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Chart Patterns

An Interesting View of the Big 4Sometimes it helps to zoom out and look at these names from a distance. we look at a view that's totally different from the daily or 30min charts we're staring at all day long, to just break away from the daily noise. This is a view of my "big 4" - looking at ==================================== * weekly chart, Renko, $1 blocks * 1 Year of data * Most common moving averages (showing 10, 20 and 50) * lower indicators: Relative Strength, Qtrly EPS and Qtrly Revenue (in that order top to bottom) What do you see? Any observations stand out if you're trading these big 4 names? Feel free to capture comments and observations below. What to look for in this broader view? * Short, mid and long term price trends * compare current price level to 1-year ago (or the peak before the bear market) level * Revenue and EPS trends for the last 4 quarters * breaking out (or below) the blue line (50MA) * potential for price upside (psychologically - where is current price from 52wk highest & lowest levels) * Which names are making new (13wk) RS highs or lows versus the market (these are shown by the blue/orange circles on the RS indicator) * .... others? My view? I'm looking at trading (and already have positions in) MSFT and GOOG - looking for an entry in AMZN, and putting AAPL on the side for now until it shows better fundamentals .. Another point here, these charts may show all 4 names are over-extended... so when we trade them, we need to be careful with our stops.. there's always the possibility market moves back into bearish sentiment from these levels.. agree ? Stay safe and green lines to you.
NASDAQ:GOOGEducation
by RedKTrader
1
MASTERING MARKET STRUCTURE : BOS, CHOCHBreak of Structure: This term is used in trading and technical analysis to describe a significant change in the price action of an asset. It occurs when the established pattern of higher highs and higher lows (in an uptrend) or lower highs and lower lows (in a downtrend) is disrupted, indicating a potential change in market sentiment and trend direction. Examples of Break of Structure: You can find examples of "break of structure" in both bullish and bearish movements. In a bullish scenario, a "break of structure" occurs when a new Higher High (HH) is formed, surpassing the previous High (H). In a bearish context, it happens when the price forms a new Lower Low (LL) below the previous Low (L), indicating a potential shift in market sentiment and trend direction. Shift in Structure : Sometimes, a "break of structure" leads to a more profound change in market character, referred to as a "Shift in Structure." This often involves a transition from a bullish to a bearish trend or vice versa. Change of Character (CHOCH): The first instance of a significant shift in market sentiment and trend direction is termed "Change of Character" (CHOCH). This emphasizes the unique nature of the initial change. Break of Structure (BOS): Subsequent occurrences of a similar shift in market sentiment are labeled as "Breaks of Structure" (BOS). These serve to differentiate the first significant change from those that follow. These concepts are vital in trading and technical analysis as they help traders identify changes in market sentiment, adapt to evolving trends, and make informed trading decisions. Recognizing a "break of structure" and understanding when it leads to a "shift in structure" is essential for effective trading.
Education
by BlackWatch01
The Art of Trading: Parallel Between Master Artists and Traders The world of trading, much like the realm of art, is filled with uncertainty, complexity, and the need for creativity. Both traders and artists embark on journeys of discovery, seeking to master their crafts and find a unique approach in their respective fields. Without further due, let’s delve into the fascinating parallels between the practices of famous artists and the strategies employed by successful traders, uncovering lessons that can be applied to excel in the volatile world of trading. 1. The Picasso Perspective: Pablo Picasso, a pioneer of modern art, was never afraid to take risks and break away from conventional artistic norms. His innovative spirit led to the creation of Cubism, a radical departure from traditional art forms. Trading Lesson: Just as Picasso embraced risk to innovate in art, traders should cultivate a willingness to take calculated risks and explore unconventional strategies. The key is to manage risk effectively, ensuring that potential rewards justify the risks taken (we would strongly encourage 1% risk with risk/reward ratio of 1:3.5+). 2. The Van Gogh Paradox: Patience in the Midst of Turbulence Vincent van Gogh’s life and work exemplify the importance of patience and perseverance. Despite facing rejection and lack of recognition during his lifetime, Van Gogh continued to paint, ultimately leaving behind a legacy of masterpieces. Trading Lesson: We can learn from Van Gogh’s unwavering commitment to his art, understanding that success in trading often requires patience and resilience. Even in turbulent markets, maintaining a long-term perspective and sticking to one’s trading plan can lead to eventual success. Although it is pretty common to see backlash from family and friends, if you stick to your goals and passion, there is no doubt you can be the next Van Gogh of trading. 3. The Da Vinci Code: Leonardo da Vinci, a true Renaissance man, was known for his disciplined approach to art and his insatiable curiosity. He meticulously studied various subjects, from anatomy to aerodynamics, to enhance his artistic abilities. Trading Lesson: Traders can draw inspiration from Da Vinci’s disciplined nature and commitment to continuous learning. Staying informed about market trends, refining trading strategies, and maintaining discipline in executing trades are crucial for trading success. As cliché as it sounds, consistency is the key. Creating the trading plan is not that hard, sticking to it is what makes the real difference. 4. The Monet Method - The Beauty in Patterns and Trends: Claude Monet, a founding father of Impressionism, was renowned for his ability to capture the subtle nuances of light and color, often painting the same scene multiple times to depict different lighting conditions. Trading Lesson: Just as Monet focused on patterns and trends in his artwork, traders should develop a keen eye for recognizing market patterns and trends. Technical analysis can be a powerful tool in a trader’s arsenal, helping to predict future price movements based on historical patterns. 5. The Matisse Approach - Simplicity and Clarity: Henri Matisse was known for his use of bold colors and simple shapes, stripping away unnecessary details to focus on the essential elements of his compositions. Trading Lesson: In trading, simplicity can be a virtue. Traders can learn from Matisse’s approach by simplifying their trading strategies, focusing on key indicators, and avoiding unnecessary complexity. A clear and straightforward trading plan can lead to more consistent results. 6. The Michelangelo Mindset - Mastery Through Practice: Michelangelo, one of the greatest artists of all time, spent countless hours perfecting his craft, from sculpting masterpieces like David to painting the Sistine Chapel ceiling. Trading Lesson: Trading mastery, much like artistic mastery, requires extensive practice and dedication. Traders should commit to honing their skills, practicing their strategies, and learning from both successes and failures. The journey to trading excellence is a marathon, not a sprint. Try having small positive months in a row, instead of 1 month with +100% return and account blown right after. 7. The Pollock Principle - Embracing Uncertainty: Jackson Pollock, famous for his abstract expressionist drip paintings, embraced randomness and uncertainty in his creative process, allowing the paint to fall where it may. Trading Lesson: The financial markets are inherently uncertain, and traders must learn to embrace and navigate this uncertainty. Developing a robust risk management strategy and maintaining a balanced portfolio can help traders manage uncertainty and protect their capital. As you have probably heard from many other specialists: “Trading is the game of probability”. 8. The O’Keeffe Outlook - A Unique Perspective: Georgia O’Keeffe is celebrated for her distinctive style and her ability to see beauty in the simplest of forms, often magnifying flowers and other natural elements in her artwork. Trading Lesson: Developing a unique trading perspective can give traders an edge in the markets. Traders should strive to think independently, conduct their own analysis, and avoid getting swayed by the crowd. A unique and well-informed perspective can lead to more profitable trading decisions. There is nothing wrong with being inspired by a post made by a well-known TradingView author, but that shouldn’t prevail over your own common sense and judgement. 9. The Warhol Way: Capitalizing on Trends: Andy Warhol was a master of identifying and capitalizing on cultural trends, turning everyday objects like Campbell’s soup cans into iconic works of art. Trading Lesson: Identifying and capitalizing on market trends is a key skill for traders. By staying attuned to economic indicators, news events, and market sentiment, traders can position themselves to profit from prevailing trends. Just as Warhol transformed ordinary objects into valuable art, traders can turn market movements into trading opportunities. Don’t fight the trends, it’s a losing battle you don’t want to be a part of. In the fast-paced world of trading, the ability to adapt to changing market conditions is vital. Put the ego aside, if the trade is going against your initial plan, close it, reevaluate, and make proper adjustments. If you made it all the way here, we would like to thank you for taking the time and reading our write-up all the way and we hope you have a wonderful trading week ahead!
BITSTAMP:BTCUSDEducation
by Investroy
1
Three White SoldiersGreetings, traders! Today, let’s dive into a powerful candlestick pattern: the Three White Soldiers. This pattern, often regarded as a bullish signal, can provide valuable insights. Understanding the Three White Soldiers Pattern: The Three White Soldiers pattern is identified by three consecutive bullish candles, symbolizing a robust influx of buying pressure. When these candles appear in a sequence, it suggests a shift in market sentiment from bearish to bullish. Key Characteristics: Bullish Momentum: The pattern signifies a strong uptrend, indicating a potential continuation of the existing market trend. Candlestick Size: Pay attention to the size of the candles. In this pattern, large-bodied candles with minimal wicks reflect substantial buying activity. This emphasizes the dominance of buyers in the market. Volume Confirmation: Volume indicators on charting platforms can validate the pattern. An uptick in volume during the formation of the Three White Soldiers further strengthens its significance. Trading Strategies with the Three White Soldiers Pattern: Confirmation with Volume: Ensure the pattern is supported by increased trading volume, affirming the authenticity of the bullish move. Combine with Other Indicators: Enhance your trading strategy by integrating the Three White Soldiers pattern with trend lines, Fibonacci retracement levels, or other technical indicators. This synergy can provide a more comprehensive view of the market. Wait for Confirmation: Patience is key. Wait for the bullish candles to close before considering the pattern confirmed. This approach reduces the risk of false signals. Consider Timeframes: Analyze the pattern across multiple timeframes. A Three White Soldiers formation on higher timeframes (such as daily or weekly charts) often indicates stronger bullish potential. Risk Management and Trade Execution: Set Stop-Loss: Establish stop-loss below first candlestick of the Three White Soldiers. Diversify Your Trades: Avoid over-concentration in a single asset. Diversifying your trades across different instruments can mitigate risks associated with individual market volatility. By combining this pattern with meticulous analysis, strategic planning, and risk management, traders can enhance their overall trading prowess. Happy trading, and may the markets be ever in your favour!
Education
by Vestinda
Trading with Head and Shoulders patternUsually the head and shoulders pattern perform at the end of channel up as a sign of a reversal trend. In this chart, we can see channel already broken on October 23, but the right shoulder has not fully performed yet. To trade with this pattern, we have a several conditions : 1. Wait for right shoulder to completely perform to touch neckline at 1.0530. As long as right shoulder not higher than head , this pattern is still valid. 2. After we have a perfect right shoulder, we need one candle full to break down the neckline as bearish confirmation . 3. Usually broken neckline will bounce at previous support to retest neckline . This is the right moment to enter short position 4. Best stop loss position is above right shoulder, as long as the risk reward ratio is still above 2 5. Head to neckline are equal to neckline to target (AB=CD). So in this sample we have 1.0361 as profit projection note : consider this pattern as failure , If step 1 to step 3 failed to perform  
Education
by AzrulAzir
Mastering Market StructureBullish Market Structure: Bullish Vibes! It's all about making Higher Highs and Higher Lows. When you spot this pattern, you're riding the wave of optimism in the market, and it's your chance to seize the moment and soar with the bulls. Consolidation Market Structure: Consolidation Market Structure is all about lateral movement, where the market forms Equal Highs and Equal Lows. It's a phase of uncertainty, with neither bulls nor bears holding a clear advantage. Traders often await a breakout to determine the next market direction. Bearish Market Structure: Bearish Market Structure: Get ready for Lower Highs and Lower Lows. Sellers are in control, creating a solid downtrend. Traders look for short entry opportunities on retracements.
Education
by BlackWatch01
CHOCH vs BOS ‼️WHAT IS BOS ? BOS - break of strucuture. I will use market structure bullish or bearish to understand if the institutions are buying or selling a financial asset. To spot a bullish / bearish market structure we should see a higher highs and higher lows and viceversa, to spot the continuation of the bullish market structure we should see bullish price action above the last old high in the structure this is the BOS. BOS for me is a confirmation that price will go higher after the retracement and we are still in a bullish move WHAT IS CHOCH? CHOCH - change of character. Also known as reversal, when the price fails to make a new higher high or lower low, then the price broke the structure and continue in other direction.
CAPITALCOM:US100Education
by Snick3rSD
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.
CAPITALCOM:US100Education
by Snick3rSD
World Wars & US Inflation From 1914This is the US Inflation Rate (YoY) from 1914 until 2022. Symbol is called USIRYY and it measures the Inflation Volatility in the United States. With the War going on in Ukraine, and Russia trying to force its way through, I took the liberty of looking into the following: - How Global Wars Affect Inflation - How US Inflation Reacts to External Wars - How Wars Affect the Financial Markets You can see the time-lines, it's all laid-out in the chart (graph). I took all the Major World Wars and events that significantly affected, not only the US Inflation, but Inflation itself. First of all, the US Inflation Rate (USIRYY) tells me the following: * When the US was involved in a War, we can notice that the US Inflation spiked. * Most of the times when US was not involved in an External War, then Inflation dropped. That's because of War & Uncertainty Sentiment around this "terrific" word. War does not bring anything good, in fact, in only brings bad times. People die and global sentiment gets super-negative. This of course, leads to... you guessed it: Market Crash. Why? Because after or during times of War, there are Recessions and Depressions. Supply Chains are disrupted and the Global Economy falls on its face. What about looking at things from a Technical Analysis perspective? * Symmetrical Triangle: and the only way is UP! I will give you points which I believe are worth keeping in mind for the next Market Crash. First of all, let's be logical about this. Winter is coming and it's only gonna get worse before it gets better. As Inflation spiked to a 40y high, the higher powers intervened, in an attempt to cool the Inflation spike off. I'm talking here about the Federal Reserve (FED) ramping up the Interest Rates. This is the Effective Federal Funds Rate (FEDFUNDS). Can you see the break-out? They want to calm down Inflation, but they can't. Why? Because this is no ordinary Inflationary period, it's a long-lasting thing. One of those hyperinflation, deflation, stagflation, or whatever the heck these experts call it... :) The Volatility Index (VIX) tells me that another spike in Fear Sentiment is inevitable. I'm in love with Elliott Wave Analysis, so I labeled this next chart. This is the United States Consumer Confidence Index (USCCI) and it measures exactly what its name says, LOL. When it drops, people are freaking out. When it rises, people are optimistic and the Markets are going up. Daaaa! With all that said, what's the bottom line here? I believe that periods of terror are gonna hit us all. Are we having World War 3? Who the heck knows? All I know is that there are more pieces to this puzzle: United States 10Y Bonds (USB10YUSD) have reached the Support, and a spike bigger than the Covid Pandemic has started: The 10Y Treasury Note Yield (TNX) have broken out of a 40y down-trend: Isn't it ironic how it synced with the Inflation 40y high? Damn! Germany 40 (DAX, GER30, GRXEUR) is doomed. Fractal sequence, Descending Channel, and a "beautiful" ABC Elliott Wave Pattern. So, how can you prosper from all this? Metals could be a good hedge. Gold (XAUUSD) just broke out of an important Bearish Structure. Maybe it will go up. Natural Gas (NG1!) & Crude Oil (USOIL) however, are showing Bearish Reversals. Bitcoin (BTCUSD) is Bearish until further notice as well. But this may become the new currency moving forward. In times of terror, the banking systems might need to change. Cash and Card is so '00. WHAT'S YOUR TAKE? WAR OR PEACE? Leave your commend down below. Cheers! Richard
ECONOMICS:USIRYYEducation
by Lionheart-EWA
5
AI-Assisted Channel Patterns: Visuals for Precision TradingTypes of Channel Pattern In this educational post, we won't take a trading position, but rather equip you with valuable insights. Today, we delve into the world of channel chart patterns. Channels come in two primary forms: bullish and bearish. Understanding these patterns is essential. A bullish channel appears as a descending pattern, resembling a falling rectangle, while a bearish channel manifests as an ascending pattern within rising rectangles. Technicals of Channel Patterns But why are these channels so important? Bullish channels often precede a shift from a bearish trend to a bullish one, signaling a shift from a pessimistic to an optimistic market outlook. Conversely, bearish channels frequently herald a move from a bullish trend to a bearish one, indicating a transition from an optimistic to a pessimistic market sentiment. Application of Channel Patterns Channels serve various purposes, from brokers illustrating their expectations to traders preparing for upcoming trends. They also offer an excellent opportunity for automation, as modern AI systems can detect channels with remarkable precision, often exceeding 70%. Our Notes to Channel Patterns However, it's worth noting that channel patterns are seldom used in isolation. To make the most of them, traders often combine AI-assisted channel detection systems with volume analysis. When analyzing BTC-USD markets across nine exchanges and over five years, we found that volume frequently aligns with precisely defined channel patterns. By incorporating volume as a technical indicator and leveraging AI-generated channels, you can enhance your trading strategies and increase your chances of success in the cryptocurrency markets. Best of luck in your trading endeavors! Best regards, ELI
COINBASE:BTCUSDEducation
by Elysian_Mind
3
The -18% Bear Market Drop This percent crash maybe linked to the Fed Rate FRED:FEDFUNDS When the Dow Jones TVC:DJI crashes the price of Gold COMEX:GC1! goes up. The parabolic system is the key. Watch this video to learn more about this system. Take note around 22nd November, 2023 of the Fed Rate Interest Rate Decision. Index funds are a good alternative to Gold. Notice the connection between the Stock Market Index And Gold. The market will recover but wait for another -5% drop before you buy it. We are left with another -5% drop According to a CNBC Survey published on their website by Yun Li And Patricia Martell On 27 Sep, 2023 In an article titled, '' Investors see 2023 gain as a bear market bounce and expect a recession next year, CNBC survey shows'' 61% of chief investors say we are in a bear market rally. What do you think? leave a comment. Also, rocket boost this content to learn more. Disclaimer: this is not financial advice, do your own research before you trade, do not buy or sell anything i recommend to you.
TVC:DJIEducation
by lubosi
How to Improve Trading ResultsHey, traders! The market is bullish now and let's talk about how we can improve our results in all cycles of the market. There are several factors that can enhance your trading results: your system, psychology, risk management, hobbies, the right environment, and healthy habits. Working on these variables will undoubtedly bring you closer to your trading goals. However, there's another factor that is often overlooked, and that's income unrelated to trading. It's essential to discuss this. Relying solely on trading income, especially in the early stages, can create unnecessary pressure. Diversifying your income sources will allow you to approach the trading process more consciously. I know many profitable traders, and almost all of them have additional income sources, such as paid communities, educational endeavors, businesses, real estate, or traditional jobs. No one relies solely on trading. Why does this happen? First and foremost, your knowledge about the market doesn't always translate into profits. You might make a quick buck by speculating on an illiquid asset that suddenly skyrockets, but this approach won't bring consistent profits in the long term. Lucky traders often give back their gains and end up with nothing. Smarter traders invest in assets that generate income regardless of market conditions and their psychological state. Diverse income sources can provide a sense of security and confidence in everyday life and when making trading decisions. Having a bad trading month? No problem. Losses can be covered by income from other areas. Your basic needs can be met with steady income, while trading serves its primary purpose — long-term capital growth. Since I diversified my income sources (one of them being this channel), my trading results have significantly improved. The pressure has eased, and the quality of my trades has increased. Now, I'm not tied to my charts for 40-hour workweeks. I trade when I want to. Trading has transformed from a pursuit of profit to a search for opportunities. I only enter a trade when I see a genuine opportunity. Take today as a starting point. You probably have some source of income that covers your basic needs. I understand it might not be the most glamorous income, and you might want to improve your quality of life right now. Don't rush to give it up in favor of trading, even if you're confident in your trading skills. Take your time and establish an additional source of stable income. Look at trading as a springboard to help you reach your goals faster. Don't put all your capital in one place. Think about the future and develop multiple income streams. Increase your profits and enhance your emotional well-being. You can have a deep understanding of trading concepts, but when your life depends entirely on trading, it can be challenging to apply that knowledge due to immense pressure. 80% of your success in trading comes from psychology and risk management. You need a strong mental state to open quality positions without overwhelming yourself. The best way to achieve this state is to make trading "one of" your income sources, not your "only" income source.
CRYPTO:BTCUSDEducation
by Ingwina
Candle trading styleTrading 101 candlestick style: I use a simple trading style that profits. " No indicators at all method ." The work of candlesticks does the rest. Count 10 candlesticks and see if it is a buy or sell. Then count the buy and sell candlesticks. Count from very first candle to 10. If there are more buy, then place a buy. Now count the sell candles Subtract buy from sell candles counted and get your take profit percent. Same goes for sell. Or take away sell from buy if there are less buy candles. Happy trading.
Education
by papertrades001
Decoding Market Patterns:10 Essential Price Patterns Every TradeIn the intricate world of trading, price patterns are the footprints left by market sentiment. Understanding these patterns is like deciphering a complex code, revealing insights into potential market movements. Today we will explore 10 essential price patterns every trader should recognize. Each pattern is a chapter in the dynamic story of market behavior, offering opportunities to identify trends, reversals, and strategic entry or exit points. 1. Bull Flag: The Flagbearer of Continuation A Bull Flag is a continuation pattern, often seen in strong uptrends. It resembles a flagpole (the initial price spike) followed by a rectangular flag (consolidation phase). When the price breaks above the upper boundary of the flag, it signals a potential continuation of the uptrend. 2. Bear Flag: The Bearish Counterpart The Bear Flag is the opposite of the Bull Flag. It appears in downtrends, with a flagpole representing the initial price drop followed by a consolidation period. When the price breaches the lower boundary of the flag, it indicates a potential continuation of the downtrend. 3. Head and Shoulders: The Classic Trend Reversal The Head and Shoulders pattern is a powerful reversal indicator. It consists of three peaks – the central peak (head) is higher than the surrounding peaks (shoulders). When the price drops below the neckline (a line drawn through the lowest points of the shoulders), it suggests a potential trend reversal from bullish to bearish. 4. Inverse Head and Shoulders: The Bullish Resurgence The Inverse Head and Shoulders pattern is the bullish counterpart of the Head and Shoulders. It occurs after a downtrend and indicates a potential reversal to an uptrend. The pattern consists of three troughs – the central trough (head) is lower than the surrounding troughs (shoulders). When the price rises above the neckline, it signals a potential shift from bearish to bullish. The cool thing about chat patterns is that they are everywhere. You often see many different chart patterns on a singular chart, or smaller patterns that are a part of a larger pattern. The tricky part is finding them and appropriately identifying them. 5. Double Top: The Bearish Reversal Duo A Double Top pattern occurs after an uptrend and signals a potential reversal. It consists of two peaks at nearly the same price level, indicating a struggle to push the price higher. When the price falls below the trough between the peaks, it suggests a possible shift from bullish to bearish. 6. Double Bottom: The Bullish Reversal Duo The Double Bottom is the bullish counterpart of the Double Top. It occurs after a downtrend and signals a potential reversal to an uptrend. It consists of two troughs at nearly the same price level, indicating a struggle to push the price lower. When the price rises above the peak between the troughs, it suggests a potential shift from bearish to bullish. 7. Rising Wedge: The Rising Price Constrictor A Rising Wedge is a bearish continuation or reversal pattern. It can form during a downtrend or in an uptrend where buying pressure becomes exhausted. The wedge is characterized by converging trend lines that slope upward. While the price may make higher highs and higher lows, the pattern tightens, indicating weakening momentum. When the price breaks below the lower trendline, it suggests a potential continuation of the downtrend or reversal of an uptrend. Rising Wedge Reversal Example: Rising Wedge Continuation Example: 8. Falling Wedge: The Falling Price Constrictor The Falling Wedge is the bullish counterpart of the Rising Wedge. It forms during an uptrend or a downtrend, characterized by converging trend lines that slope downward. While the price may make lower highs and lower lows, the pattern tightens, indicating weakening selling pressure. When the price breaks above the upper trendline, it suggests a potential continuation of the uptrend. Falling Wedge Continuation Example: Falling Wedge Reversal Example: 9. Symmetrical Triangle: The Balance of Bulls and Bears A Symmetrical Triangle is a neutral pattern that forms during a trend, indicating a period of consolidation. It is characterized by converging trend lines that slope in opposite directions. When the price breaks above the upper trendline, it signals a potential bullish move, and when it breaks below the lower trendline, it signals a potential bearish move. 10. Pennant: The Brief Consolidation Pause A Pennant is a continuation pattern that forms after a strong price movement. It resembles a small symmetrical triangle, indicating a brief consolidation before the previous trend resumes. When the price breaks above the upper boundary, it suggests a potential bullish continuation, and when it breaks below the lower boundary, it suggests a potential bearish continuation. Important Thing To Consider: Price patterns are a tool that if practiced and executed properly can be a great asset for any trader. There are a few things that all traders should keep in mind when using price patterns to make trading decisions. Context is critical: Price patterns don't exist in isolation; they occur within the context of larger market trends. It's essential to consider the prevailing market conditions, including the overall trend (bullish, bearish, or sideways), volume trends, and recent price action. Confirmation is Key: While recognizing a price pattern is an important skill, relying solely on its formation might lead to premature or false trades. Traders should always wait for confirmation signals before taking action. Confirmation can come in the form of a price breakout above a pattern's resistance level, a significant increase in trading volume confirming the pattern's direction, or additional technical indicators aligning with the pattern's signal. Waiting for confirmation helps traders filter out false signals, reducing the risk of entering trades based solely on pattern Risk management is paramount: No pattern, regardless of its historical accuracy, guarantees a profitable trade. Traders must always implement proper risk management strategies, including setting stop-loss orders and defining acceptable levels of risk per trade as a percentage of their trading capital. Risk management ensures that even if a trade based on a price pattern fails to materialize as expected, the impact on the trader's overall portfolio remains manageable. Practice, practice, practice: Identifying price patterns is a skill that improves with practice and experience. Traders should dedicate time to studying historical charts, both in live markets and during backtesting. Regularly practicing pattern charting enhances the ability to spot patterns quickly and accurately. TradingView offers a great set of tools to help anyone get started by offering a full line of automated pattern recognition indicators for educational and research use. Utilizing these automated pattern recognition indicators is a great way to visualize patterns in the real world as patterns are often less clean than textbook examples. Recognizing these price patterns equips traders with a valuable skill set for navigating a dynamic market. However, it's vital to remember that patterns, like pieces of a puzzle, offer meaningful insights when combined with other indicators and thorough analysis. No single pattern guarantees profits, and each should be evaluated within the context of the broader market conditions. By integrating pattern recognition into a holistic trading strategy, traders can unlock the door to more informed, confident, and strategic trading decisions. Happy trading! Ben with LeafAlgo
Editors' picks
NASDAQ:NVDAEducation
by LeafAlgo
19
Day Trader's Toolbox Part 2: VWAPWelcome to the Day Trader's Toolbox, a 3-Part series focused on enhancing your day trading skills. In this second instalment, we delve into the intricacies of VWAP (Volume Weighted Average Price) , a versatile indicator that can help you navigate intra-day price action. I. Understanding VWAP: What is VWAP? VWAP calculates the average price at which a security has traded during a specified period, usually a trading day. It is unique in that it combines both price and volume data to provide a weighted average, reflecting not just where a stock has traded but also the volume at each price level. How to Add VWAP to Your Charts TradingView make it easy to add VWAP to your charts. Simply type VWAP into the indicators search bar. The VWAP line will appear as a continuous line on your chart, indicating the average price levels for the day. It offers a moving average of the price throughout the day, with the line calculated using intraday price data from the market open to the close. VWAP is typically viewed on day trading timeframes (5min and 1min candle charts). VWAP resets at the open of each day, for this reason VWAP tends to become more useful as the trading day progresses. Here’s how VWAP typically looks on your intraday price chart: S&P 500 1min Candle Chart (Daily VWAP) Past performance is not a reliable indicator of future results II. 3 Ways to Use VWAP When Day Trading 1. Sentiment Analysis VWAP is a powerful tool for analysing market sentiment, helping day traders understand the prevailing mood of the market. Here's how it works: Bullish Sentiment: When the current price of a stock is holding above the VWAP line, it is often interpreted as a sign of bullish sentiment. This suggests that, on average, traders are willing to pay prices higher than the average daily price - indicating that buyers are in control. Bearish Sentiment: Conversely, when the price of a stock is below the VWAP, it indicates bearish sentiment. In this scenario, traders are willing to pay prices lower than the average daily price, implying that sellers are in control. Examples: Price Holding Above VWAP (Tesla 1min Candle Chart) Past performance is not a reliable indicator of future results Price Holding Below VWAP (Tesla 1min Candle Chart) Past performance is not a reliable indicator of future results 2. Trending Market: Dynamic Support and Resistance In a trending market, where a stock is moving in a clear upward or downward direction, VWAP serves as dynamic support and resistance. Here's how day traders use VWAP in this context: Dynamic Support: When a stock consistently trades above the VWAP line, VWAP acts as a dynamic support level. This means that, on average, the price of the stock remains above the VWAP, indicating a positive sentiment. Traders can use VWAP as a reference point to enter long positions, set stop-loss orders just below it, and potentially ride the trend for further gains. Dynamic Resistance: Conversely, when a stock remains below the VWAP, VWAP acts as dynamic resistance. This suggests that the average trading price for the day is above the current price, signifying a bearish sentiment. Traders can use VWAP as a reference point for entering short positions and managing risk by setting stop-loss orders just above it. In both cases, VWAP serves as a dynamic level that adapts to the intraday price movements, providing guidance on when to enter trades and where to place protective stops. Examples: VWAP Dynamic Support in Uptrend Past performance is not a reliable indicator of future results VWAP Dynamic Resistance in Downtrend in Uptrend Past performance is not a reliable indicator of future results Sideways Market: Spotting Market Extremes VWAP can be particularly valuable in identifying extremes in a sideways or range-bound market. An upper and lower band can be placed 2 standard deviations above and below the VWAP line (click settings on your VWAP indicator on TradingView to add the bands). Here's how day traders use VWAP to spot market extremes: Overextension Above VWAP: When a stock's price significantly extends above the upper VWAP band, it signals that price is more than 2 standard deviations away from the true average price for that day – leaving the stock vulnerable to mean reversion. Day traders can interpret this as a potential market extreme, suggesting that the stock may be overbought in the short term. This could be a signal for traders to consider taking profits on long positions or potentially entering short positions, anticipating a mean-reversion move back toward the VWAP. Overextension Below VWAP: Conversely, when a stock's price significantly drops below the lower VWAP band, it could signal overselling or excessive bearish sentiment. In this case, day traders may view it as a potential market extreme, indicating that the stock may be undervalued in the short term. This could be a signal for traders to consider taking profits on short positions or potentially entering long positions, expecting a mean-reversion move back toward the VWAP. Example: VWAP bands signal extremes in sideways market Past performance is not a reliable indicator of future results In summary, VWAP, the Volume Weighted Average Price, is a valuable tool in a day trader's toolbox. It offers insights into market sentiment, dynamic support and resistance levels in trending markets, and extreme market conditions in sideways markets. As you continue your day trading journey, consider incorporating VWAP into your trading strategy to gain a deeper understanding of market dynamics. 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.
NASDAQ:TSLAEducation
by Capitalcom
📈 The Ultimate Altcoin Survival Guide 🎯🛡️Hey there, crypto enthusiasts and market savvies! Professor here, bringing you a critical update that you can't afford to miss! 💎🔥 00:00 Hey folks, let's dive right into the world of altcoins. You've been hearing me sing praises for Bitcoin lately, but what about the underdogs, the altcoins? 🎤🤔 00:16 Well, guess what? I haven't forgotten them; I've just been analyzing. Let's get to the heart of the matter and talk about what the charts are screaming at us. 📈💡 00:23 We're looking at an 8-hour chart that excludes Bitcoin and Ethereum. Notice this massive channel? It's crucial for the altcoin market, and right now, it's shouting "Resistance!" 🛑🔔 00:49 Yup, we're walking on thin ice. This is the time to hold your horses on altcoins and keep your eyes peeled on those levels - 335 and 319 billion, to be exact. 🎯🛡️ 01:32 Bitcoin remains our "safe haven," especially with Bitcoin dominance skyrocketing. Stick with me, and you'll know why my 80% trading focus is on Bitcoin right now! 🏆🛡️ 02:42 Spotlight on ADA and Ethereum: My positions? Increasing in ADA at 0.268 and shorting Ethereum. It's not about being bullish or bearish; it's about being smart! 🎯👓 04:53 What about LINK? It's all about that channel, baby! We took a long position and scored a phenomenal trade. This channel strategy works like magic! 🌟🚀 06:18 Speaking of magic, let's talk Matic. Major resistance here; don't jump the gun. When the channel says go, we GO! 🚀💥 07:27 Targets? I've got 'em! 1.7, 1.9, and 3.2. Manage your risks and reap the rewards, simple as that. 🎯👑 08:00 XRP? It's in time-out under resistance. But hey, let's keep an eye for that rebound. It could be our golden ticket. 🎫💫 09:11 Bottom Line: The Total Three Chart for Crypto says altcoins are in danger. For now, Bitcoin is my ride or die! 🛡️🏆 09:51 Stick around, engage, and let's keep this conversation going. If you're still with me, you've just leveled up in your trading game! 🎮🌟 One Love, The FXPROFESSOR 💙 full video transcript: 00:00 Hey everyone, time to take a look at altcoins. Professor been extra extra bullish on Bitcoin. Okay, you see not so much on altcoins. 00:10 I posted a lot of Bitcoin, not many else. People ask me, hey, you forgot about phantom. You forget about sandbox. 00:16 You forget about STF CFX, but I didn't forget about anything. It's just I follow the charts. So let's follow the chart. 00:23 That's the total three. It excludes its cryptocurrencies excluding Bitcoin and Ethereum. So what do we have here? That's the eight hour chart. 00:32 And we see a massive channel, okay, which is support on the lower end support resistance in the middle and its resistance on the top. 00:42 So what do we have right here? Let's go to the 15 minute chart. Unfortunately, ladies and gentlemen, my dear friends, we have resistance. 00:49 So we need to be careful because these breakouts, it didn't go higher. So we are running a danger of going a little bit or a little bit more lower. 01:02 So 335 and 319 billion. It's where I want to buy again and of course I will have alerts. Like to all 3 on major support. 01:23 So we need to be careful with altcoins at this very moment. Think about it this way, Bitcoin. For me it's a safe haven. 01:32 That's why I keep saying safe haven. I keep repeating myself a little bit of times but you know maybe this is not the perfect time for riskier assets and cryptocurrencies altcoins and so on. 01:44 This could be time for Bitcoin. So personally I do prefer Bitcoin at this time of stage but who am I? 01:50 Let the chart do the talking. Let's go to Bitcoin dominance. You see how it has exploded and you can see here why from this level over here for this breakout on October 2nd we have been 80% posting about Bitcoin, Bitcoin, Bitcoin because the dominance was expected to rise. 02:09 And it did break out higher. So my expectation is to see the 58%. We are now at 54% and if the price drops lower then it has huge, huge support at 52%. 02:22 So Bitcoin dominance says, Hey buddy, maybe this is not a perfect time for altcoins. This is the time for Bitcoin. 02:32 And we go to 58% or we go even higher at 66%. Okay? Now let's take a look at the major altcoins that would make more sense to, everyone. 02:42 Ada, looking good. Looking good. And I'm looking to increase my position at 0.268. We've been long through here. It's going well. 02:50 Ethereum, 1771. Today we went short my community right under this level over here. So we have a short position hedging our long positions and it's beautiful. 03:00 1.827 is resistance support at 1629 and let's go to SDX no big news here okay major support would be this level over here that's why we have the alert and it will go automatically to our friends and family who follow us up very very similar very close to support but still you see not going higher for 03:29 the time being so one inch let's discuss about one inch that's a 15-minute chart you see it got rejected at the middle of the channel if we go to four hours it will make sense so one hour actually is gonna a lot of you know it's gonna make even more sense so what do we have here we have a channel how 03:51 simple is it to make a channel I mean you know resistance or resistance resistance and the middle of the channel so we are remaining long we have a long position but we want to buy over that level and that's exactly why we have the alert there and when it hits there if it breaks higher we go long for 04:10 the time being we're being aware and we would be looking to follow the price within the channel does this work does it make sense well let's take another example let's look at link for example and let's go to the eight hour chart and look at these guys i mean how more simple this is straight up most 04:32 simple charging the world as the most beautiful channel support support support support three times at the lower end of the channel three times very clear three times very clear resistance up there and then what we have the fake out over here and the minute it goes back into the channel that's the time 04:53 to go long that's the time we did go long and that's how we followed the price and we increased the position over here at this level and we have a phenomenal trade which we have shared the result with you here it's the same chart it's the same deal so the channel works we wait for the price to go on 05:12 the channel and that would be support and we can increase the position that we already took profit from massively or if it dips back under the channel then we're going to go short and we're going to keep the stop loss over the channel so as simple as that I want to show you Matic before I go because 05:29 it's also at a major major major resistance Matic is one of my favorite assets and I've post it a lot of times from 0.20 all the way up to 2.4 and 2.8 so if you have been following me you can check the previous ideas we did very very well with entering now nicely and with exiting nicely so we're looking 05:56 to get back on Matic but we want to see the price get back into the chart. I want to see the price get back into the chart so for the time being we are at the scary situation where, ah, scary, okay, ah, but we are under the channel so we are under what is right now major, major, major resistance. 06:18 So, ah, one can go short, okay, or one can wait. That's what I'm doing in this case. I don't want to go short on magic because it's one of my favorite ones, but what I want to do is I want to have a big ass alert over here that will allow me to go long and buy this break. 06:41 If the price goes back into the channel, magic major entry, we're getting up and buying. That's what I say this breakout in the channel with stop loss 0.64. 06:51 So that would be an entry at 0.66 a stop loss at 0.60. 4. Let's put some number into that. So from there to 0.64 it's around 3%. 07:03 Okay, 3% exactly. But where is the take profit? Well, if you take a look at the take profit, we're looking about a take profit of and always think risk to reward is going to help you a lot to manage risk. 07:17 So we're looking at take profit here at 153% higher or there at 188 or all the way up there to 364. 07:27 So this would be my 3 target. 0.64, the stop loss 1.7, 1.9 and 3.2 and of course there is another level to 1.03. 07:39 So I'm going to add that 1.03 as well as a 4.0. 4th target and that would be a beautiful trade. 07:48 For the time being, don't get too excited. Let's look at XRP as well because a lot of you asked about XRP also under resistance at the time so I cannot buy that. 08:00 I cannot go long. Wait and see if there is a rebound here where the support level because if that happens, then I want to go long there and I want to have my stop loss under there and you know, the beauty of this is that small risk, high reward, but at the same time if the price rebounds a little bit 08:17 like Bitcoin, we get a new entry today and the price did rebound from here, okay, all the way up there. 08:26 So already we move the stop loss out entry and worst case scenario is we're going to hit the stop loss and make no money, lose no money, okay. 08:32 So these levels will give you very high return for lower risk and at the same time it's a highly probable to rebound level so it can give us a very, very flexible. 08:48 Way of trading for the time being this is chart I want you to focus on and that's the total three for crypto so altcoins right now in danger for all the charts that I have just mentioned we're looking to buy much bigger on altcoins and there we'll have a proper bull run if only we can break this level 09:11 and get outside of the channel and have the breakout so for the time being we looked at bitcoin dominance I'll stick with bitcoin as a 80% of my trading and of course I will remain long on bitcoin. 09:27 That's it from me. Hope it makes sense and this time give me some comments discuss with me because this is a kick ass video with a lot of you know, precision charts and a lot of educational hints. 09:41 So those are you that stayed with me until the end of this 10 minute video. You must have learned something and I hope that it does help. 09:51 Take care. Keep in touch.
CRYPTOCAP:TOTAL3Education
by FX_Professor
2
How to automate Trading View indicator alerts with 3Commas In this guide we will explain how to connect and automate a Buy&Sell strategy with 3Commas using a Trading View indicator. This guide will enable you to create long strategies on all spot pairs available on 3Commas. In this example we will set up a Buy&Sell bot that will open the long position when the Tweezer Bottom - Bullish indicator signals the pattern. Then we will illustrate all the steps necessary to open the long position. The position will be closed using 3Commas take profit and stop loss. 1) Choice of the technical indicator to be used. Trading View offers an extensive library with technical indicators developed by the in-house team. To access all available indicators, open the indicators dashboard (A) and click on the Technicals section (B). In this example we will choose an indicator in the Patterns section (C) called Tweezer Bottom - Bullish (D). Remember that the choice of this indicator is purely random and is for educational purposes only, be sure to backtest and research before building any trading strategy. 2) Creating a bot on 3Commas. Now go to 3Commas and create a new DCA bot. This bot will allow you to connect the indicator signal. Set up the Main Settings section. Name your bot (A), select your exchange (B), and bot type (C). Select the ticker (A), set the type of strategy (B) and the capital to be used (C). In the Deal Start Condition section, open the drop-down menu and select 'Trading View custom signal'. Set the take profit. Set the stop loss. Configure the Safety Orders section for a Buy&Sell strategy. Set the value to zero within this section as shown in the screenshot. Set Max safety orders count and Max active safety orders count to zero. Now that you have properly created and configured your bot, go inside your new bot's 3Commas dashboard, scroll down, and copy the 'Initial Start Deal Condition' message. 3) Trading View Connection - 3Commas. Come back to Trading View and create a new alert (A), select the indicator from the drop-down menu (B), then choose Once Per Bar Close (C), and finally create a name for your alert and enter the message you copied previously within the Message field (D). As a last step, go into Notifications , enable the web-hook url and enter 3Commas' web-hook: 'https://3commas.io/trade_signal/trading_view'. Create your alert as a final step. You have now correctly created a new 3Commas Buy&Sell bot that will automatically open new orders when a new pattern is generated.
Education
by thequantscience
Bullish Pennant PatternIn this guide, we unveil the secrets of Bullish Pennant pattern, exploring its psychology, identification, and trading strategies. If you appreciate our charts, give us a quick 💜💜 Understanding the Bullish Pennant Pattern: The bullish pennant emerges post an uptrend, forming a small symmetrical triangle (the pennant) during consolidation. This pattern signifies a battle between bulls and bears, ultimately leading to a breakout, usually upward, signifying the continuation of the uptrend. Components of the Bullish Pennant Pattern: An Uptrend: A prerequisite for this pattern, characterized by higher highs and higher lows. A Pennant: A small symmetrical triangle forming after the uptrend, indicating consolidation. A Breakout: The essential phase, marking the continuation of the uptrend, often occurring upwards. Trading the Bullish Pennant Pattern: Psychology Behind Bullish Pennant: A reflection of market consolidation after bullish momentum, highlighting the buyers' dominance. Bullish Pennant vs. Bearish Pennant: Bullish pennants signal uptrend continuations, while bearish pennants suggest downtrend extensions. Bullish Pennant vs. Bull Flag: Bull flags form after sharp rallies, while bullish pennants appear after extended uptrends, marked by converging trendlines. Stop Loss Placement: Consider placing your stop loss at the pennant's resistance line for risk management. Profit Target Setting: Customize your profit target, aligning with the pattern's flagpole height or a conservative approach, harmonizing with your risk management strategy. Trade Wisely! Follow us for expert trading tips and strategies!
Education
by Vestinda
How The Tr8dingN3rd Got SlappedIn my intraday-trading, I'm pretty good to make money on a regular basis. It's a long time since I got out of control. But yesterday, I messed up twice. I was going short in a level, where I knew it was the bottom. The S&P500 intraday Chart showed clear support. And if the S&P goes north, the NQ will too in most cases. Then I did not follow my (any) plan and did everything wrong. How could that happen? Well, I was distracted. I was DIS-Tracted - Off my track! This lead to Stress, which killed my Focus, and that was the perfect mix to mess up my trade completely. Not only that I made a loss, but I also missed out the HUGE move.... So, how to fix it? Go back to the roots. Pull out the "Flight Plan" and check every step in the process. It humbled me, and its GOOD. No super Trader...No Trading Hero...Just a Human with a talent that gets slapped from time to time. Happy Trading Y'all §8-)
CME_MINI:MNQ1!Education
by Tr8dingN3rd
2
Advanced Bull Flag ConceptsHave you ever wondered why price action sometimes forms a bull flag pattern? Have you ever wondered if there is a way to predict whether a bull flag will break out before it actually does so? In this post, I will try to address these questions by presenting a couple of theories about the nature of bull flags. Bull Flag Theories (1) The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole; and (2) Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so. I will try my best to clearly explain both theories in detail below. Note: Although this analysis is also generally true for bull pennants, bear flags, and bear pennants, to keep things simple I will focus solely on bull flags. Additionally, this analysis is generally true across timeframes. Part I - The Basics of a Bull Flag First, let's begin with the basics. As shown in the image below, bull flags form when an asset is in a strong uptrend. The uptrend forms the flagpole of the bull flag structure. The flag structure forms when price consolidates, usually in a falling trend. This consolidation phase is often characterized by price oscillators rotating back down while the price retraces only a small part of its prior upward move. From a market psychology perspective, bull flags often form when most market participants who bought the asset continue to hold it expecting the uptrend to resume, while only a minority of market participants sell (or short the asset) as its price corrects downward. The bull flag pattern is a continuation pattern because it reflects the market's general expectation that price will eventually resume its upward move. Once the price definitively breaks above the upper channel of the flag (often with strong momentum and high volume), the bull flag pattern is validated. Upon breakout, the expected move up is equal to the vertical height of the flagpole. Part II - The flag structure of a bull flag tends to form along Fibonacci levels, with the ideal flag proportion being an approximated golden ratio to the flagpole Here's where things begin to get interesting. Below is the golden ratio. Two quantities, a and b (where a > b ), form the golden ratio if their ratio is the same as the ratio of their sum to the larger of the two quantities. (See the equation below) The equation above shows the Greek letter phi which denotes the golden ratio. Phi is equivalent to a/b when such ratio is also equivalent to (a + b)/a. Although bull flags can take various forms, it is my hypothesis, based on chart analysis and research, that the most perfectly structured bull flags (ones that also have the highest probability of successful breakouts) occur when the flag forms a golden ratio to the flagpole. Mathematically, this means that the vertical height of the flagpole is equivalent to (a + b) and the vertical height (i.e. the width) of the flag is equivalent to b. This is also to say that price retraces down to the 0.382 Fibonacci level as measured by applying Fibonacci retracement levels along the flagpole (or to the 0.618 point on the vertical height of the flagpole if one measures from the bottom to top). I realize that this can be quite confusing, so let’s walk through some visualizations. Let's first visualize this hypothesis using the golden rectangle. Below is an image of the golden rectangle. A golden rectangle is composed of a square (with sides equal to a) and a smaller golden rectangle (with width equal to b and length equal to a). Now let's rotate the golden rectangle to better visualize the hypothesized flag pattern. The bull flag is hypothetically an approximation of the golden rectangle, whereby the width of the flag is in a golden ratio approximation to the length of the flagpole. In the illustration below, there are multiple bull flags contained within a Fibonacci spiral. The spiral is made up of golden rectangles, with each larger golden rectangle containing a smaller golden rectangle inside it. The smaller golden rectangle is the flag structure, and the length of the larger golden rectangle is the flagpole. One can think of the Fibonacci spiral and the golden rectangles as a series of bull flags that build on top of each other in a repeating pattern. In this diagram, price is represented by the increasing length of the sides of each golden rectangle. In other words, the price on a chart can be seen as spiraling higher after each bull flag breakout. Of course, not all bull flags form a structure that approximates the golden ratio, but it is my belief that in forming a bull flag, price action is aspiring to achieve as close of a golden ratio approximation as it can. I believe that the bull flags that best approximate the golden ratio structure also present the highest probability for a successful break out. To learn more about Fibonacci spirals, including the golden spiral that Fibonacci spirals approximate, you can check out this Wikipedia article: en.wikipedia.org Part III - Fibonacci and regression analyses can provide useful insight into whether price will successfully break out of its bull flag pattern, sometimes long before price even attempts to do so. To see how Fibonacci levels and regression analysis can give insight into whether a bull flag will break out or break down before it does so, let's consider an example. Let’s consider the massive bull flag that the iShares Russell 2000 ETF (IWM) formed in 2021. In 2021, the monthly chart of IWM formed what appeared to be a bull flag, as shown below. Now let's see why Fibonacci analysis and regression analysis were warning that this bull flag was not likely to break out successfully. First, IWM's price did not retrace to a Fibonacci level before attempting a breakout (when using the pole as the Fibonacci retracement reference point). In the chart below, we see that price tried to break out, without even so much as retracing down to the highest Fibonacci retracement level: $196.71. By not undergoing Fibonacci retracement, price did not give its oscillators the opportunity to rotate back down fully. Instead, price remained overextended at the time it attempted to break out. Now let's look at regression analysis. Below is a log-linear regression channel that contains IWM's entire price history. As noted in my prior posts, a regression channel simply indicates how far above or below the mean (or average) price an asset's current price is trading. In the regression channel above, the red line is the mean price, the upper channel line is 2 standard deviations above the mean, and the lower channel line is 2 standard deviations below the mean. A successful breakout of the bull flag would have taken IWM's price way above its regression channel, to a level that is too many standard deviations above its mean price for us not to question the probability of the breakout’s success. Achieving the full measured move up would have been extremely unlikely, assuming that the regression channel is valid and that price tends to revert back to its mean over time. What was more likely than a breakout was a breakdown, and a reversion back to the mean, which is what ended up happening with IWM. Another interesting note about IWM’s bull flag is that it presented a false breakout in November 2021. This false breakout was presenting multiple warnings signs including being a UTAD test of a Wyckoff Distribution. As shown below, however, another important clue that the November 2021 breakout would likely fail was that the breakout was not confirmed when comparing IWM to the money supply (M2SL). See the chart below. One can interpret this chart to mean that in late 2021, IWM’s price was rising because the central bank was increasing the money supply, but not due to improving strength of the underlying companies that comprise the ETF. Using the money supply as a ratio to an asset elucidates the true inherent strength of the asset's value. To understand more about why the money supply can be used in this manner, you can check out my post below. Part IV - Additional Comments I have a few additional comments. I usually use Fibonacci levels on a log-scale chart to identify Fibonacci spirals because Fibonacci spirals are logarithmic spirals. However, when using Fibonacci levels based on log scale, the ratios, percentages and numbers, can seem quite confusing because they are logarithmically adjusted. If you choose to replicate my process, please be mindful of this. While using log-scale charts is critical for higher timeframes (e.g. the monthly chart or higher), I have not identified much benefit to using it on shorter timeframes. In a prior post, I noted that Plug Power (PLUG) is currently forming one of the best-looking log-scale, golden ratio bull flags I have ever seen. If my above hypotheses are true, I would expect to see PLUG move dramatically higher in the years to come. For more information about PLUG, you can read my post linked below. (This is not a solicitation to buy PLUG. Please do your own research and carefully consider all risks.) At the risk of making this post too long and too dense, I just want to briefly note that it is also my hypothesis, based on observation and research, that the golden ratio is where many S-curve dilemmas are solved. If you don't know what an S-curve dilemma is and you'd like to read about this you can see my post below about Jumping S-Curves . In short, an S-curve dilemma is another way of conceptualizing the question of whether a bull flag will break out or break down. I hope that someone finds value in this post. I spent a lot of time studying, researching, analyzing, and cogitating the mathematical nature of price action to reach many of the conclusions here. Thank you for your valuable time in reading my post.
Editors' picks
AMEX:IWMEducation
by SpyMasterTrades
53