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Median Lines and Finding the Right Path When it comes to learning about markets and trading, finding the right path and committing to it is the hardest part. The right path has little to do with any technical analysis method. It has to do with structuring our mental framework so that we fundamentally change how we experience markets, trading, and loss. In the video, I show some Median Line and Action/Reaction work but this work is useless by itself. No tool is good or bad, they are just tools we use to comprehend markets. The problem arises when the tools start using us and we think there is some kind of magic to them. The essence of our strategy should be to structure our methods and mindset towards functionality. The journey we should commit to is one marked by fostering accountability and responsibility in all our actions. The swing trade Idea I show, takes method and structures it into function. Shane
NYSE:BXEducation
by ShaneBlankenship
2
SPY Fibonacci Price Theory And BreakOut BarsThis instructional video teaches you the basics of Fibonacci Price Theory in conjunction with Breakout Bars and how price is the ultimate indicator. Throughout this video, I try to provide instruction on key elements related to the Fibonacci Price Theory (Unique & Standout Highs/Lows). Additionally, I've also included Breakout Bars and Fibonacci Price Retracement concepts. What I really hope you learn from this video is to see price as the true ultimate indicator for your trading decisions. Using technical analysis techniques is fine, but use price as the key element when trying to confirm or reject your trading ideas. I hope this helps you understand that price, action, and reaction through trends, peaks, and troughs are the most important components of the chart. Everything else is peripheral.
AMEX:SPYEducation
by BradMatheny
3
Bitcoin: How to Forecast the End of a Trend.The advance from Dec 2018 seems to be tracing an impulse pattern. Wave 1 is an impulse, wave 2 is a zigzag which neatly predicts flat wave 4 by guideline of alternation. The fifth wave appears to be tracing an impulse as well; an extension. It's probable that two minute degrees have reached completion at this stage and the market appears to be tracing out the third wave. So how do you forecast the target for wave 5? One way is to use an Elliott wave channel. Connect the end of wave 2 and 4. Draw a parallel line along the top of wave 3 to project wave 5 target. It is quite common for wave 5 to end upon reaching the upper boundary line of the channel In some cases, when wave 3 is uncommonly strong, almost vertical. Draw a parallel line using the top of wave 1 instead of wave 3. From experience, it's quite advantageous to draw the two upper boundary lines.
INDEX:BTCUSDEducation
by Aquanet_Market_Forecast
Brilliant Basics - Part 2: Reversal ZonesWelcome to the second part of our educational series, Brilliant Basics. In this series, we'll explore how mastering the fundamentals lays the groundwork for achieving high-level performance in trading. Today, we focus on reversal zones, specifically the art of drawing support and resistance consistently across multiple timeframes. Understanding Reversal Zones Reversal zones are key areas on a chart where the price has the potential to reverse its direction. These zones are defined by support and resistance levels: • Support is a price level where a downward momentum can be expected to pause due to a concentration of demand. • Resistance is a price level where upwards momentum can be expected to pause due to a concentration of supply. Drawing Support and Resistance Correctly Drawing support and resistance levels correctly is crucial for accurate and consistent analysis. Here’s how you can ensure consistency and reliability in your charts: 1. Identify Significant Swing Points: • Resistance: Look for significant swing highs. A resistance level can be created by a single prominent swing high or multiple swing highs. • Support: Similarly, support is identified by locating significant swing lows. It can be formed by a single notable swing low or multiple swing lows. Past performance is not a reliable indicator of future results 2. Define Support and Resistance Zones: To create a more accurate representation, define support and resistance as zones rather than precise lines. • Resistance Zone: This should be defined by the highest close and the highest high. • Support Zone: This should be defined by the lowest close and the lowest low. Past performance is not a reliable indicator of future results 3. Use Coloured Boxes: A handy tip is to use coloured boxes to highlight these zones. Different colours can be used for different timeframes, such as: Weekly: Use one colour (e.g., red). Daily: Use a different colour (e.g., blue). Hourly: Use another colour (e.g., green). This visual differentiation helps in quickly identifying which timeframe a particular support or resistance zone belongs to. Past performance is not a reliable indicator of future results 4. Consistency is Key: Consistency in how you draw support and resistance levels across different charts and timeframes is vital. This ensures that your analysis remains objective and reliable. Practical Examples Let’s look at an example of how we can use our rule set for drawing reversal zones consistently as price action evolves. For simplicity, we are going to stick to the daily timeframe: Resistance Example: Phase 1. Draw the Zone: Locate significant swing highs on your chart. Mark the highest close and the highest high to form the resistance zone. Past performance is not a reliable indicator of future results Phase 2. Monitor the Market’s Response: In this example, gold pushes deep into the resistance zone and breaks above resistance before closing back below resistance. This ‘fakeout’ response is potentially sufficient to initiate a short position depending on your strategy and trade plan. We have also added the new support zone onto the price chart – creating a target for shorts. Past performance is not a reliable indicator of future results Phase 3. Redraw the Resistance Zone as Price Action Evolves: As price moves away from the original resistance zone, we can now redraw the resistance zone based on the highest high to highest close rule set. Past performance is not a reliable indicator of future results Support Example: Phase 1. Draw the Zone: Locate significant swing lows on your chart. Mark the lowest close and the lowest low to form the support zone. In this example, there is a small support zone (zone 1) and a larger, more significant support zone (zone 2). Past performance is not a reliable indicator of future results Phase 2. Monitor the Market’s Response: We can see that EUR/GBP breaks through support zone 1, but then forms a bullish engulfing pattern at support zone 2. A reversal pattern of this quality is potentially enough to initiate a long position depending on your strategy and trade plan. Past performance is not a reliable indicator of future results Phase 3. Redraw the Support Zone as Price Action Evolves: As price moves away from the original support zone, we can now redraw the support zone based on the lowest low to lowest close rule set. Past performance is not a reliable indicator of future results Summary Understanding and accurately drawing support and resistance zones is fundamental for effective trading. These zones help identify potential reversal points, providing valuable insights into market behaviour. By maintaining consistency as price action evolves and using clear visual aids like coloured boxes, traders can enhance their analysis. As we continue our Brilliant Basics series, stay tuned for Part 3, where we will delve into the concept of moving averages and their role in trend analysis. Understanding this fundamental concept will further enhance your ability to identify and follow market trends. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
CAPITALCOM:GOLDEducation
by Capitalcom
2
SWING TUTORIAL - LALPATHLABNotice how the stock exactly revisited the most recent Swing High exactly after the Convergence Divergence. MACD Cross after the Convergence Divergence gave a good entry as it happened at a Higher High Higher Low Pattern indicating a good move upward. Eventually gave a 38% up move. Another MACD Cross is under play currently. Can it break the Resistance zone of 2758 and go all the up to the next 3342 Support/Resistance zone? Give your comments in the Comments Section below:
NSE:LALPATHLABEducation
by thepranam
Order typesIn the past, a person would typically have to go to the brokerage or another financial entity to buy or sell a security. The trade would be then settled through a personal meeting or, as technology progressed, over the phone. Nonetheless, the implementation of modern technology within the financial markets of the 21st century made placing buy and sell orders as easy as a few mouse button clicks. Nowadays, many trading platforms allow their clients to execute various types of orders beyond ordinary buy and sell orders. Key takeaways: Using limit orders is generally considered one of the safest ways to buy or sell a security. Modern technology allows placing buy and sell orders with a few mouse clicks. A stop-loss and stop-limit orders are used to protect an investor’s capital. A trailing stop locks in some of the accrued profits. Quick trade orders get instantly filled by a single or double click on a bid or ask button. Limit order A buy limit order is used to buy a security at a specified price. This type of order is executed automatically in a case when the price of a security is lower than the value of the buy limit order. A sell limit order is used to sell a security at a specified price. It gets automatically filled when the price of a security is higher than the value of the sell limit order. This design occasionally allows for the execution of the buy limit order or the sell limit order at a better price. Generally, limit orders are one of the safest ways to purchase or sell a security. Quick-trade order Some trading platforms allow the use of quick-trade orders. A quick-trade order is a type of order that is instantly filled by a single or double click on a bid or ask button in a trading platform. These orders are relatively safe to use. However, filling this type of order in highly volatile markets might be difficult due to a quickly changing price. Market order When traders choose to use a market order, they let the market set the price of security. In essence, this means that for a buy market order, a trade execution occurs at the nearest ask. For a sell market order, a trade execution takes place at the nearest bid. The use of the market order is less safe in comparison to limit order because it allows for worse filling of orders in illiquid markets and markets dominated by algorithmic trading. However, some platforms offer their clients the option to choose the tolerance threshold for such trade orders. Good ‘Til Canceled order (GTC) This type of order remains active until it is filled or canceled. Stop-loss and stop-limit orders A stop-loss order sells a position at a market price if it reaches or passes a specified price. Unlike a stop-loss order, a stop-limit order liquidates a position only at a specified or better price. These types of orders are used to protect investor’s capital before depreciation. Trailing stop order A trailing stop order trails the price as it moves in the trader’s favor. For a long position, a trailing stop moves higher with the price but stays unchanged when the price falls. Similarly, for a short position, a trailing stop moves lower with the price but remains unchanged when the price rises. The intent of a trailing stop is to lock in some of the accrued profits. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Therefore, your own due diligence is highly advised before entering a trade.
COINBASE:ETHUSDEducation
by Tradersweekly
2
Trade Like A Sniper - Episode 8 - EURUSD - (29th May 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing EURUSD, starting from the Monthly chart. - R2F
Education
by Road_2_Funded
2
Key Levels and what you need to know about themThere are Key Levels on every timeframe. But the ones that are relevant are the ones that agree in between timeframes. There are Swing Key Levels, Intraday Keylevels /agree on H4 + H1) and Scalpers Key Levels (I use those that agree on H1 and M30). Key Levels are zones where the market has not decided yet which direction it will choose, but as a trader you have to be one step ahead and speculate on it. Key Levels of higher time frames are always dominant. So when you scalp make sure you are not landing in between the buyers and sellers fight of swing or intraday traders. How to apply on low risk: - Have a D1 ceiling and floor, have an H1 ceiling and floor. Generally don't sell on floors and don't buy at ceilings. - Look for reversals around those areas (3 peak patterns or longer consolidations rejecting an important zone) - Be careful at Key Levels (that is everything in between the floor and the ceiling) - Generally buy at floors and sell at ceilings when you have: a. indication of reversal b. break of structure indication with candle close (not few pip around the zone, it should clearly break with close) c. momentum pushing like "engulfing patterns", long candles (towards your direction), long wigs (towards the opposite direction), Dojis (indicates end of wave and short term change of direction) How to apply on middle risk: - buy when it breaks the ceiling with volatility specific stop loss of asset - sell when it breaks the floor with volatility specific stop loss of asset Also take a look at my post about specific volatility of assets. Linked below.
OANDA:XAUUSDEducation
by Heaven10
SIMPLE ICT CONCEPTS FOR TRAADING SYNTHETIC INDICES The Inner Circle Trader (ICT) concept for trading Deriv synthetic indices involves using sophisticated market analysis techniques and proprietary trading strategies. It focuses on understanding market mechanics, price action, and order flow to make informed trading decisions. ICT strategies leverage advanced tools and ICT knowledge to predict synthetic market movements, optimizing entry and exit points for higher profitability and risk management.
Education
by FrankFx14
FAIR VALUE GAP OR ORDER BLOCK ENTRYA fair value gap (FVG) and an order block entry are concepts used in technical analysis within financial markets to identify potential trading opportunities. ### Fair Value Gap (FVG) A fair value gap refers to a price range on a chart where there is an imbalance between buyers and sellers, often resulting in a quick movement through this area without much trading activity. This gap can create a zone of interest where price may return to fill the gap, presenting a potential trading opportunity. Traders look for these gaps to predict price movements, expecting that the market will revisit these areas to achieve a fair value. ### Order Block Entry An order block is a consolidation area where significant buying or selling has taken place, often by institutional traders. These blocks are typically identified by a cluster of orders that create a strong support or resistance level. When price returns to this level, it often reacts due to the presence of unfilled orders, providing a strategic entry point for traders. Order blocks are used to predict where the price might reverse or continue its trend, offering a high-probability entry signal based on historical price action. Both concepts are used by traders to make informed decisions based on the past behavior of price and volume, aiming to identify areas where significant trading activity is likely to influence future price movements.
Education
by FrankFx14
Rocket Booster In 3 Steps - Recap VideoInside this video, we look at the recap of the rocket booster strategy that you read about yesterday - So watch it to find out more about the rocket booster strategy and how powerful this strategy can help you - with your trading journey Watch it now and rocket booster this content to learn more, - Disclaimer: Trading is risky please learn risk management strategies, because you will lose money from trading whether you like it or not.
Education
by lubosi
ORDER BLOCK CONFIRMATION ENTRY PART 2Sure! Here's another description of order block confirmation with a focus on practical application and detailed examples: ### Understanding Order Block Confirmation: Order block confirmation is a technique used by traders to identify and validate significant price levels where large orders from institutional traders have been placed. These levels often act as strong support or resistance zones. Confirming an order block helps traders make informed decisions about entry and exit points in the market. ### Detailed Steps for Order Block Confirmation: 1. **Identify Potential Order Blocks:** - **Bullish Order Block:** Look for a downtrend that ends with a strong bullish reversal, marked by one or more large bullish candlesticks. - **Bearish Order Block:** Look for an uptrend that ends with a strong bearish reversal, identified by one or more large bearish candlesticks. 2. **Analyze Market Structure:** - **Trend Context:** Determine whether the market is in an uptrend, downtrend, or sideways movement. This context helps in predicting the likelihood of the order block holding. - **Key Levels:** Note the order block's alignment with significant support or resistance levels. 3. **Volume Analysis:** - High volume during the formation of the order block is a strong indicator of institutional activity. Look for volume spikes that coincide with the large candlesticks forming the order block. 4. **Price Action Confirmation:** - **Engulfing Patterns:** A bullish engulfing pattern at a potential bullish order block or a bearish engulfing pattern at a potential bearish order block can confirm the level. - **Pin Bars and Rejection Candlesticks:** Candlesticks with long wicks (e.g., pin bars, hammers, shooting stars) at the order block level indicate strong rejection and confirm the presence of significant buying or selling interest. - **Break and Retest:** Confirmation is stronger if the price breaks through the order block level and then retests it as support (for bullish order blocks) or resistance (for bearish order blocks). 5. **Indicator Confirmation:** - **RSI (Relative Strength Index):** If the RSI shows overbought conditions at a bearish order block or oversold conditions at a bullish order block, it provides additional confirmation. - **Moving Averages:** The interaction of price with moving averages (e.g., 50 EMA, 200 EMA) near the order block level can confirm its validity. A bounce off or crossover can be significant. 6. **Confluence of Factors:** - Multiple confirmations such as Fibonacci retracement levels, pivot points, and trend lines aligning with the order block increase its reliability. ### Practical Examples: 1. **Bullish Order Block Confirmation:** - Suppose the price of a stock is in a downtrend and reaches a level where it forms a large bullish candlestick, followed by increased volume. - The RSI indicates oversold conditions. - The price breaks above the identified order block and later retests this level, forming a bullish pin bar. - This confluence of signals confirms the bullish order block, suggesting a potential entry point for a long position. 2. **Bearish Order Block Confirmation:** - Consider a forex pair in an uptrend that hits a resistance level, forming a large bearish candlestick with a volume spike. - The RSI shows overbought conditions. - The price breaks below the identified order block and retests it, forming a bearish engulfing pattern. - This setup confirms the bearish order block, indicating a potential entry point for a short position. ### Trade Execution and Management: 1. **Entry:** Based on the confirmed order block, place a buy order at the bullish order block or a sell order at the bearish order block. 2. **Stop-Loss:** Set stop-loss orders just below the bullish order block or above the bearish order block to manage risk. 3. **Take Profit:** Identify potential take-profit levels based on historical price action, nearby support/resistance levels, or using risk-reward ratios. By following these detailed steps and examples, traders can effectively use order block confirmation to enhance their trading strategies and improve their chances of successful trades.
Education
by FrankFx14
ORDER BLOCK CONFIMATION ENTRYOrder block confirmation is a concept used in technical analysis, particularly in the context of trading financial markets like forex, stocks, and cryptocurrencies. An order block is a significant price level where institutional traders have placed large orders, resulting in a concentration of buying or selling activity. Identifying and confirming these order blocks can help traders understand potential future price movements. ### Key Elements of Order Block Confirmation: 1. **Identification of Order Blocks:** - **Bullish Order Blocks:** These occur when price action suggests strong buying interest. Typically, they are identified after a downtrend when a large bullish candlestick or a series of bullish candlesticks emerge, signaling strong buying pressure. - **Bearish Order Blocks:** These are identified after an uptrend, marked by a large bearish candlestick or a series of bearish candlesticks, indicating strong selling pressure. 2. **Market Structure Analysis:** - **Trend Analysis:** Determine the prevailing trend to contextualize the order block. In an uptrend, look for bullish order blocks; in a downtrend, look for bearish order blocks. - **Support and Resistance Levels:** Order blocks often align with key support and resistance levels. Confirming these levels adds to the validity of the order block. 3. **Volume Analysis:** - High trading volume at the order block can confirm the presence of institutional activity. Spikes in volume during the formation of the order block signal strong interest from large market participants. 4. **Price Action Confirmation:** - **Engulfing Patterns:** A bullish or bearish engulfing pattern near the order block can confirm its validity. - **Rejection Candlesticks:** Pin bars, hammers, or shooting stars at the order block level indicate strong rejection, confirming the order block. - **Break and Retest:** Price breaking through the order block and then retesting it can serve as a confirmation. For a bullish order block, the price should break above and then retest the order block as support. For a bearish order block, the price should break below and then retest it as resistance. 5. **Indicator Confirmation:** - **Relative Strength Index (RSI):** An overbought or oversold RSI at the order block can provide additional confirmation. - **Moving Averages:** Crossovers or bounces off moving averages near the order block can corroborate the signal. 6. **Confluence Factors:** - The more factors aligning with the order block (e.g., Fibonacci levels, pivot points, trend lines), the stronger the confirmation. ### Practical Steps for Traders: 1. **Identify Potential Order Blocks:** - Look for significant price movements and areas where the price has previously shown strong support or resistance. 2. **Wait for Confirmation:** - Use price action, volume spikes, and technical indicators to confirm the validity of the order block. 3. **Plan Your Trade:** - Once confirmed, use the order block as an entry point, setting stop-loss orders below the block for bullish trades or above the block for bearish trades. 4. **Monitor and Manage:** - Keep an eye on market conditions and be prepared to adjust your strategy if the order block is invalidated by new price action. By carefully identifying and confirming order blocks, traders can gain insights into potential areas of strong market activity and make more informed trading decisions.
Education
by FrankFx14
Order Block ICT (Inner Circle Trader) for Beginners Order block trading is a method championed by the Inner Circle Trader (ICT), a well-known figure in the forex trading community. ICT's approach to order blocks is grounded in understanding market mechanics and the behavior of institutional traders. For beginners, grasping this concept can provide a powerful edge in trading by revealing areas of potential price reversals and continuations. ### What is an Order Block in ICT? An order block, according to ICT, is a price range where significant buy or sell orders from institutional traders have been placed. These blocks represent zones of high interest for major market participants and can serve as indicators of future price movements. Recognizing these zones can help traders anticipate where the market is likely to react. ### Key Characteristics of ICT Order Blocks 1. **Institutional Footprints**: Order blocks indicate the presence of large financial institutions in the market. They reveal where these entities have placed their orders, suggesting potential areas of strong support or resistance. 2. **Price Consolidation and Expansion**: Order blocks are often found in areas where the price has consolidated before a significant move. This consolidation is followed by an expansion, which confirms the presence of large orders. 3. **Market Structure**: Order blocks are integral to understanding market structure. They often align with swing highs and lows, forming critical points in price action analysis. ### Steps to Identify ICT Order Blocks 1. **Identify Swing Points**: Begin by marking significant swing highs and lows on the chart. These are potential areas where order blocks may form. 2. **Spot Consolidation Zones**: Look for areas where the price moves sideways, indicating accumulation of orders by institutional players. 3. **Observe Breakouts**: After consolidation, identify strong bullish or bearish candles that break out of the range, signaling the presence of an order block. 4. **Mark the Order Block**: Draw the order block by marking the high and low of the consolidation area, extending this zone into the future to identify potential trade setups. ### Trading with ICT Order Blocks 1. **Entry Points**: Wait for the price to return to the order block. Look for confirmation signals such as reversal patterns or volume spikes to time your entry. 2. **Stop Loss**: Place your stop loss just outside the order block to minimize risk in case of false breakouts. 3. **Take Profit**: Set your take profit levels based on nearby support or resistance levels, or use a predetermined risk-reward ratio. ### Benefits of ICT Order Block Trading - **Alignment with Institutional Activity**: By focusing on order blocks, traders can align their strategies with the actions of large market participants, potentially increasing the accuracy of their trades. - **Defined Risk Management**: Order blocks provide clear areas for placing stop losses and take profits, enhancing risk management. - **Enhanced Market Insight**: Understanding order blocks helps traders gain deeper insights into market dynamics and price behavior. ### Challenges for Beginners - **Learning Curve**: Identifying and correctly interpreting order blocks requires practice and experience. Beginners may find it challenging to accurately spot and draw these zones. - **Market Variability**: The effectiveness of order blocks can vary with different market conditions. Knowing when and how to apply them is crucial for success. ### Tips for Beginners 1. **Practice on a Demo Account**: Start by practicing on a demo account to build confidence and refine your skills without risking real money. 2. **Use Multiple Timeframes**: Analyze order blocks on higher timeframes for a broader market perspective and on lower timeframes for precise entry and exit points. 3. **Combine with Other Tools**: Enhance your analysis by using order blocks alongside other technical tools like trend lines, moving averages, and indicators to confirm trade setups. Order block trading, as taught by the Inner Circle Trader (ICT), offers a structured approach to understanding and navigating the forex market. By learning to identify and trade order blocks, beginners can improve their ability to anticipate market movements and make more informed trading decisions. With practice and careful analysis, ICT order block trading can become a valuable part of a trader's strategy.
Education
by FrankFx14
An idea for you tradesHello Everyone I want to say something that might be your strategy or you may criticize me about that but I am sure whoever disagrees with me about it is struggling to get profit in his account. Note: Always and always trade in a chart that is in a weekly trend. I man it does not matter what timeframe you are trading and with what method, it is incredibly vital that chose a trend (Bullish for long positions and Bearish for short positions) and never and ever try to trap yourself in a chart that is ranging in WEKLY TIMEFRAME. There are many reasons for that and I have paid a lot of money to learn it. The first reason is a lot of support/resistance level existing in this area that try to hit your Stops. Second reason is that we should follow the wales in every market and big whales do not waste their time and money for trading in this long term consolidations. Oil is a good example for now and I just want to say, these symbols are not ours and we should chose more profitable ones. This is the most reason that all charts do not move together and liquidity shifts between them. Thanks
TVC:UKOILEducation
by AMA_FX
3
Exploring Ilian Yotov's Quarter Point Theory: Refine Your Entry The quarters theory challenges the notion that financial markets are chaotic and that market prices are random by demonstrating constant orderly movement of price from one Quarter point to the next. In this publication, I will delve into the fundamentals of Yotov's Quarter Point Theory, its significance, and how it can be applied effectively in forex trading. What is Quarter Point Theory by Ilian Yotov? Ilian Yotov's Quarter Point Theory is a technical analysis strategy used in forex trading to identify potential entry and exit points. The theory is based on the observation that currency prices tend to gravitate towards specific levels known as "quarter points," which are key psychological and technical levels in the market. Key Concepts of Quarter Point Theory • Quarter Points: These are price levels that divide a currency pair's price range into four equal parts. For example, if a currency pair is trading between 1.2000 and 1.3000, the quarter points would be 1.2250, 1.2500, and 1.2750. • Psychological Levels: Quarter points often act as psychological barriers where traders tend to place buy or sell orders, causing price reactions at these levels. • Support and Resistance: Quarter points can act as support and resistance levels, where prices may consolidate, reverse, or experience significant movement. Identifying Quarter Points To apply Quarter Point Theory, traders need to identify the high and low of a currency pair's price range. These values are then divided into quarters to determine the quarter points. The quarters theory focuses on the 1000 pip range between major whole numbers in currency exchange. Each 1000 pip range can be divided into 4 equal parts called Large Quarters Each Large quarter has exactly 250 pips (1000/4 =250). A Large Quarter Point (LQP) is a price that marks the beginning and the end of each Large Quarter (250 pips range). Large Quarter Points that coincide with Major whole numbers are called Major Large Quarter Points (MLQP). MLQP signals the end of a 1000 PIP range and the beginning of a new 1000 pip range. A Major Small Quarter point is simple the number that coincides with a whole number, for example, 1.30, 1.31, 1.32, 1.33, 1.34…. Each of these numbers mark the beginning of a 100 pip range. Here is an illustration of this: Using Quarter Points in Forex When you study price around this theory, you may notice that price has a tendency to print the high of the day or low of the day around quarter point levels. Here is a example of this over a 5 day period on EURUSD: With this new-found knowledge, you could integrate this into your strategy. Once you have a directional bias for the day and you have an AOI for entry, you simply need to identify the quarter point within that range and anticipate a reaction at that level. For a deeper dive into this theory, I highly recommend reading the original work by Ilian Yotov's. If you would like a free pdf copy, drop me a message or leave a comment, I'd be happy to share this with you. Happy Trading
Education
by Pips4Breakfastx
10
Options Blueprint Series: Backspreads as a Portfolio Hedge1. Introduction Backspreads are a versatile options strategy as they allow traders to benefit from significant moves in the underlying asset, particularly when there is an expectation of increased volatility. 2. Understanding Backspreads A backspread is an advanced options strategy involving the sale of a small number of options and the purchase of a larger number of out-of-the-money options. This setup creates a position that benefits from large price movements in the underlying asset. 3. Generic Uses of Backspreads Backspreads offer traders a flexible tool to capitalize on significant price movements and shifts in market volatility. Here are some common uses: Market Sentiment Alignment: Bullish Sentiment (Call Backspreads): Traders use call backspreads when they expect a significant upward move. This strategy involves selling a smaller number of lower-strike call options and buying a larger number of higher-strike call options. Bearish Sentiment (Put Backspreads): Conversely, put backspreads are used when traders anticipate a significant downward move. This involves selling a smaller number of higher-strike put options and buying a larger number of lower-strike put options. Volatility Trading: Backspreads are particularly useful in trading volatility. They create positions with positive Vega, meaning they benefit from increases in implied volatility. This makes backspreads an excellent choice during times of market uncertainty or expected volatility spikes. 4. Hedging an Equity Portfolio using with S&P 500 Futures Put Backspreads Put backspreads offer an effective way to hedge a long equity portfolio against sharp downward moves. By setting up a put backspread, traders can create a position that not only provides downside protection but also benefits from increased market volatility. Setting Up a Put Backspread for Hedging: Sell 1 OTM Put: The initial step involves selling one out-of-the-money (OTM) put option. This option will generate a premium, which can be used to offset the cost of the puts that will be purchased. Buy 2 Lower OTM Puts: Next, purchase two lower OTM put options. These options will provide the necessary downside protection. Depending on the strike selected, the cost of these puts will be fully or partially covered by the premium received from selling the higher-strike put. Constructing a Positive Vega Position: The structure of the put backspread results in a position with positive Vega. This characteristic is particularly valuable as volatility typically rises during periods of sharp declines. Risk Profile: Below is the risk profile of a put backspread used for hedging purposes as described in section #6 below. 5. Market Scenarios Understanding how a put backspread behaves under different market scenarios is crucial for effective trade management and risk mitigation. Here, we explore the potential outcomes: Market Moving Up or Staying the Same: Flat P&L If the market moves up or remains around the current level, the put backspread will likely expire worthless. Market Moving Down Sharply: Increased Profitability If the market experiences a sharp decline, the put backspread would potentially become profitable. Impact of Increased Volatility: Enhanced Gains A rise in implied volatility benefits the put backspread as higher volatility increases the value of the bought puts more than the sold put, adding to the overall profitability of the strategy. Maximum Risk and Trade Management: Maximum Risk: Limited to the difference between the strike prices minus the net credit received (or plus the net debit paid). Trade Management: It is essential to actively manage the position. 6. Trade Example To illustrate the application of a put backspread as a hedge, let's consider a detailed trade example using S&P 500 Futures Options. Trade Rationale: Current Market Condition: The S&P 500 Futures have just created a new all-time high, indicating that the market is at a crucial juncture. From this point, the market could either continue its upward trajectory or experience a severe change of direction. Implied Volatility (VIX): The VIX, which measures the implied volatility of options, is currently very low at 11.99. This low volatility environment makes it an ideal time to enter a backspread, as any future increase in volatility will significantly benefit the position. Trade Setup: Underlying Asset: S&P 500 Futures Current Price: 5447 Strategy: Put Backspread Expiration Date: December 2024 Specifics: Sell 1 OTM Put: Sell 1 4600 put option Buy 2 Lower OTM Puts: Buy 2 4100 put options Entry Price: Sell 1 4600 Put: Receive $2,160 premium per contract (43.2 points) Buy 2 4100 Puts: Pay $1,068.5 premium each; total $2,137 for two contracts (21.37 points x 2) Net Cost: The net cost of the backspread is the premium paid for the bought puts minus the premium received from the sold put. Net Cost: $2,137 (paid) - $2,160 (received) = $23 net credit As seen below, we are using the CME Group Options Calculator in order to generate fair value prices and Greeks for any options on futures contracts. Maximum Risk: 500 – 0.46 = 499.54 points (distance between strike prices minus the net credit received). 7. Importance of Risk Management Risk management is a fundamental aspect of successful trading and investing. It involves identifying, analyzing, and mitigating potential risks to protect capital and maximize returns. When implementing a put backspread as a portfolio hedge, understanding and applying robust risk management practices is crucial. Using Stop Loss Orders and Hedging Techniques: Stop Loss Orders: Placing stop loss orders helps limit potential losses by automatically closing a position when the market reaches a certain price level. This ensures that losses do not exceed a predetermined amount, providing a safety net against adverse market movements. Hedging Techniques: Utilizing hedging strategies, such as combining put backspreads with other options or futures contracts, can provide additional layers of protection. This approach can help manage risk more effectively by diversifying exposure and reducing the impact of unfavorable market conditions. Importance of Avoiding Undefined Risk Exposure: Defined Risk Strategies: Employing strategies with clearly defined risk parameters, such as put backspreads, ensures that potential losses are limited and known in advance. This contrasts with strategies that expose traders to unlimited risk, which can lead to catastrophic losses. Position Sizing: Properly sizing positions based on risk tolerance and account size is essential. This involves calculating the maximum potential loss and ensuring it aligns with the trader's risk management plan. Precise Entries and Exits: Entry Points: Entering trades at optimal levels, based on technical analysis, support and resistance and UFO levels, and market conditions, enhances the probability of success. In the case of put backspreads, entering when volatility is low and market conditions are favorable increases the potential for profitability. Exit Points: Setting clear exit points, including profit targets and stop loss levels, helps manage risk and lock in gains. Regularly reviewing and adjusting these levels based on market developments ensures that positions remain aligned with the trader's overall strategy. Continuous Monitoring and Adjustment: Regular Review: Continuously monitoring market conditions, position performance, and risk parameters is essential for effective risk management. This involves staying informed about economic events, market trends, and changes in volatility. Adjustments: Making timely adjustments to positions, such as rolling options, adjusting stop loss levels, or hedging with additional instruments, helps manage risk dynamically and adapt to changing market conditions. By incorporating these risk management practices, traders can effectively use put backspreads to hedge their portfolios and protect against significant market downturns. 8. Conclusion In summary, put backspreads offer a powerful tool for hedging long equity portfolios, especially in low volatility environments and/or when markets are at all-time highs. By understanding the mechanics of put backspreads, their application in various market scenarios, and the importance of active risk management, traders can enhance their ability to protect their investments and capitalize on market opportunities. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME_MINI:ES1!Education
by traddictiv
Brilliant Basics - Part 1: Trendlines"Champions are brilliant at the basics." - John Robert Wooden, legendary basketball coach. In trading, just like in sports, mastering the fundamentals forms the foundations for exceptional performance. Welcome to the first part of our educational series, Brilliant Basics . In this series, we'll explore how mastering the fundamentals lays the groundwork for achieving high-level performance in trading. Today, we focus on trendlines, a crucial tool for any trader aiming to understand market momentum. Simple Elegance Trendlines are so simple in their design that their importance can often be dismissed. A child could map the swings of a market and tell you whether the line was upward or downward sloping. Yet, this simplicity is precisely what gives trendlines their potency. Past performance is not a reliable indicator of future results The elegance of trendlines lies in their ability to distil market movements into an easily interpretable format. This simplicity does not mean they lack depth; rather, it means they are accessible to all traders, regardless of experience level. Here’s why their simplicity is so important: Clarity in Chaos: Markets can be noisy and unpredictable, but trendlines help to bring order to this chaos. If drawn correctly, they provide a clear visual representation of the market’s overall direction and volatility. Universal Application: Trendlines can be applied to any market, on any timeframe. Whether you are trading stocks, commodities, or forex, trendlines work the same way, making them a universal tool in a trader's toolkit. Consistent Feedback: Trendlines offer immediate visual feedback on price action. If a trendline is respected by the market, it reinforces your analysis. If it is broken, it signals a potential change in momentum or trend. How to Draw Trendlines Correctly Drawing trendlines might seem straightforward, but there are specific guidelines to ensure they are both accurate and useful: 1. Identify Swings: Begin by identifying the swing highs and swing lows on your chart. For an uptrend line, connect at least two higher lows. For a downtrend line, connect at least two lower highs. Ensure these points are significant swings and not minor fluctuations. Past performance is not a reliable indicator of future results 2. Avoid Cutting Prices: A trendline should not intersect any price action between the points it connects. Drawing a trendline that cuts through price bars undermines its validity and the potential insights it can offer. The line should clearly touch the chosen swing points without cutting through the price action in between. Draw multiple high quality trendlines rather than a ‘line of best fit’. Past performance is not a reliable indicator of future results 3. Consistency: Maintain a consistent approach when drawing trendlines. Use the same criteria for identifying swing points and avoid forcing a trendline to fit the data. This consistency helps in making objective and reliable trading decisions. Trendline Fans and Their Insights A single trendline can offer valuable insights, but using multiple trendlines—forming a trendline fan—can provide a deeper understanding of market momentum and potential changes in trend. Rising Momentum: In an uptrend, if the subsequent trendlines are steeper, it indicates increasing momentum. Each steeper line shows that buyers are stepping in more aggressively. However, should trendlines increase in steepness exponentially this leaves the trend vulnerable to exhaustion. Past performance is not a reliable indicator of future results Ebbing Momentum: Conversely, if the subsequent trendlines in an uptrend are less steep, it indicates decreasing momentum. This situation suggests that while prices are still rising, the strength of the upward movement is waning. Past performance is not a reliable indicator of future results Practical Applications Understanding the simplicity of trendlines enhances their practical application in trading. Here’s how you can leverage their elegance: Momentum Assessment: As we’ve seen with the trendline fans, the steepness of a trendline or progressive steepness of a trendline fan can give a valuable real-time insight into market momentum. Support and Resistance: Trendlines act as dynamic support and resistance levels. In an uptrend, the trendline or trendline fan serves as a support levels where price may bounce back up upon testing. In a downtrend, the trendline acts as resistance, where price might reverse downward upon touching. Past performance is not a reliable indicator of future results Entry Signals: Trendline breaks can serve as entry signals, especially when used on multiple timeframes. A break above a downtrend line on a lower timeframe, in-line with a bigger picture uptrend could create an attractive buying opportunity. The inverse is true with a break below an ascending trendline on a lower timeframe. Past performance is not a reliable indicator of future results Exit Signals: Trendline breaks can serve as exit signals. A break below an uptrend line or multiple uptrend lines in a trendline fan might indicate a potential reversal and an exit point. Past performance is not a reliable indicator of future results Summary: The simple elegance of trendlines makes them an indispensable tool in technical analysis. Their straightforward nature belies the depth of information they can provide, making them accessible yet useful. By mastering the basics of drawing and interpreting trendlines, traders can gain a clearer understanding of market trends and make more informed trading decisions. As we continue our Brilliant Basics series, stay tuned for Part 2, where we will explore support and resistance levels. Understanding this fundamental concept will further enhance your ability to identify potential reversal zones. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 80.84% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
CAPITALCOM:GOLDEducation
by Capitalcom
5
How To Grow A Forex or Crypto Acc Scalping A 5m Time FrameIn this video, we delve into a high-probability scalping strategy, building upon the concepts introduced in our previous videos on developing a trading plan and risk management. This third installment in the series focuses on refining entry points for high-probability trades. We explore a basic trend continuation strategy on the 4-hour time frame, then zoom in on the 5-minute time frame to identify specific price action that provides a precise entry point. Our approach involves identifying when price action begins to trade sideways, forming a range on the 5m time frame, and waiting for signs of volatility, where price takes out stop losses above or below the range. Once this occurs, the trend typically sets up on the lower time frame, allowing us to enter our trade on the 5-minute chart. We always place stops above or below the previous high, targeting the previous price swing. Please note that this video is for educational purposes only and should not be construed as financial advice.
Education
by fxtraderanthony
10