Can You Explain Your Trading Strategy in 3 Sentences?Can you explain your trading strategy in 3 sentences or less?
Go ahead and give it a try in the comments below.
This is an important exercise for any trader of investor as it demonstrates mastery of an existing strategy. Meaning, if a trader knows their strategy inside and out, and has practiced it or modified it over a period of time, they also can explain it quickly and succinctly.
• Are you a swing trader? What criteria determines a trade?
• Are you a value investor? What metrics do you use?
• Are you an algorithmic trader? What code powers your trading?
All of these questions and more go into explaining your trading strategy, which is ultimately the process you're using to trade markets. However, it's often observed that new traders don't have a strategy. Instead, their trades are impulsive and random. As a community, we can use the comments section below to showcase our individual levels of expertise, helping new traders along the way and watching pro traders innovate.
We look forward to seeing what everyone writes in the comments below.
In addition, the more people who share, the more we can learn.
Be sure to like, follow, and comment on the traders who have the most interesting answers. You may find a great follow and improve your social feed here.
- TradingView Team
Community ideas
Decoding Market Patterns:10 Essential Price Patterns Every TradeIn the intricate world of trading, price patterns are the footprints left by market sentiment. Understanding these patterns is like deciphering a complex code, revealing insights into potential market movements. Today we will explore 10 essential price patterns every trader should recognize. Each pattern is a chapter in the dynamic story of market behavior, offering opportunities to identify trends, reversals, and strategic entry or exit points.
1. Bull Flag: The Flagbearer of Continuation
A Bull Flag is a continuation pattern, often seen in strong uptrends. It resembles a flagpole (the initial price spike) followed by a rectangular flag (consolidation phase). When the price breaks above the upper boundary of the flag, it signals a potential continuation of the uptrend.
2. Bear Flag: The Bearish Counterpart
The Bear Flag is the opposite of the Bull Flag. It appears in downtrends, with a flagpole representing the initial price drop followed by a consolidation period. When the price breaches the lower boundary of the flag, it indicates a potential continuation of the downtrend.
3. Head and Shoulders: The Classic Trend Reversal
The Head and Shoulders pattern is a powerful reversal indicator. It consists of three peaks – the central peak (head) is higher than the surrounding peaks (shoulders). When the price drops below the neckline (a line drawn through the lowest points of the shoulders), it suggests a potential trend reversal from bullish to bearish.
4. Inverse Head and Shoulders: The Bullish Resurgence
The Inverse Head and Shoulders pattern is the bullish counterpart of the Head and Shoulders. It occurs after a downtrend and indicates a potential reversal to an uptrend. The pattern consists of three troughs – the central trough (head) is lower than the surrounding troughs (shoulders). When the price rises above the neckline, it signals a potential shift from bearish to bullish.
The cool thing about chat patterns is that they are everywhere. You often see many different chart patterns on a singular chart, or smaller patterns that are a part of a larger pattern. The tricky part is finding them and appropriately identifying them.
5. Double Top: The Bearish Reversal Duo
A Double Top pattern occurs after an uptrend and signals a potential reversal. It consists of two peaks at nearly the same price level, indicating a struggle to push the price higher. When the price falls below the trough between the peaks, it suggests a possible shift from bullish to bearish.
6. Double Bottom: The Bullish Reversal Duo
The Double Bottom is the bullish counterpart of the Double Top. It occurs after a downtrend and signals a potential reversal to an uptrend. It consists of two troughs at nearly the same price level, indicating a struggle to push the price lower. When the price rises above the peak between the troughs, it suggests a potential shift from bearish to bullish.
7. Rising Wedge: The Rising Price Constrictor
A Rising Wedge is a bearish continuation or reversal pattern. It can form during a downtrend or in an uptrend where buying pressure becomes exhausted. The wedge is characterized by converging trend lines that slope upward. While the price may make higher highs and higher lows, the pattern tightens, indicating weakening momentum. When the price breaks below the lower trendline, it suggests a potential continuation of the downtrend or reversal of an uptrend.
Rising Wedge Reversal Example:
Rising Wedge Continuation Example:
8. Falling Wedge: The Falling Price Constrictor
The Falling Wedge is the bullish counterpart of the Rising Wedge. It forms during an uptrend or a downtrend, characterized by converging trend lines that slope downward. While the price may make lower highs and lower lows, the pattern tightens, indicating weakening selling pressure. When the price breaks above the upper trendline, it suggests a potential continuation of the uptrend.
Falling Wedge Continuation Example:
Falling Wedge Reversal Example:
9. Symmetrical Triangle: The Balance of Bulls and Bears
A Symmetrical Triangle is a neutral pattern that forms during a trend, indicating a period of consolidation. It is characterized by converging trend lines that slope in opposite directions. When the price breaks above the upper trendline, it signals a potential bullish move, and when it breaks below the lower trendline, it signals a potential bearish move.
10. Pennant: The Brief Consolidation Pause
A Pennant is a continuation pattern that forms after a strong price movement. It resembles a small symmetrical triangle, indicating a brief consolidation before the previous trend resumes. When the price breaks above the upper boundary, it suggests a potential bullish continuation, and when it breaks below the lower boundary, it suggests a potential bearish continuation.
Important Thing To Consider:
Price patterns are a tool that if practiced and executed properly can be a great asset for any trader. There are a few things that all traders should keep in mind when using price patterns to make trading decisions.
Context is critical: Price patterns don't exist in isolation; they occur within the context of larger market trends. It's essential to consider the prevailing market conditions, including the overall trend (bullish, bearish, or sideways), volume trends, and recent price action.
Confirmation is Key: While recognizing a price pattern is an important skill, relying solely on its formation might lead to premature or false trades. Traders should always wait for confirmation signals before taking action. Confirmation can come in the form of a price breakout above a pattern's resistance level, a significant increase in trading volume confirming the pattern's direction, or additional technical indicators aligning with the pattern's signal. Waiting for confirmation helps traders filter out false signals, reducing the risk of entering trades based solely on pattern
Risk management is paramount: No pattern, regardless of its historical accuracy, guarantees a profitable trade. Traders must always implement proper risk management strategies, including setting stop-loss orders and defining acceptable levels of risk per trade as a percentage of their trading capital. Risk management ensures that even if a trade based on a price pattern fails to materialize as expected, the impact on the trader's overall portfolio remains manageable.
Practice, practice, practice: Identifying price patterns is a skill that improves with practice and experience. Traders should dedicate time to studying historical charts, both in live markets and during backtesting. Regularly practicing pattern charting enhances the ability to spot patterns quickly and accurately. TradingView offers a great set of tools to help anyone get started by offering a full line of automated pattern recognition indicators for educational and research use. Utilizing these automated pattern recognition indicators is a great way to visualize patterns in the real world as patterns are often less clean than textbook examples.
Recognizing these price patterns equips traders with a valuable skill set for navigating a dynamic market. However, it's vital to remember that patterns, like pieces of a puzzle, offer meaningful insights when combined with other indicators and thorough analysis. No single pattern guarantees profits, and each should be evaluated within the context of the broader market conditions. By integrating pattern recognition into a holistic trading strategy, traders can unlock the door to more informed, confident, and strategic trading decisions. Happy trading!
Ben with LeafAlgo
Five of the Best Volatility IndicatorsVolatility can seem like a scary concept at first glance: wild price swings, stop-outs, and general unpredictability. However, there are volatility technical indicators that can help. This article covers five essential volatility indicators, discussing how they work and how they’re used to gauge market conditions.
What Is Volatility?
Volatility represents the range and rate at which the price of a financial asset moves over a specific timeframe. In other words, it gauges the degree of variation in a trading price. High volatility often correlates with higher risks and potential rewards, while low volatility suggests a less turbulent market with lower risks and potential rewards.
Volatility Technical Indicators
Volatility indicators are specialised tools that help traders quantify these price swings, making it easier to forecast future movements. They can help traders identify potential breakouts or market reversals by revealing periods of accumulation or distribution. By providing a clearer understanding of market temperament, these indicators equip traders to make more calculated decisions – be it in forex, commodities, or stock markets.
These indicators can be overlaid on price charts to offer visual cues, thereby simplifying complex data. They are commonly used alongside other technical indicators like moving averages and momentum oscillators to reinforce their signals.
Best Volatility Indicators List
Now, let’s take a closer look at five of the best volatility indicators. To see how they work for yourself, head over to FXOpen’s free TickTrader platform. There, you’ll find each indicator ready to use.
Bollinger Bands
Bollinger Bands are a volatility indicator invented by technical analyst John Bollinger in the 1980s. The indicator consists of three bands: a middle band, which is a simple moving average (SMA) of the asset's price, and two outer bands that are placed two standard deviations away from the middle band. These bands adjust dynamically with volatility, widening during periods of high volatility and contracting when volatility is low.
In trading, Bollinger Bands serve multiple purposes. They can identify overbought or oversold conditions when the asset's price reaches the upper or lower bands. The width of the bands also helps in recognising periods of increasing or decreasing volatility, often signalling potential market transitions. Traders frequently use Bollinger Bands to confirm trend reversals or to validate other technical signals.
Average True Range (ATR)
The Average True Range (ATR) is a volatility indicator introduced by J. Welles Wilder in 1978. Unlike Bollinger Bands, which envelop price action, ATR is a single line that typically appears below a price chart.
The indicator calculates the average of true ranges – essentially the greatest value among the current high minus the current low, the absolute value of the current high minus the previous close, and the absolute value of the current low minus the previous close – over a set number of periods.
ATR is primarily used for setting stop-loss levels and gauging the volatility of an asset. It doesn't offer any clues about price direction, making it a "pure" volatility measure. Higher ATR values indicate increased volatility and may suggest that price jumps or drops are more probable, warranting caution. Lower ATR values signify lower volatility, often seen during sideways market movements.
Keltner Channels
Keltner Channels are another volatility-based indicator, created by Chester Keltner in 1960 but later modified by Linda Raschke. This indicator consists of three lines: a central line, which is an Exponential Moving Average (EMA) of the asset's price, and two outer bands calculated based on the ATR. Typically, the outer bands are set two ATR values away from the central EMA.
Much like Bollinger Bands, the width of the Keltner Channels expands and contracts based on market volatility. These channels are particularly useful for identifying trend continuations and reversals. For instance, a price that moves toward the upper band often indicates bullish activity, whereas a movement toward the lower band suggests bearish behaviour.
Chaikin Volatility Indicator
The Chaikin Volatility Indicator, developed by Marc Chaikin, focuses on the expansion and contraction of price movement, differentiating it from other volatility indicators. Instead of using trading volume or calculating the average range, this indicator measures the difference between two EMAs of an asset's price, typically over 10 days.
When the Chaikin Volatility Indicator shows an upward movement, it indicates an increase in price volatility, potentially signalling a market breakout or a strong trend. Conversely, a downward trend in the indicator often suggests a decrease in volatility, possibly pointing to a market consolidation phase. Because this indicator focuses solely on price behaviour, traders often pair it with volume-based indicators for more comprehensive analysis and confirmation of trading signals.
Volatility Index (VIX)
The Volatility Index, commonly known as the VIX, operates somewhat differently from typical volatility trading indicators. Developed by the Chicago Board Options Exchange (CBOE), the VIX quantifies market sentiment and volatility expectations for the next 30 days. It is often referred to as the "fear gauge," as it tends to spike during periods of market unrest or uncertainty.
Calculated from the implied volatilities of S&P 500 index options, a high VIX value suggests that traders expect significant price swings, usually accompanying bearish market phases. On the other hand, a low VIX often indicates periods of complacency or confidence, generally correlating with bullish markets.
While not directly applicable to an asset's price chart, the VIX serves as one of the leading stock volatility indicators, offering traders context for broader market conditions.
The Bottom Line
In essence, volatility indicators are invaluable tools in a trader's arsenal, helping to demystify often unpredictable price movements. Mastering and combining these indicators, especially with momentum and trend tools, can significantly enhance your decision-making process.
To put these five tools into practice, consider opening an FXOpen account. We offer hundreds of tradable instruments and sophisticated charting tools, allowing you to navigate the markets with confidence.
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.
Mastering the Art of Investing: Common Mistakes & solutionsLet's keep it straight to the point, Shall We?
1. Emotional Investing:
One of the most prevalent mistakes is allowing emotions to drive investment decisions. Fear and greed can lead to impulsive actions, such as panic selling during market downturns or chasing speculative investments during bullish phases.
Solution: Develop a well-thought-out investment plan based on your financial goals, risk tolerance, and time horizon. Stick to this plan, regardless of short-term market fluctuations. Regularly review and adjust your portfolio, but do so based on rational analysis, not emotional reactions.
2. Lack of Diversification:
Concentrating all investments in a single asset or industry exposes investors to significant risks. If that particular investment performs poorly, it can have a devastating impact on the overall portfolio.
Solution: Diversify your portfolio across different asset classes, industries, and geographic regions. This strategy helps reduce risk and improves the potential for more stable returns over the long term.
3. Market Timing:
Attempting to time the market, i.e., buying and selling based on predictions of short-term price movements, is a common mistake. Even seasoned professionals struggle to consistently time the market correctly.
Solution: Adopt a long-term investment approach. Time in the market is generally more important than timing the market. Stay invested and focus on your financial goals rather than trying to predict short-term market movements.
4. Overlooking Fees and Expenses:
High investment fees and expenses can significantly erode returns over time. Many investors underestimate the impact of these costs.
Solution: Be mindful of the fees associated with your investments, including expense ratios, broker commissions, and advisory fees. Consider low-cost index funds or exchange-traded funds (ETFs) as cost-efficient alternatives.
5. Ignoring Asset Allocation:
Some investors focus solely on individual investments without considering how they fit into their overall portfolio. Neglecting proper asset allocation can expose portfolios to unnecessary risk.
Solution: Determine an appropriate asset allocation based on your risk tolerance and investment goals. Rebalance your portfolio periodically to maintain the desired allocation.
6. Chasing Hot Tips and Fads:
Acting on unsolicited stock tips or investing in the latest fads and trends can lead to poor decision-making and losses.
Solution: Rely on thorough research and due diligence before making any investment. Avoid making impulsive decisions based on hearsay or the fear of missing out (FOMO).
7. Lack of Patience and Discipline:
Investing is a long-term endeavor, and expecting quick riches can lead to disappointment and rash decisions.
Solution: Cultivate patience and discipline in your investment approach. Stay committed to your long-term strategy and avoid making knee-jerk reactions to short-term market movements. Also, another good way of increasing discipline is giving us a boost for our efforts :)
In conclusion, successful investing requires a well-structured plan, emotional resilience, and a commitment to disciplined decision-making. By avoiding these common mistakes and implementing the provided solutions, investors can increase their chances of achieving their financial goals and building a more secure financial future. Remember, investing is a journey, and learning from mistakes can ultimately lead to greater financial wisdom and success.
Have Insights or Questions? Let us know in the comments below.👇
While you do that, how about a boost for some motivation🚀
⚠️Disclaimer: We are not registered advisors. The views expressed here are merely personal opinions. Irrespective of the language used, Nothing mentioned here should be considered as advice or recommendation. Please consult with your financial advisors before making any investment decisions. Like everybody else, we too can be wrong at times ✌🏻
Five year view on LinkLink was one of the darlings of the last bull run. It’s story includes crazy volatility, stories of “Link Marines” blowing out Zues Capital out after its short and distort narrative fell apart. I suspect Link will once again be a darling of this new bull cycle.
cointelegraph.com
Analysis
The meat of the idea is from the main chart. We have hidden bullish divergence on the log MACD as well as the RSI. Hidden bullish divergence suggest a uptrend will continue. There is a higher low on the price but a lower low on the indicator. The green arrows show that very clearly.
The RSI getting to above 70 can signal overbought on a time frame but it can also signal that the bulls are in control of the price action. The log MACD is above zero once again. Both are very bullish indications that momentum is shifting fully bullish.
I favor using two Keltner channels, one set with the ATR at 1 and one set at 2. It helps be visualize when price is in between and make some conclusions. In order to “break” a weekly Keltner channel we need months if not years of price action creating a formation we can play.
I am just going to keep it as simple as possible. Link had a Elliot wave impulse and has completed its ABC correction. That is the structure we need to break the Keltner channel and push it upward. The chart below shows that twice link lost over 60% of its value when it corrected. So there are going to be discounts on the way back up. These relative bear markets lasted several hundred days and that can really weaken people’s hands.
Since we are using elliot wave the primary targeting technique I am using is major fib extension levels. I have only shown a couple on the main chart for simplicity but I expect action at almost all major fib lines. Stalls, retraces, all the normal drama.
Looking to buy the lower half of the Keltner channels seemed to have worked out for long term investors between 2018 and 2021. It was only when we put in the lower high at point B that strategy meant you were out of the money for a long time.
My plan
I plan on having Link be a major holding going forward. I plan on watching some tokens against Link (sol, xmr, ftm, etc) and trying to do some rotations or buying the alts when they have bullishness against link. In the long run I hope to pull close to 200x out of link with no margin.
The Euro May Have BottomedThe Euro has faced steady selling pressure since July, but now there may be signs of the currency bottoming against the greenback.
The first pattern on today’s chart is the falling trendline along the weekly highs. EURUSD has been pushing above that resistance this week. Notice how it started rallying a year ago after breaking a similar trendline.
Second is the January low around 1.048. The currency pair fell under that level in early October but recovered. The results were a false breakdown and a hammer candlestick. Chart watchers may view both as bullish reversal patterns.
This setup could keep traders on alert for a potential rally given upcoming events like gross domestic product (GDP) Thursday morning, the Federal Reserve meeting on November 1 and non-farm payrolls on November 3.
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ETH ecosystem to fund initial stage of crypto bullrunWhen markets rotate the money has to come from somewhere. Money can move in and out of one sector of the economy into the other, like money moving from industrials into technology or from fiat into precious metals. Money can also move around within a macro system from its constituent sub-systems. In the case of crypto, think we will see the Ethereum ecosystem beggared while money flows out of it into other ecosystems.
In order to try and stay ahead of the rotations into and out of crypto and into and out of the various layer one projects within crypto I turn to the best tool I have, which is the charts. Once we have the layer one blockchain we care about we can look at other layer projects that ride on top of the layer one to move up the risk curve for more volatility as we see fit.
ETH/Bitcoin
Bitcoin is the biggest single slice of the crypto by fame and market cap. The double top threat is pretty clear at this point. The black double top appears to be an eve and eve with the difference between the first and second peak about 3.12% That is about as textbook as we could want to see. We just have to start breaking the neckline of the formation and we should start to see more volatility in the pair.
Eth Dominance
ETH.D is likewise in a double top but this one is a bit further away from the neckline. The targeting is much the same. Due to the structures of the uptrend I think that 40% draw down is very reasonable and realistic.
XRPETH
XRP appears to be in a ascending triangle against ETH with a target close to 2x if full performance is reached.
Solana/ETH
Solana is suppose to be an Ethereum killer and in the long run I think it will live up to its name. I think it has a couple of years for the ecosystem to mature before It does. A major sign of strength will be if this W pattern performs to target. That would have Sol putting up over twice the gains than eth does in the initial stages of this move.
Polkadot ETH
Dot has been moving sideway for the last 4 months and has created some bullish divergence on the weekly chart. I think we will see it slowly erode share out of eth.
Kadena Eth
One of my favorite layer ones to watch and maybe trade before I see my long term set up is Kadena. It is poised ot have a W pattern that pops it over 100% against eth.
Cronos Eth
Cro seems to be another coin in a wedge against eth. The target this cycle is over 300% away from the current level.
ADA ETH
Oh, look, it is another coin in a bullish falling wedge against ETH. Sure reaching the previous ATH might take a decade or so, but that is a decade to favor ADA over eth.
Doge Meme Coin Versus Eth
Want to consider something that at first glance seem moronic or hilarious? Doge has the structure to 70x eth over the next couple of years.
Final thoughts
The Eth team has done a lot to make their system more affordable to use. As price goes down the ease of use goes up and the adoption goes up. Ethereum is in the process of turning itself into a volume trade and not a profit margin trade. That might be a good thing for cryptocurrency as a whole but I am chasing alpha. Crypto gives me more potential alpha than equities so I play here. If the alpha is leaving eth then I am going to leave as well, no matter how good it could be for the world or the ecosystem. Daddy can't pay for his girls food and clothes if he doesn't get that alpha.
Technology to Energy RatioEverything is cyclical. Every asset has its own cycle eventually in its own time. From Crypto to Real estate and Technology.
I crossed compared the Energy sector to the Technology Sector. XLE/QQQ
Then overlaid the Technology Sector to the Energy Sector QQQ/XLE
As you can see there is many clues where one will always outperform the other.
You just have to hold these assets where one is gaining vs the other.
One asset will suck the liquidity of the other and visa versa until one completes the cycle then it repeats
Hard assets are primed for outperformance.
Happy Investing
Long Term Investment Thesis for LYVLooking for long term investments is always a challenge. Thing is you need to know what you are looking for. It makes a difference to find a company that is oversold and is sitting on the 200 moving average. I have an idea that we have a gap to close between the yellow lines. I think but, time will tell, that this stock possibly could break through to those yellow lines in order to fill the gap and fill the orders that are out there within that gap.
This stock is a company that has high director ownership at 32% which tells me they believe in their company. As I dive deeper, this company is constantly increasing their employees yearly to where they are now at 28,000 employees.
As far as the Market Value 18.40B and Enterprise Value 19.68B this company has two numbers that are close. However, they do have more debt than cash but it is close.
This stock is in the niche that has plenty of growth room and they are kicking it within the entertainment business and selling tickets online.
This is a company that is in the entertainment niche. They have cornered a market and many in the USA have used this company if they have attended college sports and events or any other venues that need and use a web based ticket collection agency. This company owns and operates TicketMaster which has taken the whole process of paper tickets to be replaced, bought, sold, exchanged via web based. This stock has been trading in the same range over the past 5 years for the most part. It has been going higher over time but, the markets have been off due to the corrections with in the market. This particular stock is set to go higher over time with many analysts putting $107 and higher price tags.
The insider ownership of the directors is nearly 32% ownership and their Market Cap is 18.40B whereas the Enterprise Value is 19.68 B, which are very closely aligned. The earnings per shares is $1.07. They have continuously been hiring new employees due to their growth over the years.
This stock is:
Live Nation Entertainment, Inc. operates as a live entertainment company. NYSE:LYV
It operates through Concerts, Ticketing, and Sponsorship & Advertising segments. The Concerts segment promotes live music events in its owned or operated venues, and in rented third-party venues; operates and manages music venues; produces music festivals; creates and streams associated content; and offers management and other services to artists.
The Ticketing segment manages the ticketing operations, including the provision of ticketing software and services to clients for tickets and event information through its primary websites livenation.com and ticketmaster.com, as well as through other websites, mobile apps, retail outlets, and call centers; and provides ticket resale services.
This segment sells tickets for its events and third-party clients in various live event categories; offers ticketing services for arenas, stadiums, amphitheaters, music clubs, concert promoters, professional sports franchises and leagues, college sports teams, performing arts venues, museums, and theaters.
The Sponsorship & Advertising segment sells international, national, and local sponsorships and placement of advertising, including signage and promotional programs; rich media offering that comprise advertising related with live streaming and music-related content; and ads across its distribution network of venues, events, and websites.
This segment also manages the development of strategic sponsorship programs, as well as develops, books, and produces custom events or programs for specific brands.
It owns, operates, or leases entertainment venues in North America and internationally. The company was formerly known as Live Nation, Inc. and changed its name to Live Nation Entertainment, Inc. in January 2010.
Live Nation Entertainment, Inc. was incorporated in 2005 and is headquartered in Beverly Hills, California.
I personally buy stocks when I see setups in charting that I like which is just my style of investing. I have attached a detailed daily chart with RSI (37.44) that is showing this stock is oversold meaning that it is unloved at the moment but, most of the market is too but, it is not as cooled off as I would like to see it. I’m personally looking for it to go closer to RSI of about 30. It is also beginning to reach a critical point of touching the 200 moving average line in which I will watch to see if it continues to hold there or proceeds to break through to the downside. If it continues to hold and stay within that price range for the next week. That indicates to me that a buying trend is beginning to form. The Volume and MACD is also showing a huge sell off so, I want to see that level off some as well. I do not plan to buy into this stock until I see the MACD cross upward and at minimum 5 days of similar stock price range with stronger buying volume than the current selling off volume. I personally am also looking at a gap that I know has orders still waiting to be filled where buyer and/or sellers are waiting to get this stock at $73.73 to $67.60 price range. Generally, not always, gaps have to be filled at some point in time. I’m looking for the stock to drop into this range before I enter it. I might be late and disappointed if the markets take off and this one continues higher but, that is where I’m looking to enter. I just wanted to share this company with the group because I see much here and personally have used this company to buy all my sporting event and concert event tickets over the past 5+ years.
I know we can’t pin point “the bottom” but, I like to buy all the bottoms now that I understand how to read charts in order to have a better dollar cost average for long term stock investing. The reason I dollar cost average the bottoms, is because my personal psychology drives me crazy to see huge losses in my portfolio. Happy stock hunting and investing, y’all!
Bitcoin: Poised To Break 30K?Bitcoin short squeeze continues to the 30K resistance. In terms of momentum this move is significant and should shape smaller time frame strategies, BUT the bigger picture is another story. New resistance is the 31K AREA, new support is 27.5 to 28.5 AREA.
Based on the new developments in price structure, I suspect a potential test of 31K BUT I believe a break is low probability. A test of the 28.5 to 27.5 support area is more likely in my opinion over the coming week.
The bullish move (sparked by fake news apparently) appears to be a short squeeze. These type of moves are NOT sustainable over the long run and is nothing more than traders getting shaken out of short positions.
Gold has also expressed a similar move almost touching 2K. We can sit here and entertain ourselves as to "why" this may be and why it should continue. We can also watch Youtube videos featuring rocket ships on their title thumbnails (how original!). The REALITY is interest rates are at their highs (see US10Y). As long as money is getting more expensive to borrow, the probability of Bitcoin going beyond 31K is LOW.
Sure this may also be money looking for safety, but it is most likely temporary. Sustainable rallies and asset bubbles are driven by cheap money, NOT temporary catalysts based on fear.
IF Bitcoin cannot clear 31K decisively over the next week, then I will be looking for the test of the newly established support 28.5 to 27.5K (see drawing on chart). I would consider shorting this to be aggressive since it is against price structure. Waiting for bullish setups around 28K would be conservative. Either way, day trades or swing trades are most appropriate at these levels, these are not attractive levels for investing.
Thank you for considering my analysis and perspective.
VIX Clears 20-21, On Capitulation WatchAfter the VIX sagged to under 13 at times in the third quarter, October has brought about the bears and higher volatility, as if on seasonal cue. The S&P 500 peaked in late July right when many mega-cap tech stocks reported second-quarter earnings results. The AI-fueled rally that gave equities legs following the SVB crisis in mid-March finally lost steam.
The S&P 500 is now a stone's throw away from "correction territory" off the 4607 rebound peak a few months ago. The psychological level to watch is 4146 (-10%). As of this writing, equity futures point to an SPX near 4200 - below its rising 200-day moving average and testing the breakout point from late May. What could surprise some bulls would be a break under 4200 followed by a snapback higher.
All eyes are on the VIX. Wall Street's "fear gauge" has jumped to 23 this morning. While not screaming panic, the Volatility Index is at its loftiest level since March. The Q3 high of 31 could be in play, but I also notice that a series of lower highs has been the trend since way back in January of 2022 (39). Thus, it's reasonable to assert that the high 20s on the VIX could be the peak this go around. Of course, bullish stock seasonality really takes hold following this week (though pre-election years tend to see somewhat weaker Novembers compared to all years).
Inflation SupercycleOn the afternoon of October 3rd, 2023 something unprecedented happened in the U.S. Treasury market. For the first time ever, bear steepening caused the 20-year U.S. Treasury yield and the 2-year U.S. Treasury yield to uninvert.
Bear steepening refers to a scenario in which long-duration bond yields rise faster than short-duration bond yields, as bond yields rise across the term structure. In all past instances, inverted yield curves have normalized due to bull steepening . The probability that bear steepening would cause an inverted yield curve to normalize is so low that, until now, most term structure models excluded the possibility of it ever happening. In this post, I'll explain why this anomalous event is a major stagflation warning.
The chart above shows that the 10-year Treasury yield has been rising much faster than the 3-month Treasury yield throughout 2023, narrowing the once-deep yield curve inversion.
Since a yield curve inversion indicates that a recession is coming, and bear steepening indicates that the market is pricing in higher inflation for the short term, and even more so, for the long term, then bear steepening during a yield curve inversion indicates that high inflation may persist even during the recessionary phase. High inflation during the recessionary period is what defines stagflation . Since very strong bear steepening is normalizing a deeply inverted yield curve, the combination of these events is a warning that severe stagflation is likely coming.
High inflation has caused Treasury yields to surge at an astronomical rate of change. Bond prices, which move in the opposite direction as yields, have sharply declined causing destabilizing losses. The effects of these massive bond losses are not even close to being fully realized by the broad economy.
The image above shows a bond ETF heatmap with year-to-date returns. Large losses have been mounting across numerous bond ETFs. Long-duration Treasury ETF NASDAQ:TLT has declined by more than 18% this year. Click here to interact with the bond ETF heatmap
Despite the extreme pace of monetary tightening, many central banks are still struggling to contain inflation. Inflationary fiscal spending and ballooning debt-to-GDP levels are confounding central bank monetary policy efforts. In Argentina, for example, inflation continues to spiral higher despite the central bank raising interest rates to 133%.
The chart above shows that the central bank of Argentina has hiked interest rates to 133%. Despite this extreme interest rate, the country's inflation rate continues to spiral higher. In an inflationary spiral, there is no upper limit to how high interest rates can go.
As the Federal Reserve tightens the supply of the U.S. dollar -- the predominant global reserve currency -- all other countries (with less demanded fiat currency) generally must tighten their monetary supply by a greater degree in order to contain inflation. If a country fails to maintain tighter monetary conditions than the Federal Reserve, then the supply of that country's (lesser demanded) fiat currency will grow against the supply of the (greater demanded, and scarcer) U.S. dollar, causing devaluation of the former against the latter. In effect, by controlling the global reserve currency, the Federal Reserve is able to export inflation to other countries. This phenomenon is explained by the Dollar Milkshake Theory .
The forex chart above shows FX:USDJPY pushing up against 150 yen to the dollar. The longer the Bank of Japan continues to maintain significantly looser monetary conditions than the Fed, the longer the yen will continue to devalue against the U.S. dollar.
The meteoric rise in bond yields is particularly concerning because it has broken the long-term downtrend, signaling the start of a new supercycle. After hitting the zero lower bound in 2020, yields have rebounded and pierced through long-term resistance levels.
The chart above shows that the 10-year U.S. Treasury yield broke above long-term resistance, ending the period of declining interest rates that characterized the monetary easing supercycle.
We've entered into a new supercycle, one in which lower interest rates over time are a thing of the past. The new supercycle will be characterized by persistently high inflation. It will start off insidiously, with brief periods of disinflation, but over the long term it will accelerate higher and higher, ultimately causing today's fiat currencies to meet the same fate that every fiat currency in history has met: hyperinflation.
* * *
Important Disclaimer
Nothing in this post should be considered financial advice. Trading and investing always involve risks and one should carefully review all such risks before making a trade or investment decision. Do not buy or sell any security based on anything in this post. Please consult with a financial advisor before making any financial decisions. This post is for educational purposes only.
Pinefest #1This Pinefest was closed October 28 2023. Congratulations to its winner, alexgrover with this script .
█ CHALLENGE
Create three functions that will return the exact value where two data series intersect: crossValue(source1, source2)
crossoverValue(source1, source2)
crossunderValue(source1, source2)
When a cross occurs, the functions must return the intersection's value. When no cross occurs, they must return na .
█ SUBMISSIONS
Prepare your entry as a private open-source script publication, including a detailed description explaining to its audience how it works and can be useful, just like public scripts published in Community Scripts . Your private publication must comply with our Script Publishing Rules .
Submit your entry as a comment in the Comments section below, with a link to your private publication. This way, all TradingViewers can view submissions. Note that publishing links to private publications is against House Rules; we make an exception for our Pinefest submissions.
No public script publications will be accepted as entries. Participants who publish their entries publicly will be disqualified, and their publication will be hidden. Entries must be your own work. Calls to functions of previously published libraries (by you or others) are allowed, as is the use of a private library accompanying your entry.
You have one week to submit your entry. Submission deadline: 28 Oct 2023, 12:00 UTC
If you have questions about this Pinefest, please post a comment below.
█ EVALUATION CRITERIA
A PineCoders committee will evaluate all submissions based on the following criteria:
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In case two or more publications reach an identical final evaluation, the earliest submission will win. Committee decisions are final.
█ REWARDS
The winner of this Pinefest will receive 500 USD and publish their script publicly in our Community Scripts . Their publication will also be awarded an Editors' Pick , for which the winner will receive an additional 100 USD . Authors of the five highest-scoring submissions will be awarded TradingView merchandise.
How to find Key Price Action zones for Daytrading successPrepping a market for daytrading is an important part of my process and understanding and identifying the KEY LEVELS is the major part of that process.
We have to build a Price Action picture of what may happen and what levels may be targeted so we will be ready for a trade. Understanding who (buyers or sellers) is getting caught off side and levels the market is targeting, will set us up for the higher probability trades.
I discuss a few key concepts for Intraday trading and how I identify the important zones. I show some trade examples and high probability trade zones.
** If you like the content then take a look at the profile to get more daily ideas and learning material **
** Comments and likes are greatly appreciated **
Day Trader's Toolbox: Previous Day's High and Low (PDH/PDL)
Welcome to the Day Trader's Toolbox, a 3-Part series focused on enhancing your day trading skills.
Day trading is all about seizing quick opportunities without overnight risk. In this first instalment, we'll delve into a fundamental tool every day trader should understand: the Previous Day's High (PDH) and Previous Day's Low (PDL). These levels are essential for making informed, rapid trading decisions, and we'll show you how to use them effectively.
I. Understanding PDH and PDL:
PDH and PDL are straightforward concepts. They signify the highest and lowest prices a market touched during the prior trading session.
However, don't underestimate their significance. These levels are pivotal because they offer undeniable historical context for a market's price movement. As a result, they draw the attention of many market participants, increasing the likelihood of non-random price action at these levels.
Here's why PDH and PDL stand out as the two most vital price lines a day trader can mark on their chart.
Gauging strength or weakness
PDH and PDL offer an objective glimpse into market sentiment, which holds immense value when formulating your daily trade plan.
During the first hours trading, if the market comfortably holding above the PDH it is a clear sign of strength while failure to hold above the PDL is a clear sign of weakness.
Just being aware of this simple concept can help keep day traders on the right side of the market.
Here’s some examples:
Holding above PDH is a clear sign of strength (EUR/USD 5min Candle Chart):
Failure to hold above PDL is a clear sign of weakness (EUR/USD 5min Candle Chart):
Price reversals:
Traders use PDH and PDL to set stop-loss orders, take-profit levels, and as reference points for assessing the risk-reward ratio of a trade.
Given the close attention PDH and PDL receive, they often act as both support and resistance levels, making them prime zones for potential price reversals.
A reversal pattern forming at PDH or PDL typically carries greater significance than one occurring within the prior day's range.
And should a market break and hold above the PDH, it can then provide support when the level is retested. Conversely, a break below PDL may offer resistance when the market trades below it.
Here’s some examples:
PDH and PDL acting as support and resistance (EUR/USD 5min Candle Chart):
Broken PDH becomes support (EUR/USD 5min Candle Chart):
Broken PDL becomes resistance (EUR/USD 5min Candle Chart):
Take note of the compelling examples above. No additional indicators clutter the chart. Armed only with an understanding of how price reacts to PDH and PDL, you can make smart day trading decisions.
For a deeper understanding, add PDH and PDL to your price charts and explore your own instances. You'll be astonished by how the market consistently responds to these levels.
II. How to Use PDH and PDL
Here are some practical tips for using PDH and PDL effectively in day trading:
Identify PDH and PDL: Before you start trading, identify the PDH and PDL levels for the market you are trading. You can draw these levels on yourself or type in ‘Previous Day High and Low’ into the Indicators, Metrics and Strategies bar on Trading View – here you will find a number of scripts that will add PDH and PDL to your charts automatically.
Observe price behaviour: Using the concepts outlined in section one ‘Understanding PDH and PDL’, you can create a game plan for the trading day based upon where price is trading in relation to PDH or PDL. For example, if price has opened within the prior days range the day trader may look to take bearish reversal patterns at the PDH and bullish reversal patterns at the PDL. Alternatively, if price is comfortably holding above PDH, the day trader may look to buy pullbacks.
Combine with other indicators: PDH and PDL are even more powerful when used in conjunction with other technical indicators such as Volume Weighted Average Price (VWAP), moving averages, RSI and many other. This can help validate your trading decisions.
Set stop-loss and take-profit orders: Use PDH and PDL as reference points to set stop-loss and take-profit orders. This helps manage risk and lock in profits.
Stay informed: Keep an eye on news and events that could impact the market. Unexpected news can sometimes cause price gaps that bypass PDH or PDL.
Practice and learn: The best way to become proficient in using PDH and PDL is through practice. Use Replay mode on Trading View to scroll through and replay many different trading days and hone your skills.
In summary, the Previous Day's High (PDH) and Previous Day's Low (PDL) are foundational tools for day traders. They offer valuable insights into market sentiment, help identify potential reversal points, and act as key support and resistance levels. By incorporating these levels into your daily trade plan, you can make more informed and strategic decisions, keeping you on the right side of the market.
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.
NFLX Price Soars 12% after Strong ReportYesterday's closing price was 345.83, but this morning, NFLX's price rose above USD 390 per share in premarket trading. The reason is a strong report:
→ earnings per share = USD 3.73, expected = USD 3.49;
→ revenue = USD 8.54 billion, a year ago = USD 7.9 billion.
→ the main surprise is that the number of subscribers grew by an impressive 8.76 million in the third quarter (about 6 million were expected). The number of subscribers worldwide is approaching 250 million.
Given the increase in demand for its service, Netflix has decided to raise the price of its basic plan in the US to USD 11.99 per month from USD 9.99, and raise the price of its premium subscription to USD 22.99 per month from USD 19.99. This could attract more earnings per share in the future, which is what has helped NFLX's price soar.
From the technical analysis point of view:
→ NFLX price returns to the ascending channel that was in effect in 2023 and seems to be becoming relevant again. The false breakout pattern could become a support zone in the future.
→ NFLX price exceeded USD 370 per share.
Since early September, NFLX has been a laggard in the NASDAQ index, but after the report it may become one of the leaders. "While we have much work to do to build out this business, we're making good progress and laying the foundation for what we believe should be a multibillion-dollar revenue stream over time," Netflix executives wrote in a letter to shareholders.
Resistance to a powerful bullish impulse may come from:
→ psychological level of USD 400;
→ level at USD 412 – during the summer, the level provided support. But it was broken on September 13-14, and with a bearish gap, which could slow down the rally if the price of NFLX reaches this level. Also note that here is the Fibo resistance level of 50% of the decline A→B.
According to TipRanks, analysts have a target price of USD 454 for NFLX, but given its recent performance, the forecast could be raised.
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.
The Life of Bitcoin: The definitive Historical Count Pt.3This is Part 3 of my epic series breaking down every major, relevant Segment in Bitcoins' price history, and explaining how they fit into the 'Historical Elliot Wave Count.' In short, what this Count implies is nothing less than astonishing: Essentially Bitcoin has just completed a decade long, (Running Triple Three) Wave 2 Correction and is now in an extremely powerful Wave 3 that should take the price to over 10 Million $ per coin, with the bulk of this appreciation (if not all) occurring within the next 5-10 years. See my published chart (which preceded the series) to view what the massive, Wave 2 Correction looks like when zoomed out, as well as a bit of the rationale that supports this Count:
Snapshot
Published Chart
Also, for more context as to what this series is all about, have a look at parts 1 and 2:
The Life of Bitcoin: The definitive Historical Count Pt.1
The Life of Bitcoin: The definitive Historical Count Pt.2
To date, the historical chart can be seperated into six Segments, I will be continuing to dedicate a post (a part of the series) to each of them. The term Segment should be taken loosely to mean a Section of the market data eligible for Classification as a Wave to be included in a larger Count. In this post, Segment 3 will be the focus. Again, I will continue to build upon the theme of speaking from a Direct perspective (analyzing one piece of the puzzle under a microscope), yet also gradually bridge the gap with an InDirect perspective (how the pieces of the puzzle all fit together, and how such necessarily informs the conclusions about any given piece). With the above in mind, consider that the start of every Segment or Wave is the end of another, thus why I thought it would be valuable to include a brief revisiting of Segment 2. Before jumping into Segment 3, I will again include a small taste of the flavor of the times.
Title for this Segment: "Venture Capital continues to flood into Bitcoin, Wall Street takes note"
In Post 2, we spoke about the fall of Mt. Gox, and whispers of the 'Tech guys' dipping their toes in the water amidst Bitcoins first ever prolonged bear market (before the 2013 rise it was a highly illiquid market). Throughout this bear market, government-confiscated Silk Road coins were continually auctioned off, serving to dampen all attempts at a trend-changing rally. It was amidst this backdrop that Bitcoin found its' first 'buyer of last resort' in Tim Draper, in this sense, he was basically the Michael Saylor of the times.
Without batting an eye, Draper, again and again, packed the trunk with three digit coins, instilling a confidence in the space the new, immature market had never seen. Not only did this buying have a very real effect on the supply-demand dynamic of an asset that aims to be the future of money, but it also influenced others in the shadows to begin to publicly speak out not just about their own positions but more importantly, their intentions to support the space with the Capital it would need to grow into the powerhouse it has now become. Draper (in addition to Andreesan, Hickey, Pantera, and a few others), was the first domino to fall: Segment 3 was characterized by all the rest following suit, piling into the space continuing to build out the Wallet, Exchange, and Merchant-Proccessing infrastructure. Similarly, Barry Silbert continued to bet big on Bitcoin offering the first 'legitimate' investment vehicle, a work-around of sorts that allowed money to flow in (which otherwise could not have using 'shady' overseas exchanges), forcing Wall Street to at least acknowledge the nascent asset. Ultimately, the CME would mark the top of the rise offering the first ever Bitcoin Futures market.
There were also another two topics dominating the 'flavor of the times' that bares mentioning: The Bitcoin Fork Wars Ethereum Mania. In the beginning of Segment 3, all attention was on what would be the culmination of a raging debate amongst the Bitcoin community: The block size debate. As the price began to rise from the ongoing influx of money mentioned earlier, uncertainty around how the block size debate would be resolved (or rather which approach, or combination of approaches, would win out, and how) loomed and served as the cold water to be poured on every potential acceleration of the new bull market. In the essence of staying on track with this post, I will condense the sequence of events to this brief summary: The decision by Bitmain to hard fork the Bitcoin Protocol resulting in a distinct coin Bitcoin Cash, the failure of an 'industry led' attempt to force a block size increase into the adoption of Segregated Witness ('SegWit2X'), and the adoption of Segregated Witness by Litecoin (as well as the threat of a 'User Activated Soft Fork') all contributed to any uncertainty the market migh have had about this ongoing debate being removed, thus leading to the 2017 blow off top.
Alongside all of this, Ethereum had become a household name, enabling and encouraging huge speculation to enter the market. Most of this speculation came from retail investors, who were intoxicated by the marketing of a more exotic Bitcoin, but this version had a 'boy genius' figurehead, providing a founder they could worship like the Tech Companies they were familiar with investing in. Prompted by the sound financial advice of CNBC and others (sarcasm), the crowd followed into Ethereum, ICOs, Ripple, and others setting the stage for the eventual popping of the bubble.
Of course, there was much more happening at the time, but hopefully the above should suffice in giving at least a feel for what occurred during this Segment. Now, let's get to the meat and potatos and dig into some charts. Segments 1 and 2 required many snapshots to cover, alternatively, going forward my analysis will likely be more consice as the stage has, for the most part, been set. I was able to condense both the Time and Wave Type analysis of Segment 3 into one main Chart Snapshot (which should also be the image in the published chart), this represents the complete picture of Segment 3 analyzed *from a Direct perspective*, it is the last snapshot. The first few snapshots help provide some preliminary techniques that help inform how both Segments 2 and 3 were counted, and how they each fit together and fit within the larger Historical Count.
Chart Snapshots (see below for a short description and/or any relevant notes):
-'Where' to begin Segment 3.
The ability to discern 'where' a Segment begins and ends is one of the most overlooked requisite skills needed to master the Elliot Wave Principle. Similar
to determing 'Where to begin your Count' in Part 1, getting this right is crucial, it establishes what will help serve as the foundation for your analysis.
-Where the price data connects 'Cleanly' (incorrect approach to determining the beginning of Segment 3).
-'Exposed Points' Duration, Degree,
Structure, and Type in and of the
Segments.
-Snapshot of the Published Chart.
Trading like a Pro with Heikin AshiI am a big fan of Heikin Ashi (HA) candles! I think they are among the most powerful candles one can use.
If I were asked to trade a raw chart without any indicators or math or anything like that, I could do it with a Heikin Ashi chart. If you follow me, you will probably have seen a lot of my tutorials and education on the use of Heikin Ashi candles, as well as some strategies I have developed using Heikin Ashi.
I wanted to take the time to give a crash course, in writing, on the key concepts of using HA to trade that can be quickly applied and implemented. So let’s get into it, we will start with the foundations and then get into the advanced stuff.
Basics: Identifying Trend Starts and Stops
Before doing anything else, you need to be able to identify trend starts and stops. With HA candles, it is super easy. What you need to look for is 2 consecutive flat bottom or flat top candles on whichever timeframe you are utilizing. Let’s look at some examples of the start of bullish trends on the 1 hour, using NQ1!:
In the chart above, you can see the start of various bullish and bearish trends on the 1 hour. Once you have identified the start of the trends, you can then use these candles to draw support and resistance levels.
When drawing support and resistance levels, start from the first, flat top or flat bottom candle, like so:
If we do this on various trends on NQ on the 1 hour, we can start to see how these act as key support/resistance levels:
PRO TIP! When drawing support and resistance, avoid redundant support and resistance levels. You will notice in the chart above, The resistance level at 1528, the support level at 15303 and the resistance level at 1534 somewhat overlap (this is good, this tells you the HA is working properly to identify areas of trend starts/stops). We can simplify this by 2 ways.
Way #1 is by removing the redundancies and just leaving 1 area:
Way #2 is my preferred way and simply involves drawing a support box or “zone”:
This also works well on the daily timeframe as well:
And again, we can simplify this by drawing boxes on the closer proximity lines as such:
Identifying Trend Reversals
The one thing that is great about HA candles, is I personally find them much easier to:
a) Identify impending trend reversals and
b) Identify the likely pull-back range of the trend reversal.
How do we do that? Well, we need to pay attention to the wicks on the HA candles. Let me show you some examples of some wicks along with the terms I have assigned to them and what they mean:
#1 Stagnation
Stagnation occurs when wicks are equal height. In general, you should not see a wick that wicks higher or lower than the stagnation. Below is an example and explanation of stagnation:
The chart above shows you an example of stagnation. To clarify, I will show you examples that do not fit the stagnation definition:
What does Stagnation mean?
Stagnation means that we will see some slight pullback, but generally not below the previous low that lead to the stagnation. In the chart with the example, you can see I labelled the first low as “A”. This will be your reference range. Its simply identifying the lowest low that was made prior to the stagnation pattern forming. Stagnation generally means we will not go below that low (if bearish). If it is a bullish pattern, it means that we will pullback, but it will not go to the previous low (start of the uptrend).
Here is an example of a bullish stagnation pattern:
Stagnation is generally a BULLISH indication.
#2 Bearish Ascending Wicks
Bearish ascending wicks, as displayed in the example above, are very telling. Perfect ones are hard to come by, but if you are lucky enough to find one, it does tell you what you can expect quite reliably!
The defining characteristics of bearish ascending wicks are a cluster of 3, bullish candles with each proceeding wick proportionately higher than the previous:
What do Bearish Ascending Wicks mean?
Well, as the name suggests, this is a bearish reversal. Why they are bearish is because these wicks are telling us that the ticker is about go lower than the start of the current uptrend.
We already know how to identify the start of uptrends and downtrends. So we need to look for the start of the current uptrend that lead to these bearish wicks forming. In this case, it is here:
What the bearish ascending wicks are telling us, is that we can expect to move to and below the start of this uptrend. We can see that this was indeed the case:
Let us look at another example:
This one is a bit messier, but I wanted to show that it does work, even when the setup is not the most pretty. And let’s take a look at one more:
It works really well, but like I said, they are tough to find!
#3 Bullish Descending Wicks
Bullish descending wicks are the exact opposite of the bearish ascending wicks. You have 3, consecutive descending wicks of declining size.
These signify a likely continuation to the upside after some pullback. How high? Higher than the highest wick. So in the above example, we would draw a trendline from the highest wick as reference:
And let us find another example:
These patterns also repeat on the bottom wicks, too, but they are inverted. So let us cover those next.
#3 Bearish Descending wicks:
Bearish descending wicks are the inverted bullish descending wicks that we find on the top of uptrends. We find bearish descending wicks at the bottom of downtrends. These signal a continuation down.
How low?
Lower than the lowest of the three wicks:
Let’s look at another example:
Then, we have the other inverse:
#4 Bullish Ascending Wicks
These signal a bullish reversal and a higher high than the start of the previous downtrend. How do we find the high to reference? We need to find where the most recent downtrend started. So take a look at the chart above and see if you can identify where the trend started. Then, check below where I will give the answer:
You would also be correct to say that the trend started here:
We can simply simplify this by drawing a box:
Let’s look at one more example:
Here is a tiny one:
PRO TIP: Here is a special case. In the case below, we are in an uptrend already and the bullish ascending wicks simply signal a trend continuation. In this case, for reference, you can draw a trendline from the peak of the highest wick leading up to the ascending wicks:
Concluding remarks
And that concludes today’s lesson on using HA candles to trade!
This provides you with some fundamentals of how to use them to identify support and resistance, as well as identify trend changes. Now, its important to remember, these trend change identification strategies don’t work 100% of the time. Sometimes they fail. But they work frequently enough, especially on the indices, that I do rely on them quite a lot.
At the end of the day, no method is perfect, but I find the HA approach to be one of the more rigorous approaches to support and resistance plotting and trend identification.
Remember, these rules apply to all timeframes, including the smaller timeframes, so you can use these strategies and rules on the smaller timeframes. I personally use them on the 5 minute frequently.
I will link some of my other HA based tutorials below. Otherwise, I hope you learned something and leave your comments/questions below and suggestions below!
Safe trades!
🔜 20+ Year Treasury Bond Market. Perhaps This Is The End US stocks surprised much of Wall Street this year with a strong run that defied decades-high interest rates and recession calls. The rally was fueled by slower inflation and hype over artificial intelligence.
But more recently, the Federal Reserve's unwavering higher-for-longer rate stance and a deepening bond-market rout have had a sobering effect on equities sentiment, with the S&P 500 index halving its year-to-date gains.
Indeed stock valuations are looking increasingly stretched, raising the risk of a correction.
One such indicator in particular is flashing RED - the relative valuation of stocks versus the debt market.
SPX / ICE BofA Corporate Total Return Index
In August this year, the S&P 500 CBOE:SPX climbed to levels last seen during the peak of dot-com boom, relative to an index that tracks the US corporate bond market.
The gauge is still holding near those highs, despite the recent pullback in equities.
The metric last surged this high in the spring of 2000 — and that was followed by a multi-year meltdown in stocks that saw the S&P 500 crash 50% between March 2000 and October 2002.
SPX 50% Decline During 2000-2002
Another indicator that shows the richness of stocks relative to debt is the so-called equity risk premium — or the extra return on shares over government debt, which is considered a safer form of investment. The metric has plunged this year lows unseen in decades, indicating elevated stock valuations.
"Equity risk premium is near its worst ever level going back to 1927. In the 6 instances this has occurred, the markets saw a major correction & recession/depression - 1929, 1969, 99/00, 07, 18/19, present," research firm MacroEdge said in a recent post on X (ex-Twitter).
The so-called equity risk premium (earnings yield minus bond yield) recently fell to a new cycle low and remains well below historical averages. In other words, the stock market has become more expensive relative to the bond market despite the recent pullback.
Meanwhile the main graph (quarterly Div-adjusted chart for NASDAQ:TLT 20+ Year Treasury Bond ETF) illustrates perhaps right there could the end for U.S. Govt Bond Market decline, with Double top as a further projected/ targeted upside price action.
Will all of that bring U.S. stock market to 50% decline like in early 2000s!?
Time will show!
Harnessing Gains from Yield Curve NormalisationNot too long ago, watching interest rates was as boring as looking at wet paint dry. Not anymore. Interest rates and currencies are as interesting as they get. The US dollar has been clocking moves more akin to an EM currency.
The greenback has been on a rollercoaster ride over the past three months in line with market expectations of Fed’s interest rate policy path. This paper is set in three parts. First, the background to rising rates and spiking yields leads to a brutal bond sell off. Then, the paper evaluates the case for further Fed rate hikes. In the third and final part, it dwells into factors that support a rate pause.
It is not just the rates but also the term structure of rates that’s gone off-the-chart. This paper posits a hypothetical spread trade inspired by the divergence in 30Y and 10Y treasuries with an entry at 13 bps and a target at 40 bps hedged by a stop at 5 bps delivering a reward-to-risk of 1.5x.
RISING RATES AND SPIKING YIELDS
Fed’s commitment to taming inflation with a higher-for-longer stance leads to a surging dollar. Spiking bond yields help reign in inflation through tightening monetary conditions.
The US 10Y Treasury Bond Yields surged to their highest level since 2007, by 20% or 0.8 percentage points since July 17th.
Chart 1: US 10Y and US 2Y Treasury Yields
Yield and Bond prices are inversely related. Surging yields have hammered bond prices lower resulting in a staggering record sell-off. Leveraged funds hold a record net short positioning in US 2-year and 10-year Treasury Futures.
Chart 2: Record Net Short Positioning by Leverage Funds
This brutal selloff has pushed yields to their highest levels in more than 15 years. Among others, portfolio managers and traders can position themselves one of the two ways:
Risk Hedged Yield Harvesting: Harvest risk hedged treasury yield using cash treasury positions and Treasury futures to generate income over a long horizon, or,
Gain from Yield Curve Normalisation: Deploy CME Micro Treasury Futures to engineer a spread trade to realise gains from a normalising yield curve.
In a previous paper , Mint Finance illustrated the first. Distinctly, this paper covers spread trade using CME Micro Treasury Futures.
THE CASE FOR HIKING
The September FOMC meeting re-affirmed a higher-for-longer rate regime. Though there was no rate hike, the updated Fed’s dot plot signalled very different expectations for the rates ahead.
The dot plot was updated to show a final rate hike in 2023 and fewer rate cuts in 2024.
Chart 3: Contrasting US Fed’s Dot Plot between 14/June versus 20/September ( Federal Reserve )
The Fed has adequate grounds to crank up rates even more as highlighted in a previous paper . These include (a) American exceptionalism where the US Economy has been remarkably resilient, (b) Expensive Oil due to geopolitics & receding base level effects, and (c) Brutal Lessons from past on the folly of premature easing.
THE CASE FOR PAUSE
Factors described above have led markets to price another rate hike at Fed meetings later this year. Those views have started to tilt further towards a pause since the start of October as per CME FedWatch tool.
Chart 4: Target Rate Probabilities For 13/Dec Fed Meeting ( CME FedWatch Tool )
Bond yields have surged, helping the Fed with their fight against inflation. Yields on US Treasuries surged to their highest since 2007. As yields are inversely proportional to bond prices, this is the equivalent of a major selloff in the bond market.
Three reasons behind the selloff:
1. Steepening Yield Curve:
Yields are finally catching up to market rates, especially for long-term treasuries; yield curve is steepening
Chart 5: Yield Curve is Steepening
2. Rising Sovereign Risk Premia: The US national debt passed USD 33 trillion and is set to reach USD 52 trillion within the next 10 years. Investors are demanding higher risk premia as compensation for default risk by a heavy borrower.
Chart 6: US Debt to GDP Ratio
3. Higher Yield to Compensate for Scorching Inflation: Investors are demanding higher real rates amid a high-inflation environment.
Chart 7: Real Yields are marginally above zero
Bond yields seem to be peaking. Solita Marcelli of UBS Global Wealth Management opines that the recent upward momentum in yields has been spurred largely by technical factors and is likely to be reversed given the overhang of uncertainty over underlying forces guiding the Treasury market.
Higher bond yields support a case for a Fed pause. This is because rising treasury yields do part of the Fed’s job. Higher treasury yields tighten financial conditions in addition to being a drag on the economy.
The Fed officials shared similar sentiments over the past week:
San Francisco Fed President Daly noted the moves in markets “could be equivalent to another rate hike”.
The Atlanta Fed chief opined that he doesn’t see the need for any more rate hikes.
The Dallas Fed President remarked that such a surge in bond markets may mean less need for additional rate increases.
The Fed has made it amply clear many times that it is data dependent. The data about the economy is positive. And that is concerning. Jobs data last week, and a sticky CPI print raise concerns that the Fed’s hand might be forced to hike despite US inflation being low among G7.
Chart 8: US Inflation is among the lowest within G7s
HYPOTHETICAL TRADE SETUP
Are we witnessing peak rates? In anticipation of the peak, investors can use CME Micro Treasury Futures to harness gains in a margin efficient manner. Micro Treasury Futures are intuitive as they are quoted in yields and are fully cash settled. They are settled daily to BrokerTec US Treasury benchmarks for price integrity and consistency.
As highlighted in a previous paper , each basis point change in yield represents a USD 10 change in notional value across all tenors, making spread trading seamless.
Setting up a position on yield inversion between 2Y and 10Y Treasuries is exposed to significant downside risks from near-term rate uncertainty.
Instead, a prudent alternative is for investors to establish a spread with a short position in 10Y rates and a long position in 30Y rates. The 30Y treasury rates demand a higher term premium due to their longer maturity.
Presently, this premium is just 0.15%. In the past, this premium has reached as high as 1% during periods of monetary policy shifts with yield curve steepening.
Chart 9: US Treasury Inverted Spreads
Furthermore, downside on this spread is limited as the 30Y-10Y premium scarcely falls below 0% unlike the 10Y-2Y premium which has been in deep inversion for the past year. A long position in 30Y Treasury and a short position in 10Y Treasury with:
Entry: 0.130 (13 basis points)
Target: 0.4 (40 basis points)
Stop Loss: -0.05 (5 basis points)
Profit at Target: USD 270 (27 basis points x USD 10)
Loss at Stop: USD 180 (18 basis points x USD 10)
Reward to Risk: 1.5x
Chart 10: Hypothetical Spread (Long 30Y & Short 10Y) Trade Set Up
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. 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
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
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Understanding the Role of HFTs and Dark Pools for Day TradingNASDAQ:TSLA reports on Wednesday of this week, October 18th. Last quarter, it had a gap down on its earnings news based on Year over Year comparisons which triggered High Frequency Trading (HFTs) to gap the stock down. Quarter over Quarter, however, NASDAQ:TSLA has shown consistent growth this year.
The problem with determining if the HFT gaps are likely to gap down or up on the next earnings report is the very low Percentage of Shares Held by Giant Buy-Side Institutions (PSHI). TSLA’s CEO has lost the necessary confidence of the largest Buy-Side Institutions in the world. So it's institutional interest is extremely low for such an important US company. The Buy-Side Institutions want the Board of Directors to replace Musk with someone who is more focused on TSLA to help it grow. The PSHI is likely to remain low until a new CEO is chosen.
The highest the PSHI has ever been was in July 2020 when it reached a high of 71%. It dropped to a low of 43% in November of 2021 and the stock has been sideways with very low PSHI ever since. It is very rare to see such low PSHI in a young new technology company with such high growth potential.
With less support from largest most influential institutions, the HFTs, which use retail news as one of their 6 primary algorithm triggers for automated orders as Maker/Takers, often gap a stock down on earnings news that was actually not negative.
Smaller Fund Managers, who have a special SEC classification with lower reporting requirements, often have VWAP automated orders trigger on high volume surges. This is often mistaken by smaller funds and retail investors or traders as “Dark Pool high volume activity,” when it is not.
High PSHI creates a natural liquidity draw and thus more momentum and speculative price action. This is missing much of the time for NASDAQ:TSLA stock price movement.
The current sideways trend has existed since 2021, best seen on a Weekly Chart. The dimensions of the sideways trend and the irregularity of the price range determines whether the sideways trend is a Long Term Wide Trading Range, a Short Term Trading Range, a Wide Sideways Trend, or a Platform-Building Sideways Trend. This is a Long Term Trading Range due to the inconsistent highs and lows.
This is common in a stock that has PSHI below 60%.
On a Daily Chart, the fundamentals currently are within the rectangular shape outlined below. This area of price can be problematic for retail day traders as there are always portfolio adjustments going on by the Buy-Side Institutions who have ETFs and Index funds with TSLA as a component.
When the stock drops below that Buy Zone range, it quickly reverses and runs up into the lows of that fundamental range. This becomes a price range where there is conflict between retail day traders trying to trade on news and the Buy-Side Institutions accumulating inventory shares of TSLA for the Indexes or ETF Trust accounts that must maintain a value close to the ETF or index value upon which that ETF is based.
What happens intraday is a very choppy and indecisive price action up and down that causes whipsaw losses for day trading.
In order to successfully day-trade TSLA, these factors must be understood to use to one's advantage. This requires an understanding of how to identify a Dark Pool Sell Zone or a Dark Pool Buy Zone within the daily charts. It also requires an understanding of how HFTs trigger and how VWAP orders often cause whipsaw action as well.
Remember that Dark Pool data is not available during the trading day. That data is on Over-the-Counter Alternative Transaction Systems. Those orders are filled off the exchanges and are not transmitted to the National Clearing Houses until after the market closes.
Hence, ALL retail day traders are trading against an invisible entity whose orders they can’t see even on Level 2 screens. The art of day trading in harmony with Dark Pool activity requires what I call "Relational Technical Analysis."
