CADJPY LONG - AWATING BREAK OF RESISTANCE!Waiting for a retest of 108.216 to long CADJPY back to swing highs at 109.254
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Educationalposts
🔍 Understanding the Volatility Crush: Navigating ETH Recent PA
Hello, traders! In the ever-evolving world of cryptocurrency, we often encounter intriguing phenomena like the "volatility crush." 📊
🔍 What is a Volatility Crush? A volatility crush occurs when the price of an asset, in this case, Ethereum (ETH), experiences a significant reduction in its price volatility. It's like the storm clouds clearing after a turbulent period, leading to calmer, less erratic price movements.
💡 Recent ETH Price Action: Indeed, as you've observed, ETH exhibited rapid price movements at the end of last month. However, at the start of this month, there's been a noticeable decrease in trading volume and price volatility. This suggests a potential volatility crush in progress.
🌪️ Adaptability in Wild Times: So, how can traders adapt during such times of reduced volatility?
Diversification: Consider diversifying your portfolio beyond ETH. Explore other cryptocurrencies or assets to spread risk.
Risk Management: Tighten your risk management strategies. Lower leverage and set stop-loss orders to protect your capital.
Stay Informed: Keep a close eye on news and developments. Crypto markets are sensitive to external factors, and unexpected news can spark volatility.
Patience: Be patient. Reduced volatility doesn't mean inaction. It might be a good time to reassess your long-term goals and strategies.
Education: Continuously educate yourself about market dynamics. Understanding the underlying technology and market sentiment can guide your decisions.
Remember, adaptability is the name of the game in the crypto world. The ability to shift your strategies as market conditions change can help you not only survive but thrive in wild times.
Stay vigilant and trade wisely! 🚀📉
#CryptoInsights #VolatilityCrush #Adaptability #ETHPriceAction
DIVERGENCE CHEATSHEETHello dear traders and investors community!
The Divergence Cheat Sheet
Divergence occurs when the price of an asset and an indicator, such as the Relative Strength Index (RSI), move in opposite directions. This pattern provides valuable insights into potential price reversals or changes in trends.
Detecting Divergence
Detecting divergence is crucial for identifying lucrative trading opportunities. By using divergence indicators like the RSI, MACD, or Stochastic Oscillator, we can gain significant insights into market trends and potential price reversals.
To pinpoint divergence effectively, follow these steps:
Choose an indicator capable of detecting divergence, such as the RSI, MACD, or Stochastic Oscillator.
Look for discrepancies between the indicator and the price action. Regular divergence occurs when the price and the indicator move in opposite directions, while hidden divergence occurs when they move in the same direction but at different rates.
Monitor the direction of the trend. Divergence can indicate a trend reversal, so keeping track of the current market trend is crucial.
Confirm the divergence signal with other technical analysis tools. Divergence is just one piece of the puzzle, so it's essential to use other indicators to validate your trading decisions.
Examples of Divergence in Trading Charts
Let's examine a few examples of divergence on Bitcoin charts:
Strong Bullish Divergence:
When lows of the price decreases while the RSI increases, a regular bullish divergence occurs. This signals a potential trend reversal and presents an opportunity for a bullish trade.
Strong Bearish Divergence:
When highs the price of an asset is rising while the RSI is falling, it indicates a regular bearish divergence. This suggests a potential trend reversal and presents an opportunity for a bearish trade.
Medium Bullish Divergence:
When the lows of an asset remain equal while the RSI is rising, it indicates a medium bullish divergence. This suggests a potential increase in price, although it may not be a strong upward movement.
Medium Bearish Divergence:
When the highs of an asset remain unchanged while the RSI is decreasing, it indicates a medium bearish divergence. This suggests a potential decline in price, although the downward movement may not be significant.
Weak Bullish Divergence:
When the lows of an asset is decreasing while the RSI lows is equal, it indicates a weak bullish divergence. This suggests a potential increase in price, although it may not be a strong upward movement.
Weak Bearish Divergence:
When the highs of an asset are rising while the RSI remains unchanged, it indicates a moderate bearish divergence. This suggests a potential decline in price, although the downward movement may not be significant.
Hidden Bullish Divergence:
Hidden bullish divergence occurs when the price creates higher lows while the RSI is creating lower lows. This reinforces an existing uptrend and suggests its strength.
Hidden Bearish Divergence:
Hidden bearish divergence is observed when the price forms lower highs while the RSI forms higher highs. This indicates a potential weakening of the current uptrend and might signal a trend reversal or a pullback.
By recognizing these divergence patterns on trading charts, we can gain insights into potential market reversals, entry and exit points, and adjust trading strategies accordingly.
To effectively incorporate divergence into your trading, consider the following steps:
Identify the appropriate indicators: Choose reliable indicators such as RSI, MACD, or Stochastic Oscillator that can detect divergence patterns effectively.
Learn to spot divergence: Familiarize yourself with the different types of divergence patterns and practice identifying them on price charts. This will help you develop a trained eye for spotting potential trading opportunities.
Confirm with additional analysis: While divergence can provide valuable signals, it's essential to use other technical analysis tools to confirm your trading decisions. Look for supporting indicators, chart patterns, or trendline breaks that align with the divergence signal.
Set clear entry and exit criteria: Define your entry and exit points based on the divergence signal and your risk tolerance. Consider using stop-loss orders and take-profit levels to manage your trades effectively.
Practice risk management: Implement proper risk management techniques, such as position sizing, to protect your capital. Divergence alone should not be the sole basis for your trading decisions but rather an additional tool in your arsenal.
Backtest and refine your strategy: Test your divergence-based trading strategy on historical price data to assess its effectiveness. Make adjustments as needed and continuously monitor and evaluate your results to improve your trading approach.
Remember, divergence analysis is not foolproof and should be used in conjunction with other technical analysis methods and market factors.
Divergence analysis is a powerful tool that can provide us with an edge in the cryptocurrency market. By understanding and effectively utilizing divergence patterns, we can identify potential trend reversals, improve entry and exit timing, and enhance overall trading strategy. Incorporate divergence analysis into your trading approach and combine it with other technical indicators and risk management techniques for a well-rounded and informed trading strategy.
Driving Forces Behind Cryptocurrencies' VolatilityIn the ever-evolving realm of modern finance, the emergence of cryptocurrencies has catalyzed a seismic shift, captivating the imagination of investors and traders alike. Since the inception of Bitcoin in 2009, the cryptocurrency market has experienced an unprecedented surge, leading to a proliferation of digital assets, each with its own unique characteristics and potential applications.
However, amid the exhilarating highs and gut-wrenching lows, the cryptocurrency market's intrinsic volatility has left many pondering the enigmatic forces that propel its wild fluctuations. This article embarks on a comprehensive exploration of the fundamental drivers that propel the volatile universe of cryptocurrencies, providing an in-depth analysis of the intricate interplay between a myriad of elements that influence prices and sentiment.
From the far-reaching impact of macroeconomic factors and regulatory dynamics to the revolutionary power of technological advancements and the sway of market sentiment, a complex tapestry of influences collectively shapes the turbulent journey of digital currencies. As the global financial ecosystem grapples with the ongoing evolution of this nascent asset class, acquiring an intimate understanding of these pivotal factors becomes a cornerstone for investors, traders, and enthusiasts navigating this dynamic landscape.
Diving into the Cryptocurrency Mosaic
Cryptocurrencies have transcended their origin with Bitcoin to establish a vibrant and diverse ecosystem of digital assets. Each cryptocurrency possesses a distinct set of attributes, use cases, and underlying technologies, intricately weaving into the intricate fabric of the market.
Broadly categorized, cryptocurrencies fall into two primary groups: coins and tokens. Coins like Bitcoin, Litecoin, and Bitcoin Cash are engineered to facilitate transactions and serve as alternatives to conventional currencies. In contrast, crypto tokens are constructed atop existing blockchain platforms, such as Ethereum, fulfilling functions like governance and ecosystem transactions.
Furthermore, the consensus mechanisms employed by cryptocurrencies contribute to their diversity. The proof-of-work (PoW) mechanism, utilized by Bitcoin and others, relies on mining for transaction validation. Conversely, the proof-of-stake (PoS) mechanism, exemplified by Ethereum and Cosmos, leverages validators to confirm transactions, enhancing energy efficiency and scalability.
Decrypting Cryptocurrency Volatility
Volatility is an intrinsic characteristic of cryptocurrencies, fueled by a confluence of influential factors:
Limited Liquidity: With trading volumes and market capitalization often lower than traditional assets, even modest buy or sell orders can generate substantial price fluctuations.
Speculative Nature: Cryptocurrencies are frequently viewed as speculative instruments, leading to price movements driven by market sentiment, hype, and speculative behavior, rather than fundamental analysis.
Regulatory Ambiguity: As a relatively nascent and lightly regulated market, regulatory developments can trigger abrupt price shifts as investors respond to changes or uncertainties in the legal landscape.
Sentiment Swings: Market sentiment, shaped by events like security breaches or regulatory announcements, can exert considerable influence on cryptocurrency prices.
Manipulation Vulnerability: Due to limited oversight and liquidity in certain markets, cryptocurrencies are susceptible to manipulation by sizable holders, leading to price distortions.
Technological Factors: Technical vulnerabilities or glitches can prompt swift price fluctuations as investors react to perceived risks associated with the underlying technology.
Adoption and Utilization: The practical adoption and use cases of cryptocurrencies significantly influence their value. Currencies with tangible utility and real-world applications tend to garner heightened interest and market support.
Supply and Demand: The fundamental economics of supply and demand guide cryptocurrency prices. Scarce supply coupled with growing demand can propel prices upward.
Macroeconomic Influences: Broader macroeconomic factors, encompassing inflation, interest rates, and geopolitical events, can channel investor attention toward cryptocurrencies as alternative investment vehicles or stores of value.
Influential Figures' Statements: Public endorsements or criticisms from influential figures exert considerable impact on cryptocurrency prices, shaping market perceptions and behavior.
Conclusion
As cryptocurrencies reshape the financial landscape, delving into the driving forces behind their volatility is essential for navigating this dynamic market. From the inception of Bitcoin to the kaleidoscope of digital assets that now flourish, the cryptocurrency market is characterized by its rollercoaster-like price oscillations.
This article has undertaken a comprehensive exploration of the key factors influencing this volatile realm. Regulatory shifts, market sentiment, technological advancements, hacking incidents, and supply-demand dynamics all converge to define cryptocurrency movements. Understanding these multifaceted influences empowers investors, traders, and enthusiasts to navigate the unpredictability of the crypto landscape with poise and informed decision-making.
While cryptocurrencies promise transformation, their journey is marked by rapid evolution and maturation. As the landscape continues to evolve, maintaining vigilance and adaptability remains pivotal. Regardless of your vantage point, comprehending these factors empowers you to seize opportunities and surmount challenges in the captivating realm of digital assets.
Gold buyAs we said earlier in our yesterday's anylisis that gold will rally towards 1933 level and it has done what we predicted as the Yellow mattel is hovering aroud its 193-36 level and now as US session opens we will be watching gold at Buy side and we will go around 1946 level so hope for good
Gold buyGold was moving in downtrend earlier but now gold has change its direction in daily timeframe and moving upwards now as in confluance daily trendline is being touched on 1940 level and trying to reach its level of 1932 and then rally towards 1946 level of resistance
2nd confluance is fibo level which is showing us that price is hovering around 38.2% level and will move towards 50% level which is around 1933 level and 68% level of resistance which is around 1946 level so we will buying this commodity
Also we have to take care about our position as there are two high impact news are expected today
EURNZD LONG - WAITING FOR PULLBACK!Waiting for a retest of 1.80724 to long EURNZD back to swing highs at 1.84223
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Ascending Channels: The GuideGreetings, @TradingView community! This is @Vestinda, bringing you a helpful article on the topic of Ascending Channels!
An ascending channel, a potent chart pattern, stands out with two upward-slanting trend lines that define support and resistance levels. Also known as "rising channels" or "upward channels," these patterns offer insightful indications for traders. The foundation is laid with the lower trendline, which connects lows and establishes the trend. The "channel line," running parallel to the lower trendline, links highs, solidifying the pattern.
Ascending channels, regarded as a continuation pattern, often break in line with the current trend direction. Savvy traders might explore both long and short trades at both trendlines, anticipating rebounds.
An alternate strategy involves waiting for a trendline breakout. Breaching the upper trendline triggers a robust buy signal, while slipping below the lower trendline implies a compelling sell signal. Breaking the trendline against the trend suggests a significant trend change, while aligned breakout accelerates the existing trend. Prudence is crucial, as channels might witness false or premature breakouts, causing retracements.
These channels serve as valuable predictors of overarching trend shifts. While within the ascending channel, an upward trend remains plausible. Another angle involves tracking where prices stall short of the upper trendline – a potential sign to a trend reversal. In such cases, breaching the lower trendline is more likely.
Often nestled within a broader downtrend, ascending channels mirror either trend continuation or reversal, contingent on breakout direction.
Strategies for Trading Ascending Channels:
1. Measuring Price Targets: Calculate a price target within an ascending channel by measuring its widest point (upper trendline to lower trendline) and adding it to the breakout point for an upward breakout, or subtracting it for a downward one. This provides an outlook on potential price movements.
2. Volume Confirmation: Observe trading volume during channel dealings. Breakouts accompanied by high volume signal reliability and market conviction.
3. Oscillator Use: Incorporate indicators like the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) to spot overbought or oversold conditions within the channel. Extreme readings suggest possible reversals or pullbacks.
Risks and Considerations:
1. False Breakouts: Channels occasionally yield false breakouts – a brief exit beyond trendlines followed by a return. Wait for confirmation before trading.
2. Timeframe Matters: Ascending channel reliability hinges on the timeframe. Longer-term charts offer robust signals, while shorter-term ones might be noisy.
3. Market Conditions: Evaluate broader market conditions and potential impactful events. Economic releases, geopolitical shifts, and unforeseen news can disrupt technical patterns.
4. Risk Management: Apply proper risk management – set stop-loss orders to mitigate potential losses tied to ascending channel patterns.
Ascending channels are indispensable tools for traders, enabling precise trend analysis and informed decision-making. By using chart patterns, technical indicators, and risk management, traders can optimize gains while managing potential risks.
Happy trading!
Never Lose Again: Learn the Classified 5 Secrets to SuccessIn the dynamic realm of forex trading, where global currencies interchange on a constant basis, traders are consistently enticed by the potential for substantial profits. However, the harsh reality remains that a significant portion of forex traders find themselves ensnared in financial losses instead. For aspiring traders, comprehending the underlying reasons behind these losses is not just beneficial, but rather a crucial step in sidestepping common pitfalls and heightening their chances of success.
In this article, we embark on a comprehensive exploration of the key factors that contribute to the losses faced by forex traders. We also offer invaluable insights into skillfully navigating the intricate terrain of the forex market. This is a realm that demands a delicate balance of caution and expertise. By boldly identifying and squarely addressing these stumbling blocks, traders position themselves to acquire the indispensable knowledge and strategies necessary for mitigating risks and ultimately enhancing their overall trading prowess.
Whether you are a seasoned connoisseur of the nuances of forex or a relative newcomer cautiously venturing into the world of currency markets, this guide is tailored to empower you. It equips you not only with the requisite tools for making informed decisions but also with the mindset needed to strive for profitability within the exhilarating yet challenging domain of forex trading.
--- Exploring the Origins of Trading Losses: Unveiling Crucial Insights ---
1) The Allure of Trading Addiction:
One prevalent reason behind trading losses is the phenomenon of trading addiction. Driven by the rush of excitement and the surge of adrenaline that markets can induce, traders often find themselves ensnared in impulsive and irrational decision-making. This addiction to the market's dynamics can lead to neglecting crucial risk management practices. Consequently, the pursuit of significant gains turns into a chase after elusive victories, culminating more often than not in significant financial losses.
2) The Temptation of Overtrading:
Contributing to the landscape of losses is the trap of overtrading. The allure of frequent trades, driven by the belief that more trades equate to higher profits, can lead traders astray. Regrettably, this assumption fails to account for the hidden costs of frequent trading – escalated transaction expenses, heightened vulnerability to market fluctuations, and the eventual exhaustion of emotional reserves. Such an approach invariably corrodes potential gains, paving the way for losses.
3) Emotional Biases and Their Impact:
Emotional biases wield considerable influence in trading losses. Fear and greed, two potent emotions, often cloud rational judgment, leading to impulsive decisions. The fear of missing out (FOMO) drives traders into positions at unfavorable entry points, while the dread of losses triggers premature exits. On the flip side, unchecked greed compels traders to cling onto winning positions for too long, missing opportunities to secure profits.
4) The Void of Risk Management:
A critical contributor to trading losses is the absence of sound risk management practices. Neglecting the implementation of Stop Loss orders or employing disproportionately large positions exposes traders to substantial losses when the market turns against them. Vigilant risk management techniques, including prudent position sizing and strategic use of Stop Loss orders, stand as bulwarks against capital erosion and catastrophic downturns.
5) The Role of Trading Strategies:
Finally, the foundation of trading strategies shapes the trajectory of losses. Relying on unreliable indicators, blindly following unsubstantiated tips, or operating without a well-defined trading plan lays the groundwork for consistent losses. Without a tested and solid strategy, traders find themselves susceptible to impulsive decisions and vulnerable to the sway of emotional biases.
--- Mastering the Art of Forex Profit Protection: 5 Vital Strategies ---
Venturing into the world of forex trading offers the allure of substantial profits, but it's a realm fraught with considerable risks. Safeguarding your financial resources and steering clear of losses demands a disciplined and strategic approach. Here are five indispensable steps to shield your capital and amplify your prospects of success:
1. Operate with Business-like Precision:
Seasoned forex traders recognize that trading isn't a casual pursuit, but a serious business endeavor. This entails crafting a meticulously structured trading plan, setting well-defined goals, and adhering to a disciplined routine. Track your trades, dissect performance metrics, and glean insights from both triumphs and setbacks. Treating trading as a business sharpens your focus and amplifies your chances of sustainable success.
2. Choose Your Broker Wisely:
Your choice of forex broker wields significant influence over your trading journey. Opt for a reputable, regulated broker renowned for transparent pricing, reliable execution, and top-notch customer support. Be wary of brokers with extravagant promises and steer clear of unregulated entities. A trusted broker is your anchor in the unpredictable seas of forex.
3. Tame the Leverage Beast:
Leverage possesses the power to magnify both gains and losses in forex. While the allure of higher leverage is enticing, it accompanies heightened risk. Tread cautiously and employ leverage judiciously, only trading sums within your comfort zone. Reject the allure of excessive leverage that could obliterate your account with a solitary unfavorable market movement.
4. Weave a Web of Risk Management:
Implementing robust risk management practices serves as your fortress against capital erosion. Embed Stop Loss orders within every trade to restrict potential losses. Furthermore, refrain from staking a significant portion of your account on a single trade. A prudent guideline entails risking no more than 1-2% of your trading capital on any individual transaction.
5. Navigate with Adaptability:
Forex markets are ever-evolving landscapes. Strategies that thrive in one market scenario might falter in another. Embrace versatility and remain open to recalibrating your approach based on shifting market dynamics. Continually scrutinize market trends and recalibrate your strategy in sync with the tides of change.
Embracing forex trading as a genuine business, making a discerning choice of broker, managing leverage and risks with precision, and adeptly adapting to market shifts can drastically curtail the chances of encountering losses. Keep in mind that trading is an acquired skill honed over time. Success springs from an unwavering commitment to perpetual learning and incremental growth. Cultivate patience, uphold discipline, and fixate on the panorama of long-term profitability.
Bottom Line
In a nutshell, forex trading is like a mixed bag of opportunities and risks. To make the most of it, traders need to understand why losses happen. This helps them improve their game and move towards making profits. Things like letting emotions rule, getting addicted to trading, doing too many trades, not managing risks, and using weak strategies can drain your money.
But don't worry, there's a way out. It's all about being disciplined, using smart ways to manage risks, and being flexible as the market changes. These steps give traders a better shot at success and help them handle the twists and turns of forex trading confidently.
Remember, becoming a successful forex trader is like a journey. It takes learning, patience, and treating every trade seriously, just like running a business.
A Comprehensive Daily Routine of TraderGreetings, fellow traders and investors of @TradingView !
Trading in the financial markets is often likened to a battleground of strategies, psychology, and data analysis. To navigate this dynamic landscape successfully, we need more than just luck; we need a well-structured daily routine that blends education, analysis, and real-time decision-making. In this article, we delve into a comprehensive daily routine that can set traders on the path to success.
1. Read Heavy Subjects
Every trader knows that staying ahead in the game requires continuous learning. Reading trading-related books and articles is an essential part of honing one's skills. However, it's not just about skimming through the surface; the real value lies in diving into heavy subjects. Delve into trading psychology, technical analysis, fundamental analysis, and risk management.
Psychology books can help you understand the emotional aspect of trading, which often plays a pivotal role in decision-making. On the technical side, learning about chart patterns, indicators, and trend analysis can enhance your ability to identify profitable opportunities. Fundamental analysis books offer insights into evaluating a company's financial health, which is crucial for trading stocks. By dedicating time to reading heavy subjects, traders can fortify their knowledge base and make informed decisions.
2. Learn From Others
In the age of social media and online communities, learning from experienced traders has become more accessible than ever. Platforms like TradingView and Twitter are treasure troves of insights and strategies shared by smart traders. Engaging with these platforms allows you to learn from others' experiences, understand their thought processes, and adopt successful trading strategies.
However, a word of caution is necessary here. While learning from others is valuable, it's crucial to develop your own analytical skills and not blindly follow someone else's advice. Use these insights to inform your decisions, but always verify and validate the information before acting upon it.
3. OnChain Metrics
In the realm of cryptocurrency trading, where blockchain technology reigns, on-chain metrics can be powerful indicators of market trends. Tools like GlassNode and ArkhamIntelligence provide insights into on-chain activities, such as large transactions made by institutional investors (Smart Money) or significant movements by whales (holders of large amounts of cryptocurrency). Monitoring these metrics can give you a sense of potential market movements and sentiment shifts.
However, it's important to remember that while on-chain metrics can provide valuable context, they are not foolproof predictors of price movements. Cryptocurrency markets are influenced by a complex interplay of factors, and combining on-chain data with other types of analysis can yield more accurate insights.
4. Watch the Numbers
In trading, numbers are your allies. Monitoring market data, price movements, trading volumes, and other relevant metrics is a fundamental part of a trader's routine. Platforms like Tokenterminal and DefiLlama provide data on token performance and decentralized finance (DeFi) protocols, allowing traders to identify trends and potential opportunities.
Unusual spikes or drops in numbers can indicate significant market shifts, which might warrant further investigation. However, like any other analysis method, numbers should be interpreted within the broader market context. One should avoid making impulsive decisions solely based on numerical fluctuations.
Trading is a discipline that requires constant learning, adaptability, and discipline. Following a structured daily routine that involves in-depth reading, learning from experienced traders, monitoring on-chain metrics, and analyzing market numbers can greatly enhance a your chances of success. However, it's important to maintain a critical mindset, verify information, and integrate various analysis methods to make well-informed trading decisions.
Remember, a robust routine combined with a healthy dose of intuition can be a powerful combination in the world of trading.
BITCOIN - NO BULL RUN TILL MARCH 2024This Bitcoin chart right here is a monthly timeframe chart. We all have been expecting this bear market to be over but it keeps deceiving us. Here is a clue on what to expect in the coming month.
Based on 2017 bear cycle that lasted for 27 months (821 days) as displayed on the chart, we see the current 2021 bear market following the same trend.
We have four phases here and the number of months each lasted for
The All Time High - All Time Low (12 Months)
The Bull Trap (6 Months)
Accumulation Phase (9 Months)
And finally the;
All Time Low to All Time High (13 Months)
Comparing the two bear market together, we have completed the first two phases and we are in the accumulation phase.
Therefore, we have till February 2024 to accumulate our favorite gems before a bull run will kickstart.
Not a financial advice🙅🏼♂️
Share your opinion in the comment section✍️
Please support this idea with a LIKE👍 if you find it useful🥳
Happy Trading💰🥳🤗
Master the Basics (Understand Support and Resistance in Trading)Hello, TradingView community!
One of the foundational elements of technical analysis is the concept of 'Support and Resistance'. Whether you're trading BTCUSD, Gold, or any other instrument, these principles remain consistent. Let's dive in!
1. What are Support and Resistance?
Support is a price level where a downtrend can be expected to pause due to a concentration of demand (buyers). Think of it as the floor where the price seems to bounce off.
Resistance is where a trend can pause or stop due to selling interest. Imagine it as the ceiling where the price seems to hit and then starts declining.
2. The Power of "Why" Over "What"
Understanding why these levels exist is more crucial than just spotting them. They're formed due to:
Historical turning points (past highs and lows).
Psychological levels (e.g., round numbers like $10,000 for BTC).
Moving averages or other technical indicators.
3. Mixing It Up with Different Timeframes
Different timeframes can show different support and resistance levels. While a daily chart might show a clear resistance, a monthly chart might still be in a strong uptrend. It's essential to mix up your timeframes to get a holistic view.
4. Presentation is Crucial
When marking these levels on your chart:
Use horizontal lines or zones to represent areas of interest.
Annotate and explain why you believe a particular level is crucial.
Keep your charts clean and easy to understand.
5. Quality Over Quantity
It's tempting to mark every minor level you see, but focus on the most evident and historically respected levels. Too many lines can clutter your chart and lead to analysis paralysis.
6. Stay Truthful and Updated
Markets evolve, and so do support and resistance levels. Be ready to adjust your lines as the market provides more data. And always be truthful – if a level breaks, it's an opportunity to learn, not to hide.
In Conclusion
Support and Resistance are more than just lines on a chart. They represent the collective psychology of the market, areas where traders have historical memories, and points of decision-making. As you analyze popular instruments like BTCUSD or Gold, remember these principles and use them to enhance your trading decisions.
Remember, in trading and in sharing, honesty and continuous learning are key. Let's grow together, one trade at a time.
Happy trading and charting! 📈🌟
Six Ingredients to be a TraderGreetings, fellow traders and investors of @TradingView !
Financial markets offers limitless opportunities for earning and investing. Amidst all the available instruments, trading stands out as an exhilarating realm of dealing with securities, currencies, and other assets.
But how do you know if trading is the right path for you?
In this article, we will explore key aspects that will help you determine whether trading is your true calling.
Analytical Mind and Problem-Solving Skills: Traders need to analyze market data, predict trends, and make swift decisions. If you relish solving complex problems and seek rational approaches to decision-making, this is an indicator that trading could align with your strengths.
Patience and Self-Discipline: Success in the world of trading doesn't come overnight. Patience and a willingness to work on your skills will help you endure tough moments and maintain composure during market fluctuations.
Interest in Financial Markets: If you've always been intrigued by finance, economics, and global events that impact the market, trading can become an intellectually engaging pursuit for you.
Readiness for Continuous Learning: Markets are constantly changing, requiring traders to refresh their knowledge and skills. If you're willing to keep learning and evolving, you'll find the world of trading both engaging and vital.
Emotional Resilience: Trading can be emotionally draining, particularly during rapid market shifts. The ability to control fear, greed, and euphoria is crucial for a trader.
Tolerance for Risk: Trading comes with the risk of capital loss. If you're prepared to logically evaluate risks and make informed decisions, it can be an indicator of your suitability for this endeavor.
Trading is a captivating and intricate domain that isn't suitable for everyone. If you possess qualities such as an analytical mind, patience, an interest in finance, and a capacity for continuous learning, you have the potential to become a successful trader.
Remember that success in trading demands self-improvement, ongoing education, and adept emotional management.
GBPCAD LONG - NEW HIGHS EXPECTED!Waiting for a retest of 1.71226 to long GBPCAD back to swing highs at 1.73339
If you agree drop a like and if you have any questions leave a comment :)
Removing the Guesswork from Trading: Is Trading Gambling?Hello traders of @TradingView community!
Today, let's delve into a question that often arises in the trading: Is trading really just another form of gambling? While both trading and gambling involve risk and speculation, they differ fundamentally in their approaches and outcomes.
Trading, unlike gambling, is not about chance or luck. It's about making informed decisions based on analysis, strategy, and market trends. Successful traders rely on research, technical and fundamental analysis, and risk management to guide their actions. They aim to identify patterns and trends that increase their probabilities of making profitable trades.
On the other hand, gambling is typically a game of chance where the outcome is largely unpredictable. Whether you're playing roulette or rolling dice, the result is random, and your chances of winning are often determined by luck. While some aspects of trading might resemble gambling to an outsider, the key difference is the level of control and analysis involved.
Traders use various tools and methodologies to minimize uncertainty and make calculated decisions. They set entry and exit points, incorporate stop-loss orders, and diversify their portfolios to manage risk.
Traders focus on developing and executing long-term strategies, steadily building profits over time. In contrast, gambling often entails short-term bets with instant outcomes.
Unlike gambling, trading emphasizes risk management. Traders implement stop-loss orders and diversification to protect their investments, showcasing their control over potential losses.
In conclusion, trading is far from gambling. It's an intricate practice that requires education, analysis, discipline, and continuous learning. While both involve risk, trading is grounded in strategy and knowledge, allowing traders to manage their risk and work towards achieving their financial goals.
[Education] How To Be Consistent & Master TradingTrading has always been an alluring career. The promise of financial freedom and the ability to escape the chains of a 9-5 job have led many individuals to explore the world of trading.
This is the same for me. I've first came across trading when I was serving in the army when I was 18. Trading is a whole new world to me. Candlesticks, expert advisors, and indicators all promised a world of luxury and freedom.
However, the path to becoming a successful trader is not an easy one. It requires discipline, knowledge, and the ability to control one's emotions.
My journey was constantly on and off, looking at small successes, then followed by big failures. It was around 5 years ago when I started to be serious in my trading career. It's definitely not a short one, but it's not long either.
In this article, I will delve into the key factors that can help you become a successful trader. From developing a systematic trading system to mastering risk management and overcoming emotional hurdles, we will cover it all. So, let's embark on this journey and unlock the secrets to becoming a profitable trader.
One of the key components of becoming a successful trader is the development of a systematic trading system. Without a well-thought-out plan, trading becomes a chaotic and unpredictable process. As the famous quote goes,
Knowledge is power, but without action, it is useless.
It is not enough to possess knowledge about various trading concepts and indicators. You must have a fixed strategy that you consistently trade with.
You fall into the trap of having a scattered approach to trading. You lack a well-defined trading plan and jump from one strategy to another, hoping to find the holy grail of trading. This lack of consistency and focus leads to poor results and frustration.
It took me years to be profitable. I tried many expert advisors, signals, indicator, PAMM and account management. It took me years of losses. Is it worth it? Probably. I could have accelerated my journey with a good and solid mentor. It took me years to condense my experiences into the trading system below.
Start by marking up your charts and identifying areas of liquidity, points of interest, and demand and supply zones. Conduct a thorough multi-timeframe analysis to identify higher probability trade opportunities. Set alerts at your points of interest to ensure you don't miss any trading opportunities.
Once a trade setup is triggered, write down your analysis on the chart. Clearly articulate what you expect to happen when the price hits your point of interest. This will help you stay focused on your trade plan and avoid impulsive decision-making.
When the alert goes off, evaluate your analysis to ensure it still holds true. If it does, mark out your stop loss and profit target levels based on your risk management principles. Confirm that the risk-to-reward ratio is suitable before entering the trade. If necessary, wait for additional confirmation on a lower timeframe before executing the trade.
Once in the trade, you have the option to either actively manage your position or let it run its course. This decision should be based on your backtesting results and personal preferences. Regardless of your approach, it is crucial to journal your trades. Record your entry, take-profit, and stop-loss levels, as well as any emotions or thoughts you experienced during the trade. This data will be invaluable for analyzing your performance and identifying areas for improvement.
Emotions can be both a greatest ally and a worst enemy. It is crucial to develop emotional discipline and learn how to control your feelings when making trading decisions. Emotions such as fear, greed, and impatience can cloud your judgment and lead to impulsive and irrational trading actions.
One common emotional pitfall is revenge trading. After experiencing a loss, you often feel the need to immediately recoup their losses by taking impulsive trades. This behavior is driven by anger and a desire to prove oneself right. However, revenge trading rarely ends well and typically leads to further losses.
I wasn't good at controlling my emotions in the past. I tend to get angry and sad whenever I had a losing trade. This is made worse when I was having a losing streak. I would deviate from my trading plan and enter into a position when it does not fit my trading plan. You guessed it, I went deeper into drawdown and this vicious cycle continues.
To overcome emotional hurdles, it is essential to stick to your trading plan and follow your predetermined rules. Trust the process and have faith in your strategy. Avoid making impulsive decisions based on short-term market movements or emotional reactions.
One effective way to maintain emotional discipline is through the use of a trading journal. By documenting your trades and recording your emotions and thoughts, you can gain valuable insights into your trading psychology. Reviewing your journal regularly will help you identify patterns and emotional triggers, allowing you to develop strategies to manage your emotions effectively.
Successful trading is not just about making profitable trades. It is also about managing risk. Risk management is the key to preserving capital and ensuring long-term profitability. Without proper risk management, even the most profitable trading strategy can lead to financial ruin.
A crucial aspect of risk management is determining an appropriate position size for each trade. This involves calculating the amount you are willing to risk on each trade based on your account size and risk tolerance. I recommend risking no more than 1% of your trading account on any single trade. This conservative approach helps protect your capital and prevents catastrophic losses.
I once had a losing streak of 7 trades. On the 8th trade, everything was telling me that I should go long on EURUSD. It was a A+ setup. Everything followed my plan. I increased my risk from 1% to 10%. Guess what? I lost this trade.
Anything can happen in the market.
Even with a 80% win rate trading system, it may seem impossible to have 10 losing trades in a row. Statistically speaking, it IS possible.
Another important risk management technique is the use of stop-loss orders. A stop-loss order is a predetermined price level at which you will exit a trade to limit your losses. By setting a stop loss, you define your maximum acceptable loss on a trade. This helps protect your trading account from significant drawdowns and allows you to maintain emotional discipline during adverse market conditions.
Trailing stop-loss orders can also be used to protect profits as a trade moves in your favor. This allows you to lock in profits while still allowing the trade to potentially run in your favor.
Becoming a successful trader requires practice and screen time. The more time you spend observing the markets, analyzing charts, and executing trades, the better you will become at identifying patterns and making informed trading decisions.
Practice is especially crucial to you if you are still developing your skills and gaining experience. Consider starting with a demo account to familiarize yourself with the trading platform and practice your strategy without risking real money. This allows you to refine your trading approach and gain confidence before transitioning to a live trading account.
As you gain experience and confidence, gradually increase the size of your trades while maintaining proper risk management principles. This gradual progression will help you build consistency and avoid the pitfalls of overtrading or taking excessive risks.
For many of you, finding an accountability partner is your path to success. An accountability partner is someone who holds you responsible for your trading actions and helps you stay on track with your goals. They can provide support, guidance, and feedback on your trading performance. Regular check-ins and discussions with your accountability partner can help you stay disciplined and focused on your trading plan.
Accountability partners can offer valuable support, tips and motivation. Conduct thorough research and due diligence to ensure that you are partnering with reputable individuals who have a proven track record. Records should also be verified by third parties such as Myfxbook and not excel, where they can write anything they want.
If you've been following me for the past few months or years, you would have known about my journey from being an unprofitable trader to a profitable one. I believe I'm successful right now, and is well on track to quitting my 9-5 job. I have a prop firm funded account journey here, where I document my journey to get a public 10k account for growing my YouTube channel. I also have a verified public track record.
Right now, I'm currently $230,000 funded, with 2x $200,000 challenges in Phase 2, and 1x $200,000 in phase 1. If I manage to pass these challenges, my AUM will jump up to $830,000.
Becoming a successful trader is a journey that requires discipline, knowledge, and emotional discipline. By developing a systematic trading system, managing risk effectively, and maintaining emotional discipline, you can increase your chances of achieving profitability in the financial markets.
Remember to focus on the process rather than the outcome. Trading is not a get-rich-quick scheme, but rather a long-term endeavor that requires continuous learning and adaptation. Be patient, stay committed to your trading plan, and continuously work on improving your skills.
With the right mindset, dedication, and a commitment to continuous learning, you can unlock the potential of trading and work towards achieving your financial goals. So, embark on this journey with confidence and embrace the challenges that lie ahead.
Happy trading!
Let me know if this post resonates with you. If it does, how does it relates to you!
Poker + Trading = Winning HandHello dear @TradingView community! Today let’s focus on how Poker game enhances trading excellence.
In the sports, athletes often engage in cross-training to prevent injuries and boost performance.
For instance, football players explore swimming and weight trainings, while runners embrace activities like hiking and cycling. But have you ever considered a form of mental cross-training that could significantly improve your trading skills? Enter the arena of virtual poker.
Picture this: Poker and trading, both sedentary pursuits where your mind takes center stage. In the same way athletes focus on honing specific muscle groups, traders must nurture their mental agility. In this realm, poker emerges as potent tool for refining skills that transcend the trading landscape.
1. Risk Management: A Calculated Gamble
In the world of poker, going "all in" can swiftly lead to losing everything on a weak hand, much akin to the risks of trading. Strategic players understand the value of managing risks. Just as traders avoid recklessly investing their entire capital, poker players refrain from putting all their chips on the line. The lesson is clear: prudent risk management is the bedrock of success.
When trading, the rule of never jeopardizing more than 1% of your account on a single trade reigns supreme. This practice mimics poker's ante system, where even a $100 buy-in allows you to engage in up to 100 hands, each risking only 1%. By staying in control and considering odds, both poker players and traders minimize the chances of "blowing up" their hard-earned gains.
2. Emotional Mastery: The Art of the Poker Face
A trader's prowess lies in following set rules and staying emotionally neutral. In trading, think "Spock-like" focus, or the legendary "poker face." Concealing emotions and making calculated moves regardless of the hand you're dealt defines success.
Just as a poker player keeps a straight face to prevent opponents from reading their hand, traders curb emotional impulses that can lead to hasty decisions.
3. Probabilities and Persistence
Ever heard the phrase "You gotta be in it to win it"? While it may apply to lotteries, poker and trading echo a more nuanced sentiment. In both arenas, it's about understanding the odds and playing consistently.
Just as a skilled poker player capitalizes on favorable odds to raise the stakes, traders must recognize high-probability patterns and seize opportunities.
4. Humility: Staying Grounded in a Fickle Realm
In poker, overconfidence can be fatal. The same rings true in trading. A winning streak can inflate one's ego, leading to rash decisions. A humbling poker loss teaches the crucial lesson of respecting probabilities and staying vigilant.
By acknowledging that the market, like the poker table, is unpredictable, traders guard against costly mistakes borne from hubris.
5. Setting Financial Goals: Knowing When to Fold
Casinos shower players with perks, knowing the allure of winning often overshadows rationality. Similarly, traders who've experienced an early-session surge often squander gains through overtrading.
Establishing a financial target and having the discipline to "fold" when achieved prevents pitfalls fueled by greed. Just as a poker player may walk away after doubling their money, traders secure profits by adhering to predefined goals.
6. Community and Learning: The Power of Like-Minded Allies
Thriving in a community of dedicated individuals fuels growth. Poker players and traders alike benefit from shared insights and experiences. Engaging in online poker communities or joining global poker circles offers a haven for mutual learning.
As traders refine their craft, they unlock not only poker prowess but also a deeper understanding of market dynamics.
Intriguingly, virtual poker emerges as an unexpected but valuable ally for traders seeking to enhance their skills. It's more than a game; it's a training ground for honing the mental acuity vital for success in trading's challenging realm. So, are you ready to deal your hand and sharpen your trading edge?
Remember, whether you're at the poker table or the trading desk, calculated moves, emotional control, strategic thinking, and community engagement are your aces in the hole.
Best of luck, and who knows, maybe we'll even cross paths at the poker table one day!
HFT: Benefits, Controversies, and Technological AdvancementsIntroduction
High-Frequency Trading (HFT) is a sophisticated trading strategy that utilizes powerful technology and algorithms to execute a substantial number of trades within fractions of seconds. While HFT has revolutionized the financial markets and brought numerous benefits, it has also stirred controversies due to its potential impact on market stability and fairness. In this article, we will explore the benefits of HFT, delve into the controversies it has sparked, and examine how advanced technology enables this lightning-fast trading approach.
The Benefits of High-Frequency Trading
a. Enhanced Liquidity: One of the primary advantages of HFT is its contribution to market liquidity. HFT firms frequently provide liquidity by being both buyers and sellers in the market, narrowing bid-ask spreads and ensuring smoother price discovery.
b. Reduced Transaction Costs: The competitive nature of HFT leads to lower transaction costs for all market participants. This translates to cost savings for retail investors, institutional traders, and other market participants.
c. Efficient Price Discovery: HFT's rapid trading enables the market to react quickly to new information, leading to more efficient price discovery and reducing information asymmetry among market participants.
d. Market Efficiency: High-frequency traders help bridge the gap between different trading venues and ensure prices remain aligned, promoting overall market efficiency.
Controversies Surrounding High-Frequency Trading
a. Market Instability: Critics argue that HFT's ultra-fast trading can exacerbate market volatility, leading to abrupt price swings and destabilizing market conditions.
b. Unfair Advantage: HFT firms, with their advanced technology and proximity to trading servers, gain an unfair advantage over traditional investors and retail traders, leading to an uneven playing field.
c. Flash Crashes: HFT has been implicated in certain flash crash events where a sudden and severe market downturn occurs in a matter of minutes. Critics claim that HFT's aggressive strategies may contribute to these incidents.
d. Regulatory Challenges: Regulators struggle to keep pace with the rapidly evolving HFT landscape, leading to concerns about potential market manipulation and inadequate oversight.
Leveraging Technology for High-Frequency Trading
a. Low-Latency Trading Infrastructure: HFT firms invest heavily in low-latency trading infrastructure, such as proximity hosting and direct market access, to minimize communication delays and execute trades swiftly.
b. Advanced Algorithms: Complex algorithms form the backbone of HFT strategies. These algorithms analyze market data, identify patterns, and make split-second decisions on trade execution.
c. Co-location Services: HFT firms often lease space near exchange servers to reduce network latency further. Co-location allows them to place their trading servers in close proximity to the exchange, gaining a speed advantage.
d. Colossal Data Processing: High-frequency traders process enormous amounts of market data in real time to execute trades with precise timing and efficiency.
Regulatory Efforts and Future Outlook
In response to concerns surrounding HFT, regulators worldwide have been working to implement rules and controls aimed at maintaining market integrity and reducing the risk of disruptive events. Measures such as circuit breakers, minimum resting periods, and market-making obligations have been introduced to mitigate potential negative impacts.
The future of HFT remains promising, with ongoing technological advancements driving the industry forward. Machine learning, artificial intelligence, and big data analytics are revolutionizing trading strategies and contributing to even faster decision-making.
Conclusion
High-Frequency Trading has undoubtedly transformed the financial landscape, introducing benefits like enhanced liquidity, efficient price discovery, and reduced transaction costs. However, its lightning-fast pace and perceived unfair advantages have sparked controversies and regulatory challenges. As technology continues to evolve, the future of HFT will likely see further innovations and improvements, but it will also require careful monitoring and oversight to ensure fair and stable markets for all participants.
The Cup and Handle Pattern in TradingGreetings, fellow traders and investors of @TradingView 📈🚀
Keep your eye for cup and handle pattern, a chart formation that hints at potential market possibilities.
The Cup and Handle:
Visualize a cup, complete with a 'U' shape and accompanied by a handle. This chart pattern mimics that very shape, capturing price shifts that can hint at noteworthy market movements. Here's the essence: a cup forms through a gradual downward trajectory, leading to a stabilizing phase, and eventually, a rally that mirrors the extent of the initial decline. This sequence of price action is pivotal in identifying the characteristic cup and handle formation.
Initiated by low trading volume, the formation gathers momentum with rising volume as the left lip of the cup takes form. Subsequently, volume recedes near the cup's bottom, only to surge again towards the right lip and breakout.
The initiation involves a dip in price, followed by stabilization, and finally, a rally that aims to retrace the plummet's impact.
As the cup materializes, it curves into a 'U' shape, while the price dips slightly to craft the handle. Notably, the handle must be smaller than the cup and should exhibit a minor downward trend within the trading range. It's imperative that the handle doesn't dip below one-third of the cup's depth.
Strategy and Execution
Now, how can you effectively trade this compelling pattern? The strategy involves positioning a limit buy order just above the upper resistance of the cup and handle. Simultaneously, set a stop-loss order slightly below the handle's support. This calculated approach ensures that your buy order triggers only when the price breaks through the upper resistance level. This cautious measure shields you from premature entry due to false breakouts.
For traders seeking an extra layer of assurance, patiently waiting for the price to conclusively close above the upper trendline of the handle can provide a higher degree of certainty before initiating the trade.
🌟 Wishing you successful trades and profitable outcomes as you leverage insights from @Vestinda. Remember, patience and careful analysis are your allies on trading path.
Happy trading! 💰
GOLD sellGold sell is having bearish trend from the last weak as we have given a buy trade on Gold but it has gone the other side but now what i see on top down anylisis on daily time frame gold is forming a falling wedge which is yet not completed now moving to moving average exponential of 200 states that price has just broke down and now will continue 👇
Now in H1 timeframe price is moving downwards and the confluance of 200EMA is also supporting bearish momentum as price will reach is significant support level price can bounce back still its bearish also we are having a Trendline which is also giving us a Resistance level on 1902 to 1904 level and if price breaks above that level and gives us any signal of staying upwards we will be buying this pair but still we are bearish
Can HIRECT Re-Erect ?Hind Rectifiers Ltd. is primarily engaged in developing, designing, manufacturing, and marketing Power Semiconductor, Power Electronic Equipment's, and Railway Transportation Equipment's.
The Co. provides complete solutions in design, manufacturing and services in the field of power electronic equipment for aviation, power, telecommunication, and various industrial plants. It manufactures Active Harmonic Filters, Constant Current Regulators, Water Cooled Rectifier, Thyristor Controlled Rectifier, etc. It offers a range of products including Stud/Flat Base/Capsule devices, Power Stack/Assemblies, and Rotating Assemblies. The Co. is involved in the transport projects of Railways, Mass Transit Projects, and Metropolitan Transport Systems and it manufactures Propulsion system, Transformers, Microprocessor, Driver Display Unit & Inverters.
The Company has a strong brand and leadership position in the market for the equipment of 3Ph locomotives and LHB coaches along with the pollution control and environmental protection equipment. The Co. caters to major players such as Indian Railways and Bharat Heavy Electricals Ltd (BHEL), resulting in repeat orders from them and an increase in revenue. The Co. derives 70% of its revenue from the railway sector and increased competition and slowdown in the railway sector will hamper the growth of the company.
The Co. has incorporated 2 wholly-owned subsidiaries with an objective to leverage the growth opportunities in the service activities and to leverage the growth opportunities in the E-commerce place for B2B as well for B2C business respectively. In Q4FY22, the Co. has secured orders of Rs.127.72 Cr (including an order of Rs.46.18Cr from Railways)
This analysis is only my view and is in no way responsible for your trade. Please consult your financial advisor before making any investment.
The Carry Trade
With the current aggressive interest rate hikes happening with some of the world's leading central banks due to inflation problems, we figured it would be an ideal time to discuss the carry trade.
This post will go into further detail about the carry trade and how it works in the forex market. We will also discuss one of the most popular carry trades to take place in forex history and the risks traders should be wary of when trying to implement this strategy.
What is the carry trade?
The simple explanation of the carry trade is that a speculator borrows one financial instrument to buy another financial instrument. For example, let's assume that you go into a bank and borrow $10,000, which then charges you a 1% lending fee ($100). You then take that $10,000 and purchase a Treasury bond that pays you 5% a year. Your profit is 4% (minus commissions and other costs). Basically, you have profited from the difference in the interest rate. This is the carry trade in its simplest form.
The carry trade in the Forex market
The carry trade in the forex market is one of the oldest and simplest forms of forex trading strategies. It was first developed by fund managers to take advantage of the interest rate differentials between currency pairs. A carry trade occurs when you buy a high-interest currency against a low-interest currency. For each day that you hold that trade, the broker will credit you the interest difference between the two currencies (this difference is called the 'interest rate differential'), as long as you are trading in the interest-positive direction. To understand this further, let's give an example:
In the forex market, currencies are traded in pairs (so if you buy USD/JPY, you are actually buying the US dollar and selling the Japanese Yen at the same time).
You receive interest on the currency position you BUY and pay interest on the currency position you SELL.
What makes the carry trade unique in the forex market is that interest payments take place every trading day based on your position. This is because technically, all positions are closed at the end of the trading day in the forex market. You just don’t see it happen if you carry your position overnight due to the fact that brokers close and reopen your position, and then they credit or debit you the overnight interest rate differential between the two currencies (this is also called a rollover or swap).
The amount of leverage available from forex brokers has made carry trades very attractive in the forex market. Most, if not all, forex trading is margin-based, meaning you only have to put up a small amount of the position and your broker will put up the rest. Many brokers ask traders for as little as 1% or even less as margin to trade a position.
Continuing from our above USDJPY example, let's assume that interest rates are 6% for the US dollar and 1% for the Japanese Yen (so the interest rate differential is 5%). Let us assume that you deposit $10,000 with a broker and decide to buy USDJPY with the intention to carry trade and earn +5% interest a year. Let's say the broker offers you 100:1 leverage and you want to purchase $10,000 worth of that currency. Since the broker is offering you 100:1 leverage, you would only require a 1% deposit for the position; therefore, you hold $100 in margin. Now you have an open USDJPY trade that is worth $10,000 and is receiving 5% a year in interest. To get a clearer picture of this, let's see the image below:
What will happen to your account if you do nothing for a year? There are three possibilities. Let’s take a look at each one in the image below:
Due to the 100:1 leverage being offered to you, in this scenario you have the potential to earn at least 5% a year from your initial $10,000, but there are huge risks to this (we will get to that later).
The infamous AUDJPY carry trade
During the early to mid-2000s, traders experienced near-perfect combinations of these conditions across numerous forex pairs, most popularly the AUDJPY. This particular FX carry trade involved going long on the AUDJPY.
The Australian dollar has historically yielded higher interest rates than other global currencies. The Bank of Japan has been keeping interest rates low since the mid-1990s in an effort to revive the economy after a stock market crash caused a recession. The Bank of Japan has persisted with its approach to low interest rates, and in 2016, it announced negative interest rates. This means Japanese banks now pay interest on the cash they deposit with the Bank of Japan instead of earning interest on it.
AUDJPY Exchange Rate and Interest Rate Differential 2001–2014
As you can see in the image above, the interest rate differential between Australia and Japan was consistently high. Due to the Australian dollar yielding a much higher return on investment compared to the Japanese yen, the situation provided retail traders and big institutions great opportunities for carry trading to occur with this currency pair and reaped huge profits from it. These conditions boomed, especially throughout the early to mid-2000s; however, this seemed to change just before the end of the 2000s. In 2008, with the global recession, the economic conditions surrounding Australian and Japanese investments changed as interest rates in Japan drifted slightly upward from near zero to just above zero, while interest rates in Australia fell considerably. As a result of both countries having their interest rates close to each other, the Japanese yen drastically appreciated against the Australian dollar, which would have caused traders huge losses when implementing the carry trade method during this period. You can see this in the chart below:
AUDUSD 3-Month Chart
Interest rates have changed since then: as of August 2023, Australia's interest rates are now back up to 4.10%, while Japan's interest rate remains at -0.1%.
Risks of the carry trade
The biggest risk in a carry trade strategy is the absolute uncertainty of exchange rates. For example, if a trader is buying a currency to profit from that currency pair's interest rate differential and the country of the currency cuts its interest rate unexpectedly, the exchange rate of that currency will most likely drastically fall, which can potentially cause the trader to suffer sudden and big financial losses. Due to this, it is important to look at more than just the interest rates on the currencies before you trade on the forex market. Additionally, if a country’s economic outlook does not look positive, the demand for that country's currency will decrease, especially if the market thinks that their central bank will have to lower interest rates to help their economy.
Another important risk factor for traders to consider with the carry trade is that if substantial leverage is used to implement it, then big market moves against the trader's favour could result in losses that may cause margin calls, the position being automatically stopped out, or worse, losing more than your initial deposit and the trader's account ending up in a negative balance.
Lastly, global markets and economies have still not fully recovered from the global crash of 2008. Carry trades are very difficult to do now with major forex pairs due to the majority of brokers no longer offering positive swaps on major pairs. Traders have been looking at some exotic currency pairs as viable options because some of their countries' interest rates are still high. Exotics such as the Mexican peso, the South African rand, and the Nigerian naira are all options that many forex brokers offer, with currency pairs featuring USD, GBP, EUR, and even JPY variations. However, exotic currency pairs can be extremely volatile and dangerous as traders are susceptible to experiencing big market moves constantly in both directions, which makes these currencies very unpredictable and can cause traders big losses. These currency pairs can also be very expensive to trade due to the high spreads and possible additional commission costs.
1 Month MXNJPY chart example:
The above chart shows that traders have been looking at exotic currencies as alternative options to continue carry trades, though they pose very high risks and can be very expensive to trade.
The carry trade, while potentially lucrative and rewarding, can be very dangerous, and you must consider all risk factors if you are looking to implement this trading method. Trading this way with major and cross-currency pairs is very difficult to do now, and we cannot stress enough that you must trade with absolute caution if you’re implementing the exotic currencies into your own carry trading strategy. That being said, we may get to a time again where carry trades are possible with major currency pairs as interest rates are going back up globally in an attempt to recover from the global inflation crisis. Forex brokers may be open again to offer traders positive swaps on majors and crosses.
BluetonaFX
Exploring Minor Trends in Trading
Hey traders! Today, we're diving into the fascinating world of minor trends – those subtle shifts in the market that can hold hidden opportunities.
Minor trends are like whispers in the trading landscape, often overshadowed by major trends but with their own significance. They occur within shorter timeframes, making them perfect for agile traders seeking quick moves.
Timing is Everything: Minor trends typically span from a few days to a couple of weeks. They're like brief guest appearances on the trading stage, offering chances to capitalize on short-term fluctuations.
Spotting the Signals: Keep a keen eye on price action, volume, and technical indicators to catch the subtle hints of a minor trend forming. These clues can help you stay ahead of the curve and make informed decisions.
Ride the Ripples: Minor trends can present both bullish and bearish opportunities. Whether it's a minor uptrend offering potential long trades or a minor downtrend for short plays, adaptability is key.
Seize the Moment: While major trends may get the spotlight, minor trends offer quicker rewards. By understanding when and how they occur, you can add a dynamic layer to your trading strategy.
So, traders, embrace the power of minor trends! Sharpen your skills to harness these fleeting yet impactful movements in the market. Remember, success lies in staying nimble and seizing opportunities, no matter how small.
Happy trading!#TradingInsights #MinorTrends #TradingStrategies #StayNimble
