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Mastering Support and Resistance: An Essential Tools for SuccessSupport and resistance are cornerstone principles in trading, offering crucial insights into price dynamics and market behavior. These levels act as key indicators, signaling points where an asset's price is likely to either pause or reverse direction. Support refers to the price level where strong demand prevents further declines, while resistance marks the point where selling pressure halts a price rise. Understanding and effectively utilizing these concepts can make a significant difference in trading success. In the realm of technical analysis, which focuses on using historical market data to predict future price movements, understanding support and resistance is essential. Traders rely on these levels to pinpoint optimal trade entry and exit points while also managing risk effectively. By recognizing where the market may reverse or maintain its trajectory, traders can craft more robust strategies. Decoding Support and Resistance Levels Support and resistance levels are vital price points on a chart that traders use to forecast future market behavior. Support represents a level where a downtrend is likely to pause, driven by a concentration of buying interest. In other words, it's the price point where demand is strong enough to stop further declines. For instance, if a stock repeatedly drops to $100 and then bounces back, $100 becomes a recognized support level. On the flip side, resistance is the price level where an uptrend often halts due to a high volume of sellers. Unlike support, resistance is where selling pressure overpowers buying interest, preventing prices from climbing further. If a stock consistently hits $150 and then retreats, $150 serves as a resistance level. Example Support and Resistance on Silver These levels are significant because they represent psychological thresholds for market participants. When prices approach support, buyers may step in, seeing it as a good entry point. Conversely, when prices near resistance, sellers might take action, expecting the price to struggle moving higher. Understanding how these levels work helps traders refine their timing and make more informed decisions. The Impact of Support and Resistance in Technical Analysis Support and resistance are pivotal in technical analysis, guiding traders in interpreting market movements and predicting future price trends. These levels act as psychological barriers that help determine whether a price trend will persist or reverse. For example, if a stock repeatedly approaches a resistance level but fails to break through, traders may interpret this as strong selling pressure and consider selling or shorting the asset. Conversely, if a price consistently rebounds off a support level, traders might see it as a buying opportunity. Example Resistance and Support on Apple Stock Visual tools like charts and diagrams are indispensable for identifying support and resistance levels. By drawing horizontal lines at points where the price has historically reversed, traders can easily spot critical levels and predict potential market movements. These visual aids enhance decision-making by providing a clear picture of where key price barriers lie. The Crucial Role of Support and Resistance Levels in Trading Strategies Support and resistance levels are the foundation of successful trading strategies, offering traders the tools to optimize entry and exit points, maximize profits, and manage risks effectively. For example, when a price hovers near a support level, a trader might take a long position, anticipating a rise in value. Simultaneously, they could place a Stop Loss just below the support level to limit potential losses if the price unexpectedly drops. Similarly, resistance levels provide invaluable insights for deciding when to exit trades or set profit targets. If a price approaches resistance, it might be wise to close a position to secure gains or prepare for a possible reversal. Understanding and identifying support and resistance levels also play a vital role in risk management. Setting Stop Loss orders near these levels helps traders protect their capital from significant losses if the market turns against them. This disciplined approach not only enhances profitability but also promotes long-term success in trading. Different Forms of Support and Resistance Support and resistance levels come in various forms, each providing unique perspectives on market behavior. The most common types include horizontal levels, trendlines, and moving averages. --Horizontal Support and Resistance: These levels are drawn at points where the price has consistently reversed in the past, making them straightforward and widely recognized. Horizontal Resistance on Tesla Stock --Trendline Support and Resistance: Trendlines connect a series of higher lows in an uptrend or lower highs in a downtrend, acting as dynamic support and resistance. In an uptrend, the trendline can signal buying opportunities, while in a downtrend, it might serve as resistance. Trendline Support on EUR/USD --Moving Averages: Moving averages, such as the 50-day or 200-day average, often act as support or resistance. For instance, during an uptrend, a pullback to the 50-day moving average can indicate a buying opportunity. Moving Averages Used as Support and Resistance on USD/CAD How to Identify Key Support and Resistance Levels To identify strong support and resistance levels, traders use several strategies: --Spot Price Clusters: Look for areas where the price consistently reverses direction, signaling strong support or resistance zones. --Use Technical Indicators: Tools like Fibonacci retracements help identify potential reversal levels during pullbacks by dividing a price move into key percentages (38.2%, 50%, and 61.8%). Fibonacci Tool used as Support and Resistance areas on DXY Common Pitfalls When Using Support and Resistance in Trading While support and resistance are essential, there are common mistakes traders should avoid: --Over-Reliance on Exact Numbers: Support and resistance are better viewed as zones rather than exact values. Prices may fluctuate slightly above or below these levels before reversing. --Ignoring Confirmation Signals: Jumping into trades without confirmation can lead to losses. Always look for signs like candlestick patterns or increased volume to confirm that the level will hold. --Chasing Breakouts Too Hastily: Not all breakouts result in sustained trends. Waiting for confirmation, such as increased volume, helps avoid being caught in a false breakout. --Impatience: Many traders act prematurely at support or resistance levels. Patience is key—stick to your trading plan and wait for the right setup. Advanced Strategies for Support and Resistance Trading For more experienced traders, support and resistance levels can serve as the basis for advanced strategies: --Breakouts: A breakout occurs when the price moves above resistance or below support, often signaling the start of a new trend. Confirming breakouts with increased volume helps reduce the risk of false signals. Breakout Confirmation on BTC --Fakeouts: Prices may temporarily breach support or resistance before reversing direction. Advanced traders capitalize on these by waiting for the price to return within the range and then taking positions in the opposite direction. Fakeouts on BTC --Reversals: Traders use reversal strategies when the price changes direction after hitting support or resistance, often signaling the start of a new trend. Area $72000 resistance used as reversal on BTC Conclusion Mastering support and resistance levels is vital for any trader aiming for long-term success. These concepts are the backbone of technical analysis, guiding traders in making informed decisions about when to enter, exit, and manage risks. By understanding and identifying key support and resistance zones, traders can predict price movements, spot opportunities, and refine their strategies. Incorporating technical analysis into your trading routine will boost your confidence in navigating the market. Whether you’re a beginner or a seasoned trader, honing your skills with support and resistance can lead to more disciplined and profitable trading.
Education
by FOREXN1
14
$AAPL Identifying a Macro 5-Wave Structure In this updated chart, I’m highlighting what appears to be a macro 5-wave structure based on Elliott Wave Theory: Here’s the breakdown: 1. Wave 1 starts from a low point and pushes up strongly, initiating the trend. 2. Wave 2 corrects back but does not fully retrace Wave 1, maintaining the overall upward trend. 3. Wave 3 is a powerful impulsive wave that surpasses Wave 1’s high, as expected in Elliott Wave theory. 4. Wave 4 is a corrective phase, with a shallower retracement compared to Wave 2. 5. Wave 5 is currently unfolding, moving upward and potentially marking the final push in this trend before we enter a larger correction or a reversal. The next step would be to watch for signs of an A-B-C corrective wave once Wave 5 is completed. Thoughts?
NASDAQ:AAPLShort
by mdrb8exu8b
11
Bitcoin Monthly chart about to be fully bullishIntroduction Bitcoin has been winding up above its previous top for many months. If you check the chart habitually or have been in an altcoin that has been bleeding out while bitcoin has been going sideways this has been a very painful time for you. Somethings got to give very soon. Indicators The most important indicators for this chart are going to be the weekly and monthly Stop and Reverse Indicator. These are desiged to approach price action from a previous high or low and when price action hits the SAR the next Sar begins from the previous high or low. For example, when the price action rises to hit a SAR that is above it the next SAR appears beneath it at the value of the previous low. It then will approach the price action based on its formula. From Wikipedia the concept draws on the idea that "time is the enemy". Thus, unless a security can continue to generate more profits over time, it should be liquidated. The indicator generally works only in trending markets, and creates "whipsaws" during ranging or, sideways phases. Therefore, Wilder recommends first establishing the direction or change in direction of the trend through the use of parabolic SAR, and then using a different indicator such as the Average Directional Index to determine the strength of the trend. Right now price has been going sideways and the Monthly SAR is beneath price action. Given the total context this is bullish. The Weekly SAR is above price action. So price is being compressed between two different indicators that have been programed potentially into countless of bots and algos to determine bias. Countless other traders have alerts that will signal when the monthly or weekly SAR are touched by price action so they can reassess the charts. I have simplified the ADX to just the DI+ and the DI-. My linked idea will show I called the end of the bull market down to the week it ended. Since the bear market ended we don't see anything to concerning with the DI +/-. We are not in bear territory and our bias is still bullish. As price goes sideways and up I expect to see an upswing in DI+ and downside to DI- In a macro bull on the bullish time frame you actually add to your positions when the weekly time frames are bearish. We can see price action is currently bearish on the weekly time frame as the DI- is above the DI+. This is when you buy if you have "strong hands" Price Action Large moves require structure and they require wind up. If you have been focused on the daily or weekly charts you might have missed the fact that bitcoin has clearly been creating structure on top of its previous high . So long as it continues to do so the bias is more upside. Price can wind up below a previous high before legging upward or downward. But so long as it closes above the previous high we continue to set a higher high. What to look for Its quite simple. We are looking for price action to, on a monthly basis, stay above the blue box and continue to go sideways and then up. We are also looking for the weekly SAR to flip and then both monthly and weekly SAR will be bullish. From there the next major target is for bitcoin to roughly double at the 2.0 Fib level around 125K. Anything above the 2.618 fib level for the next market cycle top is too greedy for me. Of course, if bitcoin closes a monthly chart below the blue box, of hits the monthly SAR and flips that to bearish then this idea is negated.
INDEX:BTCUSDLong
by This_Guhy
23
Oscillator Indicators for Experienced Traders (No RSI and MACD)Oscillator Indicators for Experienced Traders (No RSI and MACD) In the realm of technical trading, seasoned traders and beginners alike often turn to indicators to gauge market momentum and potential reversals. While many are familiar with popular tools like RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence), this article takes a different route. Here, we delve into other oscillators—each with its own unique features, significance in trading strategies, and methods for interpreting signals. Once you understand these instruments, you can open an FXOpen account to try them out on the live markets, trading with tight spreads from 0.0 pips and low commissions from $1.50. Stochastic The Stochastic Oscillator, developed by Dr. George Lane in the late 1950s, serves as a momentum indicator. It identifies overbought and oversold conditions in a market and signals potential price reversals. It consists of two lines, and unlike trend-following indicators, such as moving averages, it’s placed below the chart, fluctuating between two bands (0-100). The Stochastic is calculated based on two lines: %K and %D. - %K is the primary line calculated using the most recent close price relative to the high and low prices over a specified period. - %D is a 3-period simple moving average (SMA) of %K. Its common setting is 14 periods, which means that it compares the current closing price to the highest and lowest prices over 14 periods (minutes, hours, days, etc., depending on the timeframe). There are three types of Stochastic: 1. Fast Stochastic: Uses the raw %K and %D lines, providing frequent signals. 2. Slow Stochastic: A smoothed version of the Fast Stochastic, offering fewer but more reliable signals. 3. Full Stochastic: Allows customisation of both %K and %D parameters for specific trading strategies. Signals The Stochastic Oscillator indicator provides three primary signals: - Overbought/Oversold Conditions: An asset is considered overbought when the Stochastic is above 80 and oversold when it's below 20. - Divergences: A bullish divergence occurs when the price forms a lower low, suggesting a downtrend, while the Stochastic simultaneously forms a higher low, indicating underlying strength and potential for an upward reversal. Conversely, a bearish divergence manifests when the price forms a higher high, signalling an uptrend, but the Stochastic forms a lower high, hinting at weakening momentum and a possible downward reversal. - Crossovers: When the %K line crosses above the %D line, it provides a buy signal. Conversely, when the %K line crosses below the %D line, it provides a sell signal. Awesome Oscillator The Awesome Oscillator (AO) is a well-known oscillator in trading. It was developed by Bill Williams for evaluating market momentum and potential trend reversals using a histogram that oscillates around the zero line. The AO is calculated as the difference between a 5-period and 34-period simple moving average (SMA) of the median price (the average of the high and low prices). The default settings are 5 and 3, but they can be customised according to the trader's strategy and market conditions. Signals The AO provides several key signals: - Bullish and Bearish Saucers: A bullish saucer occurs when the AO histogram is above the zero line and shows a series of three bars where the first two bars are red (decreasing in value) and the third bar is green (with a higher value), indicating a potential bullish reversal. Conversely, a bearish saucer occurs when the AO histogram is below the zero line and shows a series of three bars where the first two bars are green (decreasing in value) and the third bar is red (with a higher value), indicating a potential bearish reversal. - Zero Line Crossovers: A bullish crossover happens when the AO histogram crosses above the zero line, suggesting a potential upward trend. Conversely, a bearish crossover occurs when the AO histogram crosses below the zero line, suggesting a potential downward trend. - Twin Peaks: A bullish twin peaks signal occurs when there are two lows in the AO histogram below the zero line, with the second low higher than the first low. This suggests a potential bullish reversal. Conversely, a bearish twin peaks signal occurs when there are two highs in the AO histogram above the zero line, with the second high lower than the first high. This suggests a potential bearish reversal. - Divergence: A bullish divergence occurs when the price makes a lower low, but the AO makes a higher low, indicating that downward momentum is weakening, suggesting a potential bullish reversal. Conversely, a bearish divergence appears on the chart when the price moves higher, but the AO makes a lower high, indicating that upward momentum is weakening, suggesting a potential bearish reversal. Klinger Oscillator The Klinger Oscillator, also known as the Klinger Volume Oscillator, was developed by Stephen Klinger in the 1980s. It measures the difference between two exponential moving averages of volume and is represented by two lines. It addresses the limitations of other volume indicators by focusing on changes in volume trends alongside price movements. The oscillator consists of two lines on a chart: the Klinger line and the signal line, typically a 13-period EMA of the Klinger line. The standard settings for the Klinger Oscillator typically use a 34-period and a 55-period EMA for the Klinger line. The signal line is usually a 13-period EMA of the Klinger line. These settings are designed to capture the medium- to long-term volume trends and filter out short-term noise. Signals The Klinger provides several signals: - Divergences: Bullish divergences occur when the oscillator forms a higher low while the price makes a new low, indicating buying pressure. Bearish divergences occur when the oscillator forms a lower high as the price makes a new high, suggesting potential downward reversals. - Crossovers: Trading signals occur with the Klinger line crossing the signal line. A bullish crossover (Klinger above signal) signals potential price upward movement. Conversely, a bearish crossover (Klinger below signal) suggests opportunities for short positions, indicating bearish momentum. - Zero Line Crossings: Movements across the zero line may define price movements. Crossing above zero may indicate bullish sentiment while crossing below zero suggests bearish sentiment. Chande Momentum Oscillator The Chande Momentum Oscillator (CMO), developed by Tushar Chande, is designed to measure the momentum of a financial instrument. Unlike oscillators that typically range between 0 and 100, the CMO, consisting of a single line, oscillates between -100 and +100. This range allows traders to assess the momentum's strength and direction more dynamically. The standard settings for the Chande Momentum Oscillator (CMO) typically use a 9-period look-back, which aligns with common practices in technical analysis for measuring short- to medium-term momentum. This means that the CMO calculates the momentum based on the price changes over the past 9 periods. Signals The Chande Momentum Oscillator in the stock market and other financial markets provides key signals for traders: - Interpreting Momentum: Values above zero indicate upward momentum, with higher values suggesting stronger bullish momentum and vice versa. - Overbought and Oversold Conditions: Readings nearing +100 suggest overbought conditions, potentially indicating a reversal or slowdown in the upward trend. Conversely, values nearing -100 may signal oversold conditions, suggesting a potential reversal or slowdown in the downward trend. - Zero Line Crossover: Crossing above zero may signal a bullish trend while crossing below zero may indicate a bearish trend, providing traders with entry or exit points. Volume Oscillator The Volume Oscillator is one of the more popular oscillators in trading. It assesses market trends and their strength by comparing two moving averages of trading volume. It consists of a single line. Unlike price-based oscillators, which focus solely on price movements, the Volume Oscillator incorporates volume data, providing insights into the underlying market activity. The standard settings for the Volume Oscillator typically use: - Short-term moving average of volume: 5 periods - Long-term moving average of volume: 20 periods These settings can be adjusted based on the trader's preferences and the specific market or asset being analysed. Signals The Volume Oscillator generates the following signals: - Signs of Strength and Weakness of the Price Movement: A positive oscillator signals strong buying/selling, supporting the current trend and hinting at continuation. Conversely, a negative oscillator suggests the trend may reverse or slow down. - Divergence Signals: Divergence occurs when the Volume Oscillator's direction differs from the direction of the price movement. For example, new price highs accompanied by lower highs in the oscillator may indicate weakening upward momentum, possibly foreshadowing a downturn. Conversely, new price lows without corresponding lows in the oscillator could signal an upcoming upward reversal. The Bottom Line While oscillator indicators provide insights into price movements and potential reversals, relying solely on them for trading decisions may not be sufficient. Considering additional factors like trend analysis, candlestick patterns, support and resistance levels, and broader market sentiment may strengthen trading strategies and mitigate risks. The TickTrader platform has a variety of oscillators that market participants may use to analyse over 600 markets. FAQs How Does an Oscillator Work? Oscillators fluctuate within a defined range or around a centreline. Using mathematical formulas applied to market data, they signal overbought or oversold conditions, trend reversals, or shifts in momentum. What Does Oscillate Mean in Trading? In trading, oscillate refers to the movement of a momentum indicator back and forth within a specific range or around a midpoint. It helps identify trend reversal, momentum changes, and potential trading opportunities. What Is the Oscillator Strategy? An oscillator strategy uses oscillators as the primary tool for trading decisions, getting signals like overbought/oversold conditions, divergences, or crossovers to determine when to enter or exit trades. What Is the Difference Between Indicators and Oscillators? Indicators are the general toolbox for technical analysis, encompassing different tool types, such as trend indicators, oscillators, and volumes. Oscillators are a specific type of indicator that wiggle within set limits, helping traders identify overbought or oversold conditions and potential price reversals. 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.
Education
by FXOpen
6
EDUCATION: Using Renko Charts to Find Key Levels in XAUUSDIn this tutorial, we'll dive into a unique but powerful method for analyzing gold (XAUUSD): using Renko charts to find critical levels. If you’re unfamiliar with Renko, it's a chart type designed to filter out market noise, making it easier to spot trends and reversals. Unlike traditional candlestick charts, Renko focuses on price movement rather than time, allowing you to identify significant support and resistance levels with greater clarity. When you understand how to use Renko properly, you gain an edge in navigating volatile markets like gold. With a calm and disciplined approach, we’ll guide you step-by-step through the process of setting up Renko charts, recognizing key patterns, and spotting levels that can give you a stronger sense of market direction. The goal is simple: cut out the clutter and focus on what matters—the bigger picture. Whether you're looking to improve your entries or better understand market structure, this tutorial will provide practical insights to help you refine your trading strategies. By the end, you’ll not only grasp how to use Renko charts but also develop the mental sharpness needed to stay patient and unemotional in the face of market fluctuations.
OANDA:XAUUSDEducation
by TLTurnerTV
5
Must-Read Investing Books: The Top 5 for Every InvestorWelcome to Part 2 of our must-read book series. Last time, we took a deep dive into the fast-paced world of trading, giving you the trading must-reads to sharpen your short-term, high-risk market chops. Now it's time to slow down and shift into a lower gear. Trading is a thrill, but investing is where the long game pays off. While trading is about timing, investing is about patience—and, some might even say, good investing is boring. So let’s be real, mastering both is how you dominate. In this Idea, we’re focusing on the timeless art of investing. Whether you’re gunning for that Warren Buffett-level compound interest or just looking to stack up some dividends, these five books will teach you how to think like an investor. Grab your coffee and your notepad—let’s dive in. 📖 1. The Intelligent Investor ✍️ by Benjamin Graham We’re kicking things off with the granddaddy of all investing books. Benjamin Graham’s The Intelligent Investor is the Bible of value investing. Benjamin Graham is the father of value investing, and his no-nonsense approach to buying undervalued stocks and waiting for the market to catch up is the gold standard. Graham teaches you how to analyze companies for their intrinsic value, while cautioning against the emotional rollercoaster of market volatility. It’s all about buying low, staying patient, and letting time do its thing. 🔑 Key Insight : Ignore market noise and buy undervalued assets with a long-term view. Stick to your strategy and let time do its thing. 📖 2. Common Stocks and Uncommon Profits ✍️ by Philip Fisher Philip Fisher introduces growth investing with a focus on buying quality companies. In Common Stocks and Uncommon Profits , Fisher explains his "scuttlebutt" approach—researching a company thoroughly, from its management to its industry (think investigative journalism on a stock). This book is a must-read for those looking to spot the next Apple AAPL or Amazon AMZN before they become household names. 🔑 Key Insight : Invest in great companies with solid growth potential. Deep research is your key to success. 📖 3. The Most Important Thing ✍️ by Howard Marks Howard Marks is a legend in the world of risk management and value investing, and The Most Important Thing is essentially his playbook. Marks dives deep into risk, market cycles, and contrarian thinking—he teaches you how to avoid getting wrecked by the market’s irrationality. This isn’t your typical book on the topic of investing; it's a mindset shift and an eye-opener—everyone is a genius when markets rise. But what defines the true investing skill is how you perform in tough times. 🔑 Key Insight : Success in investing is more about managing risk than chasing returns. Protect the downside, and the upside will take care of itself. 📖 4. The Little Book of Common Sense Investing ✍️ by John C. Bogle John Bogle—the finance genius who invented the index fund—drops some serious knowledge in The Little Book of Common Sense Investing . This book strips away the complicated jargon and exclusivity surrounding Wall Street and keeps it simple: low-cost index funds will beat active management in the long run. Bogle’s philosophy is all about minimizing fees and letting compounding work miracles over time. 🔑 Key Insight : Keep it simple. Low fees and long-term compounding are the keys to building wealth. 📖 5. The Essays of Warren Buffett: Lessons for Corporate America ✍️ by Warren Buffett and Lawrence Cunningham Okay, we all know Warren Buffett is the GOAT when it comes to investing. The Essays of Warren Buffett is a collection of his legendary letters to Berkshire Hathaway BRK.A shareholders, curated and organized to offer a behind-the-curtain insight on everything from corporate governance to value investing. Buffett has a knack for simplifying complex financial ideas, making this book an invaluable resource for investors of any level. 🔑 Key Insight : There’s no better teacher than Buffett when it comes to long-term, value-based investing. His wisdom is timeless and actionable—invest in solid companies with long-term growth prospects, and don’t get distracted by short-term market swings. 📚 Bonus Picks: The Investor’s Library Expansion Pack Looking for even more wisdom? Here are a few more titles to round out your investing education: 📖 The Snowball by Alice Schroeder A biography of Warren Buffett, The Snowball takes you inside the mind of the Oracle of Omaha, showing how his investment philosophy developed and how he built his fortune. It’s part investing guide, part life lesson, and all-around a fascinating read. 📖 The Psychology of Money by Morgan Housel This book explores how our emotions, biases, and behaviors affect our financial decisions. The Psychology of Money breaks down complex financial concepts into easily digestible stories that reveal how investors can avoid the psychological traps that lead to poor decision-making. 📖 One Up on Wall Street by Peter Lynch Legendary investor Peter Lynch shares his strategy of finding "tenbaggers"—stocks that increase tenfold in value. Lynch teaches that sometimes the best investment ideas are right in front of you—pay attention to the businesses you love and understand. 📖 A Random Walk Down Wall Street by Burton Malkiel Random Walk argues that trying to time the market is a fool’s errand. Instead, Malkiel promotes the idea of efficient markets, where it’s almost impossible to outperform the market consistently without taking on substantial risk. It's an excellent guide for those who believe in passive investing and long-term strategies. 📖 Mastering the Market Cycle by Howard Marks Another essential from Howard Marks, Mastering the Market Cycle teaches you how to recognize the ups and downs of the market and adjust your strategy accordingly. Timing the market may be impossible, but understanding its cycles will give you an edge. And there you have it—five more powerhouse reads to add to your investing library. These aren’t just books; they’re roadmaps from some of the sharpest minds in finance. Whether you’re looking for market cycles with Howard Marks or tapping into Warren Buffett’s timeless wisdom, each of these picks will help you get better in the long game. The best investors aren’t just lucky—they’re educated, patient, and, most importantly, they’re always learning. So grab a book, dive in, and start stacking knowledge that compounds just like your portfolio should. 💎 Got any personal favorites that didn’t make the list? Drop them in the comments—we’re always down to discover more investing wisdom!
SP:SPXEducation
by TradingView
2
Bitcoin: Avoid Getting Caught In This.Bitcoin has retraced further than anticipated from my previous analysis (went to 60K instead of 64K support). There was never any price confirmation to go long on this time frame so you should have been able to avoid getting caught on the wrong side of such a move. While there appears to be a bullish correction of that move in progress now, it is important to prepare for the coming resistance where a lower high may unfold over the coming week (64K previous support/new resistance). The arrow on my chart points to the 64K resistance area. This location is notable for two important reasons: price can present a bearish reversal there on this time frame, and retest the level again as a profit objective in the near future. The illustration on my chart shows how I am anticipating the price action will play out in this regard. Keep in mind, this is NOT any kind of guarantee, it is what I believe has a greater possibility compared to a narrow range of scenarios over a short time horizon (click on previous articles to see how my illustrations play out). The whole point of sharing this analysis is to help you prepare for what the market can throw at you over the coming week. The key to using this information effectively is evaluating price action around these levels in search of CONFIRMATION (Trade Scanner Pro was made of this purpose). For example, over the previous week, Bitcoin broke the 64K anticipated support without ever confirming. There was never a reason to justify risk here, and every reason to step aside. Having a decision making model of this nature not only helps you to adjust to unexpected changes, but also avoid unnecessary losing positions. In terms of current momentum, there was an inside bar breakout at 62,300 (previous high) and a long signal in play. This type of opportunity is best managed by smaller time frame strategies (day/swing trades). This is far from an attractive investment level, especially since there is only about 1K points before first resistance (64K). I consider this location as one of elevated risk, especially compared to the possibility of retesting 60K support again to be followed by a bullish signal. The second bullish signal (off 60K) would be the lower risk/higher probability play. This is just a possible scenario that I will be prepared for IF Bitcoin presents and confirms it, this is NOT a forecast. Whether you are an investor or trader, you must have a way to objectively make decisions. A set of criteria to identify an opportunity, confirm entries, project exits and define risk. The time horizon that you choose will be an important factor that will shape how you process this information. As complex as all of this may sound, the goal is to accomplish this all while using as little information as possible. This is the LEAST you can do in a market environment where we as the retail trader/investor have NO advantage whatsoever. Otherwise you are simply stuffing your money into a glorified slot machine. Thank you for considering my analysis and perspective.
COINBASE:BTCUSD
by MarcPMarkets
13
Potential bullish rise off overlap support?NZD/USD is reacting off the support level which is an overlap support and could rise from this level top our take profit. Entry: 0.6156 Why we like it: There is an overlap support level. Stop loss: 0.6122 Why we like it: There is a pullback support level. Take profit: 0.6207 Why we like it: There is a pullback resistance that is slightly above the 23.6% Fibonacci retracement. Enjoying your TradingView experience? Review us! Please be advised that the information presented on TradingView is provided to Vantage (‘Vantage Global Limited’, ‘we’) by a third-party provider (‘Everest Fortune Group’). Please be reminded that you are solely responsible for the trading decisions on your account. There is a very high degree of risk involved in trading. Any information and/or content is intended entirely for research, educational and informational purposes only and does not constitute investment or consultation advice or investment strategy. The information is not tailored to the investment needs of any specific person and therefore does not involve a consideration of any of the investment objectives, financial situation or needs of any viewer that may receive it. Kindly also note that past performance is not a reliable indicator of future results. Actual results may differ materially from those anticipated in forward-looking or past performance statements. We assume no liability as to the accuracy or completeness of any of the information and/or content provided herein and the Company cannot be held responsible for any omission, mistake nor for any loss or damage including without limitation to any loss of profit which may arise from reliance on any information supplied by Everest Fortune Group.
Long
by VantageMarkets
4
The Formula That Helped Me Get Into in the Top 2% of TradersI spent years testing different strategies, obsessing over charts, and trying to find the perfect entry point. It took me a while to realize that it wasn’t just about picking the right trades—it was about knowing how much to risk on each trade. This is where the Kelly Criterion came into play and changed my entire approach. You’ve probably heard the saying, “Don’t put all your eggs in one basket.” Well, Kelly Criterion takes that idea and puts some hard math behind it to tell you exactly how much you should risk to maximize your long-term growth. It’s not a guessing game anymore—it’s math, and math doesn’t lie. What is Kelly Criterion? The Kelly Criterion is a formula that helps you figure out the optimal size of your trades based on your past win rate and the average size of your wins compared to your losses. It’s designed to find the perfect balance between being aggressive enough to grow your account but cautious enough to protect it from major drawdowns. F = W - (1 - W) / R F is the fraction of your account you should risk. W is your win rate (how often you win). R is your risk/reward ratio (the average win relative to the average loss). Let’s break it down. How It Works Let’s say you have a strategy that wins 60% of the time (W = 0.6), and your average win is 2x the size of your average loss (R = 2). Plugging those numbers into the formula, you’d get: F = 0.6 - (1 - 0.6) / 2 F = 0.6 - 0.4 / 2 F = 0.6 - 0.2 = 0.4 So, according to Kelly, you should risk 40% of your account on each trade. Now, 40% might seem like a lot, but this is just the theoretical maximum for optimal growth. The thing about using the full Kelly Criterion is that it’s aggressive. A 40% recommended risk allocation, for example, can be intense and lead to significant drawdowns, which is why many traders use half-Kelly, quarter-Kelly or other adjustments to manage risk. It’s a way to tone down the aggressiveness while still using the principle behind the formula. Personally, I don’t just take Kelly at face value—I factor in both the sample size (which affects the confidence level) and my max allowed drawdown when deciding how much risk to take per trade. If the law of large numbers tells us we need a good sample size to align results with expectations, then I want to make sure my risk management accounts for that. Let’s say, for instance, my confidence level is 95% (which is 0.95 in probability terms), and I don’t want to allow my account to draw down more than 10%. We can modify the Kelly Criterion like this: 𝑓 = ( ( 𝑊 − 𝐿 ) / 𝐵 )× confidence level × max allowed drawdown Where: 𝑊 = W is your win probability, 𝐿 = L is your loss probability, and 𝐵 = B is your risk-reward ratio. Let’s run this with actual numbers: Suppose your win probability is 60% (0.6), loss probability is 40% (0.4), and your risk-reward ratio is still 2:1. Using the same approach where the confidence level is 95% and the max allowed drawdown is 10%, the calculation would look like this: This gives us a risk percentage of 0.95% for each trade. So, according to this adjusted Kelly Criterion, based on a 60% win rate and your parameters, you should be risking just under 1% per trade. This shows how adding the confidence level and max drawdown into the mix helps control your risk in a more conservative and tailored way, making the formula much more usable for practical trading instead of over-leveraging. Why It’s Powerful Kelly Criterion gives you a clear, mathematically backed way to avoid overbetting on any single trade, which is a common mistake traders make—especially when they’re chasing losses or getting overconfident after a win streak. When I started applying this formula, I realized I had been risking too much on bad setups and too little on the good ones. I wasn’t optimizing my growth. Once I dialed in my risk based on the Kelly Criterion, I started seeing consistent growth that got me in the top 2% of traders on TradingView leap competition. Kelly in Action The first time I truly saw Kelly in action was during a winning streak. Before I understood this formula, I’d probably have gotten greedy and over-leveraged, risking blowing up my account. But with Kelly, I knew exactly how much to risk each time, so I could confidently scale up while still protecting my downside. Likewise, during losing streaks, Kelly kept me grounded. Instead of trying to "make it back" quickly by betting more, the formula told me to stay consistent and let the odds play out over time. This discipline was key in staying profitable and avoiding big emotional trades. Practical Use for Traders You don’t have to be a math genius to use the Kelly Criterion. It’s about taking control of your risk in a structured way, rather than letting emotions guide your decisions. Whether you’re new to trading or have been in the game for years, this formula can be a game-changer if applied correctly. Final Thoughts At the end of the day, trading isn’t just about making the right calls—it’s about managing your risks wisely. The Kelly Criterion gives you a clear path to do just that. By understanding how much to risk based on your win rate and risk/reward ratio, you’re not just gambling—you’re playing a game with a serious edge. So, whether you’re in a winning streak or facing some tough losses, keep your cool. Let the Kelly formula take care of your risk calculation. If you haven’t started using the Kelly Criterion yet, now’s the time to dive in. Calculate your win rate, figure out your risk/reward ratio, and start applying it. You’ll protect your account while setting yourself up for long-term profitability. Trust me, this is the kind of math that can change the game for you. Bonus: Custom Kelly Criterion Function in Pine Script If you’re ready to take your trading to the next level, here’s a little bonus for you! I’ve put together a custom Pine Script function that calculates the optimal risk percentage based on the Kelly Criterion. You can easily enter the variables to fit your trading strategy. // @description Calculates the optimal risk percentage using the Kelly Criterion. // @function kellyCriterion: Computes the risk per trade based on win rate, loss rate, average win/loss, confidence level, and maximum drawdown. // @param winRate (float) The probability of winning trades (0-1). // @param lossRate (float) The probability of losing trades (0-1). // @param avgWin (float) The average win size in risk units. // @param avgLoss (float) The average loss size in risk units. // @param confidenceLevel (float) Desired confidence level (0-1). // @param maxDrawdown (float) Maximum allowed drawdown (0-1). // @returns (float) The calculated risk percentage for each trade. kellyCriterion(winRate, lossRate, avgWin, avgLoss, confidenceLevel, maxDrawdown) => // Calculate Kelly Fraction: Theoretical fraction of the bankroll to risk kellyFraction = (winRate - lossRate) / (avgWin / avgLoss) // Adjust the risk based on confidence level and maximum drawdown adjustedRisk = (kellyFraction * confidenceLevel * maxDrawdown) // Return the adjusted risk percentage adjustedRisk Use this function to implement the Kelly Criterion directly into your trading setup. Adjust the inputs to see how your risk percentage changes based on your trading performance!
COINBASE:BTCUSDEducation
by Fractalyst
11
PEPE + BNB Will Moon Just Like ETH Did In 2017 17 year experienced trader here sharing my thoughts to help the crypto community. As everyone knows this is a very important time for the market as we are approaching the end of the 3rd year of the 4 year cycle . Year 4 has always been ALTSEASON . The charts I am sharing with you are setting up to have HUGE runs into 2025. In teh video I share with you my reasoning on why this meme coin and BNB will explode higher just like ETH did back in 2017 . ETH was the the daddy back then and now MEME coins are the hot narratives (look at how many meme coins that Binance have listed) and there is a reason for it . Meme coins are bring in heavy trading volume for exchanges creating good revenue and they also bring in new crypto people to the community , we have seen xrp bring in millions of people , then we seen DOGE bring in millions of people then SHIB and then PEPE . Each ALTSEASON it has been a new meme coin that helps bring in and grow the crypto community so this time will be no different . This time we have new coins like NEIRO that can moon also but that is for another video . Do not sleep on these coins and if u need any help or have any questions please just send me a message and I will be happy to try my best to help . Have a great weekend MartyBoots
Long
by MartyBoots
14
$AMD Chart Setup: A Strategic Play Ahead of Advancing AI Event.As we approach AMD’s highly anticipated Advancing AI event this Thursday, the market may soon see the company in a whole new light. Historically, these events tend to prompt a "sell the news" reaction, giving us the opportunity to front-run the event throughout the week. The chart is setting up nicely with a confirmed wedge breakout, supported by strong bullish volume on both daily and weekly candles. If the stock goes flat or even sells off ahead of the event, it could present a bullish opportunity for us to capitalize on, if it continues to run, could be a short opportunity as the move could be priced in. My positions are as follows: Calls over $171.21, with targets at $177.55 and $185. Puts under $164.42, with targets at $162.58 and $154.49. Let’s stay sharp and position ourselves for what could be a pivotal moment for NASDAQ:AMD this week. Cheers.
NASDAQ:AMD
by Solidified
4
How I stopped strategy hopping by creating my own strategyIn the fast-paced world of trading, many of us, especially when beginning our journey, we find ourselves caught in a relentless cycle of strategy hopping. We jump from one strategy to another, lured by the promise of quick profits. However, this constant shifting often leads to frustration, a sense of not making any progress, and most importantly, a lack of consistent results. I experienced this firsthand as I back-tested, forward-tested, and executed various trading systems, on demo and live accounts, each time hoping for better outcomes but always ending up not meeting expectations and feeling more or less stuck in the same position of having to find a profitable trading strategy. Eventually, after having tried many different systems that I found online, I decided to finally try to create my own and this time stick to a single system for a prolonged period of time. This idea/publication explores my journey on how I created this simple trading strategy and how I used my engineering background to create a semi automated-trading system around it. And just to clarify, this is not financial advice, this should serve as an idea. If you want to try this out, do so at your own risk, after understanding the concept and after testing. I’m still testing this myself, but in theory it’s sound, and so far in my forward-testing is performing very well! Scalping, Day trading, Swing trading, Fibonacci levels, Support/Resistance levels, round psychological levels, Bollinger bands, EMAs, RSI, MACD, ICT, Smart money concepts, algo-trading, forex, crypto, indices, metals, multi-timeframe analysis, etc, etc. I’ve traded in these timeframes: D, 8h, 4h, 2h, 1h, 30m, 15m, 5m, 1m, and I’ve explored quite a few different strategies based on the concepts I just dumped above so I don’t bore you with every single case, and so based on that experience I’m taking a few considerations before creating my strategy. First, I’ll be trading forex, metals, and maybe crypto and indices. Personal choice. But there’s no reason this shouldn’t work in any other market. Second, I personally need to be more consistent on when it comes to analyzing the charts. So, for now let’s say that I’ll “log-in” every day, Monday-Friday, some amount of time during NY session. Third, I’ve learned that multi-timeframe analysis is better than analyzing only one specific timeframe, so I’ll include that. Next, I know there are different approaches, but from my perspective the market is either trending or not trending (aka consolidating; bouncing between two levels, imperfectly). I guess it’d be great to have one strategy for trending markets and one for markets that are in consolidation, but for now I’m specifically picking a trend-following strategy. I found that following the trend can be very rewarding, especially when you catch it from the start or near it and are able to exit right before it ends (that’s the tricky part, but we’re only talking theory for now). So a totally reasonable idea would be to try to enter the market on pull-backs, while expecting the price to continue in the direction of the main trend. So a Fibonacci retracement tool sounds ideal for this method. I’d like to somehow incorporate algo-trading up to some extent. I have a software engineering background, so it comes natural for me to try to create or adjust an existing trading bot to execute operations for me. But the issue I always had was creating a trading bot to spot good opportunities. It is just not easy to achieve, for any trading strategy. And that is because of the constantly changing nature of the markets. It requires subjectivity by a human to some extent when it comes to reading, understanding the market and predicting a direction. 💡 So with that said, now, two very important ideas I realized that this system exploits. 1. You don’t need to know exactly up to where price is going to retrace to on the Fibonacci tool. You can bet on more than one level. 2. You don’t need to create a trading bot that “fully” automates trading. It can only handle the part of managing the position(s). Let me explain. With the Fibonacci Retracement tool the trader is free to choose however many levels they want to visualize. And that is great, but it’s not easy to predict accurately and consistently up to which level price is going to retrace. We might miss some trades if we bet on a bigger pull-back and price continues on the trend without hitting our entry, or, we might experience some losses if we bet on a smaller pull-back and price decides to retrace more, and then continue on the same trend direction (which is even more painful to see lol). So the idea here is to place more than one order based on a few different fib levels. Managing more than one position can be challenging, but that’s when the next idea comes into play. “Semi” automating the strategy with the help of a trading bot. As I mentioned previously, at least for me it has been difficult to create a trading bot that can reliably match the trading opportunities that I would find. Sometimes the bot would find good opportunities, but some other times it would find opportunities that wouldn’t make sense to take because of other reasons (price close to some Support/Resistance level, news, different direction on higher timeframes, etc) and if all of those reasons were taken into account that would increase the complexity of the code and most of the time the actual opportunities found by the bot would decrease (including the good ones!). So it’s a trade-off. On the other hand, managing the position(s) is totally doable for a trading bot. Managing one or more open positions or pending orders is done after confirming a trading opportunity, so a trading bot can do precisely what a human would do based on the same conditions. And creating that kind of bot is not that complicated to achieve. So with all of that in mind I started writing some rules for the trading strategy. Timeframe for entries: 15m Multi-timeframe analysis: D, 4h, 1h, 15m I’ll be spotting opportunities around NY session open I’ll need a trading bot to manage the positions for me so I don’t stare at the charts for too long (not because I don’t want to, but because apart from having other things to do it wouldn’t improve the outcome! + that the trading bot is much better at handling its emotions :wink) I’ll focus on EIGHTCAP:XAUUSD first and maybe later I’ll apply this strategy to other markets. Let’s focus for a bit on the fib tool and the positions for now. The screenshot below shows the levels that I’m using. And for now I’m just betting on 3 positions. Again, managing more than one position can be tricky, but I’m relying on the fact that a trading-bot can help us in this part which is easy for the bot to handle. And apart from that we only have one position open at a time so it’s not actually that hard as it might sound if we don’t want to use a trading bot. Of course no system is perfect, so losses are expected. But I’m positioning myself in a way that my wins will cover my losses and give me good profit. In consequence, risk management is very important. With every bet or fibonacci tool I place and open X positions (in this case 3) I want to make sure that in total I’m not risking more than 0.5% of my total account balance. This part depends on the trader, some traders can tolerate bigger draw-downs, and so they can risk more % per position, others risk less, I personally like 0.5% for now. At the time of writing this I’m testing with the following risks: Position 1 (2.3R if TP hit): 0.10% of the account balance Position 2 (3.6R if TP hit): 0.18% of the account balance Position 3 (4.2R if TP hit): 0.22% of the account balance With those positions placed these things can happen: 1. Price doesn’t retrace enough to trigger any of the pending orders and continues in the same direction of the trend. In that case, when there’s a new higher high or lower low we just cancel our pending orders and analyze again to spot new opportunities. 2. Price retraces enough to hit all of our SL resulting in a loss of the 3 positions (-0.50%) 3. Only Position 1 gets triggered and we go to TP (2.3R * 0.10% = 0.23% gain) 4. Position 2 gets triggered and we go to TP (-0.10% + 3.6R * 0.18% = 0.55% gain) 5. Position 3 gets triggered and we go to TP (-0.10% - 0.18% + 4.2R * 0.22% = 0.64% gain) Nothing to do with alternatives 1 & 2 as it’s normal for us to lose or miss an opportunity sometimes. With alternative 3 we have a small gain. And with alternatives 4 & 5 we have a slightly better gain than our total risk of 0.50%. Now all of that might not sound ver impressive and it’s because this follows the fixed position way of managing the positions. Trailing the SL many times can produce much better returns when managed properly. But more on that later. Possible winning example below using ATR trailing SL. But let’s stick to the fixed positions for now to understand and get used to the system first and then you can let the bot do the management with the trailing SL method. Now why those specific risk %s for those 3 positions? The reasoning is that in my recent trading I’ve noticed that price tends to retrace enough to trigger either my Position 2 or my Position 3 more often than triggering only my Position 2. So it makes more sense to me to add slightly higher risk on those to increase profit. However, in my experience, in the higher timeframes price retraces even to the 38.2% level to then continue in the same trend direction more often than on the lower timeframes. But this part as I said depends on the trader, if you decide to incorporate this strategy/system to your trading you are free to choose different risk % per positions. Additionally, you could even open more positions (again, relying on the trading bot for position management), and of course following a good risk management plan by adjusting the risk for all positions and sticking to a total of less than 2% risk per fib tool placement. But this also depends on the trader. Sometimes price does like to ‘grab liquidity’ by retracing slightly more than the 100% level, hitting my last SL, and then continue on the trend direction we placed our bet on. However, I think that 3 positions is enough, at least for me, specially in the lower timeframes. Let’s focus on the trading bot for a bit now. As I said the bot should only manage my positions so I need a way to turn it on when I spot a good opportunity and then let it run until the position hits SL or TP, or it gets closed because of another reason. In this case I developed two systems. One is with fixed SL and TP, and one is with managing the position(s) with a trailing SL. The trailing SL is based on the current ATR value, but this could be expanded even further to another method of trailing SL based on specific levels the user provides (e.g. when in 1.4R move SL to break-even, when in 2R move SL to 1R, etc). For now I tested with fixed positions and with ATR trailing SL and they both work great and are profitable. The rules can be extended even more, for instance you choose the ATR trailing SL method and still place TP on the -27% or on the -61.8% fib levels so positions fully close on those levels, or you could close partially let’s say 30% when TP1 is hit (0% fib level) and then keep trailing, etc. There are many variations, and those can be handled by the bot based on the initial configuration. So on how the actual trading bot works. I developed a PineScript strategy that fires alerts that I can use with a service like PineScript to execute the operations but I found that those services most of the time don’t allow managing multiple positions at once and have other complications. So I created my own webhook server that receives the alerts and I also developed an EA that receives that information and executes the operations but this is still in testing phase and is not ready for use unless you have advanced technical knowledge. I’m thinking of ways to make this available however and would love some thoughts/feedback/suggestions! This strategy can still be applied even without a trading bot. However the trading bot would make the system much better and allow for more time to maybe analyze different markets and take on more trading opportunities, or just focus on other stuff. So to put all of this together now we’re only missing the part of spotting the opportunities. There are different ways, I personally just look for trends. I rely on simple price action (for uptrend I want to see clear higher highs and higher lows, and for downtrend I want to see clear lower lows and lower highs), a smoothed Heikin-Ashi EMA, and sometimes on the ADX indicator to see how strong the trend is. In the example below I show my thought process while applying this strategy on a forward-testing phase. This is exactly how I saw the chart when I logged-in for my trading session a few days ago. In the higher timeframes I checked that there is room for price to keep going up, that means that there shouldn’t be a S/R level or round psychological level near price. Having also analyzed higher timeframes and seen that it makes sense for price to continue this uptrend I decided to place my fib tool. I usually consider wicks too. So I place the first fib limit on the higher low, and the second fib limit on the higher high. Having placed the fib tool and created the pending orders now we need to wait for price to trigger our positions. But sometimes price is not done and keeps going up, invalidating our higher high (or lower low on a downtrend). When that happens we just need to stay focused on when price closes to see if a new higher high has been formed. If that happens we simply update our fib tool placement, and update the pending orders (entry, SL, & TP). This is a condition that the trading bot can probably handle. Eventually price will make it clear where the higher high is, and we finally see a retracement. And now we wait… but still focused in case we need to adjust our fib tool and pending orders if price is not yet retracing. Price drops with a strong move. Now we just step away, we already have the positions placed with SL and TP. We did our analysis, and so we don’t need to look at the charts and let any negative emotions gain control. At this point with fixed positions we can just close the charts and give an end to this trading session. And if using the trailing SL method we just leave it to the trading bot to manage the positions. In this case I was just testing the fixed positions and it unfolded into a win for the 3rd position. So overall about a 0.64% gain (the best alternative). So this is it. This covers the base of this strategy and my thought process while creating the rules for this system. It can be adjusted to different timezones as well, different markets depending on the asset type, etc. I’ve been forward-testing this strategy and system for a few weeks so far and it seems very promising. And I couldn’t wait any longer to share this idea in hopes that you can learn at least something from everything I shared. I’d also love to hear if anyone would be interested in using a system like this with the actual trading bot, so I can plan best on how to make it accessible to other users that don’t have technical/engineering knowledge. In conclusion, I shared my journey from strategy hopping to creating my own trading strategy based on my own needs. By exploring the key ideas of leveraging the Fibonacci retracement tool to bet on multiple positions and embracing a semi-automated approach, I’ve developed a system that aligns with my trading style and allows for necessary flexibility in response to market changes. If you find yourself caught in the cycle of strategy hopping, or don’t see the results you expected (be reasonable though!) I urge you to reflect on what you truly want from your trading experience. Consider creating your own strategy that aligns with your objectives and trading style! And feel free to take ideas from this article to build your own system. Share your thoughts and experiences in the comments below. I’d love to hear it, any thoughts/feedback or suggestions are appreciated. Looking forward to the discussion. Thanks, and good luck!
EIGHTCAP:XAUUSDEducation
by alfred343
8
Creating a Balanced Investment PortfolioCreating a Balanced Investment Portfolio In the vast realm of trading, where platforms like FXOpen play a pivotal role, strategy and skill stand paramount. As the age-old adage goes, 'Don't put all your eggs in one basket.' In the context of trading, this underscores the significance of diversification. Enter the concept of a balanced investment portfolio - an excellent balanced portfolio example, which emerges as an oasis of hope amidst the unpredictable dunes of market volatility. Understanding the Importance of a Balanced Investment Portfolio To achieve a balanced investment portfolio, it's crucial to consider the balance of individual components, especially forex, CFDs, stocks, and bonds. For example, a stock portfolio balance refers to the proportion of stocks in relation to other investment types. This balance is pivotal, as stocks often carry higher risks but also higher potential rewards. By understanding their own risk tolerance and learning how to balance portfolio assets effectively, traders can determine the ideal portfolio balance that meets their specific objectives. Building the Foundation: Investment Basics Every experienced trader knows that the world of investments is vast, presenting myriad opportunities. Some of the primary investment types include: - Stocks: These signify ownership in a company and constitute a claim on a fraction of its assets and earnings. - Bonds: Essentially, when you invest in bonds, you're loaning your money, either to a corporation or the government, in exchange for periodic interest payments plus the return of the bond's face value when it matures. - Real Estate: Investing in tangible land, buildings, or housing. Given its physical nature, it often acts as a hedge against more volatile markets. - Mutual Funds: These funds pool money from several investors to invest in a diversified portfolio of stocks, bonds, or other securities. Central to investment basics is the risk-return tradeoff. Essentially, it highlights that the potential return on any investment is directly proportional to the risk associated with it. In this matrix, diversification emerges as the most effective strategy, helping to spread and, in turn, mitigate risk. Asset Allocation Strategies Asset allocation might seem like a complex term, but at its core, it's about ensuring that your portfolio reflects your investment portfolio balance, harmonising your desired risk and reward. 1. Modern Portfolio Theory (MPT) Introduced by the visionary economist Harry Markowitz in the 1950s, the Modern Portfolio Theory (MPT) has since established itself as a seminal concept in portfolio management. Groundbreaking for its time and still influential today, MPT hinges on a principle that feels intuitive yet was revolutionary upon its debut: diversifying investments to maximise returns while judiciously managing the associated market risk. Central to the MPT is the construct of the 'Efficient Frontier'. This captivating concept represents a boundary in the risk-return space where portfolios lie if they offer the highest expected return for any given level of risk. In essence, any portfolio residing on the Efficient Frontier is deemed optimal, reflecting a balance where no additional expected return can be achieved without accepting more risk. 2. Strategic Asset Allocation Here, traders establish a base policy mix — a proportional combination of assets based on expected rates of return for each asset class. It’s a long-haul game, adjusting the portfolio as long-term goals or risk tolerance evolve. 3. Tactical Asset Allocation A more active management portfolio strategy, this method tries to exploit short-term market conditions. It involves shifting percentage holdings in different categories to take advantage of market pricing anomalies or strong market sectors. Diversification In the complex world of investing, understanding how to balance a portfolio is key. Diversification is the guardian against unpredictability. It is the art of spreading investments across various assets or sectors, ensuring that potential adverse events in one area won't unravel the entire portfolio's performance. Essentially, diversification is the protective shield that buffers against market volatility, offering a more stable and consistent growth path for traders. Geographical Diversification Globalisation has knit economies closer than ever before, yet each retains unique characteristics influenced by internal and external events. By diversifying investments across continents and countries, traders can leverage these unique attributes. Sector Diversification Beyond geography, the global market is segmented into various sectors — technology, healthcare, and finance, to name a few. Each has its growth trajectory, impacted by different factors. Spreading investments across sectors can hedge against unforeseen adversities. Individual Asset Selection The keystone of a robust portfolio is the judicious choice of individual assets. Beyond the broad strokes of diversification, the meticulous selection of each asset determines the portfolio's potential success. It's where profound understanding meets strategic decision-making, ensuring that every asset, be it a stock, bond, or commodity, is handpicked to serve the trader's overarching goals and vision. Proper research, encompassing financial performance, management quality, growth potential, and market trends, provides insight, reducing the chances of unwelcome surprises. Risk assessment is another crucial part of individual asset selection. Risk is an inherent part of investing. However, with rigorous risk assessment, traders can anticipate potential pitfalls. Evaluating the risk associated with each asset and its correlation with others in the portfolio helps in achieving the desired balance. Monitoring and Rebalancing In the dynamic dance of markets, continuous oversight and timely adjustments keep a portfolio's rhythm and harmony intact. - Regular Portfolio Review. The world doesn't stand still, nor do the markets. Regular reviews ensure that the portfolio aligns with the trader's goals and market realities. - Rebalancing Strategies. Over a period of time, certain investments will experience more rapid growth than others. This can shift the portfolio’s balance, necessitating rebalancing. Rebalancing, whether by reinvesting dividends or selling assets that have appreciated to buy those that have declined, ensures alignment with the desired risk levels and asset allocation strategy. Conclusion Crafting a balanced trading portfolio is an art backed by science, strategy, and due diligence. It's an ongoing process requiring constant monitoring and fine-tuning. By keeping a finger on the pulse of global trends, understanding risks, and staying committed to their goals, traders can navigate the choppy waters of global markets effectively. For those eager to embark on or deepen their trading journey, FXOpen offers the platform and tools. To initiate this exciting endeavour, you can open an FXOpen account and explore the dynamic offerings of the TickTrader platform. 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.
NASDAQ:TSLAEducation
by FXOpen
5
7 Ways to Optimize Your Trading Strategy Like a ProYou’ve got a trading strategy—great. But if you think that’s where the work ends, think again. A good strategy is like a sports car: It’s fast, fun, and dangerous… unless you keep it tuned and under control. And given how volatile modern trading is, yesterday’s strategy can quickly become tomorrow’s account-drainer. So, how do you keep your trading strategy sharp and in profit mode? Let’s dive into seven ways to fine-tune your setup like a pro. 1️⃣ Backtest Like Your Profits Depend on It (Spoiler: They Do) Before you let your strategy loose in the wild, backtest it against historical data. It’s not enough to say, “This looks good.” Run the numbers. Find out how it performs over different time frames, market conditions, and asset classes — stocks , crypto , forex , and more. If you’re not backtesting, you run the risk of trading blind — use the sea of charting tools and instruments around here, slap them on previous price action and see how they do. 💡 Pro Tip : Make sure to backtest with realistic conditions. Don’t cheat with perfect hindsight—markets aren’t that kind. 2️⃣ Optimize for Risk, Not Just Reward Everyone gets starry-eyed over profits, but the best traders obsess over risk management. Adjust your strategy to keep risk in check. Ask yourself: How much are you willing to lose per trade? What’s your win-loss ratio? A strategy that promises massive returns but ignores risk is more like a ticking time bomb than a way to pull in long-term profits. 💡 Pro Tip : Use a risk-reward ratio of at least 2:1. It’s simple: risk $1 to make $2, and you’ve got a buffer against losses. Want to go big? Use 5:1 or why not even 15:1? Learn all about it in our Asymmetric Risk Reward Idea. 3️⃣ Diversify Your Strategy Across Markets If you’re only trading one asset or market, you’re asking for trouble (sooner or later). Markets move in cycles, and your strategy might crush it in one but flop in another. Spread your strategy across different markets to smooth out the rough patches. 💡 Pro Tip : Don’t confuse this with over-trading. You’re diversifying, not chasing every pop. 4️⃣ Fine-Tune Your Time Frames Your strategy might be solid on the 1-hour chart but struggle on the 5-minute or daily. Different time frames bring different opportunities and risks. Test your strategy across multiple time frames to see where it shines and where it stumbles. 💡 Pro Tip : Day traders? Shorten those time frames. Swing traders? Stretch ’em out. Find the sweet spot that aligns with your trading style. 5️⃣ Stay Agile with Market Conditions No strategy is perfect for every market condition. What works in a trending market could blow up in a range-bound one. Optimize your strategy to adapt to volatility, volume, and trend shifts. Pay attention to news events , central bank meetings, and earnings reports — they can flip the script fast. 💡 Pro Tip : Learn to identify when your strategy isn’t working and take a step back. Not every day is a trading day. 6️⃣ Incorporate Multiple Indicators (But Don’t Go Overboard) More indicators = more profits, right? Wrong. It’s easy to fall into the trap of loading up your charts with a dozen indicators until you’re drowning in lines and signals. Keep it simple — combine 3 to 5 complementary indicators that confirm your strategy’s signals, and ditch the rest. 💡 Pro Tip : Use one indicator for trend confirmation and another for entry/exit timing. 7️⃣ Keep Tweaking, But Don’t Blow Out of Proportion Here’s the rub: There’s a fine line between optimization and over-optimization. Adjusting your strategy too much based on past data can lead to overfitting — your strategy works perfectly on historical data but crashes in live markets. Keep tweaking, but always test those tweaks in live conditions to make sure they hold up. 💡 Pro Tip : Keep a trading journal to track your tweaks. If you don’t track it, you won’t know what’s working and what’s not. Get familiar with the attributes of a successful trading plan with one of our top-performing Ideas: What’s in a Trading Plan? 💎 Bonus: Never Stop Learning The market’s constantly changing and your strategy needs to change with it. Keep studying, keep testing, and keep learning. The moment you think you’ve mastered the market is the moment it humbles you. Optimizing a trading strategy isn’t a one-and-done deal—it’s an ongoing process. By fine-tuning, testing, and staying flexible, you can keep your strategy sharp, profitable, and ahead of the curve. Optimize smart, trade smart!
SP:SPXEducation
by TradingView
7
30% to 60% Upside Coming for Natty (Divergence Strategy)A powerful monthly bullish divergence just confirmed on natty. We see that the CCI had a monthly close which confirmed the bullish divergence setup. In this video I review how to determine targets with this strategy, and how to determine your risk. I anticipate a minimum 30% rally from current prices for natty, possibly heading up 60% from here. This doesn't mean this market won't have a pullback in the meantime. In my opinion, pullbacks are for buying until these price targets are reached. If you have any questions about this strategy, feel free to shoot me a message. Have a great week.
NYMEX:NG1!Long
by Tradius_Trades
18
The British Pound Is Stronger than the US DollarThe British Pound Is Stronger than the US Dollar: Understanding the Reasons GBP/USD is the third most actively traded currency pair on the foreign exchange market, after EUR/USD and USD/JPY. It is also one of the oldest pairs traded on forex. The British pound continues to cost more than the US dollar, despite the dollar overtaking it as the global reserve currency. Why is the British pound stronger than the US dollar? In this FXOpen article, we look at the GBP/USD pair and the factors that keep the British pound strong to help you understand how to trade it. What Is the GBP/USD Pair? Currencies are always traded in pairs on foreign exchange markets. GBP/USD refers to the value of the British pound sterling against the US dollar – specifically, how many US dollars traders need to buy one pound. For example, if the GBP/USD exchange rate is 1.28, a trader would need $1.28 to buy £1. How come the British pound is always stronger than the US dollar? The answer is rooted in history. A Brief History of the GBP/USD Pair Until World War I, the British pound was the global reserve currency, accounting for over 60% of the world’s debt holdings. It was valued at just under $5. After the war, the US dollar began to strengthen, and by 1944, when the Bretton Woods system was introduced, the pound was pegged at $4.03. The Bretton Woods system fixed the US dollar to the gold price and established it as the unofficial global reserve currency. After World War II, the value of the USD began to rise, and it overtook GBP as the primary currency used in international trade. The Bretton Woods system began to slowly collapse after 1971, and both the GBP and USD became free-floating, with the US dropping the gold standard. This has resulted in the value of the GBP gradually sliding over the following decades. The free-float rate made the GBP/USD pair highly volatile. The pound sterling reached a high of 2.08 against the dollar in 2007 during the global financial crisis, as higher UK inflation raised expectations that the Bank of England would raise interest rates. In June 2016, the UK’s vote to leave the European Union drove the value of the pound down to the 1.20–1.25 area overnight. That was its lowest level since the collapse of the exchange rate mechanism in 1985 and the largest one-day decline since the end of Bretton Woods. The GBP/USD pair has since largely traded between 1.20-1.40. A notable exception was the start of the COVID-19 pandemic, when investors flocked to the safe haven US dollar amid uncertainty about the economic impact, and the pound fell to 1.16 against the USD. COVID-19 shutdowns and the loss of European trade following Brexit have weighed on the prospects for the UK economy. At the same time, geopolitical tensions such as the US-China trade war and the Russia-Ukraine conflict have lifted the value of the dollar, as have rising interest rates. In 2022, the Bank of England was forced to intervene as the value of sterling fell close to a record low of 1.035 against the dollar in response to a crisis of confidence in the UK government, high inflation and unemployment rates, and concerns regarding the domestic economy. However, by April 2023, the pound had recovered and became the best-performing G-10 currency of the year. According to Forbes, the British pound is the world’s fifth strongest currency, while the US dollar is the 10th strongest. The GBP/USD pair has primarily been trading around 1.20-1.30 so far in 2023. Why is the pound still stronger than the dollar? Is GBP Stronger than USD? Why is the pound more expensive than the dollar? The value of the GBP against the USD in forex doesn’t solely determine the strength of the US and UK economies. Analysts consider other factors that can question the strength of the pound. Nominal Value A currency’s nominal value refers to its value against another currency in forex. As was mentioned above, the nominal value of both currencies changed significantly over time. Although GBP was always more expensive than the US dollar, this conclusion is relatively arbitrary. Also, it’s worth considering the lower number of British pounds in circulation, which is worth £81 billion, compared to $2.33 trillion US dollars, which contributes to the higher value of GBP as of May 2023. Relative Strength The strength of a particular currency against another at any point in time is also relative, as it could actually be weaker against other currencies. For example, GBP could rise in value against USD but fall against EUR, AUD and JPY, which would suggest that the relative value of the pound is weaker – just not as weak as the USD. This is because the relative strength is determined not only by the value of one currency against another but by economic data, including inflation, economic growth, and the trade balance, which determine the strength of the overall economy. To gauge a currency’s real strength, analysts track its value in relation to multiple currencies over time. For instance, the Dollar Index (DXY) measures the value of the USD against a basket of currencies from its key trading partners and competitors, as this is a more accurate measure of its value than a single pair. Quoting Conventions The use of GBP/USD as the quoting convention reflects the pound’s strength. For instance, a GBP/USD quote of 1.25 signifies that $1.25 is needed to buy £1. This quoting convention originated in the late 1900s during the British Empire when the UK had a larger economy than the US. Despite the subsequent shift in economic power, this convention has endured. Since World War I, the US economy has surpassed the UK economy in terms of size. Modifying quoting conventions is challenging, given how entrenched they are in the financial industry. However, the tradition of quoting GBP/USD in itself does not determine the value of the pound and the dollar. Purchasing Power Parity (PPP) While the GBP/USD trading value suggests the pound is stronger, the purchasing power parity (PPP) fluctuates. PPP indicates how much a currency is worth based on the value of a basket of goods. In these terms, the dollar can be stronger than the pound. The concept underlying PPP is that the exchange rate should equalise the purchasing power of each currency within its respective country. For instance, if a basket of items costs £100 in the UK with a GBP/USD exchange rate of 1.15, the PPP would suggest that the equivalent cost of the same basket in US dollars should be $115. In practice, exchange rates frequently diverge from their PPP levels. The degree to which a currency such as GBP or USD deviates from its PPP indicates its relative strength or weakness against another currency. Global Economy Although the US economy is stronger than that of Great Britain, sterling’s history as the former global reserve currency and political and economic power have contributed to its strength. The pound is one of the world’s oldest currencies, having been introduced in the 1400s. The UK remains a major global financial centre, and the Bank of England continues to participate in international economic developments. What Factors Affect GBP/USD There are several factors that affect the value of the British pound and US dollar: - US Federal Reserve monetary policy - Bank of England monetary policy - Inflation rate, which has a strong impact on the interest rates - Employment data, which influences government fiscal policy - Geopolitical events - Other economic indicators, including retail sales and industrial production Does It Matter If GBP/USD Falls Below Parity? A weaker sterling could support UK exports, but it would also increase the cost of imported goods and drive up inflation. The Bank of England would be forced to intervene to contain inflation. As seen in 2022, there is also a risk that a sharp drop in the pound’s value could become disorderly, which could create political and economic turmoil. However, if the value of the pound fell below the dollar, it would be a psychological milestone for the UK, but it would not have a major impact on the forex market. Conclusion The British pound sterling has traditionally maintained a higher value against the US dollar because of historical convention. However, the US dollar is stronger overall as it is the world's reserve currency and has larger trading volumes. The GBP/USD exchange rate has been in a long downtrend. Therefore, there are risks that GBP will soon lose its nominal premium. Understanding how the British pound is stronger than the US dollar can help you to form strategies to trade the GBP/USD forex pair. By observing economic indicators, you can take a view on how you expect the market to move. If you are looking to trade forex markets, you can open an FXOpen account. The TickTrader platform allows you to analyse live price charts and trade a range of currency pairs. 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.
Education
by FXOpen
11
How to Trade Gap Up and Gap Down Opening? Full Guide What is gap up and gap down in trading? In this article, I will teach you how to trade gap up and gap down opening . You will learn a simple and profitable gap trading strategy that works perfectly on Forex, Gold or any other financial market. First, let's start with a theory . A gap up after the market opening is the situation when the market opens higher than it was closed without any trading activity in between. Above you can see the example a gap up after the market opening on EURGBP. The price level where the market closed is called gap opening level. The price level where the market opened is galled gap closing level. A gap down after the market opening is the situation when the market opens lower than it was closed without trading activity in between. Here is the example of a gap down after the market opening on WTI Crude Oil. Why such gaps occur? There are various reasons why opening gaps occur. One of the most common one is the release of positive or negative news while the market was closed. The market opening price will reflect the impact of such news, causing a formation of the gap. What gap opening means? Gap openings reflect the sudden change in the market sentiment. Gap up will indicate a very bullish sentiment on the market while a gap down will imply very bearish mood of the market participants. However, the markets do not like the gaps. With a very high probability, the gaps are always filled by the market very soon. We say that the gap is filled, when the price returns to the gap opening level. Above, you can see that after some time, EURGBP successfully closed the gap - returned to gap opening level. Such a pattern is very reliable and consistent among different financial markets. For that reason, it can provide profitable trading opportunities for us. You can see that a gap down on WTI Crude Oil was quickly filled and the price returned to the gap opening level. How to trade gap opening? Gap Up Trading Strategy Once you spotted a gap up after the market opening, you should wait for a bearish signal before you sell. You should look for a sign of strength of the sellers. One of the most accurate signals is a formation of a bearish price action pattern: Double top, Triple top, Inverted Cup and Handle, Head and Shoulders, Symmetrical or Descending Triangle, Rising Wedge... Bearish breakout of a trend line / neckline of the pattern will be your signal to sell. Look at a price action on EURGBP before it filled the gap. At some moment, the price formed a double top pattern and broke its neckline. That is our signal to sell. Your stop loss should lie above the highs of the pattern. Take profit - gap opening level. Safest entry is on a retest of a broken neckline/trend line of the pattern. Safest entry point on EURGBP is the retest of a broken neckline of a double top pattern. Stop is lying above its highs. TP - gap opening level. Gap Down Trading Strategy Once you spotted a gap down after the market opening, you should wait for a bullish signal before you sell. You should look for a sign of strength of the buyers. One of the most accurate signals is a formation of a bullish price action pattern: Double bottom, Triple bottom, Cup and Handle, Inverted Head and Shoulders, Symmetrical or Ascending Triangle, Rising Wedge... Bullish breakout of a trend line / neckline of the pattern will be your signal to buy . Let's study the price action on WTI Crude Oil before it filled the gap. You can see that the price formed a cup and handle pattern. Bullish breakout of its neckline is a strong bullish signal. Safest entry is on a retest of a broken neckline/trend line of the pattern. Your stop loss should lie above the lows of the pattern. Take profit - gap opening level. Following this strategy, a nice profit was made. Always remember that probabilities that the gap will be filled are very high. However, it is not clear WHEN exactly it will happen. For that reason, you should carefully analyze a price action and wait for a signal, before you open the trade. That will be your best gap opening trading strategy. ❤️Please, support my work with like, thank you!❤️
Education
by VasilyTrader
10
Apple Stair-Steps Toward a Potential BreakoutApple could be stair-stepping toward a potential breakout as a big month approaches. The first pattern on today’s chart is the pair of rallies and pullbacks since early August. Both times the smart-phone giant bounced at a 50 percent retracement of the upward move. (See the green arrows.) Does that reflect the presence of an uptrend? Next, AAPL is holding above its 21-day exponential moving average and 50-day simple moving average. That may reflect the presence of bullish uptrend. Third is the 2023 high of $199.62. The stock broke through that resistance in June after announcing AI support at its Worldwide Developers Conference. It then found support around that old resistance last month. The first AI features are expected to appear in October, along with quarterly results. Traders looking for a breakout may look to those catalysts for cues. TradeStation has, for decades, advanced the trading industry, providing access to stocks, options and futures. See our Overview for more. Past performance, whether actual or indicated by historical tests of strategies, is no guarantee of future performance or success. There is a possibility that you may sustain a loss equal to or greater than your entire investment regardless of which asset class you trade (equities, options or futures); therefore, you should not invest or risk money that you cannot afford to lose. Online trading is not suitable for all investors. View the document titled Characteristics and Risks of Standardized Options at www.TradeStation.com . Before trading any asset class, customers must read the relevant risk disclosure statements on www.TradeStation.com . System access and trade placement and execution may be delayed or fail due to market volatility and volume, quote delays, system and software errors, Internet traffic, outages and other factors. Securities and futures trading is offered to self-directed customers by TradeStation Securities, Inc., a broker-dealer registered with the Securities and Exchange Commission and a futures commission merchant licensed with the Commodity Futures Trading Commission). TradeStation Securities is a member of the Financial Industry Regulatory Authority, the National Futures Association, and a number of exchanges. TradeStation Securities, Inc. and TradeStation Technologies, Inc. are each wholly owned subsidiaries of TradeStation Group, Inc., both operating, and providing products and services, under the TradeStation brand and trademark. When applying for, or purchasing, accounts, subscriptions, products and services, it is important that you know which company you will be dealing with. Visit www.TradeStation.com for further important information explaining what this means.
NASDAQ:AAPL
by TradeStation
2
THE MUST-SEE CHART YOU DIDN'T KNOW YOU NEEDED!The TVC:VIX VIX (Volatility Index), often referred to as the "Fear Gauge," measures market volatility expectations based on options prices for the SP:SPX S&P 500 index over the next 30 days. It reflects the sentiment of market participants about future volatility, with higher values indicating more anticipated volatility (often associated with market fear or uncertainty) and lower values reflecting calm market conditions. Investors frequently use the TVC:VIX VIX as a tool for assessing market risk, especially during periods of market turbulence or significant economic events. Since it tends to rise when the stock market declines, it is often seen as a hedge against market downturns. It's important for traders and analysts, particularly in the context of options trading and for assessing overall market sentiment. The TVC:VIX VIX's relationship with the cryptocurrency market, particularly with BNC:BLX Bitcoin and other major assets, can offer insights into market sentiment across traditional and digital financial spaces. While the TVC:VIX VIX primarily reflects volatility in the U.S. equity market, changes in its level can indirectly impact cryptocurrencies in the following ways: 1. Market Sentiment Correlation: High VIX: A rising VIX indicates fear or uncertainty in traditional markets. In times of high volatility, investors tend to move away from risky assets, including cryptocurrencies, leading to potential sell-offs in both markets. However, some may consider Bitcoin a hedge during extreme cases of fear, driving demand as a "digital gold" asset. Low VIX: A lower VIX reflects calm and stability, which may encourage investors to take on more risk. This could benefit high-risk, high-reward assets like cryptocurrencies, potentially driving capital into Bitcoin, Ethereum, and other cryptos. 2. Liquidity and Risk-Off/Risk-On Dynamics: In a risk-off environment (high VIX), institutional and retail investors often reduce exposure to volatile assets like crypto, leading to a potential liquidity crunch and sell-offs. Conversely, a risk-on environment (low VIX) may signal that investors are more willing to take risks, increasing liquidity and driving up crypto prices. 3. Crypto's Evolving Correlation with Equities: Over time, there has been an evolving correlation between the S&P 500 and Bitcoin, particularly during times of high macroeconomic stress (e.g., during the COVID-19 pandemic or interest rate hikes). As VIX tracks equity market sentiment, rising volatility in equities often spills into crypto markets. In bull markets or periods of equity recovery, crypto markets may also benefit from an inflow of capital, reducing VIX levels and increasing crypto prices simultaneously. 4. Hedging and Diversification: Some institutional investors use the VIX as part of their hedging strategy when managing portfolios with exposure to equities and cryptocurrencies. For example, a high VIX may prompt them to move into stablecoins or reduce exposure to speculative assets. In the future, more sophisticated products like a "crypto volatility index" may emerge, mirroring the role of the VIX but for digital assets. 5. Macro Events: Major macroeconomic events, such as central bank decisions or geopolitical events, can cause both the VIX to rise and have similar effects on crypto volatility. During such periods, correlations between traditional and digital markets may strengthen. feargreedmeter.com The VIX (Volatility Index) and the Crypto Fear and Greed Index serve similar purposes by gauging market sentiment, but they do so in different ways and in distinct markets. Below is a comparison between the two: 1. Purpose and Market Focus VIX (Volatility Index): Market: Traditional financial markets, specifically the S&P 500. Purpose: Measures expected volatility in the S&P 500 over the next 30 days based on options prices. It’s often used as an indicator of fear or complacency in the U.S. stock market. Focus: Short-term volatility expectations, acting as a “fear gauge” for equity market participants. Crypto Fear and Greed Index: Market: Cryptocurrency markets, with a strong emphasis on Bitcoin. Purpose: Measures the emotional sentiment of the crypto market by analysing multiple factors to determine whether the market is driven by fear or greed. Focus: Broader emotional sentiment rather than technical market volatility. It tracks how much fear or optimism is present among crypto traders. 2. Inputs and Calculation VIX: Derived from the implied volatility of options on the S&P 500. It looks at a range of call and put options to estimate expected price swings in the market. Key Factors: Options market data, specifically the prices investors are willing to pay to hedge against future volatility in the stock market. Crypto Fear and Greed Index: Combines various inputs to capture overall market sentiment. These include: Volatility: Tracks Bitcoin volatility and compares it with historical trends. Increased volatility is associated with fear. Market Momentum/Volume: Rising buying volumes signal greed while declining volumes suggest fear. Social Media Sentiment: Analyses mentions, hashtags, and engagement on social media related to crypto topics, reflecting hype or panic. Surveys : Sometimes include survey data from market participants. Dominance: Focuses on Bitcoin’s dominance in the market. Rising dominance suggests fear (as investors flock to Bitcoin for safety) while decreasing dominance implies a risk-on environment. Google Trends: Looks at search query trends for cryptocurrency terms, reflecting public interest and sentiment. 3. Interpretation VIX: Higher VIX (>20): Indicates high expected volatility, often interpreted as fear in the market. Investors are anticipating larger price swings, usually in a negative direction. Lower VIX (<20): Suggests a calm market with lower expected volatility, often indicating complacency or a bullish outlook in the equity markets. Crypto Fear and Greed Index: 0-24 (Extreme Fear): Indicates significant fear in the crypto market. Traders may be overly concerned about price drops, which could lead to buying opportunities based on contrarian strategies. 25-49 (Fear): The market is still cautious, with more sellers than buyers. 50-74 (Greed): Optimism and confidence are high, with traders taking on more risk. 75-100 (Extreme Greed): Overconfidence or euphoria in the market. This is often seen as a warning that the market may be overbought, making a correction likely. 4. Time Horizon VIX: It focuses on expected short-term volatility (the next 30 days), meaning it's more of a short-term indicator of market swings. Crypto Fear and Greed Index: A broader measure of overall sentiment, not specifically tied to volatility or timeframes, it captures emotional extremes in the market that could persist for days, weeks, or longer. 5. Use Cases for Investors VIX: Used by traditional investors to gauge risk in the stock market. When the VIX is high, it can be a signal to hedge positions, reduce exposure to equities, or take advantage of volatility-driven strategies like options trading. During periods of low volatility, investors may become complacent and could be blindsided by sudden spikes in the VIX, often driven by external events (e.g., geopolitical issues or economic reports). Crypto Fear and Greed Index: Helps crypto traders assess the general market mood. Extreme fear can signal potential buying opportunities (contrarian strategy), while extreme greed may indicate an overheated market, possibly a time to sell or de-risk. Useful for emotional market analysis in a space that is known for strong, irrational sentiment swings, making it a helpful tool for timing market entries and exits. 6. Impact on Price VIX: Typically inversely correlated with stock prices. A rising VIX often accompanies a falling stock market, and vice versa. Crypto Fear and Greed Index: A sentiment indicator is not directly tied to price movements, but extreme readings can signal turning points or potential corrections in crypto prices due to market overreactions. If you have any questions, please reach out!
TVC:VIXEducation
by LisaNEdwards
11