data.
- Diversification of Analysis: Use multiple sources of information and different types of analysis (technical, fundamental, sentiment analysis) to form a more balanced view of the market.
- Challenge Your Assumptions: Regularly question your assumptions and consider alternative scenarios. This practice can help you remain flexible and adapt to changing market conditions rather than clinging to a biased perspective.
- Adopt a Skeptical Mindset: Be skeptical of patterns that seem too good to be true or that perfectly align with your expectations. This skepticism can protect you from falling into the trap of seeing what you want to see.
Conclusion:
In trading, the tendency to see what we want to see—much like pareidolia—can cloud our judgment and lead to poor decision-making. By acknowledging this bias and actively working to maintain objectivity, traders can improve their ability to make sound, evidence-based decisions. The market is a complex and often unpredictable environment, and the best way to navigate it is with a clear, unbiased perspective that prioritizes facts over wishful thinking.
P.S:
I didn't randomly choose to post this educational piece under the BTC/USD chart on TradingView.
In the case of Bitcoin, pareidolia is something I've encountered quite frequently.
I vividly remember in 2021, when everyone was eagerly expecting BTC to surpass $100k, but instead, it began to decline. The majority of analyses were along the lines of: "BTC has dropped to the 50-day moving average, it’s a great buying opportunity," or "BTC has reached the 100-day moving average, an incredible moment to buy." And then, "It's at some horizontal support, that didn’t work out, so let’s count Elliott waves—whatever it takes to justify that it will reach $100k, $500k, or whatever."
I don't claim to know whether BTC will hit $1 million in the long or very long term. All I know for sure is what the father of modern economics once said: "In the long run, we are all dead."
And no, I have nothing against BTC or the crypto market. To keep things objective, I also have something to say to those who have been predicting BTC at $0 for over ten years, or to those who have been forecasting a market crash for five years straight and then finally shout they were right when the market does drop: "The last person to predict the end of the world will eventually be right."
Have a nice day,
Mihai Iacob
Life of Trader'sAfter Assistant Part Time Trader (Bhupen A My system) unsuccessfully attempts suicide, he recounts his story of the Trader, India, underworld, which he'd been investigating for decades. It begins with the tale of System (Display), a smuggler. Bhupen A to take System down through the gang leader's relationship with a Hardware Toolkit, but his attempt fails. Then a rising gangster, the power struggle is far from over and Bhupen A(Trader) cut his system head..
How to Trade with Hybrid StrategiesHow to Trade with Hybrid Strategies
In today's intricate financial landscape, traders have an array of strategies at their disposal. This article delves into the core methods—technical, fundamental, and algorithmic/quantitative analysis—and introduces the concept of hybrid strategies. Learn how combining these techniques can offer a balanced approach to trading, enhancing decision-making and risk mitigation.
Creating Hybrid Trading Strategies
In the world of trading, there are primarily two schools of thought: fundamental analysis (FA) and technical analysis (TA). Fundamental analysis delves deep into economic indicators such as GDP, inflation rates, and earnings reports, aiming to assess an asset's intrinsic value.
On the other hand, technical analysis focuses on studying past price movements and trading volumes, often through charts, to predict future activity. You can find all the charts and tools necessary for technical trading strategies over in FXOpen’s free TickTrader platform.
While both approaches have their merits, a growing number of traders are blending these methodologies to create what are known as hybrid strategies.
Creating a hybrid strategy involves integrating the predictive elements of both FA and TA. For example, a trader might consider an asset's economic indicators to gauge its inherent value and then use technical tools like Moving Averages or Bollinger Bands to time their entries or exits. The aim is to capitalise on the strengths of each approach while mitigating their individual weaknesses.
Beyond traditional financial markets, the principles of hybrid strategies have been used for cryptocurrencies*. Given the highly volatile and dynamic nature of crypto* assets, a well-crafted crypto* trading strategy often incorporates both fundamental and technical elements.
While fundamental analysis in crypto* trading might involve studying the utility and adoption rates of a specific digital asset, technical analysis frequently employs chart patterns and indicators to gauge market sentiment. Combining the two in crypto* trading methods can offer a more comprehensive understanding of market conditions, allowing traders to better position themselves for potential opportunities while managing risks effectively.
Strategy 1: Overbought/Oversold after News Release
The overbought/oversold after news release strategy capitalises on short-term market fluctuations that occur as a reaction to major economic announcements, using the Relative Strength Index (RSI) to determine whether the price is overbought or oversold. This approach is particularly effective on lower timeframe charts, where quick reversals are more pronounced.
Entry
Traders often wait for a significant economic news release that could impact the market.
Once the RSI indicator crosses back below 70 or above 30, an entry point is typically considered.
Stop Loss
Stop losses are commonly set at the most recent swing high or low to protect against adverse market moves.
Take Profit
Traders usually aim for a risk-reward ratio of at least 1:2. Profits are often taken at established support or resistance levels, depending on the direction of the trade.
In this example, we see the EUR/USD currency pair immediately after the release of US GDP data. The news caused a spike in the pair's price, pushing the RSI above 70, indicating an overbought condition. After the initial excitement, the RSI crossed back below 70, and a retracement followed. Traders using this strategy could have considered this an opportune point for a short position, expecting the price to revert to a mean or proceed downward.
Strategy 2: Interest Rate Differential Pullback
The interest rate differential pullback strategy leverages the disparity in interest rates between two currencies to predict long-term directional bias. By combining this fundamental factor with a technical setup involving 50-period and 200-period EMAs, traders can pinpoint high-probability entry and exit points. This strategy is often most effective on higher timeframe charts such as the 4-hour or daily.
Entry
Traders usually identify a currency pair with a substantial interest rate differential. After a pullback in the prevailing trend, entry is typically considered when a crossover between the 50-period and 200-period EMA appears in the direction of the trend.
Stop Loss
Stop losses are commonly set below recent swing highs or lows. Alternatively, they can be set below or above either of the EMAs, depending on the trade direction.
Take Profit
Traders may choose to exit positions at predetermined support or resistance areas. Another approach is to wait for an opposite crossover of the 50-period and 200-period EMA to signal a trade exit.
Above is a chart of the USD/JPY currency pair when the US interest rate was 2.5% and Japan's rate was -0.1%. Given this rate differential, a long-term appreciation of the pair was expected. On a 4-hour chart, a pullback occurred, and a subsequent crossover of the 50-period and 200-period EMA confirmed the long-term bullish bias. An entry would typically be considered at this point.
Algorithmic Trading and Quantitative Analysis
The advent of sophisticated algorithms has given rise to various automated trading strategies, including those that leverage hybrid approaches. Algorithmic trading strategies can execute a range of actions, from simple buy and sell triggers to complex portfolio rebalancing, all based on predefined criteria that could involve both FA and TA.
For traders who seek a statistical edge, quantitative trading strategies employ complex mathematical models to scrutinise numerous variables, often incorporating elements from both FA and TA. Moreover, advancements in AI algorithmic trading have enabled the creation of self-learning models that adapt to market conditions, further optimising trade execution and risk management. These algorithmic solutions offer a level of efficiency and precision that is difficult to achieve manually.
The Bottom Line
In summary, mastering multiple forms of analysis offers traders a holistic approach to navigating financial markets. No matter what trading approach you follow, be it scalping, swing trading, or trend following, a hybrid strategy is a worthy consideration. To take the first step in implementing these comprehensive trading methods, consider opening an FXOpen account to gain access to a wealth of resources and tools. Happy trading!
*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.
Stock Market Logic Series #10Do you think the above is a coincidence?
There are no coincidences in life - only cause and effect.
You are where you are because of a cause that is bound to physical and natural laws.
The same pressure of physics that works on the airplane wing, or the balloon that wants to push its way up when pressed into water (pool), also works in the stock market.
You just have to KNOW how to SEE it. follow my explanation.
If you follow the price action, you can see clearly where the high-pressure volume comes in, you can't miss it. It is obviously seen.
Then you need to wait for the correction, and you want to see that the correction is demonstrating a low-volume pressure behavior.
When you see this low volume pressure behavior, the stock has DRIED UP.
This DRYING-UP effect is a key indicator of a probable future LIFT and stock movement.
You want to ask yourself the question:
Why the stock is not falling down anymore?
The question of "WHY" is searching for the cause BEHIND the stock movement.
The stock movement is only the effect!
In previous posts, I explained the other LOGIC behind this pattern, and explained why the price should not fall down and with a high probability of going up.
If you read any of the books of Jesse Livermore, he clearly states that you need to "KNOW" that the stock will move your way, first let the market "SHOW YOU" exactly what will happen, and only then you put in a trade.
The KEY CONCEPT in this idea is the DRYING UP OF VOLUME.
When you understand the WHY behind the stock movement, buying and selling are emotionless.
The focus should be only a trading setups that you "KNOW" it is highly probable to move in your expected trade direction. You "KNOW" because you have stock market LOGIC to back it up.
If you want a specific post about Jesse Livermore's trading rules, let me know in the comments.
It is always important to make sure that you have the correct perspective on the stock market, otherwise, you get confused. There is only at every given time only ONE side to the market as Jesse Livermore said, "The RIGHT SIDE". This goes back to my idea, that at every given time the puppet master ONLY buys or sells but NOT BOTH.
Beginner Chart Patterns: Head & Shoulders, Double Tops and MoreWelcome to the world of chart patterns—the place where every price action tells a story. And if you read it right, you might just walk away with profits. In this Idea, we explore the immersive corner of technical analysis where chart patterns shape to potentially show you where the price is going. We’ll keep it tight and break down the most popular ones so you’d have more time to take your knowledge for a spin and look for some patterns (risk-free with a paper trading account ?). Let’s roll.
Chart patterns are the market’s version of geometry paired with hieroglyphics. They might look like random squiggles at first, but once you learn to decode them, they might reveal where the market is headed next. Here are the mainstay chart patterns everyone should start with: Head and Shoulders, Double Tops, and a few other gems.
1. Head and Shoulders: The King of Reversals
First up is the Head and Shoulders pattern—an iconic, evergreen, ever-fashionable formation that traders dream about. Why? Because it’s a reliable reversal pattern that often signals the end of a trend and the beginning of a new one.
Here’s the breakdown: Imagine a market that’s been climbing higher. It forms a peak (a shoulder), pulls back, then rallies even higher to form a bigger peak (the head), only to drop again. Finally, it gives one last weak attempt to rise (the second shoulder), but it can’t reach the same height as the head. The neckline, a horizontal line connecting the two lows between the peaks, is your trigger. Once the price breaks below it, it’s time to consider shorting or bailing on your long position.
And yes, there’s an inverted version of this pattern too. It looks like a man doing a handstand and signals a trend reversal from bearish to bullish. That’s Head and Shoulders—flipping trends since forever.
2. Double Tops and Double Bottoms: The Market’s Déjà Vu
Next up, we have the Double Top and Double Bottom patterns—the market’s way of saying, “Been there, done that.” These patterns occur when the price tries and fails—twice—to break through a key level.
Double Top : Picture this: The price surges to a high, only to hit a ceiling and fall back. Then, like a stubborn child, it tries again but fails to break through. That’s your Double Top—two peaks, one resistance level, and a potential trend reversal in the making. When the price drops below the support formed by the dip between the two peaks, it’s a signal that the bulls are out of steam.
Double Bottom : Flip it over, and you’ve got a Double Bottom—a W-shaped pattern that forms after the price tests a support level twice. If it can’t break lower and starts to rally, it’s a sign that the bears are losing control. A breakout above the peak between the two lows confirms the pattern, signaling a potential bullish reversal.
3. Triangles: The Calm Before the Storm
Triangles are the market’s way of coiling up before making a big move. They come in three flavors—ascending, descending, and symmetrical.
Ascending Triangle : Here’s how it works: The price forms higher lows but keeps bumping into the same resistance level. This shows that buyers are getting stronger, but sellers aren’t ready to give up. Eventually, pressure builds and the price breaks out to the upside. But since it’s trading, you can expect the price to break to the downside, too.
Descending Triangle : The opposite of the ascending triangle, this pattern shows lower highs leaning against a flat support level. Sellers are gaining the upper hand and when the price breaks below the support, it’s usually game over for the bulls. But not always—sometimes, bulls would have it their way.
Symmetrical Triangle : This is the market’s version of a coin toss. The price is squeezing into a tighter range with lower highs and higher lows. It’s anyone’s guess which way it’ll break, but when it does, expect a big move in that direction.
4. Flags and Pennants: The Market’s Pit Stop
If triangles are the calm before the storm, then flags and pennants are the pit stops during a race. These patterns are continuation signals, meaning that the trend is likely to keep going after a brief pause.
Flags : Flags are rectangular-shaped patterns that slope against the prevailing trend. If the market’s in an uptrend, the flag will slope downwards, and vice versa. Once the price breaks out of the flag in the direction of the original trend, it’s usually off to the races again.
Pennants : Pennants look like tiny symmetrical triangles. After a strong move, the price consolidates in a small, converging range before breaking out and continuing the trend. They’re short-lived but pack a punch.
Final Thoughts
To many technical analysts, chart patterns are the best thing the market can do. The secret code, or however you may want to call them, they can give you insight into the dealmaking between buyers and sellers and hint at what might happen next.
Whether it’s a Head and Shoulders flashing a trend reversal, a Double Top marking a key resistance level, or a Triangle gearing up for a breakout, these patterns are essential tools in your trading garden.
So next time you stare at a chart, keep in mind that you’re not just looking at random lines. You’re reading the market’s mind from a technical standpoint. And if you know what to look for, you’re one step closer to cracking the code.
This Simple Strategy Could Make You a Fortune in the Gold Marketprice action of Gold Spot (XAU/USD) in relation to the trendlines and patterns indicated.
Chart Analysis
1. Weekly Flag Trendline:
- The first chart shows a trendline forming a "flag" pattern on a higher time frame (possibly weekly or daily). This flag appears to be a bullish continuation pattern, indicating that after the consolidation within the flag, the price might continue in the direction of the prior trend, which seems to be up.
2. Price Action Inside the Flag:
- Within the flag, there is a period of consolidation marked by the parallel trendlines. The price has been respecting these lines, creating higher lows and lower highs, indicating indecision or preparation for a breakout.
3. Potential Breakout Zones:
- Key breakout zones are marked by the upper resistance of the flag pattern around the 2,530 level and the lower support trendline of the flag around the 2,470 level. A breakout above the upper resistance could signal a continuation of the prior uptrend, while a break below the lower support could indicate a reversal or deeper pullback.
4. Smaller Patterns:
- On the second chart (1-hour time frame), there's a more detailed view of recent price action with a potential bearish flag or pennant forming, suggesting a temporary pullback or consolidation within the larger flag. This smaller pattern appears to be within a trading range bounded by the horizontal support and resistance levels.
5. Key Support and Resistance Levels:
- The charts show horizontal support around the 2,433.301 level, which aligns with a historical low that could serve as a significant support level. Similarly, the resistance level is around 2,530, where the price has repeatedly failed to break above.
6. Current Market Context:
- The price is currently hovering around 2,497, near the middle of the trading range, suggesting indecision. This midpoint could be a neutral zone where the price could move in either direction based on upcoming market momentum or news.
Trading Strategy and Considerations
- Entry Points:
- If considering a bullish scenario, a long entry could be planned near the lower support line of the flag, around 2,470, with a stop loss slightly below the flag's support to manage risk. A breakout above the 2,530 resistance could also provide a good entry point for a continuation of the uptrend.
- For a bearish scenario, a short entry could be considered if the price breaks below the 2,470 support level, confirming a breakdown from the flag pattern.
- Risk Management:
- The proximity of the price to both upper and lower boundaries of the flag pattern provides clear levels for stop placement. This helps in managing risk effectively, keeping losses contained if the trade goes against the initial bias.
- Monitoring Price Action:
- Watch for potential breakouts from the smaller patterns within the flag, as these could provide early signals of the larger move's direction. It would also be essential to keep an eye on volume changes, as increased volume could confirm the validity of a breakout or breakdown.
By aligning your trades with these patterns and key levels, you can take advantage of the potential setups provided by the price action within these consolidating formations. Ensure to adapt to new market conditions and stay disciplined in executing your trading plan.
Quarter Theory: Intraday Trading Mastery - Part 1 IntroGreetings Traders!
In today’s video, we’ll be introducing Quarter Theory Intraday Trading Mastery, a model grounded in the algorithmic nature of price delivery within the markets. We’ll explore candle anatomy and learn how to predict candle behavior on lower timeframes to capitalize on intraday trading opportunities. This model will also help us identify the optimal trading sessions and execute trades with high probability, all while effectively acting on market bias.
This video will focus primarily on the foundational content, with practical examples to follow in the next video. In the meantime, I encourage you to practice these concepts on your own to deepen your understanding.
This video is part of our ongoing High Probability Trading Zones playlist on YouTube. If you haven’t watched the previous videos in the series, I highly recommend checking them out. They provide crucial insights into identifying market bias, which Quarter Theory will help you act on effectively.
I’ll attach the links to those videos in the description below.
Premium Discount Price Delivery in Institutional Trading:
Mastering Institutional Order-Flow Price Delivery:
Quarter Theory Mastering Algorithmic Price Movements:
Mastering High Probability Trading Across All Assets:
Best Regards,
The_Architect
Seasonal Strategies: Trading Natural Gas with a Tactical Edge1. Introduction
Natural Gas Futures (NG1! and MNG1!) hold a significant place in the energy market, acting as a key barometer for both seasonal and macroeconomic trends. These futures contracts are not just tools for hedging energy prices but also present potentially lucrative opportunities for traders who understand the underlying seasonal patterns that influence their movement.
Seasonality is a powerful concept in trading, particularly in commodities like Natural Gas, where demand and supply fluctuations are often tied to predictable seasonal factors.
2. Understanding Seasonality in Natural Gas
Seasonality refers to the predictable changes in price and market behavior that occur at specific times of the year. In the context of commodities like Natural Gas, seasonality is particularly significant due to the cyclical nature of energy consumption and production. Factors such as weather patterns, heating demand in winter, cooling demand in summer, and storage levels contribute to the seasonal price movements observed in Natural Gas Futures.
For this analysis, daily data from November 14, 1995, to August 30, 2024, has been meticulously examined. By calculating the 21-day moving average (representing a month) and the 63-day moving average (representing a quarter), bullish and bearish crossovers have been identified.
3. Analyzing Bullish and Bearish Crossovers
Bullish and bearish crossovers are critical signals in technical analysis, representing points where momentum shifts from one direction to another. In our analysis of Natural Gas Futures, such crossovers provide a clear indication of the monthly and quarterly trends.
The data reveals distinct patterns in the frequency and magnitude of bullish and bearish crossovers across different months:
Bullish Crossovers: Certain months, particularly March, April, and September, show a high number of bullish crossovers. This suggests that these months are historically strong for upward price movements, offering potential buying opportunities.
Bearish Crossovers: On the other hand, months like May, June, October, and November are marked by a higher frequency of bearish crossovers. These periods have historically seen downward price pressure, which could present short-selling opportunities.
The below chart further illustrates these patterns, highlighting the months with the most significant bullish and bearish activity.
4. Key Seasonal Patterns in Natural Gas
The analysis of Natural Gas Futures reveals distinct seasonal patterns that vary significantly from month to month. By understanding these patterns, traders can strategically plan to time their trades by aligning with the most opportune periods for either bullish or bearish movements.
January to February: Mixed Signals
Historically showing a balanced number of bullish and bearish crossovers. This suggests that while there are opportunities for both long and short trades, caution is warranted as the market can be unpredictable during this period.
March to April: Bullish Momentum
We see a shift towards more bullish activity. While there is still some bearish potential, the overall trend favors upward movements. Traders might consider looking for long opportunities during this period.
May to June: Bearish Pressure
The market shows signs of bearish pressure indicating a potential shift in momentum.
July, August and September: Summer Bulls
July and August: The bullish trend tends to be back but with a higher degree of volatility which may involve sudden market reversals.
September: Showing frequent up-moves with strong percentages. This month offers opportunities for traders to re-enter the market on the long side.
October to December: Volatile and Bearish
Bearish momentum and strong down-moves opening the door to shorting opportunities. Traders should be especially cautious in December with very high volatility in both directions.
These seasonal patterns provide a roadmap for traders, highlighting the months that are historically more favorable for either long or short positions in Natural Gas Futures.
5. September Seasonality Analysis: A Potential Buying Opportunity
September has historically been one of the most bullish months for Natural Gas Futures. Despite the common perception that autumn marks a period of declining demand for natural gas as the summer cooling season ends, the data reveals a different story.
Current Market Opportunity
Current Price: With the continuous contract of Natural Gas Futures (NG1!) currently trading around 2.18, the historical trends suggest that this could be a valid entry point for traders looking to capitalize on a potential price rally.
Historical Patterns: September has witnessed some of the most robust bullish activity, with the data showing a clear pattern of price increases. On average, September has seen up-moves of 36.45%, making it a standout month for bullish opportunities.
Trade Setup
Entry Point: Entering the market around the current price on NG1! of 2.18.
Target Price: Based on the historical average up-move of 36.45%, traders could set a target price around 2.98.
Stop Loss: To manage risk, a stop loss could be placed 11.28% below the entry price, around 1.93.
Probability of Success: Historical data suggests a high probability for this trade where 11 out of 13 trades produced bullish moves.
Conservative Approach
For traders seeking a more conservative strategy, setting a target at the UFO resistance level of 2.673 (instead of 2.98) offers a more cautious approach.
6. Trading with a Tactical Edge: Risk-Reward Analysis
The risk-reward ratio compares the potential profit of a trade to the potential loss. In our September example:
Risk: The stop loss is placed 11.28% below the entry price at 1.93, limiting potential downside.
Reward: The target is 36.45% above the entry price at approximately 2.98.
This setup offers a risk-reward ratio of about 1:3.2, meaning that for every point of risk, the potential reward is 3.20 points. Such a ratio is generally considered favorable in trading, as it allows for a greater margin of error while still maintaining profitability over time.
Point Values for Natural Gas Futures
When trading Natural Gas futures, it is essential to understand the point value of the contracts. For standard Natural Gas futures (NG), each point of movement in the price is worth $10,000 per contract. This means that a move from 2.18 to 2.98 represents a potential gain of $8,000 per contract with a potential for risk of $2,500 per contract.
For Micro Natural Gas futures (MNG), the point value is one-tenth that of the standard contract, with each point of movement worth $1,000 per contract. Therefore, the for same trade plan, the potential for reward and risk per contract would be $800 and $250 respectively.
7. Discipline and Emotional Control
Successful risk management also requires discipline and emotional control. It's essential to stick to your trading plan, avoid impulsive decisions, and manage your emotions, especially during periods of market volatility. Fear and greed are the enemies of successful trading, and maintaining a level-headed approach is crucial for long-term success.
8. Conclusion
The analysis of seasonality in Natural Gas Futures reveals a rich landscape of trading opportunities, especially when approached with a tactical mindset that incorporates probability and risk-reward analysis. By understanding the historical patterns that have shaped the market over the years, traders can position themselves to capitalize on the most opportune moments, whether the market is poised for a bullish rise or a bearish decline.
This September, in particular, presents a compelling case for a potential buying opportunity.
Ultimately, successful trading requires more than just identifying patterns—it demands a disciplined approach to risk management, a clear understanding of market dynamics, and the ability to adapt to changing conditions. By integrating these elements into your trading strategy, you can enhance your ability to navigate the complexities of the Natural Gas market and achieve consistent, long-term success.
As you apply these insights to your own trading, remember that while historical data provides valuable guidance, it is not a guarantee of future results. Always approach the market with caution, stay informed, and continuously refine your strategy based on the latest information and market conditions.
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.
Geometry: Using Chords to Predict Trend EndpointsIdentify Key Points :
Start by pinpointing significant highs and lows within the trend. These will be the endpoints of your chords.
Draw Chords:
Connect these significant highs and lows with straight lines (chords). These chords represent potential paths the market might follow.
Analyze Chord Patterns:
Uptrend : Draw chords connecting higher lows to higher highs. This helps visualize the upward momentum and potential reversal points.
Downtrend : Draw chords connecting lower highs to lower lows. This helps identify the downward momentum and potential support levels.
Sideways Trend : In a sideways trend, chords can connect alternating highs and lows, helping to identify consolidation zones.
Looking at the EUR currency index, we can see the chord being used to monitor the trend critical points, lower highs and lower lows, validating a weaker EUR.
Conclusion
Expect a rise in pairs paired with EUR, such as USD, GDP. Keep in mind that it’s also important to validate the strength of the other economies before deciding on a trade.
Transition of Support to Resistance and Vice Versa(Video 6 of 6)During these 6 videos, we explored and analyzed the prevalent trends in the market and how upward and downward trends develop. We introduced methods on how to work with sideways trends.
Additionally, we discussed two scenarios that can enhance the probability of new trend formation.Finally, in this video, we introduced support and resistance zones to enhance your understanding of the formation of market highs and lows and analyzed their relationship with the existing trends.
Thanks for watching!
Video series on the Introduction to Market Structure (Part 5). In this video series, we provide an overview of the formation of highs and lows, and how trends develop in the market. We also introduce and analyze support and resistance zones within charts. Additionally, we introduce a factor that can reinforce the likelihood of forming uptrends and downtrends on the charts.
Video series on the Introduction to Market Structure (Part 4)In this video series, we provide an overview of the formation of highs and lows, and how trends develop in the market. We also introduce and analyze support and resistance zones within charts. Additionally, we introduce a factor that can reinforce the likelihood of forming uptrends and downtrends on the charts.
Trading Lucrative-Heads 'N' Shoulders Patterns : Silver 1 HR
Heads 'N' Shoulders' Patterns can be very lucrative and a pattern to keep in mind every trading day. They work on all time-frames. Often I see market structure price reversals on the 1 minute timeframe all the way down to 10 seconds.
They will be easier to trade on the higher time frames as their price-action can be super-fast on these very low timeframes. Depending on how you apply risk to reward in your trading, they will be more lucrative on the higher timeframes and more reliable because more traders see them on these bigger timeframes right up to weekly and monthly charts.
Here is what you need to know:
* Take advantage of the tradingview 'All Charts' pattern recogniser. This is what most traders including professional-traders would be using because it eliminates subjectivity.
* Draw your neckline from the bottom of left-shoulder across and beyond where the right shoulder comes down (price will be below to the left of the right shoulder & your exact point for the left shoulder will be under & to the right of left shoulder)
* Most often price will in the first instance after the right shoulder is formed, break through the neckline and then retest above the neck line or below the neck line if its a bullish Inverse Head 'N' Shoulders pattern. Seeing this retest occur will give the setup more reliability.
(Note: Price does not always Retest especially if price is selling or buying from a strong resistance or support area, respectively)
* Your trigger to buy or sell is on the retest/retracement above or below neckline, look for an increase in volume and/or a strong reversal candle like a pin-bar or engulfer.
(Your reward is generally the same distance as the neckline below the head)
* I hope this helps in your own trading. Trading is risky. Please don't rely solely on my financial analysis or trade setups.)
Smart Money and the why behind it
I have used @TradingView for near enough 10 years now. What I like about the platform is the simplicity and the tools.
I often get asked about things like strategy or other people's techniques - "What do you think of SMC or this guy or that guy"
Look, when it comes to trading - Liquidity is something very little people understand. Gurus talk about it and draw pretty lines but still fail to break it down as to why it's there in the first place.
"Ah it's where the big boys buy or sell"
so to help visualise this lets use some of these tools here on Tradingview.
Look at my first chart here;
What I have done is jumped up a timeframe and placed a volume profile tool on my chart, then simply used the drawing tool to draw a squiggle around the relevant nodes.
I then dropped back to the smaller timeframe and switched on a couple of indicators to help visualise where the liquidity is.
if you look at the lines 15minutes and 30minutes both in green and cast your eyes to the right, can you see they sit just below (as price is coming from above) to those higher volume nodes from that higher timeframe?
Let's use another tool here on TradingView;
This one is called a fixed range volume profile.
the two blue lines extended out are known as the value area high and low. Often this is set to around 70-75% but I like to reduce that a little. The red line is called a PoC or point of control. This basically means the highest transactional point of the range you fixed.
However, if you look over to the left this time you will see two higher volume nodes (mountains) and therefore look at the 15m and 30m lines again with fresh eyes.
In this next image I have increased the range and dragged it over to include more data. I could write full strategies on this tool alone.
The first thing you should notice is the PoC has now jumped up higher. Think logically about this for a second.
We are seeking lower timeframe liquidity down low and the area of interest and value is showing price was accepted up high.
So, after grabbing liquidity, would we anticipate the price to continue down lower or come back to play in the accepted zone?
This is where a lot of newer traders fail, especially when trading smart money concepts "SMC" for short. They fail to understand the bigger picture.
Another little tool in the same box-set is the Timeprice indicator.
Much like session volume this gives a pretty clean view and of course settings can be adjusted. I like the look on this one, it's very modern. But the real value isn't until you zoom in and zoom in and you see why it's called Time - Price. I'll leave that for another post.
But continuing the theme of this post; look at the clusters of the time price indicator and note where the PoC sits on the 15m liquidity level. Then below the 30m liquidity is the lower side of the value area. Are you starting to see a theme?
In this last image; I have simply highlighted liquidity to keep my chart clean.
You will see candles showing the last buys before the selloff. Then a consolidation under the liquidity - this is basically a Wyckoff structure prior to a mark down move.
We then drop into the liquidity pocket and here is where most SMC traders would be jumping long. We see a very nice little rally, then a large fast drop through the liquidity, this hitting many stops and triggering new short positions.
which is why as these shorts get triggered, you anticipate the pullback - to what level? Well look left and the charts will tell you.
I hope this has opened a few eyes - go away and have a play with these indicators on @TradingView and feel free to aks if you have any questions.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years' experience in stocks, ETF's, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Bitcoin’s Rounded Top [Wyckoff Distribution]: 5 Phases to KnowHello, Trading Community!
Today, we dive into the fascinating world of the Wyckoff Distribution model as it applies to Bitcoin's current market structure. Please remember that this article is purely for educational purposes and is not intended as trading advice.
While we explore potential scenarios, including the possibility of Bitcoin heading down to $30,000 or even $25,000, these claims are speculative and should be considered hypothetical.
The Wyckoff Distribution Model: A Roadmap for Market Tops
The Wyckoff Distribution model offers a comprehensive framework for understanding how major market players distribute their holdings before a significant downturn. It is divided into several phases:
Phase A: The market begins to show preliminary signs of selling pressure after an extended uptrend. This is the first hint that the balance of power is shifting from buyers to sellers.
Phase B: The market enters a consolidation phase, moving sideways as large investors gradually distribute their positions.
Phase C: A deceptive breakout, known as the Upthrust After Distribution (UTAD), occurs here, often trapping unsuspecting retail traders.
Phase D: The onset of a decline, marked by clear Signs of Weakness (SOW), indicates that the distribution phase is nearing its end.
Phase E: The final phase, where the market confirms the distribution and continues to fall, marking the completion of the process.
Breaking Down Bitcoin's Key Price Points
Let's take a closer look at the crucial price points that have defined Bitcoin's current structure within the Wyckoff Distribution model:
Buying Climax (BC) - $73,660
This is the pinnacle of buying activity, where demand reaches its peak before supply starts to dominate. For Bitcoin, this level marked the highest point in the current cycle before a significant sell-off began.
Automatic Reaction (AR) - $60,795
Following the Buying Climax, the market experienced an Automatic Reaction—a sharp drop as sellers stepped in. This level is critical as it signifies the start of the distribution process.
Upthrust (UT) - $71,180
The Upthrust represents a rally that tests the resistance near the Buying Climax. However, it fails to sustain those levels, hinting that the market's upward momentum is weakening.
Upthrust After Distribution (UTAD) - $71,680
The UTAD often serves as a bull trap, where the price makes a final push above the resistance only to quickly reverse. This move confirms that distribution is taking place.
Sign of Weakness (SOW) - $54,344
After the UTAD, the market drops significantly, signaling a clear Sign of Weakness. This level demonstrates that sellers are gaining control, pushing the price to new lows.
Last Point of Supply 1 (LPSY 1) - $70,040
The first Last Point of Supply (LPSY 1) is a weaker rally that fails to reach previous highs. This is a key indicator that the market's bullish momentum is fading, and distribution is nearing completion.
Last Point of Supply 2 (LPSY 2) - $65,105
Currently, Bitcoin is in Phase E, at the LPSY 2 point. This level is crucial as it typically marks the final confirmation of distribution before a sustained downtrend.
Navigating Phase E: The Final Act of Distribution
As Bitcoin navigates through Phase E, the LPSY 2 level becomes a focal point. This phase is characterized by further price declines as the market confirms the distribution. Here’s what to watch for:
Lower Highs and Lower Lows: Expect the price to continue forming lower highs and lower lows, reinforcing the bearish trend.
Volume Patterns: During this phase, volume analysis becomes critical. Look for decreasing volume on upswings and increasing volume on downswings, which confirms the presence of distribution.
Final Thoughts
The Wyckoff Distribution model provides a structured way to understand how markets transition from bullish to bearish trends. With Bitcoin currently exhibiting a Rounded Top structure and sitting at LPSY 2 in Phase E, the evidence suggests that we may be on the cusp of further declines. By staying vigilant and analyzing key price levels and volume patterns, traders can better position themselves to navigate this challenging market environment.
In this complex market phase, understanding the underlying forces at play can be the difference between protecting your capital and being caught off guard by the next big move.
Stay tuned for more!