HOW And WHY The Markets MoveIn this video I explain HOW and WHY the markets move.
At it's core, trading is a zero-sum game, meaning that nothing is created. There must always be a counter-party to any trade, after all it is called "trading". Because of this, liquidity is the lifeblood of the market and it is what is required by all participants, albeit more for the larger entities out there. In order for these larger entities to trade, they must do so in stages of buying and selling, and not all in one single position like we do as retail traders. They buy on the way down, and sell on the way up, throughout many different time horizons. Therefore, they require price to be delivered efficiently in order to sustain this working machine.
I hope you find the video somewhat insightful. Regardless of your beliefs, I think it can be agreed that these two principles are what drives the marketplace and it's movements.
- R2F
Efficiency
Renewable energy – a requisite tool for tackling climate change"The electric light did not come from the continuous improvement of candles." – Oren Harari
In the year 1900, the world had a simple energy mix. One half of total energy supply came from coal and the other came from biomass. Gas, oil, and hydropower existed but paled in comparison. Fast forward 121 years, by 2021, things had changed in two key aspects. First, oil and gas had come head-to-head with coal to collectively account for nearly 77% of the energy mix. And second, total energy consumption had increased 14x1.
This drastic increase in our energy consumption, and demand mostly satiated by fossil fuels, has created a problem. It has left us with a carbon budget of 380 gigatons of CO2 equivalent from the start of 2023. In other words, we could hit 1.5°C of warming in 9 years2.
That is, unless things change meaningfully. Not continuous improvement, but radical change. Like shunning fossil fuels for cleaner alternatives. Not only is this essential but, luckily, it is now achievable thanks to the advancement of renewable energy.
At the heart of the energy transition
Consider the gap between the base case (dark blue line in the chart below) in Figure 1 and the path we must adopt in the 1.5°C scenario (teal line). The teal scenario appears to be possible by doing a combination of two things. Where decarbonisation of power and transportation is possible, it must be done. Where it isn’t, say heavy industries like steel and cement, carbon capture must be employed. Scaling up renewable sources of energy, therefore, is at the heart of this endeavour.
A more efficient alternative
Historically, our total energy consumption has only moved in one direction – upwards. While population growth and advancement in industrialisation and technology are the prime reasons for this, another contributing factor is that energy efficiency has seldom been achieved on a large scale. But with the rapid electrification of transport and buildings, efficiency gains vs using fossil fuels could result in total end-use demand for energy peaking by 2028 and, potentially, declining thereafter (in a 1.5°C scenario).
Wind and solar have arrived
Among renewables, wind and solar are expected to play the leading role (see Figure 3). There are numerous reasons for this. First, both technologies have been around long enough to see significant cost reductions in recent years. According to a Bloomberg New Energy Finance report published in June 2022, new onshore wind now costs about $46 per megawatt-hour (MWh), while large-scale solar plants cost $45 per megawatt-hour. In comparison, new coal-fired plants cost $74 per MWh, while gas plants cost $81 per MWh.
Second, most places in the world have access to either wind or sunshine (if not both). The only challenge that needs to be overcome, therefore, is obtaining the necessary funding required to install renewable energy farms.
And third, wind and solar are seeing some exciting innovations. Consider floating offshore wind as an example. Floating offshore wind power has several benefits as a source of renewable energy. First, floating wind turbines can be deployed in deeper waters where traditional fixed-bottom turbines cannot reach. This allows for greater access to stronger and more consistent wind resources, which can generate more electricity at a lower cost. Additionally, floating offshore wind turbines are less visible from shore and have a smaller environmental footprint compared to onshore and fixed-bottom offshore wind farms. Furthermore, floating offshore wind farms have the potential to be located closer to population centres, reducing transmission costs, and improving energy security. Lastly, because they are not limited by the ocean floor, floating wind turbines can be moved to different locations if needed, making them a more flexible option for renewable energy production.
Wind and solar can be complemented by emerging sources of renewable energy like hydrogen. Green hydrogen, which is produced through the renewable electrolysis of water, that is, passing a current of renewable electricity through water, has the potential to help decarbonise both heavy-duty transport like trucks, ships, trains, and airplanes, and energy-intensive industries like steel and coal. As the production of green hydrogen achieves scale, cost-reductions will foster further growth.
The pathway forward
Renewable energy can help the energy sector deliver net zero with the aid of the following:
1. Effective policy design - regulatory, commercial, and technical barriers to entry be removed.
2. Capital - by 2050, US$47 trillion is required to deliver the generation and infrastructure of a net zero energy system3.
3. Technology – wind and solar will need to be supported by emerging technologies like hydrogen and carbon capture.
4. System flexibility – innovative ways of energy storage and distribution will need to support renewable energy.
5. Sustainability – recycling will need to be scaled up to ensure we efficiently utilise natural resources.
Renewable energy is being fuelled by political will, technological progress, and investor interest. It is an exciting time to employ this tool in our fight against climate change.
Sources
1 Source: Visual Capitalist as of 10 March 2023 with original data from ‘Our World in Data’.
2 Intergovernmental Panel on Climate Change, 2023.
3 Wood Mackenzie, 2023.
BTC Weekly SellIf you are using a price efficiency trading model and are seeing weekly sell-offs entering the market, it may be a good time to consider selling some of your Bitcoin holdings to take advantage of the current market conditions and potentially maximize your profits.
Also ooking at the weekly RSI for confluence.
Gold-nice sell retracementrice action. Price efficiency
Buys are done.. great orice for price to fall from.
Trade Alert 450 pips GBPAUD Keep a watch out for the GBPUSD we could see a massive trade develop in a short time of over 450 pips. I will keep this in the watch list as the develops over the next few days to weeks you should also.
Kellogg: Company splitting!!Kellogg Company
Short Term - We look to Buy at 71.09 (stop at 67.91)
This stock has recently been in the news headlines. They are splitting into 3 strategic companies which will increase efficiencies. The stock reacted premarket by breaking out of the triangle formation to the upside. This is positive for sentiment and the uptrend has potential to return. We look to buy dips.
Our profit targets will be 81.87 and 84.00
Resistance: 76.00 / 82.00 / 88.00
Support: 70.00 / 66.00 / 60.00
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NAS100 on the 4hr TF Bearish OF and Structure this is not signals nor fincial advice just how I see the market through my lens
Fourier: Interpreting and Over-interpreting Frequency AnalysisGreetings to all!
In this post, I'd like to share some thoughts on frequency analysis based on Fourier transform.
This mathematical method breaks down data into cyclical constituents (frequency components). Then the importance of each frequency component in the original data is expressed as the square of its amplitude, that is, power . Some time ago I published a Pine Script implementation of the Fast Fourier Transform (FFT) algorithm. I made it specially designed to be used for filtering data based on its frequency content. The concept of FFT filtering is well known and quite simple (for detail, see the link to my script below).
When it comes to frequency analysis , that's a whole different story. Using the power versus FFT frequency plot (i.e., the spectrum ) to study the data is an extremely popular analytical technique in science and technology. But with financial data, it is tougher than it sounds. When dealing with noisy, non-stationary and overall uncertain price data, the FFT never works as well as it does in math textbooks.
Here, to illustrate the capabilities, limitations, and some myths of frequency analysis, I generated artificial price data, applied an FFT to each price column, and plotted a power spectrum as a function of time (i.e. a spectrogram ). The spectrogram shows frequency information along the vertical axis. The lowest frequency content is displayed at the bottom, the highest frequency content is displayed at the top. Frequencies are given as the number of cycles per sample size (256 bars in the above chart). Power levels are defined by the color map shown to the right. As for the generated data, it is basically a random walk with a few non-random constituents added at given time intervals (sinusoidal functions and a gap).
Now let's discuss a few aspects seen in the chart:
1. True periodicity
Starting on a high note, if there is real oscillatory behavior in the data (see the green and red areas in the above chart), the FFT can reveal this quite well. The problem is that the frequency resolution is heavily influenced by the sample size. For example, with a sample size of 64 price bars, it is impossible to resolve cycles longer than, you guessed it, 64 bars. It should also be noted that the ideal deterministic sinusoidal functions shown in the above chart can never be found in real market data.
2. Discontinuities
If there is a gap, it's bad. Gaps, that is, discontinuities in the data, are prominent features that have broad and smooth frequency spectra that can overshadow other features. If you google "Fourier transform of a step function", you can see what I mean. Thus, if a gap occurs somewhere within the sample window, the Fourier spectrum is unlikely to be reliable.
3. Random walk
This is not surprising, but even purely random data can produce rich frequency content. It is even difficult to tell from the spectrogram where the purely-random area changes into the one containg a sinusoid. (Well, if we accept the random walk theory of markets, the last comment does not make much sense. But here we are talking about syncretic data).
The situation, however, becomes much more fun if we analyze the change in data per bar (i.e., data - data ), rather than the actual data. In the case of a random walk, these changes are purely ... well, random. And it is known from textbooks that the Fourier spectrum of random noise contains only noise. However, in areas containing sine, there is an order in the data. In other words, the data is autocorrelated. As a result, the FFT spectra of the data reveal the corresponding frequency components way above the noise level. In this sense, Fourier analysis may seem as a potential tool to to test market efficiency. (There is even a Fourier-based version of the Dickey-Fuller test for stationarity of time series, but that is a different story.) However, I am not aware if it can somehow outperform the more commonly used tests.
Conclusion
In the context of financial time series, the Fourier transform is often associated with the estimation of marked cycles. I think that's why it has become one of the most polarizing technical tools out there. While it is certainly a powerful math tool, it is helpful to know its limitations. Can one capitalize on the revealed qualitative information about the "cycle" periods? Regardless of how to think about the concept of market cycles, I don't think so. But could the Fourier transform be potentially useful in general for analyzing price data? Definitely yes!
See below for how to use FFT to filter data:
1 more pushup - BTCUSDlooking for a long around here then for BTCUSD to drop
seeing a sponsored candle on the 3Hr chart that was now made effecient
Setting Alarms For Fun and ProfitOne of the most attractive things about being a trader is that once you become proficient with your trading system you don't have to spend all day in front of your computer like an extra in the Walking Dead. There's a lot more to life than trading. The goal is that once we have developed that skill, we can “trade to live” and not “live to trade.”
I like to teach that trading is like fishing - Your job is to go into the water, cast a few lines, and wait for the fish to come and snag a hook. The keyword there is wait . Once you set your lines, you don't have to babysit them: go do something else. (We trade to live, after all!)
Likewise, with trading, once you have developed a certain level of skill in "setting your lines", you should only need to spend about 30-60 minutes in front of your computer "working". Then you simply need to wait until the trade, that is price, gets snagged onto your hook. In the meantime, go do whatever it is in life that you enjoy doing.
How do fishermen then know when a fish has taken the bait? Some fishermen attach a small bell on the end of their pole, a “fishing buddy”, and as the fish jerks the line the bell alerts the fisherman that “he’s got a live one!”
How is is that Alarms can instantly become your "fishing buddy?" Let us count the ways:
First: Management of Buying Power
Let's say you have a $10,000 trading account. You wake up, do your morning routine, head to your home office (or the kitchen table) and “go fishing” in the Futures markets. You find three great opportunities for Soybeans, Oil, and Copper. The margin requirements for each of them (per contract) is $4,500, $5,800, and $7,300, respectively.
Futures trading requires that you have a certain amount of capital in your account per trade setup, known as the margin, or buying power, at the time you setup your trade. This "margin" is set aside in your account and can't be used, even if the trade hasn't been triggered or entered. If you wanted to setup all three of those trades before you headed to work you would need $17,600 in your account. But you only have $10,000. What do you do?
In the past, when I ran into this situation, I would have to guess (or hope) I would choose the correct trade to place before I left for work, and send just that one trade to my broker. Inevitably, I would choose the one losing trade, or the one that didn't get hit , and it ended up that one or more of the other trades turned out to be winners - the trades I did not take - all because I couldn't put on all three at the same time. Aaargh!!! Every day I felt like the trading gods were against me!
Here's where alarms can become your best friend.
Let's say at any given moment if you received an alarm, you would be able to respond to that alarm within an hour. You could setup an alert line 1/24th the daily ATR away from your entry price. For example, at the time I am writing this, the Daily ATR for Crude Oil is 1.7708 - the average distance or range that Oil trades in a day. Divide that by 24 and on average, oil moves about .0738 per hour.
If you are looking to go long oil at $73, you would draw a horizontal line at 73.0738, and set an alert on the line, giving you about an hour to check that the trade is still valid. When price activates your alert, you can log into your trading platform, verify that you still want to take the trade, right-click the long-short tool (which you had setup beforehand) and send the trade to your broker, whereby then and only then will the $5,800 be allocated from your Buying Power.
It is unlikely that all three trades will hit at the same time so this gives you the "buffer time" needed to efficiently manage the available capital in your account to take as many trades as possible.
Using alerts in this manner can help you minimize the number of missed opportunities you might experience because of the limited amount of buying power you may have.
Second: Trade Opportunity Alerts
In the futures market, I have what I call my "31 Flavors" - the 31 Futures contracts that I actively trade. On any given morning I might find 5 assets where I’m looking for a long opportunity, another 5 assets that I’m looking for a short, and the rest aren’t in any trend or environment where I’m looking to trade.
Many indicators let you set an alarm when a certain condition occurs. For instance, I can set an alarm on the ten high-probability assets I have flagged to let me know “Hey, Captain: a Sabre Long opportunity just formed on the S&P;”, or “Hey Captain, a short opportunity with the pattern you are looking for just popped up on Crude Oil.”
Likewise, if you are following a Moving Average strategy, you can setup an alarm saying “Hey, Trader: XYZ just crossed the 89 Moving Average” or "ABC just crossed the 40 day Moving Average.
At the time of this writing TradingView will let you setup up to 400 of these alerts. (P.S. - If you need more than 400 alerts, you're probably overtrading... just sayin') :-)
When the alert is triggered you can just take a few minutes out of your day outside of your normal trading hours to check in and see if that mid-day opportunity is worth setting up. After a couple minutes, you can get back to what it was you were doing.
The myth of the day trader who is glued to his or her computer all day in fear of missing an opportunity is just that - a myth, because alerts free you up to do what is important. Remember, we are trading to live - we aren't living to trade.
Finally: Trade Management
Let's say you are a swing trader. Trades you enter may take anywhere from 3 to 30 days to hit their target. Say, however, you have a hard and fast rule to take 3R profit from all of your trades because you would rather take 3R any day rather than see price go to 5R, or 7R, just to have it come on back and stop you out for a loss due to emotions or lack of paying attention, because, yes, you trade to live - you're not tethered to your computer or smartphone all day. You've got better things to do. (At least I hope you do!)
You can setup an alarm to let you know that a trade you have running achieves 3R of profit, whereby you can then move your stop, then check in on it each morning and/or evening to see how you may want to lock in more profit or call it a day and cash in on your winning trade.
Conclusion:
In short: Use alarms to make your trading more efficient, more effective, and ultimately, more profitable.
Are there any other ways that you use alarms to maximize your trading game? Let us know in the comments... I'm sure we are all, myself included, dramatically under-utilize this very powerful trading tool.
Trade well, everybody!
BTC playing HArd to getWill price go down to my weekly price efficiency area before a big push up?
It has headed towards that area twice this week...but never quite got there..
If it touches my line I am taking strong BUYS
An Efficient Way to Make ALL Your Money Work For You!For options traders, there is a way to make ALL your capital work for you! Yes, you heard that right. Not sure what I mean? Keep reading...
You see, most options traders don't position size larger than 5% risk of capital...and most options traders don't put on more than 10 trades at a time. Making these assumptions, we can therefore conclude that you'll never use more than 50% of your capital towards buying power reduction.
This is a very inefficient use of your capital because that means half of it is just "sitting" capital (capital that doesn't go towards making money for you!). Solution you ask? Well, the solution is simple...just redeploy that capital elsewhere besides your trading account. For example, you can take that useless 50% capital lying around in your trading account, and put it into a savings account that say has a 2% annual interest rate...and voila!, now all your capital is being put to use! and you just gained an extra 1% return on capital annually!
I almost forgot to add...remember to position size as if trading capital were equal to the sum of the 2 accounts' values (trading & savings accs).
So for example, #units = 5% ( e1 + e2 ) / max loss per unit ....
e1 - represents trading account's value
e2 - represents savings account value
Hope this helps, enjoy! and please hit the like button.
Efficient vs Inefficient Price ActionWhatsup traders! In this video I will be talking about the difference between efficient and inefficient price action. Once you understand this concept, you can incorporate it into your trading and utilize it to find targets and setups!
SNAP PINS TWTR Market Efficiency Play Pt 1Comparative Analysis
SNAP currently has a market cap of $21B, PINS $10B, and TWTR $23B. SNAP has a net income of just under -$1B, PINS the same, and TWTR became wildly profitable in 2018 netting over $1B. This last quarter TWTR dropped 20% due to weak earnings.
Social media platform success is largely due to the network effect of your platform, which means as more users join the better the platform becomes.
FB has an excellent network effect, TWTR does as well since it's an information platform, the more opinions/content creators the better. TWTR has established itself as a unique form of social media, concentrated on information sharing. It has a unique competitive advantage to other platforms given the structure of its platform, made for short and quick text, easy to scroll through, and easy to share with others. For this reason, it is a great place for viral news and media to post, as well as opinionated statements. The risk in the TWTR platform is the difficulty to advertise to users, this is a challenge that TWTR must figure out moving into the future, however looking at the improvements in their bottom line over the last 5 years, they seem to be moving in the right direction.
PINS has a solid network effect, users create a "virtual corkboard" of ideas and interests, their feeds are then made up of pins similar to their own interests. The more data and users PINS has to create pins, share pins, and collect data on the better their service will become and more ideas will be able to be shared. Although they blew through over $1B in the last year, they have just begun investing heavily in their advertising platform, which has proven to be very successful for advertisers so far. Given the type of content that is put on there (sharing cool things and interests) it makes it a prime location to advertise to the users. As they gather more data and improve their targeting abilities, they will likely follow a similar, if not more accelerated track to profitability than TWTR over the last 5 yrs.
SNAP on the other hand has a weak network effect. I cannotsay that it doesn't have some form of network effect, but since all of their key features (stories and feed) are easily replicated by competitors, there is not much of a reason to keep the service. The unique proposition is disappearing photos, which is a novelty at best, it gets old. They are experiencing growth internationally, but their only way of driving profitability is to stop spending on R&D and lower their SGA expenses. If they invested $0 in R&D last year they still would have lost money. Seeing as they rely on gimmicky new features like fancy filters, their R&D spending will not slow in the future, and in order to run a profit at their current expense levels that would mean more than a 2x increase in gross profit. Needless to say, SNAP will not be around for long if they continue to operate the way they are. They have a lot of cash, but cash burns quick when you're losing that much money.
SNAP should not be worth the same as TWTR, this is the efficiency play. Clearly either SNAP is overvalued or TWTR is undervalued. Regardless, this relationship presents a great neutral trade opportunity. TWTR has 50% more MAU (monthly active users) and is valued the same as SNAP while TWTR is profitable and SNAP is not. That is not rational. PINS is as unprofitable as SNAP, has a stronger network effect, better prospects for reaching profitability, and the same MAU's as SNAP, however PINS is valued at half that of SNAP. Again, not rational. I am opening my first position on this with the tight stop shown in the picture. I will be adding below $15, above $16 I will be cutting loses and watching for another entry, if it breaks below $15 again I will hit it again or will watch the tape closely to watch for block selling or areas where MM are creating hype to exit their positions. TWTR long and PINS long posts will follow in the coming days as I open those positions as well.
