Ichimoku Cloud: How To GuideHave you ever considered using the Ichimoku Cloud, a powerful and versatile technical analysis tool that goes beyond traditional chart analysis?
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Discover the Ichimoku Cloud, technical analysis tool developed by Japanese journalist Goichi Hosoda in the late 1960s.
This method visually represents support and resistance levels, providing crucial insights into trend direction and momentum.
Let's delve into the key aspects of the Ichimoku Cloud, providing you with insights and skills to take another step up in your trading game.
1. Understanding Ichimoku Cloud
Components of the Cloud:
The Ichimoku Cloud comprises five key elements — Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and the Kumo (cloud). Grasping the role of each component is fundamental to interpreting the cloud's signals.
- Kijun Sen (red line): The standard line or base line, calculated by averaging the highest high and the lowest low for the past 26 periods.
- Tenkan Sen (blue line): The turning line, derived by averaging the highest high and the lowest low for the past nine periods.
- Chikou Span (green line): The lagging line, representing today’s closing price plotted 26 periods behind.
- Senkou Span (red/green line): The first Senkou line is calculated by averaging the Tenkan Sen and the Kijun Sen and plotted 26 periods ahead. The second Senkou line is determined by averaging the highest high and the lowest low for the past 52 periods and plotted 26 periods ahead.
It’s not necessary to memorize the computations; understanding their interpretation is key.
2. Trading Strategies with Ichimoku
Kumo Twists and Turns:
The twists and turns of the Kumo offer valuable signals. A bullish twist occurs when Senkou Span A crosses above Span B, while a bearish twist is signaled by the reverse. These crossovers present entry and exit points.
The Power of Kijun-sen and Tenkan-sen:
The relationship between the faster Tenkan-sen and the slower Kijun-sen offers additional insights. A bullish crossover suggests a potential uptrend, while a bearish crossover may indicate a trend reversal.
Utilizing the Lagging Span:
The Lagging Span (Chikou) acts as a momentum indicator. Confirming its position relative to the price and cloud provides a powerful confirmation tool for trend strength.
3. Practical Tips for Ichimoku Trading
Timeframe Considerations:
Adapt your approach based on the timeframe. Longer timeframes offer a broader market perspective, while shorter timeframes can reveal short-term trends.
Risk Management:
Like any trading strategy, risk management is paramount. Set stop-loss orders, and ensure risk-reward ratios are carefully considered before executing a trade.
Backtesting and Practice:
Before going live, engage in extensive backtesting and paper trading. This will hone your understanding of Ichimoku signals and enhance your ability to interpret them in real-time.
4. How to Interpret Ichimoku Lines
Senkou Span:
- If the price is above the Senkou span, the top line serves as the first support level while the bottom line serves as the second support level.
- If the price is below the Senkou span, the bottom line forms the first resistance level while the top line is the second resistance level.
Kijun Sen:
- Acts as an indicator of future price movement.
- If the price is higher than the blue line, it could continue to climb higher. If below, it could keep dropping.
Tenkan Sen:
- An indicator of the market trend.
- If the red line is moving up or down, it indicates a trending market. If it moves horizontally, it signals a ranging market.
Chikou Span:
- A buy signal if the green line crosses the price from bottom-up.
- A sell signal if the green line crosses the price from top-down.
As a trend-following indicator, Ichimoku can be applied across various markets and timeframes. Emphasizing trading in the direction of the trend, it helps avoid entering the wrong side of the market.
With its combination of support and resistance levels, crossovers, oscillators, and trend indicators, Ichimoku simplifies complex analysis, making it an invaluable tool for traders seeking a comprehensive approach to technical analysis.
Dive into the charts, explore the strategies, happy trading!
Chart Patterns
Me Going Over My 400k Funded Challenge Me Going Over A Lil Of My Fib Master Strategy In Detail And Good Ideas On Future Trades.
Trading View Premium Chart PatternsI just upgraded my Trading View account to Premium so I could get access to the premium chart patterns. I did this over Black Friday so I think it costed a $1 more per month with their deal and they gave me 13 months for the year.
This video goes over the some of the automatic chart patterns and candle indicators that Trading View provides. I think it could be helpful for my trading as it will show me patterns automatically that I might have missed otherwise.
Hope this video helps out as I couldn't see any real videos on this on YouTube.
Market Structure The market moves in two phases; Impulse and Correction.
Impulse is composed of a strong bullish or bearish momentum while
Correction is composed of a sideways move, which is always a serious consolidation.
Trades are taken at the break of the correction
Mentorship, day trading setup 2023Copy this exactly onto your tradingview because its what i have to help you setup trading
How to succeed in trading ✅From the experience I have in trading I have identified 3 pillars on which my success is based. I can't say that one is less important than another, so I try to combine all of them:
1) Psychology - is one of the most difficult aspects to master, which requires a lot of theoretical and practical knowledge, so I recommend first of all to study yourself, after you have managed to identify what kind of person you are, you will gain knowledge from books, videos, trainings that will help you control your emotions when trading. At the same time, this aspect can help you in your daily life.
2) Risk management - due to proper risk management, I managed to become funded. I also understood that in trading it is more important to tend to have a small risk, than a high profit, because greed for money can bring you into a less pleasant situation. I managed to take the account with a risk of 1% per trade and with an RR of at least 1: 2, which therefore showed me that even if I take 6 sls for 10 trades, I still remain profitable.
3) Trading plan - this is the aspect that motivates me to progress, once I have made a trading plan with well-defined goals, I tend to fulfill them. In addition to the purposes, a trading plan should contain the strategy applied, as well as the rules for entering / managing / exiting the transaction.
How to trade Double Tops to the Short Side using 1 hour barsI always ask myself: What's my favorite chart pattern for finding high probability entries? I look at my stats, I look at my various strategies, and I always find I like one type of trade best: Trend Continuation trades using double tops for shorts and double bottoms for longs.
The strategy is simple: Using 1 hour wickless bars, (I'll show you how in the video), identify a trending stock by seeing where price is clearly up or down, then identify a double top or double bottom occurring along the trend. When you have two confirmed tops or bottoms, get short or long, as the case may be. The patterns really do come in all shapes and sizes, but they are best when they occur along a resistance line, be it VWAP, a 20 EMA, or some other. They also can be confirmed by looking at your RSI chart which will indicate clearly two v bottoms for a long entry or two peaks for a shorty entry. Seeing where on the RSI chart these double patterns are forming is also instructive. Longs should show up on the RSI chart as a pair of v bottoms occuring at the bottom of the upper half of the chart, above the 50% line. Shorts should show up on the RSI chart as a pair of peaks at the top of lower half of the chart, just below the 50% line. Because you're using 1 hour bars to find entries, it naturally stands to reason that your setups will trigger at the top of the hour, when there is typically a burst of volume. If your analysis is correct, that volume burst will push your trade in the proper direction within seconds, so if you like instant gratificatrion like I do, you'll enjoy that aspect of trading this way.
Interpreting RSI (Relative Strength Index)The Relative Strength Index (RSI) is a momentum indicator that measures the speed and magnitude of price movements. It is a versatile tool that can be used to identify overbought and oversold conditions, as well as divergences and trend strength.
Overbought and Oversold Conditions
The RSI oscillates between 0 and 100. Traditionally, the RSI is considered overbought when above 70 and oversold when below 30. These levels are not set in stone, and they can vary depending on the security and the market conditions. However, they are a good starting point for identifying potential buying and selling opportunities.
Overbought:
An RSI reading above 70 indicates that the security is overbought, which means that it has been trading up rapidly and may be due for a correction. However, it is important to note that the RSI can stay in overbought territory for an extended period of time before a correction occurs.
Overbought RSI indicator
ETHUSD(Day Chart)
As you can see in the chart, when the RSI indicator hit the 70 level, the price started dropping continuously.
Oversold:
An RSI reading below 30 indicates that the security is oversold, which means that it has been trading down rapidly and may be due for a bounce. However, like with overbought conditions, the RSI can stay in oversold territory for an extended period of time before a bounce occurs.
Oversold RSI indicator
BTCUSD (weekly Chart)
As you can see in the chart, when the RSI indicator hit the 30 level, the price started bouncing from the bottom level.
The RSI indicator has accurately predicted the bottoms of Bitcoin's major bear markets in 2015, 2018, and 2022.
Stay tuned for more updates on this topic.
Regards
Hexa
Divergent TradingDivergent trading is when you compare the movement of a currency pair to the movement of a related indicator. We can see price is making new highs but our volume flow (Moving average) is making lower highs. Consider this a potential reduction in price to come.
How To Trade With Most Accurate & Real Tool in all Market Volume Profile is a technical analysis tool used in financial markets, including the forex market, to analyze the distribution of trading volume over a specified time period. It helps traders identify significant price levels and potential areas of support and resistance. Here are key aspects and information about Volume Profile in the context of forex trading:
Definition:
Volume Profile is a charting tool that displays the trading volume at different price levels over a specified time period.
It creates a histogram on the side of the price chart, showing where the majority of trading activity has occurred.
Calculation:
The volume profile is calculated based on the total volume traded at each price level.
It can be applied to various time frames, such as daily, weekly, or intraday.
Key Components:
Point of Control (POC): The price level with the highest traded volume. It is often considered a significant reference point.
Value Area: The price range where a significant portion (usually 70-80%) of the trading volume occurred. It is divided into the upper and lower value areas.
Interpretation:
High volume nodes indicate areas of strong interest to market participants.
Low volume nodes suggest areas where there is less interest or acceptance by traders.
Traders often look for confluence between Volume Profile levels and traditional support/resistance levels.
Trading Strategies:
Rejection and Acceptance: Traders may look for price rejection or acceptance at key Volume Profile levels.
Breakouts: Volume Profile can be used to identify potential breakout levels where high volume nodes act as support or resistance.
Trend Confirmation: Confirming the strength of a trend by analyzing volume at different price levels.
Intraday Trading:
Day traders often use Volume Profile for intraday analysis, helping them identify levels where significant buying or selling occurred.
Volume at Price vs. Time:
Volume Profile is different from traditional time-based charts. It focuses on the distribution of volume at different price levels rather than the price movement over time.
Software Tools:
Traders often use charting software that includes Volume Profile tools to visualize and analyze volume data effectively.
Limitations:
Volume data in the forex market is decentralized, and the availability of accurate volume information can be a challenge.
Volume Profile should be used in conjunction with other technical analysis tools for comprehensive market analysis.
Education and Practice:
Traders interested in using Volume Profile should educate themselves thoroughly and practice applying it in a demo or simulated trading environment before using it in live markets.
Remember that while Volume Profile is a valuable tool, no single indicator guarantees success in trading. It's important to use it as part of a comprehensive trading strategy and to consider risk management principles. Additionally, the effectiveness of Volume Profile may vary depending on the market conditions and time frames used.
The Visible Range Volume Profile is a specific type of Volume Profile analysis that focuses on the most recent or "visible" price action within a specified time frame. It's a way to zoom in on the current market activity and identify key price levels based on recent trading volume. Here are the key points related to the Visible Range Volume Profile in the context of forex trading:
Definition:
The Visible Range Volume Profile considers only the most recent price action, typically the visible range on the chart.
Time Frame:
The time frame for the visible range can vary, but it is often set to the current trading session or a recent period, such as the last few days.
Calculation:
It calculates the distribution of trading volume within the specified visible range, creating a volume histogram on the chart.
Key Components:
Similar to traditional Volume Profile, it includes the Point of Control (POC) and the Value Area, representing levels where the most significant trading activity has occurred.
Intraday Trading:
Visible Range Volume Profile is particularly useful for intraday traders who want to focus on the most recent market dynamics.
Dynamic Analysis:
It provides a dynamic analysis of the market based on the current conditions, helping traders adapt to changing price structures.
Identification of Key Levels:
Traders use the Visible Range Volume Profile to identify key support and resistance levels, as well as potential breakout or breakdown points.
Confirmation Tool:
It can be used as a confirmation tool for other technical analysis methods, such as trendlines or chart patterns.
Decision Support:
Traders may use the Visible Range Volume Profile to make more informed decisions about trade entries, exits, and stop-loss placements.
Adjustable Parameters:
Traders can often adjust the parameters of the visible range, allowing them to focus on shorter or longer time frames based on their trading preferences.
Integration with Other Indicators:
It is often used in conjunction with other technical indicators and analysis methods for a more comprehensive view of the market.
Real-Time Analysis:
As it focuses on the most recent price action, Visible Range Volume Profile provides real-time insights into the current market sentiment.
Educational Resources:
Traders interested in using Visible Range Volume Profile should educate themselves on its interpretation and application. Many trading platforms and charting tools provide educational resources on this topic.
It's essential to note that while Visible Range Volume Profile can be a valuable tool, it should be used as part of a broader trading strategy, considering other technical and fundamental factors. Additionally, traders should practice using it in simulated or demo trading environments before applying it in live markets.
Using Volume Profile with a fixed range in forex trading involves analyzing the distribution of trading volume within a specific, predetermined price range. This technique helps traders identify important support and resistance levels, potential breakouts, and areas of high and low liquidity. Here's a step-by-step guide on how to use Volume Profile with a fixed range in forex trading:
1. Select a Time Frame and Asset:
Choose a relevant time frame for your analysis, whether it's intraday, daily, or another period. Also, select the specific forex pair you want to analyze.
2. Insert Volume Profile Indicator:
Most trading platforms have a Volume Profile indicator that you can add to your chart. Ensure that the indicator allows you to set a fixed range.
3. Set the Fixed Range:
Specify the fixed range you want to analyze. This could be a specific number of price bars, a percentage of the recent price action, or a fixed price range.
4. Identify Key Components:
Look for the following key components within the fixed range:
Point of Control (POC): The price level with the highest traded volume.
Value Area: The price range where a significant portion of the trading volume occurred, often representing about 70-80% of the total volume.
5. Analyze High and Low Volume Nodes:
Identify areas of high volume (nodes) and low volume within the fixed range. High-volume nodes are potential support and resistance levels.
6. Spot Breakout and Breakdown Levels:
Pay attention to price levels where the Volume Profile shows a concentration of volume. Breakouts or breakdowns from these levels may signal strong market sentiment.
7. Combine with Other Analysis Tools:
Use Volume Profile in conjunction with other technical analysis tools, such as trendlines, moving averages, or support/resistance levels, to strengthen your overall trading strategy.
8. Consider Context:
Take into account the broader market context, news events, and economic data when interpreting Volume Profile within the fixed range.
9. Adjust for Market Conditions:
Be flexible in adjusting the fixed range based on market conditions. In trending markets, you might want to expand the range, while in choppy markets, a narrower range could be more appropriate.
10. Risk Management:
Always incorporate proper risk management principles into your trading strategy. Set stop-loss orders based on the analysis and your risk tolerance.
11. Practice and Refine:
Practice using Volume Profile with a fixed range in a demo or simulated trading environment before applying it to live markets. Refine your approach based on your observations and experiences.
12. Stay Informed:
Stay informed about changes in market conditions, and be open to adjusting your analysis as new information becomes available.
Remember that no single indicator guarantees success in trading, and using Volume Profile with a fixed range should be part of a comprehensive trading strategy. Additionally, market conditions can vary, so it's essential to adapt your approach accordingly.
Understanding the "Dead Cat Bounce" in TradingIn the dynamic world of trading, one peculiar phenomenon that often catches investors' attention is the "Dead Cat Bounce." This term, as bizarre as it sounds, is a crucial concept in technical analysis and market psychology. It refers to a temporary recovery in the price of a declining stock, followed by a continuation of the downtrend. This article delves into the nuances of the Dead Cat Bounce, helping traders recognize and navigate this pattern effectively.
What is a Dead Cat Bounce?
Originating from the saying, "even a dead cat will bounce if it falls from a great height," this metaphor is used to describe a brief and false recovery in a bear market. Essentially, it's a short-lived rally in the price of a stock or an index following a substantial decline, misleading some into believing that the downtrend has reversed.
Characteristics of a Dead Cat Bounce
Precipitating Sharp Decline: Typically, a Dead Cat Bounce occurs after a significant and rapid drop in price.
Temporary Rebound: The stock or index experiences a brief period of recovery, which may be mistaken for a trend reversal.
Resumption of Downtrend: The initial downtrend resumes, often eroding the gains made during the bounce.
Identifying a Dead Cat Bounce
The key challenge for traders is differentiating between a true market recovery and a Dead Cat Bounce. Here are some indicators:
Volume Analysis: A genuine recovery often accompanies increasing trade volumes, whereas a Dead Cat Bounce may occur on lower volumes.
Duration: Dead Cat Bounces are usually short-lived, lasting from a few days to a couple of weeks.
Technical Indicators: Tools like moving averages, RSI (Relative Strength Index), and Fibonacci retracements can aid in identifying these patterns.
Trading Strategies for Dead Cat Bounces
Short Selling: Traders might short sell a stock during a Dead Cat Bounce, anticipating the resumption of the downtrend.
Stop-Loss Orders: Setting strict stop-loss orders can mitigate risks if the bounce turns out to be a genuine reversal.
Patient Observation: Sometimes, the best strategy is to wait and observe the price action for clearer trend confirmation.
Case Studies and Examples
Analyzing past instances of Dead Cat Bounces can be educational. For instance, examining the 2008 financial crisis or the dot-com bubble burst reveals classic examples of this phenomenon.
Conclusion
The Dead Cat Bounce is a fascinating aspect of market behavior, representing the constant battle between optimism and reality in trading. Understanding this concept is not just about recognizing a pattern but also about grasping the underlying market psychology. As always, traders should approach these scenarios with caution, equipped with sound research and a well-thought-out strategy.
XAUUSD Time ZoneRisk management is a crucial aspect of successful trading. It involves implementing strategies and techniques to minimize potential losses and protect your trading capital. Here are some essential tips to help you improve your risk management skills:
1. Define your risk tolerance: Determine how much risk you are comfortable taking on each trade. This will depend on your trading experience, financial situation, and personal preferences. Establishing a risk tolerance level will help you set appropriate position sizes and avoid excessive exposure.
2. Use stop-loss orders: A stop-loss order is an instruction to close a trade if it reaches a certain price level, limiting your potential losses. Place your stop-loss orders at a logical level based on technical analysis or support/resistance levels. This will help you exit a losing trade before it significantly impacts your account balance.
3. Set realistic profit targets: Just as it's important to limit losses, it's equally important to define your profit targets. Determine a reasonable profit target based on market conditions, price patterns, and your trading strategy. Taking profits at predetermined levels helps you lock in gains and avoid the temptation of holding onto winning trades for too long.
4. Diversify your portfolio: Avoid putting all your eggs in one basket by diversifying your trades across different assets, markets, or trading strategies. This helps spread risk and reduces the impact of potential losses from a single trade. Be cautious not to over-diversify, as it may become challenging to monitor and manage all your positions effectively.
5. Use proper position sizing: Determine the appropriate position size for each trade based on your risk tolerance and the distance to your stop-loss level. Avoid risking an excessive percentage of your trading capital on any single trade. Many traders use a fixed percentage of their account balance, such as 1% or 2%, as a general rule for position sizing.
6. Avoid emotional trading: Emotions can cloud judgment and lead to impulsive decisions. Develop a trading plan with predefined entry and exit criteria, and stick to it. Avoid making impulsive trades based on fear, greed, or other emotional factors. Following a disciplined approach will help you make rational decisions and maintain consistent risk management practices.
7. Regularly review and adjust your risk management strategy: As your trading experience grows, regularly review and refine your risk management strategy. Assess the effectiveness of your stop-loss levels, profit targets, and position sizing techniques. Adapt your risk management approach as market conditions change or as you learn new insights.
Remember, risk management is an ongoing process that requires continuous monitoring and adjustment. By implementing these tips, you can enhance your trading skills and protect your account from significant losses.
Strategy Smarts Part 3: Playing the RangeWelcome to our four-part Strategy Smarts series designed to give you some practical trading templates which build on the concepts outlined in our Day Traders Toolbox and Power Patterns series.
In Part 3, Playing the Range we look at strategies for tackling choppy, rangebound markets. These are markets with plenty of noise and randomness – markets that can chop you to pieces if you’re trying to trade breakouts or be rich hunting grounds for those who know how to effectively time reversals.
We’ll run through; what trading ranges look like in real world trading and provide you with simple yet robust techniques for trading them with consistency.
Understanding Trading Ranges
A trading range reflects a market that is in a state of equilibrium – there is a broad balance between buyers and sellers.
In general, trading ranges see prices oscillate sideways around a moving average. In a trading range price behaves like a rubber band, the further it moves away from a moving average, the higher the propensity to snap back and revert to the mean.
Trading ranges occur far more frequently than trends, so it is essential that you know how to identify them in real world conditions, and how to know when the rubber band is stretched enough to tip the probability of success in your favour.
3 Types of Trading Range:
In the real world, markets are messy and full of noise. If you’re expecting your trends to be at perfect 45-degree angles and ranges to ping pong precisely between support and resistance, you won’t be equipped to place many trades.
With this in mind, it is best to think of trading ranges in three broad categories; Box, Expanding, and Contracting. Let’s take a look at the key characteristics of these three types:
1. Box Range
This is your text-book sideways range with clearly defined levels of support and resistance.
However, in the real-world reversals at support and resistance are very messy and therefore it is best to think of the parameters of the box range as broad zones.
Out of the three types of trading ranges, box ranges tend to offer the cleanest trade setups as it is relatively more straightforward to define levels of risk and reward.
Key feature: Support and resistance levels are broadly horizontal.
Top Tip: At the extremes of the range, the distance between the highest close and highest high can define your resistance zone, the lowest close to lowest low can define your support zone.
Example: FTSE 100 1hr Candle Chart
Past performance is not a reliable indicator of future results
2. Expanding Range
As the name suggests, an expanding range occurs when prices are oscillating sideways but swinging to every greater extremes on both sides of the moving average.
An expanding range represents an increase in volatility, making it far harder for traders to define levels of risk and reward than a box range.
Key feature: Support is getting lower and resistance is getting higher.
Top Tip: Use trendlines to map the expansion of the range.
Example: EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
3. Contracting Range
Contracting ranges effectively ‘funnel’ the market into an apex. They represent a contraction in volatility and tend to occur when trends take a pause for breath and consolidate.
A contracting range can often present a prime trading opportunity for trend traders to position themselves within a longer-term trend at attractive levels of risk/reward.
Key feature: The range is getting progressively narrower.
Top Tip: Zoom out and look for a higher timeframe trend. If the market is trending on the higher timeframe, only take trades within the contracting range that are in the direction of the higher timeframe trend.
Example: EUR/USD 4hr Candle Chart
Past performance is not a reliable indicator of future results
Strategies for Playing the Range
Now, let's delve into two robust trading strategies tailored for navigating range-bound markets:
VWAP Bands Day Trade:
Day Traders need to identify a range bound market quickly and then look for trading opportunities at the extremes of the range.
A great tool for doing this is VWAP (Volume Weighted Average Price) which combines both price and volume data to provide a weighted average, reflecting not just where a market has traded but also the volume at each price level.
An upper and lower band can be placed 2 standard deviations above and below the VWAP line. When price moves outside of the bands in a range bound market, probabilities are tipped in favour of mean reversion.
Reversal candle patterns, such as engulfing candles, pin-bar candles, and double-top/bottom’s that form outside of the bands can create the entry trigger. Traders will then target mean reversion – a move back to VWAP.
For more information on trading with VWAP see Day Trader's Toolbox Part 2: VWAP (see link at the bottom of the page).
Example 1: EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
Example 2: Apple (AAPL) 1min Candle Chart
Past performance is not a reliable indicator of future results
Fakeout Swing Trade:
Swing Traders aim to take a ‘clean swing’ of price action out of the market, typically holding trades between 2-5 sessions.
A robust swing trading method in range bound markets is to look for fakeout’s at the extremes of the range.
The term ‘fakeout’ is trading slang for false breakout, the fakeout pattern occurs when price breaches the extremes of the range only to snap back quickly (within one or two candles).
The beauty of the fakeout is that it clearly defines the risk parameters on the trade – stops can be placed above or below the fakeout. Swing traders can choose to hold for a move back to the top of the range, or take partial profits at a defined mid-point or moving average.
Fakeout trades tend to work best in a box range as levels of support and resistance are clearly defined – making it much easier to identify the fakeout.
For more information on the fakeout pattern see Power Patterns: How to Trade the Fakeout (see link at the bottom of the page).
Example 1: GBP/USD Hourly Candle Chart
Past performance is not a reliable indicator of future results
Example 2: FTSE 100 Hourly Candle Chart
Past performance is not a reliable indicator of future results
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.
Continued Learning:
10 POWERFUL INVESTING & TRADING QUOTES OF ALL TIME
Here are powerful quotes of professional traders, investors and experts in financial markets.
Let their words inspire you and help you in your trading journey.
"To succeed in the market, you must learn to think like everyone else and do the opposite." - Sir John Templeton 📈💭💡
"The four most dangerous words in investing are: 'This time it's different.'" - Sir John Templeton ⏳📉🛑
"The more you learn, the more you earn." - Warren Buffett 📚💰📈
"The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money." - Victor Sperandeo. 💪💰🚫🧠
"Investing is not about making predictions, it's about having a plan and sticking to it." - Tony Robbins 📊🔄📌
"The best time to buy a stock is when the blood is running in the streets." - Baron Rothschild 💀🔪💰
"The best investment you can make is in yourself." - Warren Buffett 💼💡💰
"The stock market is not a casino; it's a crooked casino." - Charlie Munger 🎰🎲🏛️
"Losses are part of the game. You can't win every trade." - Martin Schwartz . 📉😔💔
"The fundamental law of investing is the uncertainty of the future." - Peter Bernstein . ⚖️❓🔮
The More I trade, the more I realize how precise and meaningful are these phrases. Take them seriously, and they will help you achieve the financial success.
❤️Please, support my work with like, thank you!❤️
Overtrading Pitfalls: Breaking It DownIn trading, a prevalent pitfall is the tendency to take on an excessive number of positions, driven by the misconception that more trades equate to higher profits. However, trading isn't a lottery; success requires a more strategic approach.
Misguided Profit Expectations:
Traders often fall into the overtrading trap when their profit expectations don't align with market volatility. The temptation to catch multiple moves to meet ambitious goals can lead to unnecessary trades and increased risk.
Working Harder Misconception:
There's a prevalent misconception that success in trading comes from sheer volume — taking more trades equates to working harder. However, the real focus should be on quality trades rather than quantity. Precision over volume is the key.
Conditioning for Better Results:
Traders may be conditioned to believe that increasing the number of trades will automatically lead to better results. This belief can contribute to overtrading tendencies, where the quantity of trades takes precedence over their quality.
Need for Constant Action:
Some traders feel the need for constant activity, thinking that staying engaged all the time is necessary for success. This drive for continuous action can lead to overtrading behaviors, where the quantity of trades becomes more significant than their strategic value.
Lack of Focus:
Having too many open trades simultaneously can weaken a trader's focus. This lack of concentration may result in missed opportunities and emotional decision-making. Quality analysis and execution require a focused, selective approach.
Understanding and overcoming these overtrading pitfalls is crucial for long-term success in the dynamic world of trading. By recognizing the psychological and strategic factors that contribute to overtrading, traders can shift their approach to prioritize quality over quantity, ultimately leading to more informed and successful trades. Remember, it's not about the number of trades but the thoughtful, well-executed ones that make a real impact.
What Traders and Detectives Have in Common 📊🕵️♀️In this article, I want to talk about the interesting similarities between trading and detective work. Like detectives solve mysteries to find the truth, traders explore the market to understand patterns and make smart decisions.
1️⃣ Gathering Clues:
Both trading and detective work rely on the acquisition of timely and relevant information.
Traders stay informed about market news, economic indicators, and patterns, just as detectives gather clues from witnesses, documents, and other sources. In both cases, the quality of information directly impacts decision-making.
2️⃣ Risk Assessment:
Detectives must carefully assess risks and probabilities to navigate the unknown.
Similarly, traders must evaluate market risks, weighing potential rewards against potential losses. Just as a detective gauges the likelihood of various scenarios, a trader assesses market conditions to make calculated decisions that align with their risk tolerance.
3️⃣ Patience and Persistence:
Success in both trading and detective work demands patience and persistence.
Detectives may spend long hours sifting through evidence, and traders may patiently wait for the right market conditions. Like a detective unraveling a case, a trader must persistently analyze data and adapt strategies to changing market dynamics.
🔎 In essence, trading is a financial investigation, where observation, critical analysis, and connecting the dots play a crucial role.
As we navigate the market's complexities, let's embrace the spirit of a detective, ever vigilant and ready to uncover hidden truths that guide our decisions.
Wishing you successful trades and discoveries in your financial journey.
Did I forget any similarities? What are your thoughts?
Also, what would you like me to compare traders to next?
📚 Always follow your trading plan regarding entry, risk management, and trade management.
Good luck!
All Strategies Are Good; If Managed Properly!
~Richard Nasr
"Stop Loss Essentials: Preventing Losses in Uptrends"Hi guys, This is CryptoMojo, One of the most active trading view authors and fastest-growing communities.
Consider following me for the latest updates and Long /Short calls on almost every exchange.
I post short mid and long-term trade setups too.
Let’s get to the chart!
I have tried my best to bring the best possible outcome to this chart, Do not consider financial advice.
Common Reasons Why Traders Lose Money Even in an Uptrend
#Not Setting Stop-Loss:
#Not Conducting Technical Analysis:
#Going against the Trends:
#Following the Herd:
#Being Impatient:
#Not doing Homework or Research:
#Averaging on Losing Position:
Buy low sell high' is the motto. As simple as it sounds, why do most people lose money trading or investing?
There are four major mistakes that most beginners make:
1. Excessive Confidence
This stems from the idea that people think of themselves as special. They think they can 'crack the code' in the stock market that 99.9% of people fail to, and eventually make a living trading and investing. However, taking into consideration the fact that more people lose money in the market, this form of wishful thinking is the same mentality as going into a casino feeling lucky. You may actually get lucky and win big the first few times, but in the end, the house always wins.
2. Distorted Judgements
While simplicity is key, the approach most beginners make in trading and investing are too simplistic, to the extend where it's hard to even call it a trading logic or reason to invest. They spot a few reoccurring patterns within the market, and this is almost as if they discovered fire. It doesn't take long to realize that the "pattern" they spotted was never based on any solid reasoning, or worse, wasn't even a pattern at all in the first place.
3. Herding Behavior
The fundamentals of this is also deeply rooted in a gambling mindset. Beginners are attracted to the idea of a single trade or investment that will make them a millionaire. However, they fail to realize that there is no such thing. Trading and investing is nothing like winning the lottery. It's about making consistent profits that compound throughout time. While people should definitely look for assets that have high liquidity and some volatility , the get-rich-quick mentality drags irrational beginners into overextended/overbought stocks that eventually drop drastically.
4. Risk Aversion
Risk aversion is a psychological trait embedded within all of mankind's DNA. Winning is fun, but we can't tolerate losing. We tend to avoid risk, even when the potential reward is worth pursuing. As such, many beginners take extremely small amounts of profits, in fear that they might close their position at a loss, trading with a terrible risk reward ratio. In the long run, their willingness to not take any risks leads to losses.
Depending on the price action, they also go through seven phases of psychological stages:
- Anxiety
- Interest
- Confidence
- Greed
- Doubt
- Concern
- Regret
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Lack of Discipline
An intraday trader must stick to a proper plan. A full-fledged intraday plan includes profit targets, factors to consider, methods to put a stop loss, and ways to select the right trading hours. The trading plan provides a comprehensive overview of how trading should be executed. Also, you can keep a record of trades executed during the day with the performance analysis of each stock at the end of the day. Such records help you identify the weak areas in your trading strategy and correct them. It is very important to be disciplined as a trader, the proper discipline will help you minimize the losses and maintain your capital.
Not Setting Proper Trading Limits
In intraday trading, the success lies in managing the risk. You should pre-define a stop loss and profit target when entering intraday trading. This strategy itself is an important part of trading discipline and this is where most people fail. For instance, if you incur a loss in the first hour itself, you should shut down the trading terminal for the rest of the day. You should also have an overall capital loss limit in place, it will safeguard you against trading losses.
Compensating for a Rapid Loss
This is one of the common mistakes in the trading community. When a trader incurs a loss, he/she either tries to average a position or overtrades excessively to recover the loss. This further leads to a greater loss and put them into more trouble. Losses are a part of intraday trading, instead of overtrading, it is wise to accept the loss, analyze the strategy and make improvements from the next day.
Heavy Dependency on Tips
Nowadays, there are ample of intraday tips flowing everywhere on the digital media. It is a common phenomenon for a trader to rely on these external tips, however, this needs to be avoided. The best way to learn intraday trading is by gradually learning how to read charts, understanding structures, and interpreting results on your own. Many traders refrain from taking these efforts and because of this, they end up on the losing side. The Beyond App by Nirmal Bang provides deeper insights into the market, the technical research offered by Nirmal Bang is spot on. You can use that research for reference, however, nothing can beat practical experience.
Not Keeping Track of Current Affairs
The external news, events, and tragedies do have an impact on the stock market. Hence, it is important for an intraday trader to keep a track of the Indian as well as global markets. Even the performance of global markets has an impact on the movement of Indian markets. Make your trade after the news or event has been announced, do not try to speculate the market based on the news.
There are even instances when traders do not have any sound trading strategy, they just make decisions based on gut feelings or emotions. One needs to remember that intraday trading in itself is a skill, it is not a gamble, it takes time to develop proficiency, you cannot expect rapid results. The above are some of the major reasons why intraday traders lose money, ensure that you are disciplined enough, stick to a proper strategy, analyze your strategy at regular intervals, and things will fall in place.
we will discuss 3 classic trading strategies and stop placement rules.
1) The first trading strategy is a trend line strategy.
The technique implies buying/selling the touch of strong trend lines, expecting a strong bullish/bearish reaction from that.
If you are buying a trend line, you should identify the previous low.
Your stop loss should lie strictly below that.
If you are selling a trend line, you should identify the previous high.
Your stop loss should lie strictly above that.
2) The second trading strategy is a breakout trading strategy.
The technique implies buying/selling the breakout of a structure,
expecting a further bullish/bearish continuation.
If you are buying a breakout of resistance, you should identify the previous low. Your stop loss should lie strictly below that.
If you are selling a breakout of support, you should identify the previous high. Your stop loss should lie strictly above that.
3) The third trading strategy is a range trading strategy.
The technique implies buying/selling the boundaries of horizontal ranges, expecting a bullish/bearish reaction from them.
If you are buying the support of the range, your stop loss should strictly lie below the lowest point of support.
If you are selling the resistance of the range, your stop loss should strictly lie above the highest point of resistance.
As you can see, these stop-placement techniques are very simple. Following them, you will avoid a lot of stop hunts and manipulations.
What Is a Stop-Loss Order?
A stop-loss order is an order placed with a broker to buy or sell a specific stock once the stock reaches a certain price. A stop-loss is designed to limit an investor's loss on a security position. For example, setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. Suppose you just purchased Microsoft (MSFT) at $20 per share. Right after buying the stock, you enter a stop-loss order for $18. If the stock falls below $18, your shares will then be sold at the prevailing market price.
Stop-limit orders are similar to stop-loss orders. However, as their name states, there is a limit on the price at which they will execute. There are then two prices specified in a stop-limit order: the stop price, which will convert the order to a sell order, and the limit price. Instead of the order becoming a market order to sell, the sell order becomes a limit order that will only execute at the limit price (or better).
Advantages of the Stop-Loss Order
The most important benefit of a stop-loss order is that it costs nothing to implement. Your regular commission is charged only once the stop-loss price has been reached and the stock must be sold.
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One way to think of a stop-loss order is as a free insurance policy.
Additionally, when it comes to stop-loss orders, you don't have to monitor how a stock is performing daily. This convenience is especially handy when you are on vacation or in a situation that prevents you from watching your stocks for an extended period.
4
Stop-loss orders also help insulate your decision-making from emotional influences. People tend to "fall in love" with stocks. For example, they may maintain the false belief that if they give a stock another chance, it will come around. In actuality, this delay may only cause losses to mount.
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No matter what type of investor you are, you should be able to easily identify why you own a stock. A value investor's criteria will be different from the criteria of a growth investor, which will be different from the criteria of an active trader. No matter what the strategy is, the strategy will only work if you stick to it. So, if you are a hardcore buy-and-hold investor, your stop-loss orders are next to useless.
At the end of the day, if you are going to be a successful investor, you have to be confident in your strategy. This means carrying through with your plan. The advantage of stop-loss orders is that they can help you stay on track and prevent your judgment from getting clouded with emotion.
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Finally, it's important to realize that stop-loss orders do not guarantee you'll make money in the stock market; you still have to make intelligent investment decisions. If you don't, you'll lose just as much money as you would without a stop-loss (only at a much slower rate.)
Types of Stop-Loss orders
Fixed Stop Loss
The fixed stop is a stop loss order triggered when a particular pre-determined price is hit. Fixed stops can also be timed-based and are most commonly used as soon as the trade is placed.
Time-bound fixed stops are useful for investors who want to provide the position with a pre-set amount of time to profit prior to moving on to the next trade.
Only utilize time-based stops when positioned sized properly to permit major adverse swings in share price.
Trailing Stop-Loss Order
Trailing order caters to the capital gains protection of an investor, while simultaneously providing a hedge against any unexpected price downturns. It is set as a percentage of the total asset price, and the order to sell is triggered in case market prices fall below the stipulated level. However, in the case of a price rise, the trailing order adjusts automatically in tune with an overall increase in market valuation.
Suppose, in a trailing stop-loss market, an order for execution is set if the price of a security falls below 10% of the market value. Assuming the purchase price is 100 an order to sell the security is executed automatically by an authorised broker if the price falls below 90.
In case the share prices rise to 120, the trailing order stands at 10% of the current market price, which is 108. Hence, if prices consequently start falling after peaking at. 120, a stop-loss order will be executed at 108. It allows an individual to enjoy a capital gain of 8 (108 – 100) on his/her investment corpus.
Stop-Loss Order Vs Market Order
While a stop-loss order performs a sale of underlying securities provided the price falls below a prescribed limit, a market order is issued to a broker to conduct trade (both buying and selling) at the prevailing market price. Stop-loss orders are designed to reduce the risk factor, while market orders aim to increase liquidity in the stock market by eradicating the bid-ask spread difference. A market order is the most basic form of trade order placed in a stock market.
Stop-Loss Order and Limit Order
Limit orders execute a trade of stipulated securities if the price reaches a pre-set value. While a buy limit order facilitates the purchase of any securities if the price falls below the given limit, a sell limit order is executed if the price rises above the value. Limit orders are designed to maximise the profitability of an investment venture by maximising the bid-ask spread. It is in contrast to stop-loss orders, which are implemented only if the price is equal to the limit stated by investors, as a method of minimising losses in a bear market.
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NQ Uptrend Still BullishWhen evaluating whether to take a short or long position, it's crucial to observe current trends. For example, the NQ 4-hour chart maintains its uptrend as it hasn't broken any higher lows. This was evident during a live chat I observed today, where some traders were initiating short positions anticipating a "flush." However, their rationale wasn't clear. Understanding the shift in trends, characterized by breaking higher lows followed by forming lower highs and lower lows, is a key aspect in determining your trading bias across all time frames. Although the 4-hour trend is still strongly bullish, the 1 to 5-minute timeframe may exhibit a "pullback," offering short-term intraday shorting opportunities. However, it's important to be aware that this strategy goes against the dominant bullish trend in a higher time frame and is very high risk.
How to Trade with the Hockey Stick Chart PatternTraders strive to identify structures and indicators that can assist their decisions. One such pattern that has garnered attention is the hockey stick. Whether you are an experienced trader or just starting your journey in the world of trading, understanding this hockey stick effect can be a valuable addition. In this FXOpen article, we will explore what this pattern is, how to spot it, and, most importantly, how to trade it effectively by identifying the hockey stick growth curve.
What Is the Hockey Stick Pattern?
The term hockey stick pattern is used to highlight a significant change or inflection point in a trend or data series. The name comes from the shape of a hockey stick, with its long handle and curved blade. This pattern can refer to a few different concepts depending on the context in which it is used. Here are two common interpretations:
In Finance and Economics: A hockey stick pattern can describe a financial or economic trend that resembles the shape of a hockey stick. In this context, it typically refers to a situation where there is a relatively flat or stable period followed by a sudden and significant upward (or sometimes downward) movement. This formation can be seen in various economic indicators, such as a sudden surge in stock prices.
In Data Visualisation and Business: The pattern is also used to describe a particular shape in data graphs or charts. It's often seen in business presentations, especially related to sales or revenue. In this context, the hockey stick represents a slow or steady start followed by a sharp increase in numbers.
In this article, we will consider the hockey stick trading pattern.
How to Spot the Hockey Stick in the Chart?
Here are some key characteristics:
Gradual Build-Up: The pattern begins with a period of stability or slow development, often represented by a nearly horizontal or slightly inclined line resembling the blade of a hockey stick. Given its shape, it is also known as the “blade phase” of the hockey stick pattern.
Inflection: The most defining feature of the formation is the sudden and steep upward curve that follows the initial flat phase.
Rapid Growth: The final phase of this formation is the hockey stick growth, meaning a continuous upward trajectory and signalling a rapid exponential increase. Usually, there is a surge in trading volume during the sharp uptrend phase, which validates the strength of the formation. This curve signifies an increase in the asset's value, akin to the shaft of a hockey stick.
Duration: This can occur over varying time frames, from days to months, so traders stay vigilant across different intervals.
How to Trade the Hockey Stick Pattern
Trading this formation involves a strategic approach that traders employ to potentially capitalise on the formation's characteristics.
Entry
Traders typically consider entering a position in the “inflection phase,” as it represents an opportunity to enter a trade while the asset's price is still relatively low, but the market signals growth potential.
Take Profit
In trading the hockey stick setup, establishing a take-profit level is vital, but the pattern doesn’t provide specific levels. Market players set this target above the inflection point, considering market conditions and their risk tolerance, as a strategy to secure gains.
Stop Loss
Risk management is pivotal in trading. For the hockey stick formation, the stop-loss placement depends on the entry point. Traders entering during the “inflection phase” often set it below the “blade phase”, typically beneath initial support. If entering during the third phase, they might position the stop loss near the inflection point.
Live Market Example
To better understand how to trade this formation, let's look at a live market example using FXOpen's TickTrader platform.
Suppose you open an FXOpen account and access the TickTrader platform to analyse the daily chart of TSLA stock.
During 2017-2020, the stock had shown flat movement resembling the blade phase of a hockey stick formation. The traders had a notable opportunity to open trades in this phase to receive potential gains. The stock price was $20 at this stage. Had market players believed in the company, they might have considered entering a long position at this stage.
After “blade” years, the growth began in the initial months of 2020. The sudden rise in this stock was witnessed, with stock prices hitting $60 in the early months of 2020. A huge increase of 200% in the stock price was very convincing for traders.
Over time, the stock experienced a slight downtrend followed by the expected sharp upward curve, resembling the shaft of a hockey stick. At this stage of surging growth, the stock price reached $420. Traders that decided to open a buy position at the ‘inflection point’ near $60 must have experienced a 700% gain if they closed the position at ATH of $420.
Limitations of the Hockey Stick Pattern
While the hockey stick formation offers market players valuable insights, it's crucial to understand its limitations. Like all chart formations, the hockey stick can occasionally produce false signals. It's recommended that traders use this pattern in combination with other analytical tools to confirm signals and enhance trading accuracy.
Conclusion
The hockey stick growth chart pattern is a valuable tool for traders seeking to identify opportunities in the global financial markets. By understanding the characteristics of this formation and following a disciplined trading strategy, they can potentially capitalise on significant price increases. However, it's important to remember that no pattern or strategy is foolproof, and risk management is essential to protect capital.
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.
3-Step Rocket Booster StrategyNotice the breaking news before you decide when you trade.
US Stocks according to Reuters are trending up - Watch it in the video for more information
3-Step Rocket Booster Strategy
1-The Candle Stick Chart Pattern
2-Price Action
3-Using The EMA Cross-Over
Disclaimer:Do not buy or sell anything i recommend to you.Do your own research before you trade anything.
Rocket boost this content to learn more.
JUST A REMINDER CHART FOR BEGINNERS
Here are some Educational Chart Patterns JUST A REMINDER CHART FOR BEGINNERS
I hope you will find this information educational & informative.
>Head and Shoulders Pattern
A head and shoulders pattern is a chart formation that appears as a baseline with three peaks, the outside two are close in height and the middle is the highest.
In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal.
>Inverse Head and Shoulders Pattern
An inverse head and shoulders are similar to the standard head and shoulders pattern, but inverted: with the head and shoulders top used to predict reversals in downtrends
An inverse head and shoulders pattern, upon completion, signals a bull market
Investors typically enter into a long position when the price rises above the resistance of the neckline.
>Double Top (M) Pattern
A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs.
It is confirmed once the asset's price falls below a support level equal to the low between the two prior highs.
>Double Bottom (W) Pattern
The double bottom looks like the letter "W". The twice-touched low is considered a support level.
The advance of the first bottom should be a drop of 10% to 20%, then the second bottom should form within 3% to 4% of the previous low, and volume on the ensuing advance should increase.
The double bottom pattern always follows a major or minor downtrend in particular security and signals the reversal and the beginning of a potential uptrend.
>Tripple Top Pattern
A triple top is formed by three peaks moving into the same area, with pullbacks in between.
A triple top is considered complete, indicating a further price slide, once the price moves below pattern support.
A trader exits longs or enters shorts when the triple top completes.
If trading the pattern, a stop loss can be placed above the resistance (peaks).
The estimated downside target for the pattern is the height of the pattern subtracted from the breakout point.
>Triple Bottom Pattern
A triple bottom is a visual pattern that shows the buyers (bulls) taking control of the price action from the sellers (bears).
A triple bottom is generally seen as three roughly equal lows bouncing off support followed by the price action breaching resistance.
The formation of the triple bottom is seen as an opportunity to enter a bullish position.
>Falling Wedge Pattern
When a security's price has been falling over time, a wedge pattern can occur just as the trend makes its final downward move.
The trend lines drawn above the highs and below the lows on the price chart pattern can converge as the price slide loses momentum and buyers step in to slow the rate of decline.
Before the lines converge, the price may breakout above the upper trend line. When the price breaks the upper trend line the security is expected to reverse and trend higher.
Traders identifying bullish reversal signals would want to look for trades that benefit from the security’s rise in price.
>Rising Wedge Pattern
This usually occurs when a security’s price has been rising over time, but it can also occur in the midst of a downward trend as well.
The trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal.
While price can be out of either trend line, wedge patterns have a tendency to break in the opposite direction from the trend lines.
Therefore, rising wedge patterns indicate the more likely potential of falling prices after a breakout of the lower trend line.
Traders can make bearish trades after the breakout by selling the security short or using derivatives such as futures or options, depending on the security being charted.
These trades would seek to profit from the potential that prices will fall.
>Flag Pattern
A flag pattern, in technical analysis, is a price chart characterized by a sharp countertrend (the flag) succeeding a short-lived trend (the flag pole).
Flag patterns are accompanied by representative volume indicators as well as price action.
Flag patterns signify trend reversals or breakouts after a period of consolidation.
>Pennant Pattern
Pennants are continuation patterns where a period of consolidation is followed by a breakout used in technical analysis.
It's important to look at the volume in a pennant—the period of consolidation should have a lower volume and the breakouts should occur on a higher volume.
Most traders use pennants in conjunction with other forms of technical analysis that act as confirmation.
>Cup and Handle Pattern
A cup and handle price pattern on a security's price chart is a technical indicator that resembles a cup with a handle, where the cup is in the shape of a "u" and the handle has a slight downward drift.
The cup and handle are considered a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume. The pattern's formation may be as short as seven weeks or as long as 65 weeks.
>What is a Bullish Flag Pattern
When the prices are in an uptrend a bullish flag pattern shows a slow consolidation lower after an aggressive uptrend.
This indicates that there is more buying pressure moving the prices up than down and indicates that the momentum will continue in an uptrend.
Traders wait for the price to break above the resistance of the consolidation after this pattern is formed to enter the market.
>What is the Bearish Flag Pattern
When the prices are in the downtrend a bearish flag pattern shows a slow consolidation higher after an aggressive downtrend.
This indicates that there is more selling pressure moving the prices down rather than up and indicates that the momentum will continue in a downtrend.
Traders wait for the price to break below the support of the consolidation after this pattern is formed to enter in the short position.
> Channel
A channel chart pattern is characterized as the addition of two parallel lines which act as the zones of support and resistance.
The upper trend line or the resistance connects a series of highs.
The lower trend line or the support connects a series of lows.
Below is the formation of the channel chart pattern:
>Megaphone pattern
The megaphone pattern is a chart pattern. It’s a rough illustration of a price pattern that occurs with regularity in the stock market. Like any chart pattern, there are certain market conditions that tend to follow the formation of the megaphone pattern.
The megaphone pattern is characterized by a series of higher highs and lower lows, which is a marked expansion in volatility:
>What is a ‘diamond’ pattern?
A bearish diamond formation or diamond top is a technical analysis pattern that can be used to detect a reversal following an uptrend; the however bullish diamond pattern or diamond bottom is used to detect a reversal following a downtrend.
This pattern occurs when a strong up-trending price shows a flattening sideways movement over a prolonged period of time that forms a diamond shape.
Detecting reversals is one of the most profitable trading opportunities for technical traders. A successful trader combines these techniques with other technical indicators and other forms of technical analysis to maximize their odds of success.
Technicians using charts search for archetypal price chart patterns, such as the well-known head and shoulders or double top /bottom reversal patterns, study technical indicators, and moving averages and look for forms such as lines of support, resistance, channels and more obscure formations such as flags, pennants, balance days and cup and handle patterns.
Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down the volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/ volume indices and market indicators. Examples include the moving average, relative strength index and MACD. Other avenues of study include correlations between changes in Options (implied volatility ) and put/call ratios with a price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc.
There are many techniques in technical analysis. Adherents of different techniques (for example Candlestick analysis, the oldest form of technical analysis developed by a Japanese grain trader; Harmonics; Dow theory; and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation.
Contrasting with technical analysis is fundamental analysis, the study of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all the underlying fundamental factors. Uncovering the trends is what technical indicators are designed to do, although neither technical nor fundamental indicators are perfect. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.
Trade with care.
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Breakaway Bullish and Bearish Candle Formation
This is a very nice text book example of Break Away Candle formation. if you check NZD/USD pair on Weekly time frame, you will see these three example of Break Away happened over and over again.
Break Away, Bullish consist of three almost the same size candles. First is Bullish then is Bearish and followed by another Bullish on the bottom of Bearish trend.
Break Away, Bearish is exactly the opposite. It happens on the pick of an Up Trend starting with a Bearish candle followed by a Bullish and then a Bearish Candle. They are almost the same size which it will result in impulsively Bearish move.
This is an effective Candle Formation.
