How to Choose Stocks for TradingWhat stocks do day traders trade? What stock types are more appropriate for swing traders? Selecting suitable stocks for trading requires an amalgamation of keen market understanding and thorough research. This process, while complex, is fundamental for traders aiming to navigate the ever-evolving financial markets with precision. Platforms like FXOpen provide traders with the tools and resources necessary to facilitate this selection, with instruments like TickTrader aiding in a more refined analysis. This article offers a structured approach to stock selection, encompassing various analytical techniques and considerations.
Understanding Your Trading Goals
Every trader has unique objectives shaping their strategies. While a young trader might aim for aggressive growth, those nearing retirement might focus on capital safety.
Consequently:
Growth-oriented traders are drawn to emerging companies with promising revenue growth, even if earnings vary, as they provide a high level of volatility.
Those emphasising capital preservation opt for long-standing firms known for steady profits.
Defining Your Trading Approach
Your trading approach will determine the stocks you can trade:
Short-Term: This is where understanding how to research stocks for day trading becomes essential. This period, which can last anywhere from a few moments to a few days, is ideal for traders who are looking for rapid market movements. Emerging equities and penny stocks may be an ideal option.
Medium-Term: Traders who choose medium-term trading lasting anywhere from weeks to months pay attention to securities whose value highly depends on sector trends or company-specific developments that could affect their value in the near future.
Long-Term: This investment timeframe extends over years. Although it’s not common for traders to keep trades open for such long periods, they may choose stocks with promising growth potential supported by solid company fundamentals.
Are you scouting for the best day trading stocks today, or are you more intrigued by swing trading? With platforms like FXOpen, traders can optimally navigate the markets on chosen timeframes.
Risk Tolerance Assessment
If you are looking for the best stocks for trading, it's crucial to assess the level of risk you're comfortable with in relation to your entire trading capital. Risk tolerance can be categorised into different profiles, such as conservative, moderate, or aggressive:
Conservative approach: priority for capital preservation and lower-risk investments.
Moderate approach: a trader may take some risk but still prefer a balanced approach.
Aggressive approach: higher levels of risk for potentially higher returns.
Understand Stock Types
Stocks can be categorised into various types based on their risk profiles, such as:
Blue-chips: Generally considered less risky and associated with established financially stable companies.
Growth: Offers the potential for higher returns but comes with higher volatility and risk.
Value: Tend to be less volatile and may appeal to more conservative traders.
Fundamental Analysis
Fundamental analysis provides the map for a stock trading journey, using financial statements and key ratios to decode a company's performance and potential.
Evaluating Financial Statements
Income Statement: This vital document illuminates the revenue, expenses, and profits, acting as a window into a company's profitability over a specific period. By examining it, traders discern how the company generates profits and manages its operating expenses.
Balance Sheet: Acting as a financial snapshot, the balance sheet reveals a company's assets and liabilities at a particular point in time. It provides insights into the company's net worth and financial resilience.
Cash Flow Statement: A crucial tool for traders, it traces the journey of cash as it enters and exits the company. More than just profitability, this statement underscores the company's liquidity, showing how well it manages its cash resources.
Analysing Key Financial Ratios: Ratios like P/E, Debt-to-Equity, and ROE offer profound insights into a company's valuation, leverage, and profitability, respectively.
Assessing the Company's Industry and Market Position: Understanding the industry trends and the company's standing within its sector provides context. Does the company lead its peers, or does it follow?
Identifying Potential Catalysts: A product launch, merger, or even macroeconomic factors can serve as catalysts, inducing stock price movements.
Technical Analysis
Technical analysis deciphers stock price movements through historical trends and patterns, enabling traders to base decisions on past data over speculation.
Reading Stock Charts
By analysing chart patterns and technical indicators, you can identify the best stocks with precise entry and exit points, increasing the likelihood of effective trades. For example, if you're looking to learn how to find stocks to day trade, understanding and utilising candlestick patterns can be an incredibly useful tool.
Using Technical Indicators
Technical indicators allow traders to determine the assets with the most promising price movements. Whether you are a day trader or keep trades open for weeks, technical analysis tools will help build a strong trading strategy.
Volume Analysis
Every stock movement is driven by the forces of supply and demand. Volume analysis helps to understand this by shedding light on a stock's trading activity. A surge in volume could indicate a growing interest in a stock, while dwindling volumes could suggest fading enthusiasm. This metric is essential, especially when identifying the best stocks to day trade.
Market Sentiment Analysis
Market sentiment analysis offers a deep dive into traders' collective perceptions, providing insight into their outlook on particular stocks or the market as a whole. Such insights often serve as the vital link between analytical data and the real-world trading environment.
Understanding Market Sentiment: Recognising the market's overall sentiment can be invaluable. For instance, a predominantly bullish sentiment on a blue-chip stock after a strong earnings report might indicate a potential upward trend.
Monitoring News and Events: External events, such as an unexpected CEO resignation or geopolitical tensions, can drastically impact stock prices. Staying updated can prepare traders for sudden market shifts.
Social Media Sentiment Analysis: Platforms like Twitter can be goldmines of trader sentiment. A sudden spike in tweets about a tech company following a product launch, for example, might hint at market excitement.
Sentiment Indicators and Tools: Several tools, such as those on platforms like TickTrader, offer sentiment metrics. Tracking market volume is a logical way to measure market sentiment. Large market volumes are a good indicator of how the market feels about a particular security.
Screening for Trading Candidates
Traders need a systematic approach to identify the most suitable stocks for their strategy in order to navigate the vast sea of options available. Effective screening can be the difference between capitalising on an opportunity and missing it entirely.
Liquidity ensures traders can promptly enter or exit trades. Typically, blue-chip stocks have higher liquidity than small-cap stocks.
Volatility represents price fluctuations. High volatility can provide more short-term trading chances, but it comes with risks. For instance, emerging industry stocks tend to be more volatile.
Price Trends track stocks with steady trajectories. A stock frequently hitting its 52-week high may suggest a sustained bullish trend.
Stock Screeners and Tools: With modern tech, traders use stock screeners to filter stocks that match their criteria, streamlining the selection process.
Conclusion
Choosing stocks requires a careful mix of insight, study, and instinct. As markets change, being informed and adaptable remains crucial. Platforms such as TickTrader support traders, providing essential tools for their trading journey. If you are keen to further harness these approaches, consider opening an FXOpen account.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Community ideas
Pinefest #1 WinnersThe winner of Pinefest #1, our first Pine programming contest, is alexgrover with this script . Alex is one of our Pine Wizards , and a well-known Pine programmer in our TradingView community. Alex will receive 500 USD and TradingView merchandise.
The five runners-up are:
Trendoscope
ImmortalFreedom
SimpleCryptoLife
jason5480
SamRecio
They will receive TradingView merchandise.
Congratulations to all our winners, and warm thanks to all participants. Pinefest #1 was an unqualified success. We were very pleased to see our vibrant Pine community participate, and were impressed with the number of high-quality entries. Fractions decided the final outcome.
We will continue to issue Pinefest challenges periodically. You can expect a few every year. Upcoming challenges will explore a variety of aspects of Pine programming.
Participants to our next Pinefests should keep in mind that it's important to read the challenge very carefully, to ensure you understand it correctly. It's also essential to produce complete publications for your entries, including a useful description. We are looking for high-quality publications, where descriptions are as important as code.
— The PineCoders team
Why Is Gold Outpacing the Stock Market?Looking back to 1928, when the time series for the S&P 500 began, U.S. equities have had an average annual price return of 5.9%. But gold isn’t far behind with an average yearly gain of 4.9%.
It can be instructive to reprice equities in gold terms by dividing the S&P 500 index by the dollar price of gold.
The S&P 500 to gold ratio has been through broad swings over the past century, with stocks falling by 86% in gold terms between 1929 and 1942; rising by 1165% versus gold from 1942 to 1967; falling by 95% versus gold from 1967 to 1980; soaring 4000% versus gold between 1980 and 2000; and then falling by 89% between 2000 and 2011.
More recently, the S&P 500 rose by 350% versus gold between 2011 and 2021 but has since dropped back by around 15%.
Gold tends to outperform stocks during periods of fiscal and monetary expansion, price instability, and periods of geopolitical conflict and uncertainty. As such, one might wonder if gold might be the outperformer for the remainder of the 2020s.
If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
By Erik Norland, Executive Director and Senior Economist, CME Group
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
Bearish Dollar Breakdown, Fuel For A Year-End RallyKey to much of the market’s late 2022 and first-half of 2023 rally was a general move lower in the US Dollar Index (DXY). Mostly a short play on the euro, the DXY is a key macro indicator – when it’s rising, it is considered a ‘risk-off’ environment for stocks while significant equity bull markets have featured sideways or downward moves in the greenback. Nothing is set in stone, though, and there have certainly been periods where both the S&P 500 and the buck moved higher in tandem.
Today, though, it’s clear that the usual negative correlation is in play. Just take a look at last week. The SPX enjoyed its best week since November last year as the DXY suffered its worst weekly decline since July. The dollar had been on a great run for much of the second half – with the Invesco Bullish Dollar ETF (UUP) rising in 13 out of 14 weeks, undoubtedly inflicting pain on stock market bulls. That trend may have ended just in time for the usual November-December equity rally.
This week’s chart illustrates a bearish breakdown in the US Dollar Index. The DXY had steadied itself in a range between 105.50 and 107 during October. Last week, and so far this morning, the index is under the key 105-105.50 zone. There’s now a bearish measured move price objective to just under 104. Now, the dollar does not have to collapse to get stocks trending higher over the months ahead, but a bearish DXY bias would be another bullish piece of evidence for investors to consider as strong seasonal trends persist in the next two months.
Reading multi timeframe Secrethello everyone, this is my first video tutorial on this website. I hope I explained everything properly if I didn't let me know so I can make improvements...
I did have some people who contacted me how to trade, they liked my analysis so I made this video for them and also for people new to trading.. Or people who are already pro this will give a nice upgrade on there skills
for this tutorial I used DXY which is the most important index in trading and I think it's a good start for new traders so they can use DXY to trade major currencies..
please let me know how the video was?
thank you
SPX weekly preview and what to watch forAll in the video - 4400 is going to decide whether or not we continue the uptrend. For short term a little higher makes sense, but if this is a bear market rally, this is typical kind of movement. Sometimes they go a little higher, consolidate and pullback again. I cover everything in the video. Thank you for being patient and for your support.
Can DraftKings Overcome Key Technical Levels?Primary Chart : DraftKings Inc. Weekly Price Chart with Fibonacci Levels and Downward Trendline from All-Time Highs
DraftKings Inc., an innovative sports-betting company, has been one of the hottest stocks of this week after it beat earnings expectations and raised revenue guidance. Many are likely chasing the stock's price here without any discipline whatsoever, being driven by fear of missing out and the possibility of untold gains from a former darling of growth investors.
The magenta trendline on the primary chart, which is logarithmically scaled by the way, shows that the downtrend remains intact despite today's powerful rally. This downward trendline could be broken, by the way, if momentum is sustained by bullish seasonality and tailwinds into year end in a pre-election year. But a shorter-term down trendline has been decisively snapped with today's upside push, and this suggests near-term strength for DKNG.
Supplementary Chart A
And DKNG gapped above its key 50-day SMA today as well.
Supplementary Chart B
But this post does not recommend shorting or longing this stock; instead, its purpose is to analyze NASDAQ:DKNG and consider its current position in light of a severe bear market in 2021-2022 and a euphoric bull-market run in 2020-2021. With discipline, some trading profits might be made long or short given this stock's inherent volatility—the stock rose about 15% today and about 25% this week alone. But without risk management, this stock could easily obliterate anyone attempting to gather quick profits on a short-term to intermediate-term time frame.
The stock is extended here after it gapped above key moving averages. It also has reached critical resistance at the .618 Fibonacci retracement after breaking above the 50% retracement on October 31, 2023. The .618 Fibonacci retracement lies at $34.25, a few cents above the high of the week and the day today. A bit of consolidation of today's move may provide traders with a bullish view into the new year (a time frame of about 2 months) a reason to buy the dip.
But caution is warranted into 2024 and 2025—can technological innovation and earnings surprises be enough to sustain this stock? Your comments on this particular question are welcome. There may be room for some debate as macro headwinds cannot prevent rallies like the one seen in equity indices like SP:SPX and some growth stocks. But there is a decent likelihood that macro headwinds may work against DKNG as long as interest rates remain high and inflation does not disappear. The Federal Reserves funds rate is now at 5.25% to 5.50%, a 22-year high. And quick look at the TradingView's Financial overview shows that DKNG has not had positive net income yet. And its financial history is not that long yet: It was founded in 2011, and it has only been public since 2020. So despite the major earnings beat and positive guidance today, DKNG still lost $0.61 per share. Unprofitable growth stocks do not perform as well in high-rate environments.
________________________________________
Author's Comment: Thank you for reviewing this post and considering its charts and analysis. The author welcomes comments, discussion and debate (respectfully presented) in the comment section. Shared charts are especially helpful to support any opposing or alternative view. This article is intended to present an unbiased, technical view of the security or tradable risk asset discussed.
Please note further that this technical-analysis viewpoint is short-term in nature. This is not a trade recommendation but a technical-analysis overview and commentary with levels to watch for the near term. This technical-analysis viewpoint could change at a moment's notice should price move beyond a level of invalidation. Further, proper risk-management techniques are vital to trading success. And countertrend or mean-reversion trading, e.g., trading a rally in a bear market, is lower probability and is tricky and challenging even for the most experienced traders.
DISCLAIMER: This post contains commentary published solely for educational and informational purposes. This post's content (and any content available through links in this post) and its views do not constitute financial advice or an investment or trading recommendation, and they do not account for readers' personal financial circumstances, or their investing or trading objectives, time frame, and risk tolerance. Readers should perform their own due diligence, and consult a qualified financial adviser or other investment / financial professional before entering any trade, investment or other transaction.
TradingView Masterclass: Paper TradingIn this Masterclass, you’ll learn how to use our official paper trading tool. Paper trading gives trades the capability to test their trading skills in a simulated environment without risking real money. For all the new traders out there, you’ll want to make paper trading your best friend. Why? Have all the fun you want, practice endlessly, and never lose a dime.
Reminder: With Black Friday nearing (seriously… it’s coming soon), now is the time to master one of our most important tools. You’ll be ready to go the second you activate your upgraded account.
To get started, follow the steps below:
Step 1 - Click the ‘Trading Panel’ button located at the bottom of the chart.
Step 2 - Once you click the ‘Trading Panel’ button, a list of brokers in your region will appear, but also, at the very top, a Paper Trading account powered by yours truly, TradingView.
Step 3 - Click Paper Trading and you’ll now start the process of opening your free, simulated trading environment, entirely powered by us.
You made it! Time to celebrate! 🕺💃
Alright, let’s go a little deeper and talk about the buttons you’ll want to understand now that you’ve got your Paper Trading account opened.
While still having the Trading Panel open, click the button that says “Trade” and an order slip will appear. It’ll look like this:
As you get started, here are some tips to keep in mind:
Take Paper Trading seriously. Work Paper Trading as if it were a real account:
Record your trades, the reasons, the results obtained and the lessons learned.
Explore different approaches like intraday trading or swing trading.
Maintain emotional discipline, your trading strategy and risk management.
Practice, practice, practice - that’s what this is all about, getting better at trading through practice.
It gets better, because there are multiple ways to trade and customize your paper trading experience. Open the chart settings menu or right click on the chart, and you can add specific trading features to the chart as needed.
In-fact, we’ll explain all of the features available to you in the chart settings.
🟥🟦 Buy/Sell buttons :
When these are turned on, you’ll see a Buy and Sell button at the top right of the chart. When it comes to buying and selling, there are three primary order types:
Market (executed at the current market price),
Limit (executed at a defined specific value), and
Stop (executed when the price falls below a certain level).
👆 Instant Orders placement :
This option allows you to open positions at the market price by simply clicking the buy and sell buttons. You can choose the quantity by clicking on the number below the spread.
⏰ Play Sound for executions :
You can enable this option to receive an audible notification when a trade is executed, with eight different tones to choose from.
📲 Notifications :
Receive notifications for All events or Rejection orders only.
Tip : You can open the order panel by using the Shift + T shortcut or by right-clicking on a chart, then selectings Trade > Create a new order.
👁🗨 Positions :
Uncheck this box if you don’t want to see your active trading positions.
🔺🔻 Profit & loss :
This option allows you to view the profit and loss changes in your trades, which can displayed in both ticks and percentages.
🔃 Reverse button :
When enabled, a button is added to your active trading positions that allows you to reverse your trade.
👁 Orders :
See your current open unexecuted orders by checking this box.
🔺🔻👁 Brackets profit & loss :
It functions similarly to the Profit & Loss option, but for pending orders.
⏪ Executions :
It displays the past executed orders on the chart.
Execution labels :
Enable this option to view specific information about past execution orders, including trade direction, quantity, and executed price.
Extended price line for positions & orders :
It creates an extended horizontal line for your active trades.
⬅⬆➡ Orders & positions alignment :
You can move the alignment of your orders to Left, Center and Right in your charts.
🖥 Orders, Executions and Positions on screenshots :
Check this box if you want to download screenshots (shortcut: Ctrl + Alt + S) with active and pending orders.
Thanks for reading and we hope this tutorial helps you get started! We look forward to reading your feedback.
- TradingView Team
Revisiting Automatic Access Management API for VendorsThis video explains how to automate access management for vendors who build and sell invite only scripts based on subscription or one time fee. I have made videos about this earlier as well. But, due to high demand, I have been asked to make this video again.
🎲 Tools Required
Replit - Used for hosting the service that automates access management
Postman - To test the services hosted
🎲 Prerequisites
User should have premium tradingview account and be able to publish invite only scripts by following the house rules.
User should disable 2FA on their account in order to allow programs to login remotely and manage access.
🎲 Steps
All the steps are also mentioned in the githup repository: github.com
🎯 Run the access management service
Fork the replit repository: replit.com
Update Environment Variables tvusername and tvpassword
Run the repl
🎯 Use postman to test the service methods
Detailed explanation of the API calls are present in the github link provided above. The service is capable of doing following things.
Check if the given tradingview username is valid or not
Get the access details of given user to list of scripts identified by pub id.
Delete the access to given user to list of scripts identified by pub id.
Provide/Extend access to given user to list of scripts identified by pub id for specific duration.
🎲 Notes
Please follow house rules while publishing and selling subscriptions to invite only scripts.
Do not commercialize these API calls or do not turn it into product. The mechanism is built on backend calls that are not officially supported by tradingview. While tradingview is tolerant on individual use, any malicious activity may force them to shut this down for everyone.
MSFT: Double-Top, or Bull Flag Breakout?NASDAQ:MSFT is showing a mixture of bullish and bearish signals; however, the most concerning of which is an active rug pull event which kicked off on March 16, 2023 at $265.20 via the 2D timeframe:
This coincides with a large RSI divergence event occurring on the larger timeframes; highlighting the potential for a double-top:
That being said, there appears to also be a major bull flag forming on the larger timeframes:
If we dive a bit deeper into the smaller timeframes and analyze the bull flag, we see another active rug pull at $345. This signals a high likelihood NASDAQ:MSFT will hit $345 in the near future:
With a high degree of both bullish and bearish signals, it can be hard to discern where NASDAQ:MSFT might be headed next.
We are keeping a very close eye on the AVWAP derived from the March 16 event as a guiding factor. Should the price significantly break below this level, we expect further drawdown to $265 will occur.
The road higher will be bumpyWhile bullish in the long term, we are still awaiting further pullback in the price of gold after its impressive run above $2,000. Right now, we are paying close attention to support and resistance levels near $2,009, $1,985, and $1,959. If the price of gold manages to hold above $1,985, it will be positive; the same applies to the breakout above $2,000 and resistance near $2,009. However, if the price fails to stay above the mentioned level, and we see more decline in RSI and Stochastic on the daily chart, it will alert us to more downside; in such a case, we would expect gold to drop below $1,960 (and maybe even to as low as $1,925). Yet, regardless of our opinions, it is important to note that there is a FOMC meeting scheduled for today, which can have a volatile impact (to either side) on the price depending on the FED’s decision and the chairman's tone during the press conference.
Illustration 1.01
Illustration 1.01 portrays the daily chart of XAUUSD and simple support/resistance levels derived from particular peaks and troughs.
Illustration 1.02
The image above shows the daily chart of RSI. The yellow arrow indicates a bearish crossover below 70 points, which raises our suspicion (though it still could be just a fakeout).
Technical analysis
Daily = Bullish
Weekly = Neutral
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. Therefore, your own due diligence is highly advised before entering a trade.
Trading strategyA trading strategy encompasses a set of guidelines for initiating a position.
A trading system encompasses a set of rules for consistently profitable trading. This involves a clear comprehension of your strategy, specifying the assets you trade, the setups you utilize, the risk involved, preferred timeframes, and other pertinent details.
Consistency: A meticulously crafted action plan serves as a tool to maintain a steady trading strategy while minimizing the sway of emotions on your decision-making. Such consistency often yields more predictable results and enhances overall performance over time.
Confidence: Equipped with a playbook, you can trade with increased self-assurance, knowing that you are following a tried-and-tested strategy. This confidence alleviates stress and anxiety, enabling you to maintain focus and make sound decisions.
Adaptability: In the face of shifting market conditions, having a playbook at your disposal empowers you to adjust and fine-tune your strategies as needed. This adaptability is a critical factor in staying ahead and sustaining success in the constantly evolving realm of trading.
4 distinct components that constitute a trading strategy:
Context: Context encompasses the surroundings and circumstances related to a trading idea or event. It is crucial for a comprehensive understanding of the situation and is vital for maximizing the potential of your trading strategy. Many traders erroneously believe that a trading strategy is simply about identifying patterns or triggers along with basic risk management. For instance, some may focus on trading Order Blocks. However, the key to making Order Blocks a profitable tool lies in applying the correct context.
Patterns: The second component involves identifying the triggers or patterns that dictate when to enter a position. Context is applied to these triggers for in-depth analysis, aligning them with the risk-to-reward parameters defined in your trading system. Triggers can vary widely and should be chosen according to your individual trading style and strategy.
Position Management: Inexperienced traders often find themselves overwhelmed when they enter a position, leading to irrational decisions. Defining a repeatable process for managing your trades is essential. This process should align with the goals set out in your trading strategy. For instance, if your strategy aims for a risk-to-reward ratio of 3R or higher, your approach will differ from someone targeting a minimum of 1.5R. To ensure consistency, it's crucial to avoid excessive discretion when managing positions, such as attempting to achieve a 1:5 risk-to-reward ratio, placing short stops, or averaging down. Instead, aim for strict consistency, gradually honing your skills.
Risk Management: The final facet of any trading system is risk management. Poor risk management is a leading cause of trader failures. It often results from excessive leverage and a lack of understanding. Your risk management plan doesn't need to be overly complex, but it must be clear and diligently adhered to. By following a robust risk management strategy, you can avoid the pitfalls that ensnare many inexperienced traders who destroy their accounts due to reckless trading practices.
It may vary depending on your trading style, but for day trading I recommend the following:
* 1% maximum risk per trade
* 2% maximum per day
* 6% maximum per week
* 10% maximum per month
6 essential steps to build and refine your trading strategy:
Determine Your Trading Style: Start by defining your trading style, whether you are a day trader, swing trader, or long-term investor. This choice guides your selection of appropriate strategies, time frames, and risk management techniques. For instance, specify your preferred win rate (e.g., 50%+), risk-to-reward ratio (e.g., 2R minimum), and trading style (e.g., scalping, position trading, or swing trading).
Research and Select Strategies: Explore various trading strategies and choose the ones that align with your trading style, risk tolerance, and financial objectives. You may want to consider strategies like Smart Money trading, which could be particularly beneficial.
Define Entry and Exit Criteria: For each selected strategy, outline precise entry and exit criteria. Determine your stop loss and profit targets to ensure you execute trades accurately and limit potential losses. It's crucial to establish a well-defined trade management plan that guides step-by-step position management. For example, decide to move your position to break-even when a 1:1 risk-to-reward ratio is reached, open trades exclusively with a 1:2 ratio, or close 50% of your position at 1:1 and the remaining 50% at 1:3.
Establish Risk Management Rules: Implement robust risk management rules to safeguard your capital. These rules might include setting a maximum percentage of your account balance to risk per trade or using Expert Advisors to automatically determine position sizing for risk control.
Test Your Strategies: Prior to committing real capital, test your strategies using historical market data or a demo account. This testing phase allows you to refine your strategy and build confidence in your approach. If you cannot achieve positive results on a demo account, it's advisable to avoid risking real money until you've honed your skills.
Analyze Your Trades: Maintain a comprehensive trade journal recording the strategy used, entry and exit points, and relevant market conditions for each trade. Regularly review your trade results to pinpoint areas for improvement and adapt your trading plan accordingly. Analyzing your trades is crucial for continuous growth as a trader.
Hope you enjoyed the content I created, You can support with your likes and comments this idea so more people can watch!
✅Disclaimer: Please be aware of the risks involved in trading. This idea was made for educational purposes only not for financial Investment Purposes.
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How to Trade Crude OilLearning how to trade crude oil requires a nuanced understanding of its fundamental aspects, instruments, and trading strategies. This comprehensive article offers insights into the critical elements that affect crude oil prices, the range of instruments available for trading, and specific strategies traders use in this market.
The Basics of Crude Oil
Crude oil, often referred to as "black gold," is a fossil fuel derived from the remains of ancient organic matter. It serves as a crucial raw material for various industries, including transportation, chemicals, and manufacturing.
Two primary types of crude oil traded on global markets are West Texas Intermediate (WTI) and Brent Crude. WTI is primarily sourced from the United States and is known for its high quality and low sulphur content. On the other hand, Brent Crude originates mainly from the North Sea and serves as an international pricing benchmark.
The Organization of the Petroleum Exporting Countries (OPEC), which includes members like Saudi Arabia, Iran, and Venezuela, plays a pivotal role in determining global oil supply. By adjusting production levels, OPEC influences crude oil prices significantly. Additionally, other regions like Russia and the United States contribute to the world's oil supply, further affecting market dynamics.
Factors Affecting Crude Oil Prices
In oil trading, economics is a fundamental aspect that traders need to grasp to make educated decisions. Several factors drive the price of crude oil, and here are some of the most significant:
Supply and Demand: At its core, the price of crude oil is determined by how much of it is available (supply) versus how much is wanted (demand). An oversupply can depress prices, while high demand can cause prices to spike.
Geopolitical Events: Conflicts, wars, and diplomatic tensions in oil-producing regions can disrupt supply chains, affecting prices. For instance, sanctions on Iran or instability in Venezuela can push prices higher.
Currency Fluctuations: Oil prices are generally quoted in US dollars. A strong dollar can make oil more expensive for countries using other currencies, thereby affecting demand.
Seasonal Changes: During winter, demand for heating oil can rise, pushing crude oil prices up. Conversely, a mild winter might result in lower demand and prices.
Technological Advances: Innovations in extraction methods, such as fracking, can alter the supply landscape, making it easier to extract oil and thereby affecting prices.
OPEC Decisions: As previously mentioned, OPEC has a significant influence on oil prices. Their production quotas can tighten or flood the market, causing price swings.
Economic Indicators: Data like unemployment rates, manufacturing output, and interest rates can indicate the health of an economy, which in turn can affect oil consumption and prices.
How Is Crude Oil Traded?
When learning how to trade crude oil, traders have a variety of instruments to choose from. However, it’s also important to be aware of its trading hours and how leverage is used.
Crude Oil Instruments
Futures Contracts: A futures contract is an agreement to buy or sell a specific quantity of crude oil at a predetermined price on a specified future date. Both WTI and Brent Crude have their own futures contracts traded on exchanges like the New York Mercantile Exchange (NYMEX).
Contracts for Difference (CFDs): This financial derivative allows traders to speculate on oil price movements without owning the actual commodity. Essentially, you're entering into a contract with a broker to exchange the difference between the opening and closing prices of the crude oil position.
Exchange-Traded Funds (ETFs): These are investment funds traded on stock exchanges. ETFs such as the United States Oil Fund (USO) or the SPDR S&P Oil & Gas ETF (XOP) provide exposure to oil prices by either tracking the commodity's price or investing in oil-related equities.
Options: These financial instruments give traders the right but not the obligation to buy or sell crude oil at a fixed price before a certain date. They offer more flexibility but are generally considered riskier due to their complex nature.
Spot Market: In the spot market, physical crude oil is bought and sold for immediate delivery. However, this is less common for retail traders due to the logistical challenges involved.
At FXOpen, we offer both WTI and Brent Crude CFDs. To get started with oil trading, software such as our free TickTrader platform can provide the technical analysis tools necessary to analyse crude markets.
Trading Hours
Crude oil markets are open almost around the clock, offering high liquidity and the potential for trading opportunities at various times. The New York Mercantile Exchange (NYMEX), for example, is open for trading from Sunday evening until Friday afternoon, with a daily trading break. The most active trading hours are generally during the US (9:00 AM to 2:30 PM EST) and European sessions (6:00 AM to 11:00 AM EST).
Leverage
Leverage allows traders to use small amounts of capital to control a larger position. While this can amplify profits, it also increases risk. Most retail traders opt for trading crude oil through CFDs, which often come with higher leverage options, making it essential to manage risk carefully.
Crude Oil Trading Strategies
Given the volatile nature of crude oil prices, traders employ specific strategies to capitalise on price fluctuations. Here are some strategies particularly useful for crude oil trading:
Trend Following with Moving Averages
The trend is your friend, especially in commodities like crude oil. One effective way to follow the trend is by using moving averages, such as the 50-day (blue) and 200-day (orange). When the 50-day crosses above the 200-day, it's generally a bullish signal, and vice versa for a bearish trend. However, as with all technical analysis tools, moving averages can sometimes trigger false signals.
Range Trading
Due to supply-demand dynamics and geopolitical factors, crude oil prices often fluctuate within a specific range. Identifying these ranges can be useful for short-term trading. Traders buy at the lower end of the range and sell at the higher end, applying technical indicators like RSI or Stochastic Oscillator for entry and exit signals.
News-Based Trading
In crude oil markets, news about OPEC decisions, US oil inventory data, geopolitical tensions, and technological advancements can dramatically impact prices. Traders keeping an eye on oil news can take advantage of sudden announcements or an economic release likely to push prices in a particular direction. Given the high leverage commonly available in CFD trading, this strategy can be profitable but also comes with significant risk.
The Bottom Line
In crude oil trading, having the right strategies and tools is essential for success. By understanding the fundamentals, market dynamics, and utilising specific trading techniques, you are now equipped with the knowledge you need to get started. To access these markets with competitive spreads and rapid execution speeds, consider opening an FXOpen account and step confidently into the world of crude oil trading.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Day Trader's Toolbox Part 3: Average True Range (ATR)
Welcome to the final instalment of our Day Trader's Toolbox series, in which we highlight some essential tools and indicators which have the potential to transform your day trading.
Today we lift the lid on the Average True Range or ATR – a simple yet highly effective tool when analysing the price movement of any market. We’ll explain how ATR helps you to view the market through the eyes of a professional trader and we’ll outline the three core uses for ATR in day trading.
I. Understanding ATR:
What is ATR?
Okay, let’s start with the basics: ATR is designed to measure market volatility by calculating the average range between the high and low prices over a specific period.
Without delving into the ATR formula, it's important to understand that this indicator takes price gaps into account. This factor provides traders with an authentic representation of market volatility.
On TradingView, the ATR indicator appears as a line underneath your chart. And whilst it can be calculated on any timeframe, we typically talk about ATR in terms of the daily timeframe – hence ATR will tell us how much we can expect a stock to move up or down in typical trading day.
Daily ATR on Daily Candle Chart
Past performance is not a reliable indicator of future results
Start Seeing Price Movement Like a Seasoned Trader
Have you ever found yourself drawn to the lists of top gainers and losers on stock trading platforms? It's a common fascination for novice traders, as these lists provide quick summaries of what's "hot" on any given day.
However, seasoned traders know that evaluating stock prices solely based on percentage movements is about as practical as a paper umbrella in a rainstorm.
To illustrate this point, consider two stocks, Stock A and Stock B, both opening with a 3% increase. Yet, Stock A typically fluctuates by 3% on an average day, while Stock B usually moves by 1.5%. In this context, Stock B's price movement is far more significant.
This is where ATR comes into play. ATR normalises market price movements, making it a valuable tool for comparing a stock's price changes against its historical performance and its peer group.
So, it's time to shift your perspective. Leave behind the world of percentage-based analysis and adopt ATR to see price movement through the eyes of a professional trader.
II. 3 Ways to Use ATR When Day Trading
1. Profit Targets
Consider this day trading scenario: The market has broken above its previous day's high (PDH), and the price is showing signs of consolidation while staying above VWAP. With these clear signals of strength and insights from your higher timeframe analysis, you decide to go long. Now, the question is, where do you place your profit target?
Answer:
As a day trader, your goal is to capitalise on intraday price movements and avoid holding positions overnight, thereby mitigating overnight risks. This means that setting a structural target, such as the next resistance level, may not be practical.
However, if you incorporate the daily ATR with the current day's low, it provides you with an exceptionally realistic profit target. This target is entirely objective and calibrated to the specific market's current level of volatility.
It's important to note that ATR is an average, so it should be used as a guide rather than an absolute rule. Nevertheless, having a tool to adjust your profit expectations is invaluable, especially in the emotionally charged environment of day trading.
Example:
ATR based profit target
Past performance is not a reliable indicator of future results
2. Stop Placement
In swing trading, where positions are held over several trading sessions to capture price swings, using multiples of the ATR for stop placement is a smart strategy. It helps keep your stops outside of market noise and enhances risk management.
However, when it comes to day trading, it's understandable that stops need to be considerably smaller. But that doesn't mean we can't use ATR to fine-tune our stop loss levels according to market volatility.
Day traders can benefit from using a multiple of a lower timeframe ATR to establish a volatility-adjusted stop loss. This approach is often more effective than simply placing a stop below the nearest level of support. For day traders using a 5-minute candle chart, a stop set at 10 times the ATR on this timeframe is a reasonable starting point.
Keep in mind that ATR serves as a normaliser of price movement across different markets. Using ATR for stop placement allows for consistency in risk management across the various markets you trade.
For day traders who prefer locking in profits as a trade moves in their favour, an ATR trailing stop can be an invaluable tool. It trails the stop a certain number of ATRs below the close of a specified number of bars, dynamically adjusting to the market's volatility. TradingView offers numerous ATR trailing stop indicators just search for “ATR Trailing Stop” in the indicators tab.
Example:
ATR Trailing Stop Loss
Past performance is not a reliable indicator of future results
3. Measuring Overextension
Just as ATR proves invaluable in setting realistic profit targets calibrated to market volatility, it also serves as an objective measure to define when a market is overextended.
There are various methods to use ATR for this purpose, but one of the most straightforward approaches involves Keltner Channels, which envelop an ATR band on either side of an exponential moving average.
When the price moves beyond the boundaries of the Keltner Channels, it is considered overextended. Day traders can experiment with Keltner Channel settings. The standard setup involves using 2.5 times the ATR wrapped around a 20-period exponential moving average. Wider bands (a higher ATR multiplier) across a longer period of the moving average generate fewer signals, while narrower bands across a shorter period produce more signals.
Incorporating Keltner Channels, in conjunction with support and resistance levels, provides an additional layer of confirmation for day traders, enhancing their ability to assess overextension in the market.
Example:
Keltner Channels: S&P 500 5min Candle Chart
Past performance is not a reliable indicator of future results
In summary, ATR is a versatile tool for day traders, helping them navigate volatile markets with precision. It aids in setting realistic profit targets, fine-tuning stop placement, and identifying market overextension. By incorporating ATR into your trading strategy, you can make informed decisions and manage risk more effectively.
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.
NEAR Q3 OverviewExecutive Summary
NEAR Protocol stands as a Layer-1 (L1) smart contract blockchain that couples a state-of-the-art sharded architecture with an emphasis on offering a user experience reminiscent of Web 2 platforms. While maintaining the security and decentralization integral to blockchains, NEAR aims to surpass the capabilities of prior chains, such as Ethereum, in terms of usability, efficiency, and scalability. Recognizing and aiming to overcome Ethereum's limitations, NEAR incorporates sharding. This key distinction allows the blockchain to significantly enhance its throughput, accommodating a more substantial transaction volume by dividing the blockchain into smaller, concurrent shards.
A pivotal differentiator for the NEAR Protocol, sharding was introduced in November 2021 as Nightshade. This technique allows validators to process only transactions specific to their assigned shards, enabling potentially infinite scalability. For end users and investors, Nightshade ensures quicker transaction speeds at reduced fees. Diverging from traditional sharding methods that split the blockchain into multiple states, NEAR's design maintains the blockchain as a singularly sharded entity. Additionally, a synchronized state mechanism ensures that a change in one block's state prompts adjustments in other shards correspondingly.
In March 2023, NEAR unveiled the Blockchain Operating System (BOS), a groundbreaking open-source platform that allows developers to craft applications across various blockchain environments using well-known programming languages. Moreover, it provides crypto users with an experience reminiscent of Web 2. Designed to be inclusive, BOS appeals to Web3 veterans and those new to the decentralized web. By ensuring easy onboarding, robust security, and seamless cross-chain interactions, BOS is setting a new paradigm for Web 3 application development.
The NEAR Foundation, with the inception of the NEAR Digital Collective (NDC) and a pivot to community DAOs, is pioneering a transition to a more democratized and decentralized framework compared to the conventional Board-based system. Launched in Q3 2022, the NDC represents a concerted effort to decentralize decision-making within the NEAR network, emphasizing transparency through defined treasury management and embracing decentralized governance with on-chain voting. Furthermore, the NDC aspires to advance validator decentralization and stimulate the development of the core protocol and infrastructure.
Looking forward into 2024, the Near protocol will introduce several pivotal milestones, including the next step in Nightshade sharding, meta transactions, zero-balance accounts, a Global Storage proposal, and more.
Introduction to Near
NEAR Protocol is a Layer-1 (L1) smart contract blockchain with a bleeding-edge sharded design and an emphasis on an intuitive Web 2-like customer experience, all while preserving the security and decentralization users expect with a blockchain. Established in 2018, it sets out to achieve improved usability, efficiency, and scalability over preceding chains like Ethereum. Founded by Illia Polosukhin and Alexander Skidanov and spearheaded by the Near Collective, the NEAR Protocol was envisioned to serve as a community-driven cloud computing PoS blockchain and a decentralized hub tailored explicitly for hosting innovative decentralized applications.
The central motivation behind NEAR's technology is to prevent network congestion and furnish a conducive environment for developers, thereby promoting on-chain protocol development. Early on, NEAR identified certain operational challenges in Ethereum, particularly related to network congestion and high/volatile gas fees, that it looked to solve. To do so, Near turned towards sharding.
A key differentiator for NEAR, sharding, in essence, provides the ability for a blockchain to increase its throughput and handle a larger number of transactions by partitioning the blockchain into smaller parallel shards. In its pursuits, Near introduced an original approach to sharding in November 2021 known as Nightshade, initially unveiled as Simple Nightshade. The underlying principle of Nightshade is that validators are not burdened with the task of processing every incoming transaction. Instead, they only handle transactions that are within specific shards. By doing so, Nightshade paves the way for theoretically limitless scalability. But what does this mean for the end user or investor? Primarily, this approach, which is entirely abstracted from the end-user experience, allows for reduced transaction fees while ensuring rapid transaction speeds.
Additionally, Near recently launched a new initiative in early 2023 known as the Blockchain Operating System (BOS). This development represents a significant shift in how we perceive blockchain platforms. The BOS is designed to integrate seamlessly with various blockchain systems while facilitating decentralization and discoverability, which have historically been impossible to achieve together.
Essentially, the BOS is grounded in blockchain technology but broadens its application by acting as a universal layer, making it adaptable to different blockchain frameworks. One of its primary features is the provision of a decentralized platform for front-end development. This platform aims to simplify the creation of blockchain applications by emphasizing clarity and flexibility.
One of the core advantages of BOS is its potential to decentralize user interactions, improve security protocols, and enhance the modularity of components. Additionally, it prioritizes compatibility across diverse blockchains, presenting developers with a more intuitive and straightforward development environment.
NEAR Technologies
Blockchain Operating System (BOS)
In March 2023, the NEAR protocol introduced the Blockchain Operating System (BOS), an open-source platform empowering developers with the flexibility to build across diverse blockchain environments using familiar programming languages and equipping crypto users with a familiar Web 2 UX. The BOS is designed to be inclusive and democratize the open, catering not only to seasoned web3 enthusiasts but also to the broader audience who might be newer to the decentralized web. A significant breakthrough in the system is eliminating the immediate need for a new user to own any cryptocurrency, substantially reducing the friction of user onboarding.
Additionally, the BOS interface streamlines access and navigation, making it more user-friendly for both developers and the general populace. Moreover, it enables users to search through a portal to diverse communities and applications, all the while prioritizing data privacy. Further, the BOS's user-centric design, coupled with its focus on accessibility, does not just simplify the onboarding experience but also bolsters the discovery of new applications.
Remarkably, the BOS functions both as a development platform and a social network. It’s an environment where users can both deploy and unearth new applications. In delivering straightforward onboarding procedures, unmatched security, and fluid interactions across all chains, the BOS is reshaping the framework for constructing Web 3 applications.
Source
BOS Under the Hood
The Blockchain Operating System (BOS) by NEAR seeks to redefine the landscape of Web3 applications through its unique architecture based on three pivotal elements: components, blockchains, and gateways. Here, we will delve into the significance of each element and examine how they collectively shape the BOS framework.
Components: The Building Blocks of BOS
Components exist at the decentralized application (dApp) layer and can be equated with notable platforms such as Lido, Uniswap, Compound, and others. They stand out for their on-chain storage, high degree of transparency, and their ability for developers to fork these applications, harnessing their functionalities and composability to craft comprehensive web applications. Storing the entirety of a component's code on-chain not only ensures auditability but also bolsters security. With the code readily available for scrutiny in blockchain explorers, users can operate these applications locally, enjoying resilience against potential censorship and a streamlined user experience. This ability to natively audit and locally run the applications represents a paradigm shift in the user-app relationship.
Blockchains: The Underlying Infrastructure
The versatility of components and the BOS becomes apparent in their ability to interact with numerous blockchains and smart contracts instead of just one chain. Currently, BOS offers compatibility with all EVM chains, such as Ethereum, Polygon, Arbitrum, and Optimism, as well as, the native NEAR platform. As EVM chains dominate the TVL in the DeFi space, the BOS’ ability to work across nearly all enables users to tap into nearly all the liquidity and top dApps in the crypto economy. NEAR's capability to efficiently and cost-effectively store HTML/CSS/JS makes it the preferred choice for hosting app source codes.
Gateways: Bridging the Gap to Decentralization
Gateways, the third pillar of the BOS, facilitate the delivery of decentralized front-ends to a broader audience. Each gateway is underpinned by a bespoke virtual machine (VM) equipped to load and run frontends for protocols, be they Ethereum-based, Layer 2 solutions, or alt-L1 platforms like NEAR. All code pertaining to these frontends finds its home on the NEAR blockchain. The gateways are diverse, ranging from wallets and portfolio tools to distinct applications like SWEAT. They cater to tasks as rudimentary as adding swap functionality or as intricate as erecting decentralized app stores. Integrating this expansive functionality requires just the addition of a JavaScript library, followed by a selection of desired app front-ends. Prominent gateway exemplars include near.org, bos.gg, near.social, Cantopia, and nearpad.dev.
The decentralization of composable front ends enabled by the BOS is unique to Near, filling a conspicuous and much-needed void in the crypto arena. Instead of relying on centralized data servers, these front ends are blockchain-stored, promoting both composability and resistance to potential censorship. Historical instances, such as Uniswap's token delisting and the sanctions imposed on Tornado Cash, underscore the vulnerabilities of front ends. BOS’s decentralized approach allows developers the flexibility to fork these front ends and build in the truly OSINT environment that the cryptocurrency movement was built upon.
BOS Advantages
The BOS aims to integrate decentralization with discoverability and developer flexibility. Central to the BOS framework is its array of Web3 development tools that are crafted with the intent of pushing Web3 mainstream. From the onset, the system is designed to enhance user onboarding, improve cross-chain development and app discoverability, and create a seamless UX for Web3 users.
This last point on abstracting away different blockchains for a seamless Web3 experience has benefits beyond simply improving UX. It can potentially also reduce the liquidity fragmentation and tribalism associated with a fragmented crypto economy built around disparate, siloed blockchains. The BOS proposes a solution to this by striving for a consistent user experience across multiple blockchains and allowing developers globally to access and implement various Web3 components. With users and developers now (potentially) unable to discern which blockchain they are using, there is no longer a need to promote one over the other.
None of this is possible without the composability offered by the BOS. The system aims to be chain and language-agnostic, allowing developers to reuse and adjust different components while utilizing the language of their choice. The BOS supports a variety of languages for smart contract development, including JavaScript, Rust, AssemblyScript, and Solidity. Complementing this are their collaborations with established cloud providers, namely Google, Seracle, and Alibaba Cloud, to make transitioning from Web2 to Web3 as comfortable as possible.
In addition, NEAR has initiated the NEAR Dev Hub, a platform envisioned as a resource hub for developers. Preliminary outputs from this initiative include sponsored hackathons and the establishment of community groups.
Thresholded Proof of Stake
The NEAR Protocol operates on a distinct consensus mechanism known as "Thresholded Proof of Stake" (TPoS). Similar to other PoS implementations, TPoS still uses validators, who must stake NEAR tokens to participate, to validate transactions and ensure the integrity/security of the network. However, within the TPoS environment, validators can assume one of four pivotal roles:
Chunk Producers: Their primary responsibility is to authenticate transactions on individual shards, subsequently crafting a chunk, often referred to as a "shard block", from their designated shard.
Block Producers: These validators gather chunks from their chunk-producing counterparts associated with discrete shards. Their function culminates in the production of a block, which is then added to the primary chain.
Hidden Validators: Operating under a veil of confidentiality, these validators authenticate random shards — shards whose identity remains a secret to them and is undisclosed to the public. This veil serves a dual purpose. Firstly, it considerably complicates the task for any malevolent entities attempting to compromise them. Secondly, it robustly augments the chain's overall security measures.
Fishermen: Actively overseeing certain chain segments, these validators act as the guardians against fraudulent activities. They constantly monitor, ready to flag any nefarious activities. Interestingly, their operational requirements are modest — a minimal stake. However, this role, though critical, doesn't confer any rewards.
Central to TPoS is its innovative auction system employed to select validators. This methodology, in essence, discourages the practice of pooling. When validators amass resources, they not only amplify their individual rewards but also consolidate control over the chain. Such centralization runs counter to the foundational principles of blockchain, which emphasize distributed control. The TPoS design confronts this challenge head-on by placing natural barriers against pooling.
Additionally, TPoS tackles the issue of consensus forking — a scenario in which multiple validators simultaneously contribute blocks to the chain. Such events can elongate the time required for transaction finality. By minimizing the possibility of these forking instances, TPoS ensures swifter transaction finality.
Validator Requirements
Validators bear the critical responsibility of validating and executing transactions across the entirety of NEAR's sharded blockchain. Additionally, they monitor their peers (other validators), ensuring no invalid blocks are produced or alternate chains are formed. Validators found compromising network stability undergo "slashing," where part or all of their staked assets are confiscated. To compensate for their services and inherent risks, NEAR validators receive a inflationary protocol rewards, amounting to 4.5% of the total supply annually.
Given the complexity of the validator role, there are stringent hardware requirements (e.g. costs) for anyone looking to run one. To effectively run a validator, a robust system configuration, consisting of an 8-Core CPU, 16GB of RAM, and 1 TB SSD storage, is necessary. Current estimates indicate that the monthly expenditure for hosting a block-producing validator node stands at $330+.
This excerpt just scratches the surface, for the full report, click here .
The very Fat tail of the Market!The trading value of the 5078 stock tickers traded in the 6088 billion USD.
Hence, the trading value of the top 10 tickers with the highest dollar value of trading was 1811 billion USD, almost 29.75% of all circulated dollars in the market.
The fact that the top 10 tickers account for almost 29.75% of all trading value is a sign of market inefficiency. This suggests that the market is skewed towards a few large tickers. This can lead to increased risk for investors who are trying to exploit market inefficiencies.
The top 10 tickers were:
TSLA: Accounts for more than 7.2% of all trades, 10.3% of S&P500 trades, and 18.98% of NASDAQ100
NVDA: Accounts for more than 6.8% of all trades, 10.3% of S&P500 trades, and 15.27% of NASDAQ100
AAPL
MSFT
AMZN
META
AMD
BRK.A
NFLX
GOOG
The top 10 tickers account for 70.55% of all trading value of tickers on the NASDAQ 100..!
The top 10 tickers account for 38.54% of all trading value of tickers on the S&P500..!
The S&P 500 and NASDAQ 100 are both broad market indices that track the performance of the 500 largest publicly traded companies in the United States and the 100 largest non-financial companies listed on the Nasdaq stock exchange, respectively. These indices are widely used by investors as benchmarks for their portfolios.
However, the fact that the top 10 tickers account for such a large share of trading value suggests that these indices may not be as representative of the overall market as they once were. This is because the performance of the top 10 tickers can have a disproportionate impact on the performance of the S&P 500 and NASDAQ 100.
The high kurtosis in the distribution of trading values also suggests that the S&P 500 and NASDAQ 100 may not be as good at capturing the full range of risk and return potential in the market. This is because the distribution of trading values is skewed towards a few large tickers. This means that there is a greater potential for large losses in the S&P 500 and NASDAQ 100 than would be suggested by their average returns.
As a result of these factors, the S&P 500 and NASDAQ 100 may be less useful for investors who are looking for a diversified portfolio that is representative of the overall market and that has a low risk of large losses.
Implications
The fact that the top 10 tickers had such a significant impact on the overall trading dollar value has a few implications.
1st: it means that investors who focus on investing in the top 10 tickers are more likely to generate higher returns than investors who invest in a wider range of tickers.
2nd: it means that regulators need to be aware of the potential for market manipulation by investors who have large holdings in the top 10 tickers.
3rd: it means that investors need to be careful not to over-concentrate their portfolios in the top 10 tickers, as this could make them more vulnerable to losses if the performance of these tickers deteriorates.
4th: The correlation between the tickers and indexes may be overstated. This is because the performance of the top 10 tickers has a disproportionate impact on the performance of the indexes. As a result, the correlation between the tickers and indexes may not be representative of the correlation between the individual tickers.
5th: The correlation between the tickers and indexes may be less informative. This is because the correlation between the tickers and indexes does not provide any information about the specific relationships between the individual tickers. For example, the correlation between the tickers and indexes does not tell us whether the individual tickers are moving in the same direction or in opposite directions.
Conclusion:
Even among the top 10 tickers, TSLA and NVDA have dragged too much attention from most market participants, and the Future of the market is very dependent on the future movements of these 2 tickers!
Education:
A fat tail in statistics is a feature of a distribution where the tails of the distribution are thicker than those of a normal distribution. This means that there are more extreme values in the distribution than would be expected under a normal distribution.
Swiss Franc Rides High on Investor Flight to Safety?Investor flight to safety might provide a favorable outlook for the Swiss franc this week.
Swiss franc against the USD and GBP might be the most interesting considering the Fed and the Bank of England (BoE) hold their policy meetings this week, where they are both expected to keep rates exactly where they are. These pauses by the Fed and BoE might contrast too sharply with the Swiss National Bank (SNB), whose Vice-Chairman made some hawkish comments over the weekend, pushing back against expectations that the SNB is done with its rate hikes, and cause some rumblings in the USDCHF and GBPCHF.
Investor risk-aversion has already caused the Swiss franc to hit a high not seen since 2015 against the Euro. Euro Area inflation is also due this week, so this pair might also be appropriate to watch this week.
Regarding the Middle East conflict, latest developments have seen Israeli Prime Minister Benjamin Netanyahu deny they would agree to ceasefire, drawing parallels to US retaliation to the terrorist attacks of 9/11. In this way, we might expect drawn out conflict, and the desirability of the Swiss franc rising.
Unlocking Trend Reversals: Mastering Bollinger Bands and VWAPsIn this comprehensive video tutorial, we will delve into the powerful techniques of utilizing Bollinger Bands and VWAPs (Volume Weighted Average Prices) to identify and master trend reversals in the futures market. ES1!
You will learn how to leverage these volatility-based indicators to detect potential turning points in price trends. By understanding Bollinger Bands' ability to highlight periods of market consolidation and expansion, you will gain an edge in predicting trend shifts and take advantage of profitable opportunities.
Additionally, we will explore the significance of VWAPs, an essential tool for analyzing price and volume dynamics. By combining volume-weighted prices with Bollinger Bands, you will be equipped with a comprehensive approach to assess market liquidity, support, and resistance levels.
Throughout this tutorial, I provide step-by-step guidance to effectively interpret the signals generated by Bollinger Bands and VWAPs, empowering you to make informed trading decisions. We will also address common misconceptions that can often lead to misinterpretations and false signals.
Whether you are a seasoned trader seeking to refine your strategy or a beginner eager to grasp these technical indicators, this video is designed to provide valuable insights and practical knowledge that can elevate your trading outcomes.
Bitcoin Bull Run Precedes Ethereum RallyDays of triple digit volatility and rampant amateur speculation are gone. Unlike the overblown enthusiasm which defined the peak of 2021, investors now are more measured and discerning.
2023 has been defined by (a) discrete and information fuelled rallies followed by unprecedented low volatility, and (b) rise of traditional finance entrants in digital assets.
Bitcoin (BTC) has rallied sharply relative to Ethereum (“ETH”), pushing BTC-ETH ratio to its highest level since 2021. Several factors point to a potential reversal in the ratio. Investors can deploy CME Micro BTC and Micro ETH Futures to harness gains from eventual reversion.
BTC surged 20% during the past week driven by excitement over the anticipated approval of a BTC Spot ETF. Large liquidations triggered as BTC prices rose on its re-emergence as a haven asset as discussed in a previous paper .
BITCOIN IS A HAVEN (AGAIN)
In October, BTC’s correlation with gold rose while correlation with Nasdaq-100 has inverted suggesting that investors consider BTC as a haven rather than a risk-on asset.
The case for BTC as a haven derives from its limited supply. Every four years, the number of BTCs minted as a mining reward, halves and will eventually halt, leading to a fixed supply.
BTC has played its role as a haven previously. In March this year, during the US regional banking crisis, BTC surged 40%. BTC also rallied 20% at the start of Russia-Ukraine conflict but soon pared those gains. Given the repeated pullback in its prices, question around BTC’s ability to deliver as a safe haven remains.
Assigning BTC a haven status could be a tad bit too early. It is a new asset. It faces regulatory ambiguity. It remains under-invested relative to traditional safe havens like gold and treasuries.
Notwithstanding that BTC is new, it is the most popular and widely tested cryptocurrency. Flow of assets from riskier crypto to the safety of BTC during rising uncertainty partly contributes to haven flows into BTC.
SHORT SQUEEZE ACCENTUATED BITCOIN’S RALLY
Recent rally was punctuated by heavy deleveraging in BTC derivatives. During the long squeeze in August, 64,000 BTCs were liquidated. In the following period, only half of these long positions returned.
These positions were not spared either as large liquidations occurred on October 17th and 23rd leading to unwinding of more than 60,000 BTC.
Source: Glassnode
The size of liquidation was like those in Jan 2023 when prices definitively broke above the $20k range, suggesting that this washout may be adequate to cement a major psychological price level.
AWAITING A BTC SPOT ETF
The latest development in the BTC spot ETF saga comes as an appeals court upheld the ruling against SEC’s rejection of Grayscale’s spot ETF application based on concerns that market manipulation is not addressed sufficiently.
The court held that SEC’s decision was arbitrary, capricious, and unenforceable. This time around, the SEC stated it will not be appealing any further.
The SEC’s easing stance is also echoed in the modest feedback response to other spot ETF applications. Many now believe that all spot BTC ETFs will be approved together and probably before the deadline of January 10th.
Approval of spot BTC ETFs is expected to make the asset available to a wider audience in a familiar Tradfi product structure making BTC go “mainstream.”
Spot ETFs will spur greater demand for spot BTC from ETF manufacturers. When gold ETF was first listed, incremental fund flows translated into higher demand for physical gold.
ETF listing and BTC price run is not a given as regulatory concerns remain. Prices have struggled to sustain ETF excitement driven rallies not once but thrice in 2023 due to slow developments compounded by a harsh macro backdrop.
The risk that the current rally will pullback persists. Earlier this week, price action was significantly influenced by investors speculating on the approval of Blackrock spot ETF (IBTC). The rumours have been spurred by the listing, delisting, and relisting of the ticker on Depository Trust and Clearing Corporation (DTCC) website.
BITCOIN BULL RUN PRECEDE ALTCOIN RALLIES
In stark contrast to BTC’s rally, other major cryptocurrencies have lagged pushing BTC dominance to its highest since 2021.
ETH has rallied 15% over the past week. ETH underperformance relative to BTC has pushed the ratio between them to levels unseen since 2021.
Altcoin underperformance is unusual. During past BTC rallies, ETH price tops lagged BTC tops by a month. This is a consequence of capital rotation within crypto.
In past rallies, asset rotation can be seen in three distinct waves starting with (1) increase in BTC capital, (2) ETH rotation, followed by (3) increasing stablecoin flows.
MARKET METRICS AND ON-CHAIN SIGNALS
A raft of market metrics points to bullish sentiment in crypto markets due to resilient Long-Term Holders (LTH), limited profits at current levels, and strained supply which is expected to be exacerbated by demand from spot ETFs.
More importantly, market metrics indicate a higher bullish sentiment for ETH.
FUTURES AND OPTIONS POSITIONING
Leveraged funds have built up net short positioning over the last few weeks in BTC futures. Contrastingly asset managers have setup net long positioning. In options, BTC full size options have a bullish P/C ratio of 0.51 and Micro BTC options have a P/C ratio of 0.76.
In contrast, leveraged funds bullish on ETH have switched from net short to net long positioning last week. Full size ETH options have bullish P/C ratio of 0.38 and Micro ETH options have P/C ratio of 0.38.
Overall, leveraged funds and option markets are more bullish on ETH compared to BTC.
TRADE SETUP
BTC prices may pullback relative to ETH in the short term given price divergence. CME’s suite of crypto futures can be deployed to harness gains from this trend reversal.
The hypothetical spread posited in this paper consists of two legs: (1) long position in Micro ETH futures expiring on November 24th ( METX3 ) and, (2) short position in Micro BTC futures expiring on the same date ( MBTX3 ).
Each lot of Micro ETH futures provide exposure to 0.1 ETH while each lot of Micro BTC futures provides exposure to 0.1 BTC. To balance notional values, nineteen lots of METX3 are required for each lot of MBTX3 at current prices
● Entry: 19.090
● Target: 17.58
● Stop Loss: 20.000
● Profit at Target: USD 276
● Loss at Stop: USD 169
● Reward to Risk: 1.6x
MARKET DATA
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