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HOW TO RECOGNIZE A SCAM SIGNAL PROVIDER WEBSITEForex signal providers can be a good resource for traders looking to access the markets. However, not all signal providers are created equal, and some of them act as scammers, preying on unsuspecting novice traders. In this article, we will look at how to recognize a fraudulent signal provider's website and how not to fall victim to their machinations. The provider's website can be a great indicator of professionalism or, on the contrary, a desire to deceive you. 1. Bad website design One of the easiest ways to recognize a fraudulent signal provider website is to check its design. Fraudulent sites often have poor design with low-resolution images and poor grammar. You won't find any information about the provider itself on such sites. Non-working buttons or links are also a reason to be cautious. The sites of legal signal providers are usually well designed, have professional images and clear language. 2. Lack of contact information The websites of fraudulent signal providers often lack contact information or provide fake contact information. In many cases there are icons of almost all social networks, but when you click on the link there is nothing there. If there is even an account in social networks, they are mostly completely anonymous. On the other hand, legitimate signal providers should have a physical address, phone number and e-mail address on their website. Traders should check the contact information provided and make sure it is legitimate. 3. Unverified performance Fraudulent signal providers may provide unverified results or manipulate performance metrics to appear more profitable than they actually are. It can be easy to show fake trading results on a website. You should treat such results with caution. You should always check the accuracy of the performance results before using services from any signal provider. Legitimate signal providers should provide verified performance results from third-party sources. Our team has already checked a huge number of them and found out who is working correctly and who is falsifying the trading results. 4. Lack of social proof Social media is a staple of business these days. Social buttons can lead to the homepage of a website, to an empty profile, or to nowhere at all. Social media proof is a powerful tool that can help traders identify fake signal providers. The websites of fraudulent signal providers often have no reviews or they usually have fake reviews. There are always satisfied customers on their website and social media pages with no way to read the comments. Providers using a well-known consumer review system is usually a good sign. But you still should also check third-party review websites to see what other traders are saying about the provider. If there are a lot of short positive reviews you should also be wary as they may be fake. 5. Check the domain name Domain names registered for a short period of time, say a year, can be suspicious because scammers don't invest a lot of money in their sites. They purchase domain names with short expiration dates to minimize their costs. Websites that are newly created and have a short lifespan are more likely to be fraudulent. In conclusion, recognizing scam signal provider websites is crucial for traders to avoid falling victim to scammers and achieve their trading goals. By checking for poor website design, lack of contact information, unverified performance, lack of social proof, traders can identify legitimate signal providers and avoid being scammed. Be safe.
Education
by UnknownUnicorn15614419
4
Top 6 Most Tradable Currency PairsForex traders have the luxury of more highly leveraged trading with lower margin requirements compared to traders in equity markets. But before you jump headfirst into the fast-paced world of forex, you'll want to know about the currency pairs that trade most often. Here's a look at six of the most traded currency pairs in forex: 1. EUR/USD: Trading the "Fiber" The most traded currency pair is the EUR/USD, most likely because of the global prominence of the economies of the European single market and the United States. It made up 22.7% of overall market share, as of the latest BIS survey. That's down from 24% market share in the previous 2019 survey. The high daily volume and liquidity of this pair ensure tight spreads for traders. The EUR/USD tends to have a negative correlation with the U.S. dollar and Swiss franc (USD/CHF) and a positive correlation with the British pound/U.S. dollar (GBP/USD). This is due to the positive correlation of the Euro, the British pound, and the Swiss franc. 2. USD/JPY: Trading the "Gopher" The next most actively traded pair was the USD/JPY, with high liquidity and a market share of 13.5%, slightly higher than its prior 13.2%.2 This pair has been sensitive to political sentiment between the United States and the Far East. It tends to be positively correlated to the USD/CHF and the U.S. dollar/Canadian dollar (USD/CAD) currency pairs. This relationship is due to the U.S. dollar being the base currency in all three pairs. USD/JPY also responds to changes made to interest rates by the Bank of Japan and the effect on the yen relative to the U.S. dollar. 3. GBP/USD: Trading the "Cable" Trading in the GBP/USD currency pair represented 9.5% of forex market share, a small decrease from the prior survey in 2019. Again, the popularity and volume of trading in this pair reflect the strength of the British and U.S. economies. The GBP/USD tends to have a negative correlation with the USD/CHF and a positive correlation with the EUR/USD. This is due to the positive correlation between the British pound sterling, the Swiss franc, and the Euro. 4. USD/CNY: Trading the Yuan The USD/CNY currency pair represents the relationship between the U.S. dollar and the Chinese renminbi, more commonly known as the yuan. Its market share grew to 6.6% from its previous 4.1% of market share in daily forex trades. The U.S.-China trade relationship has been a volatile one, providing USD/CNY traders with plenty of speculative trading opportunities. Those interested in the USD/CNY should maintain awareness of developments in that relationship, as they could affect the pricing of the pair. 5. USD/CAD: Trading the "Loonie" Market share for the USD/CAD currency pair increased to 5.5% from 4.4% in the previous survey three years ago. Interest rates in the U.S. and Canada will affect the price of this pair, reflecting the effects on the individual currencies. In addition, as oil is a major economic driver for Canada, its price will affect the price of Canadian currency. This in turn can have an impact on the currency pair. The USD/CAD tends to be negatively correlated with the AUD/USD, GBP/USD, and EUR/USD pairs due to the U.S. dollar being the quote currency in these other pairs. 6. AUD/USD: Trading the "Aussie" The AUD/USD currency pair captured 5.1% of forex market share, compared to its previous 5.4%. It tends to have a negative correlation with the USD/CAD, USD/CHF, and USD/JPY pairs due to the U.S. dollar being the base currency in these cases. The value of Australia's currency is closely tied to the role and value of its exports in its economy. Therefore, a downward movement in that value could affect the AUD/USD currency pair value, strengthening the dollar to the loonie. The relationship between the interest rates set by the respective central banks can affect the currency pair price, as well. Conclusion The list of the most actively traded currency pairs starts with the EUR/USD, which has the greatest trading volume. All six currency pairs offer the liquidity that investors who trade them need for profits. However, various factors such as trade relationships, changing interest rates, economic upheaval, and country disputes, including war, can affect individual currencies (and thus pairs). So make sure that you're up to date on such news and information before leaping into the forex market so you can choose the most viable currency pairs to trade.
Education
by tradingconmike
HOW TO TRADE RECTANGLESAs we already know, a price trend does not usually reverse instantly. As a rule, upward and downward trends are separated by periods when the price is in a trading range - a sideways trend. To take a simple analogy, imagine a huge ship. It's not easy to slow it down, it takes a lot of time. Now imagine how long it takes to turn around? It's the same with prices. Hence the simple rule that the longer the trend is, the more time it takes for it to reverse. In this case, the process of reversal, aka the horizontal phase of the market is of great importance. Because it is the horizontal range that separates an upward trend from a downward trend (or vice versa). But when the sideways range comes in the shifting phase, the battle between sellers and buyers is equal. Until, for one reason or another, the price does not go down under selling pressure. It is the breakout of the sideways range, with a new low being reached, that indicates to the trader that a trend reversal is taking place. In other words, when the price falls out of the trading range, it is a sell signal. When the bearish trend ends, the reversal process begins. The Reversal Rectangle And The Psychology Behind It When the rectangle is just starting to form, some news is released on the asset and uninformed market participants, who heard about it for the first time, jump in to buy. At this stage, there are positive forecasts everywhere and to go long seems to be the right choice. We remember that absolutely every trade has two participants: the seller and the buyer. At the same time sellers have absolutely different view on the market. They diligently bought much earlier, on rumors of positive news. And now the positive news has arrived, which means what? That's right, it's time to sell. And who is the best person to sell to? Uninformed participants. This is how the well-known principle "buy the rumors, sell the facts" looks to everyone. If price patterns like a rectangle are formed at the bottom of the market, they are called accumulative, and the process itself is called accumulation. Here the psychology is exactly the opposite. Sellers see that the price of the asset is falling and decide to sell when bad news and future forecasts become known to all investors. Potential buyers previously hesitated because they did not want to enter on such bad news. Simply put, the upper reversal rectangle is just a version of the signal that the series of rising highs and lows will reverse. And exactly the opposite is true for the bottom rectangle. You also need to realize that a reversal pattern needs something to reverse. In other words, there should be a clear trend in the opposite direction from the expected reversal before such a rectangle. Accordingly, there should be a strong upward trend up to the top rectangle, and a downward trend down to the bottom rectangle. How Is The Rectangle Formed? In the picture shown above, the upper and lower boundaries of the rectangle are formed by at least 3 touches between two horizontal trend lines. However, the rectangle could actually be made on the first two touches. Don't forget, any sideways trend is just an area where buyers and sellers are fighting. If the battle results in a rectangle with more than two touches, it means that the battle between the two sides has turned intense. It also means that the bearish characteristics of the rectangle in the example above are intensifying. The more touches the rectangle has, the more significant it is As you will notice we use the phrases "touches" and "approaches" this is important because on real charts rectangles will not be so perfect and beautiful. Approaching any trend line , including the horizontal one in a rectangle, is as important as actually touching it. So, if the price reaches the boundary and then reverses, it reinforces this support or resistance zone anyway. Significance Of Any Price Pattern The principles of price patterns are universal. They can be used on any timeframe, from 1-minute candles to monthly candles. However, it is the size and depth of the pattern that influence how significant it is in a particular timeframe. 1. Timeframe The larger the timeframe, the more significant the pattern is If a pattern is drawn on a monthly chart, it means that it is significantly more important than the one seen on an intraday chart. Suppose we are looking at a daily chart and we have noticed two patterns. The first one took 10 days to form, while the second one took 4 weeks. It is understandable that the significance of a 4-week epic battle between buyers and sellers is much higher than a 10-day clash. 2. Significance of price fluctuations The more price fluctuates within a pattern, the more important it is If the price stands still for a long time, traders and investors inevitably get used to buying at one price and selling at another. That is why the price moving beyond the usual prices changes the whole picture dramatically and represents an important event from the psychological point of view. 3. Significance of pattern depth The more in-depth the pattern, the greater its significance A breakout of a wide trading range is much more important than a breakout of a narrow trading range. The bigger (proportionally) the price fluctuations inside the pattern, the stronger the subsequent movement will be. If the pattern is formed by wide price movements, it means that the end of the pattern is likely to be marked by them as well. It is also important to note that if you get a very narrow rectangle, it means that the battle between buyers and sellers is very balanced. This is especially true if there is almost no trading activity. When the balance is broken for one reason or another, the price will often move faster and further than initially expected. How To Measure The Impact Of A Breakout To assess the impact of a breakout, simply measure the distance between the inner boundaries, and then project them downwards. In most cases, the price will go further than the potential target we have highlighted. In very strong movements it will go further by many percent. Moreover, these price range projections often become important support and resistance zones in themselves. Unfortunately, we cannot determine exactly where the next level will be after the price move, because technical analysis, again, does not allow us to accurately determine the duration of the price movement. However, we can well estimate the probability of whether this zone will be support or resistance. To put it plainly, this approach is a minimum expectation of the price movement. Cancellation Effect The minimum distance after a breakout can become a new zone where another accumulation or distribution begins. It usually takes a long period in the new range for the price to move back into the old range. That being said, if there was a breakout of, say, a 2-year rectangle and price reached the minimum target, even though it didn't go any further, it will usually need the same accumulation/distribution period as it did in the previous range. It is only then that price can move back up. False Breakout As we have already found out, a price breakout outside the price pattern, even if it is small, often indicates a trend reversal or its confirmation (if the price was in an accumulation/rectangle). However, it is not uncommon for price to show deceptive, movements, so we need to introduce clear rules to avoid mistakes. It is quite ironic that false breakouts actually confirm the significance of certain support or resistance zones. For example, on a daily chart, you see a confident breakout of a rectangle. But if the price does not hold above the broken line for more than one day, such a signal becomes suspicious. From a technical point of view, such a breakout can be much less significant, because if it does not hold, it means that the momentum is exhausted. If the price has uncertainly broken the level, in most cases it turns in the opposite direction to the breakout A hesitant breakout is often accompanied by further concentration of the price in the range until the price structure is technically prepared for a new breakout. When the price has confidently exited the pattern, this is an indication that the breakout has taken place. Indications of a false upside breakout: price is moving back into the range and breaking the previous lows, the rising trendline connecting the previous lows. Indications of a false downside breakout: price moves back into the range, breaks the previous high, a descending trendline connecting the previous highs. Keep Risk Management In Mind We remember that an upward breakout indicates a possible price rise. However, the same can be said about a pullback. If the price is back in the range, the probability of it reaching higher values decreases rapidly. Unfortunately, there are no quick and easy ways to determine this in any market conditions. Every market situation is different. This is the reason why you need to think everything through in advance, even before opening a trade. Otherwise, if the trade is already open, your emotions will come into play and affect the result. If you do not think over your risks in advance, if things go badly, you will be emotionally stressed and tense when you exit the trade. You will be influenced by some news, sharp price movements and in general anything except a sober, logical plan thought out in advance. Let's Summarize A rectangle is a trading range between two parallel trend lines. We measure the consequences of a breakout: the depth of the pattern is projected in the direction of the breakout. Indications of a false upward breakout: price moves back into the range and breaks the previous lows, the rising trendline connecting the previous lows. Indications of a false downside breakout: price moves back into the range, breaks the previous high, downward trend line connecting the previous highs. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
11
LIQUIDITY TYPESThere are a huge number of trading strategies in trading, however, there are some that significantly prevail over all others. They are based on the concept of liquidity. Let's look at them in detail. ✴️ STRUCTURED LIQUIDITY Swing High and Swing Low are market highs and lows respectively, and Equal high and Equal low are equal market highs and lows respectively. BSL (Buy Side Liquidity) - liquidity at the highs SSL (Sell Side Liquidity) - liquidity at the lows Trend liquidity. Trend is the most popular trading model all over the world and has been used for decades. No matter what you read, no matter what you watch, everywhere there will be a system of trend detection and trading logic described. It is hard not to guess where market participants, who trade both along the trend and against it, will set stop-losses. ✴️ LIQUIDITY IN A BULLISH TREND Let's consider where liquidity appears behind the nearest maximum in an upward trend. Historically, the most traders set stops above/below some highs or lows. The first participants are sellers who started shorting the market and successfully caught the reversal. These traders set their stop losses behind the nearest maximum, i.e. over the top where the reversal started. Those with experience will start to partially close their orders or get rid of the whole position during the pullback. The second participants are those who trade the reversal, who do not believe in the continuation of the trend. They set their limit orders for a rebound from a significant zone (or jump on the market) and set their stop losses in the same place as the first ones - over the nearest maximum. It is understandable, if it goes higher, it means that the analysis was wrong. And here are the third participants who trade breakouts, who trend trade and enter the battle only when the price updates the maximum. There are two options to enter the trade: buy-stop or manual, where both types of orders are market orders. It's simple, if the price breaks through the resistance zone, then they jump just follow the trend. What have we found out? The first ones set stops behind the level, the second ones set their stops in the same place, the third ones work according to the market. All this crowd set tons of market orders behind the nearest maximum. All these market orders are liquidity. What do you think, if the big player has plans to mark down the price, will it go after this liquidity? ✴️ LIQUIDITY IN A BEARISH TREND Liquidity in a bearish trend is the same, but in reverse. ✴️ LIQUIDITY POOL Equal high (EQH) and Equal low (EQL) are equal market highs and lows, respectively. From technical analysis are support and resistance zones. When price approaches the previous high in a bull market, participants begin to both buy and sell. What happens if the price does not make the high in a continuation of the trend and bounces back? Those who doubted the rebound from this zone start jumping in by the market, putting their stops above this high. What do we have? The first stops were put by those who caught the reversal at the peak, the second ones are those who came in on the rebound, the third ones are those who are still waiting for the breakout and do not believe in the reversal, and the fourth ones are those who start jumping on the rebound. And there are also those who have not decided what to do. How to get them into the market? Simple is to show more rebound from this zone. The more touches of one significant zone are made, the more liquidity accumulates behind this zone. ✴️ TREND LIQUIDITY When the price rolls in one direction, clearly bouncing off the trend line visible to everyone, it does it for a reason. In addition to those who jump on the market structure, there are those who open trades from the trend line. Stops of all participants are distributed below the lows (if we consider the trend line upwards), someone puts thembelow the first, someone below the second, someone fears to put them farther away. More often than not, all this liquidity will be cleaned out in the near future, and very often it happens in one sharp move. Why? To show the effect of surprise and prevent most from jumping out of the trade. Essentially, it's liquidity both structural and trend-following. Since the market is fractal, this happens on all timeframes. You don't think that you have seen a trend and you need to urgently open a trade in the other direction. You need to realize that this liquidity can be collected once, collected by the same movement or not collected at all. It all depends on the market context of the higher timeframe. ✴️ DAILY LIQUIDITY It's simple here liquidity accumulated behind the previous day's high and low. ✴️ SESSION LIQUIDITY Similarly liquidity generated outside the minimums and maximums of the time sessions. Someone trading to collect session liquidity usually hunts for Asian session liquidity.
Education
by DeGRAM
1
TRADING BASICS: TRENDLINESTrend lines are the simplest and most basic concept of technical analysis. It is also, paradoxically, one of the most effective tools. Since almost all price patterns require the use of trend lines, the latter are the basic element of both pattern definition and its use. Now we will discuss what trend lines are, how to work with them and how to determine whether they are working. A trendline is a straight line that connects descending lows in a rising market or highs in a falling market. Lines that connect lows are called rising trend lines, and those that connect highs are called falling trend lines. To make a falling trend line, we connect the first high to the subsequent highs. When the price breaks the trend line, it is a hint that the trend may change. Similarly, for a rising line. How to draw a trend line? ✔️ For a trend line to be real, it must connect the previous highs or lows. Otherwise, there is no sense in such a line at all. This is called the major trend line. It is where the first low of a bearish trend connects to the first intermediate low. In the example below, the trend line is not particularly steep (it is at a low angle, and angles are important in a trend). Unfortunately, price then accelerates sharply after the next low. In a situation like this, it's best to simply redraw the trendline as price moves further away. This is called a new line in the picture and it reflects the changed trend much better. This line will be a secondary trend line. Well, the downtrend lines are drawn in the same way, but in reverse. Since the trend can go sideways, it is quite possible to guess that trend lines can be drawn horizontally. This is often the case when we find price patterns like the "neck" in the Head and Shoulders pattern, or the upper and lower borders of triangles. In such patterns, if the trend line is crossed, it is an indication that the trend is changing. The same is true for rising and falling trends. It is also important to realize that drawing a trend line is a matter of using common sense, not a set of very strict rules. A trendline breakout could indicate a reversal or consolidation The completion of a price pattern can indicate: 1. reversal of the previous trend, aka reversal pattern; 2. continuation of the previous trend, aka consolidation or continuation pattern. Similarly, a trend line breakout indicates either a reversal of the trend or a continuation of the trend. An example demonstrates this concept for a downtrend. In this case, the trend line connecting one high after another is broken in a downtrend. The fourth high will be the highest point of the bearish trend, so an upward breakout of the trend line in this case indicates the beginning of a bullish trend. In the picture above we see again a rising trend and a trend line breakout, but this signal has a completely different outcome. The reason is that the break of the trend line caused the trend to continue, but at a much slower pace. The third scenario is when the price goes into consolidation (aka sideways) instead of reversing, which is shown in picture. Accordingly, when a trendline is broken, it is a strong indication of a trend reversal. A changed trend can eventually reverse or go sideways after rising or falling. Unfortunately, in most cases we can't tell accurately what will follow a trendline breakdown. However, there can be some pretty good clues, such as the angle of the trendline. Since trends that run at an acute angle are less stable, their breakout more often leads to sideways rather than reversals. Useful hints can be hidden in the general state of the technical structure of the market. In addition, a trend line breakout often occurs at the successful completion of a reversal price pattern or shortly before. Extended trend lines ✔️ Many beginners, when they see that a trend line is broken, automatically conclude that the trend is about to change and immediately forget about the line. After all, an extended trend line can be as important as the fact of its breakdown. For example, if a rising trend line is broken, the price very often returns to the same line, but later. This is called a throwback. Significance of trend lines ✔️ So, we have it all figured out - a trend line breakout leads to either a trend reversal or a trend slowdown. Of course, it is not always possible to say what exactly happens there, but we need to understand how effective a trend line breakout is in general, which we are going to do now. In general, the significance of this event depends on three factors: The length of the line; The number of touches; The angle of inclination or rise. 1. Trend line length ✔️ A trend line is used to measure a trend. The longer the line, the longer the trend and the more such a line will become important to us. If descending lows come one after another for 3-4 weeks, such a trendline is less relevant. If the trend line lasts 1-3 years, its breakout is extremely important to us. The breakout of an old trend line is very important, it is a powerful signal. The breakout of a fresh (relatively) trend line is a less important signal. 2. Number of touches or approaches to the trend line ✔️ The more touches or interactions with the trend line, the more important it is, there is a direct correlation. Why is this so? Because the trend line represents a dynamic zone of support or resistance. Each successful touch of the line strengthens it, reinforces its importance as a support or resistance zone. Thus, the trend line's role as a guide for the trend as such is also strengthened. Approaching the trend line is no less important than touching it, because this is how the zone is actualized. If the trend line has become strong due to the touches, its continuation will be no less strong, but from the other side. After all, in an extended trend line, support often becomes resistance and vice versa. 3. Angle of slope ✔️ A very steep trend is usually unstable and easily broken, even by a short sideways movement. All trends break sooner or later, this is a fact. However, steep trends break much faster. The breakout of a steep trend is less significant than the breakout of a smooth and gradual trend. It sounds paradoxical, but the point is this - the break of a steep trend usually causes a short correction, sideways price movement, after which the trend resumes, but much less strong and smoother. Accordingly, the breakout of a steep trend line is a confirming pattern, not a reversal pattern at all. To summarize Trend lines are an easy tool to understand, but they must be used correctly and thoughtfully. A trend line breakout indicates a temporary interruption of the trend or a reversal of the main trend. The significance of a trend line consists of its length, the number of touches/approaches to it and the slope angle. A good trend line always reflects the underlying trend and forms significant support and resistance areas. Extended trend lines change former support/resistance in places, which should be paid special attention to. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
36
INDUCEMENT IN TRADINGInducement is the most popular phenomenon in the smart money concept, but most traders don't know how to label it properly and what its definition is. This post will definitely improve your ability to pinpoint the exact location of the inducement and how to use that inducement to your advantage. What is Inducement? Inducement is labeled IND on the chart, sometimes you may see IDM. Inducement is the area and specific point that encourages (incentivizes) traders to buy and sell. In the Smart Money concept, most traders buy after the breakdown of the previous high and sell after the breakdown of the previous low. This is a normal phenomenon and it is what most people do, because this is what all classic trading books teach from the point of view of market structure. ✴️ Examples Look at the initial structure. The bullish movement is accompanied by small pullbacks. According to the classics, if the price breaks the last low, the bullish movement will be replaced by a bearish one. What we see is that the pullback starts and the price updates the previous low. Traders start to buy on the pullback towards the continuation of the movement and sell on the breakout, towards the new, bearish direction. The previous low in a bull market is the Inducement. This is the place where inexperienced traders give their money to the big player, a bait, not otherwise. After liquidity is collected, the big player drives the price in the direction of the true trend. When the price updates the high it will be a BOS, i.e. confirmation of the structure. Note that when the price rises, lows are formed again, these are again the places where you usually buy and sell. ✴️ The idea behide it As you can see, the real market structure is a bit more complicated than retail traders imagine. After the last example, the price can go higher again, there is nothing to prevent it, but we will just move our structural low under the previous inducement. The essence of price movement is only one thing and that is to collect and form liquidity. That is why the price very often goes down when trending up and updates the low, and then continues to fly up, but without you. The same is true for a downward trend. In the picture above you can see the logic of price movement. As you may know or already know from classic books, the price after an impulsive movement starts to make a pullback. This pullback is done not because the price needs to rest, but because the price needs liquidity to continue the trend. Each pullback is an achievement of inducement, that is, a set of liquidity, and within each pullback you can find the same thing. That is, there are pullbacks within a pullback, and within that another pullback, etc. The market itself it is a fractal. This is what confuses millions of traders to choose the right place to enter a position. Reality is very different from what is portrayed in books, people just don't realize which low will be the break. Which top is extreme? Show one chart to 10 traders and all 10 will show a different structure. It also strongly influences why some traders make money while others, in the same pattern, lose. As you have already realized, price will always take out highs and lows to gather liquidity. If you buy or sell without understanding and practicing such a concept, that liquidity will be you. You must understand and be able to identify where that very spot will be inducement. The main thing to remember is that IND appears only when the price updates a structural high or low. You don't have to incorporate a bunch of Smart Money trading principles into your trading strategy. You just need to realize that without liquidity there will be no movement in the market. Price needs only one thing and that is liquidity. You can trade profitably, even without using any instrument, if you understand what highs and lows most traders buy and sell.  
Education
by DeGRAM
5
BULLISH AND BEARISH FLAG PATTERNSBullish and bearish flag patterns are common patterns in forex that are used by traders to determine potential price movement in a trending market. These patterns can provide clues about market sentiment and help us make informed decisions about when to enter or exit a trade. It should be remembered that this pattern is a continuation pattern, not a reversal pattern, as these patterns appear after a strong movement. How to apply in trading patterns bullish and bearish flag? The bull flag pattern is a continuation pattern that forms after a strong upward price movement. This pattern is characterized by a sharp price rally, followed by a period of consolidation in the form of a descending channel or flag, and then a continuation of the movement. The flag is usually accompanied by a decrease in market volatility and momentum, which indicates a temporary pause in the uptrend. The price is resting after a strong bullish movement before continuing. How to apply in trading? 1. Identify a strong upward movement (flagpole): The first step is to identify the flagpole of the initial strong upward price movement that precedes the formation of this pattern. 2. Flag formation: After identifying the flagpole, traders must draw a trend line connecting the highs and lows of the consolidation to see the flag pattern. You need to watch the price closely because this pattern can turn into an ascending triangle. 3. Breakout of the contraction: Then wait for a breakout above the upper trend line of the flag pattern, accompanied by an increase in momentum. A breakout of the co-principal level confirms the continuation of the uptrend and is a potential entry point for long positions. Usually the price makes a move equal to the flagpole, which gives an approximate take profit point. Conversely, the bearish flag pattern is a continuation pattern that is formed after a strong downward price movement. This pattern is characterized by a sharp decline in price followed by a period of consolidation in the form of an ascending channel or flag. Similar to the bull flag pattern, the bear flag pattern is accompanied by a decrease in momentum, which indicates that the price is temporarily resting in a downtrend. How to apply in trading? 1- Identify a strong bearish move (flagpole): The first step is to identify the flagpole of the initial strong downward price movement that precedes the formation of the flag pattern. 2. Flag formation: After identifying the flagpole, we must draw a trend line connecting the highs and lows of the consolidation boundary to recognize the flag pattern. 3. Waiting for support breakdown: We should wait for a breakdown of the lower trendline of the flag pattern, accompanied by an increase in price momentum. Such a breakdown confirms the continuation of the downtrend and is a potential entry point. In conclusion, the use of bullish and bearish flag patterns in trading requires identifying a flagpole, building a flag pattern and waiting for a breakout to confirm the continuation of the trend. By understanding and effectively utilizing these patterns, we can enhance our analytical skills. This pattern can complement your existing trading method.
Education
by UnknownUnicorn15614419
2
SIGNAL PROVIDERS: EXPERT ADVISORSAs the world of trading evolves and expands, new signal providers are popping up every day, promising to help traders identify potential market opportunities. However, there are many problems among legitimate providers from one of them: signal providers offer fraudulent Expert Advisors (EAs). These unscrupulous providers promise extraordinary returns and flawless trading systems, but in reality, they disappoint and lead to financial losses for unsuspecting rookie traders. In this post, we will examine the reality of EA fraud and give important tips on how to protect yourself in the trading industry. EA scams primarily target traders looking for automated trading solutions using EAs. 99% of the time these are traders who have been in the industry for no more than a year. Signal providers often use deceptive tactics to lure people into their schemes. The main signs of fraud can include: 1. Unrealistic promises: This is the biggest red flag. Signal providers make big claims of guaranteed profits or excessively high returns in a short period of time. Things get to the point of nonsense like 100% capital growth every week. But in reality, no trading system can do such results in a short period of time completely eliminating risk or ensuring error-free success. 2. Fabricated results: To attract inexperienced clients, scammers show fabricated evidence of high EA returns using fake data or false reviews. It is crucial to independently verify track records and performance data as our team has done. 3. Lack of transparency: Signal providers often lack transparency in their operations. They may withhold important information such as the strategy or methodology behind their EAs, making it impossible for traders to evaluate their performance. An EA may be behind a sliding line crossover. As a consequence, the EA gives signals when the market is in sideways movement, which is likely to lead to losses. Protecting against expert advisor scams: 1. Do your due diligence: Before signing up with any signal provider or purchasing an EA, conduct thorough research. Read reputable sources of user reviews and independent analysis to assess the reliability and performance of the provider. Since the reputation of the provider itself comes first. If the provider has a good reputation, they will not offer anything that is not of any use. 2. Check the track record: Request supporting documents from the signal provider or developer, such as statements from real trading accounts or third-party verification results like we do. Reliable providers should be transparent about their historical performance. 3. Be skeptical of unusual claims: Be cautious when encountering providers promising guaranteed profits or unusually high returns, this is always a red flag. Remember that trading always involves risk, and no system can completely eliminate it. 4. Test periods and money back guarantees: Choose signal or EA providers that offer trial periods or money back guarantees. Legitimate providers are confident in their services and allow traders to test them with minimal financial commitment. 5. Get professional advice: We have reviewed hundreds of signal providers and if you are unsure or inexperienced in evaluating signal providers or advisors, get advice from professional traders who will help and show you the right way. Conclusion: Although there are both genuine signal providers and effective advisors in the trading industry, traders must remain vigilant to protect themselves from EA scams. By conducting thorough research, checking history, using regulated platforms, being skeptical of unusual claims, using trial periods and money-back guarantees, and seeking professional advice, traders can reduce the risk of falling victim to scammers.
Education
by UnknownUnicorn15614419
2
DOUBLE TOP FORMATIONWhat is a double top? This pattern appears when the price reaches some levels, makes a high, then goes down for a while. Then it comes back to about the same level and draws the same high at about the same level as the previous one, and then turns around and goes down. With a double top, this pattern is a reversal pattern and favors, subsequently, a downward price move. What should I pay attention to? Let's say you had some buys open; you saw a double top and, accordingly, decided to exit. So, how can you determine whether it is a quality pattern or not? First of all, you should pay attention if there is a resistance level at the level of the double top. In this case, we have one top, the second one and we can pay attention to the fact that there is a level nearby. And it almost overlaps with our double top. This gives additional strength to the pattern and it becomes more significant. Secondly, there should be at least six candlesticks between the two tops. That is, the tops should not literally follow each other. There should be at least six candles between the tops. So that it visually looks like 2 peaks, not 2 or 3 candles next to each other. But at the same time take into account that if the second peak is very far from the first one, then this pattern is most likely not a pattern and it is just a coincidence, and most likely you will not see any strong trend reversal. A correction, perhaps, but no more than that. Accordingly, the farther the first top is located from the second one, the weaker the pattern is. This is because the significance of the chart formation is simply lost in time. Therefore, try to select trades in which the second touch is lower than the previous one, if possible. And in case the reversal does take place, you can catch a very big movement. And if the space on the left looks filled, then accordingly, you should not count on any strong reversal. But strong global reversals are not so common, so it is not easy to catch them in any case. As they appear by themselves quite rarely. How to enter the market? Let's look at an example. As we know, this pattern is a reversal pattern. We have formed the first top, then the second top was formed and the price went up. You do not know what to do, to enter or not to enter, when to enter, where to put stop loss and take profit. First, we build a trend line of the previous trend. Moreover, it should capture the lows that preceded the second top. In this case, we had an upward trend, so our trend line will be built approximately like this. Next, we put a horizontal line at the level of our last low that preceded the second top. We will enter, as you guessed, at the breakdown of our trend line or neckline. And our target will be: the distance from our last low to the level of our last tops. Entry on the breakoout of middle low. And you can put, of course, pending orders, you do not have to sit in front of the screen and wait for this breakout to happen and the stop-loss will be approximately at the level of our two tops, a little bit higher. And this is how the trade will look like.
Education
by UnknownUnicorn15614419
3
UNDERSTANDING MOVING AVERAGEHello traders! 👋 🤗 Today I will try to explain to you guys another perspective and the concept of moving average. This is one of the oldest technical indicators and, perhaps, the most popular and most frequently used, as a huge number of other indicators are based on it. A lot has been written about moving averages. And at the same time, despite the abundance of information and respect for this instrument on the part of almost all traders, the issue of trading on MA is poorly covered. What do we often see about moving averages? Most of it is crossover. When one sacred line crosses another, we should enter the trade or something like that. I would like to show one simple method of working with moving averages. A few important points Only Simple Moving Average (MA) on closings is used. When working with moving averages, only 2 parameters are important: PERIOD AND SLOPE ANGLE . Any crossings and other things are not taken into account. Only MAs with a high period (from 100 and above) are used. Thus, we can see the general direction, which looks a bit smoother and more obvious than a regular chart. In general, it is considered that if the price is above the moving average, it is an upward trend; if it is below the moving average, it is a downward trend. At the same time, the higher the period of the moving average, the more long-term the trend is. For example, with a moving average period of 21, we can say that if the price is above it, it is a rather short-term upward trend. If the moving average period is much bigger, say 100, and the price is above the moving average with a period of 100, then we can say that there is a solid upward trend. If the price is below the moving average with a longer period (for example, 100), then we realize that there is a solid downward trend. In other words, the longer the period of the moving average, the more inflexible it is because it has to calculate the average value for the last candles (in our case, 100). This is a lot. And, accordingly, the longer the moving average period, the more important it is in the long term. Our job as traders is to squeeze everything out of the movement. The least job is to stay at breakeven and don’t blow the account. That is why large MA periods are used. And do not believe the words when they say that MAs are lagging. For the demonstration we will use 3 timeframes: 4 hoursly - 1 daily - 1 weekly. As practice shows, the approach described below works even in the combination of 5 minutes - 15 minutes - 1 hour. This for day traders. Examples of moving averages As an example, we will now show the chart of one asset from 3 timeframes as already mentioned above: Weekly (MA 100) will show us the direction of the global trend Dayly (MA 200) the medium-term trend 4-hourly (MA 100) the actual entry points and setting Stop loss and Take profit The essence of working with big MAs is very simple: we can trade only in the direction of MA movement, and at the entry point, the price should be on one side of all MAs (above or below it) on all 3 timeframes. In this case, the mandatory condition is that the angle of slope of the MA of the highest period must be strong, approximately 45 degrees. AUDCHF weekly Go down to the daily timeframe and apply MA 200. We highlight the areas where the price is also below the MA 200 on the daily timeframe. We also take into account the slope angle of the current MA. We highlight this movement with a green block. AUDCHF daily AUDCHF 4H Now we go to H4 and apply MA 100. This is the timeframe for a possible entry point. We select the block where the price is below the MA on the current timeframe. We cut off all the moments when the price was above the MA, highlight the price movement below the MA with yellow blocks 3 potential areas where we can look for entry points to open short positions. Let's take a closer look at each area. First opportunity Second opportunity Third opportunity Of course, on live trading, things would be much more difficult. But as you can see, we got at least two very clean trades that screamed to take them. Another one EURJPY weekly EURJPY daily EURJPY 4H Closer look Again in hindsight everything looks good, but the purpose of this post is to help you build and understand a slightly different method of applying moving averages if you use them. As you can see, trend trading is actually much easier. What about sideways movements? If the trend is more or less clear, and as soon as the SMA on the higher timeframe (say, daily) shows a more flat angle of slope for the last 5–10 bars, we have a sideways movement. You can try to take advantage of this on the lower timeframes.  In this post I tried to show how to systematize and demonstrate my approach to trading on moving averages. Of course, there are many methods of trading on short-term moving averages, on the combination of multi-period MAs on one chart, etc. Sometimes it is hard to describe in words what is "right" angle of slope, and the overall price movement, I guess all this comes only with personal experience. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
17
BUILDING A CHART "BRICK BY BRICK"What is it Renko? Renko charts were invented in Japan, just like regular candlesticks, many years ago and they are called Renga, which means "brick". They display charts symmetrically and are effective for identifying major trends and structural support and resistance levels. Renko charts are very well suited for trend trading as they are visually appealing, making it easy to screen out noise and highlight trends easily. Renko charts show a trend in a way that bars and candlesticks charts cannot. They are able to filter out the noise and create the sameness underlying the trend. In order to understand what a Renko is, let's remember what candlesticks show on our charts? They are the fluctuations in the price of a particular currency pair over a certain period of time: price and time. The main difference is that Renko charts show only the change in price, neither trading volumes nor time intervals are taken into account in their development. The principle of building Renko bricks is based, as already mentioned, only on price fluctuations. In order for the chart to be displayed correctly, first of all, it is necessary to set the size of one brick. For example, many traders use a simple rule: 1 brick equals 10 pips. In other words, for a new brick/block to appear on the chart, the price must change by at least 10 points. Candlestick chart: Renko bars: This is the feature of the Renko chart: it is extremely smooth and clear. All blocks have the same size. At the same time, if the price has changed by only a few points, it will not be displayed on the chart. There are two types of brick size assignment methods: traditional and ATR-based. It measures the volatility of the asset, i.e. the values will be different at different periods of the trading period and on different time intervals. If you use this method, the value of the Renko bar should be equal to the ATR value. Main Advantages and Disadvantages Like any other graphical display of price changes, Renko has its pros and cons. Advantages of Renko: • This principle of construction allows to eliminate almost all noise from the chart as mentioned above. • Renko shows itself perfectly in work with most indicators. Let's remember the main problem of some popular indicators - they output data with some delay (information is substituted into the formula only after the candle is closed). And since Renko is not tied to time, the indicator displays more real information as a result. • Renko indicators show themselves perfectly in intraday trading. The trader does not need to wait for the candle to close. The Main Disadvantages of Renko are as Follows: • The chart does not work with most volume indicators. • A new brick is built only when the trend increases/decreases by a certain number of points (which is equal to the size of one block). That is, the chart can remain unchanged for a long time if the market is consolidating. • Renko chart does not show consolidation and impulse moves as seen on regular charts. • In order to be aware of the likely measurement of trend direction, it is necessary to constantly monitor the market with other charts. Examples We will use a simple strategy based on the moving average with a period of 20 on the 15 minute timeframe. The sell and buy signal will be pinbar. Enter the trade when the pinbar is created near the moving average. Of course you can create your own strategy. You just need to spend some time with the chart and you will know if it will work for you or not. EURAUD USDJPY GBPUSD (Sometimes Renko chart gives really beautiful and clear signals.) Conclusion Renko charts are quite convenient and practical because they display symmetrical candles and are effective for identifying major trends, support and resistance levels by filtering out noise. They can also be used in combination with other indicators to improve trading results. Renko charts allow you to identify various reversal patterns and see price structures in the market. However, they are mainly suitable for intraday trading.
Education
by DeGRAM
24
TRADING SESSIONS CHARACTERISTICSIn this post, we will look at the three major forex sessions and their features to understand when and where we can expect volatility and movement in the forex markets. This will be helpful for those who want to associate their forex market trading as a day trader. Main Sessions in the Forex Market When trading currencies or indices, there are three main sessions that occur every day. We all know that the currency market is open 24 hours, but during those hours when the markets are open there are spikes and lulls in volume and volatility that we need to be aware of. Asian Session The Asian session comes first. The reason why the trading day starts with it is that it opens the trading week as early as Sunday, at 8:00 am in Tokyo and 9:00 am in Sydney. This session is usually marked by very volatile price action, with the exception of some pairs (JPY, AUD, NZD) occasionally showing volatility during the Asian session. In addition, there is usually little volume or manipulation by banks and financial institutions at this time, resulting in very organic and slow price movements. Liquidity at the Asian Session There is one interesting feature here. This thing is that a little volatility in the Asian session is created naturally, because of this over the range of the session, above and below, liquidity is created. As the London session begins, the price moves strongly to one side. When day trading, you must realize and consider that that liquidity above and below the Asian session range is highly likely to be absorbed almost immediately after the London session opens. London Session Following the Asian session, the London session opens. This time is the main trading time in the UK and Europe. Why do people love the London session? Asia tends to accumulate liquidity in or around its range, the further out, the more volatile the market gets. When trading opens in Frankfurt or London, there is a huge volume of orders coming into the market. This creates ideal trading conditions, especially for those who want to capitalize on large intraday movements. Before London Opens The official opening starts at 8:00 am local time. The London session is characterized by high volatility for the first 2-3 hours, after which this volatility starts to slow down as both retail traders and financial institutions start having lunch. London time is great, especially if you will be trading major pairs, European indices or equities, because London movement is real movement. Lull in London Session From about 11:00 to 12:00 (noon), price fluctuations quieten down a bit as the major movements in the London session come to an end. This does not mean that the trading day is over and there is no more volatility, from three o'clock and up to an hour before or after the opening of the New York session you can see it rising again. Most traders who trade both sessions take a break, and those who trade only the London session may call it a day. New York Session Next we have the New York session, which is a favorite for those living in North and South America, as well as for Europeans who are just too lazy to get up early for the London session and prefer to start trading at 13:00 local time zone. The New York session is special because it also includes the opening of the US stock market, which leads to volatility in certain asset classes that forex traders can trade, including indices. Before the Opening New York Session As with the opening in Frankfurt before London, the hour before the session opens is worth devoting some attention to trading and analysis. There is usually a bit of a lull with volatility during this time frame as well. This is something to be aware of and remember, as a good trader, that normal movement will soon begin again. Opening of New York Session Next, the New York currency session opens at 8:00 am EST, which is usually accompanied by a lot of volatility, but not as consistently as the hour or two of the London session. During the New York session, you will usually see a big spike in volatility across the major pairs and North American indices, and sometimes a little volatility into the evening. It should be noted that the London session closes at 4:00 p.m. local time, which means lower volumes from London banks and other financial institutions. The Highs and Lows of the Day The day's highs the day's lows are key liquidity levels that can either be consumed or used as target liquidity to drive movement. Typically, you will want to mark the highs and lows of previous days to get an idea of what liquidity is being harvested where, as well as the current day's high and low if globally you are in a price range. Traders, If you liked this educational post, give it a boost 🚀 and drop a comment
Education
by Lingrid
14
THE IMPORTANCE OF TAKING BREAKS IN TRADING✴️ How to do the job right Around 2-3 hours in the afternoon you feel tired, your brain is not working as actively as in the morning and you want to take a nap. Is that normal? More than normal. All of us to more or less conscious age were taught to sleep at night and stay awake all day. But it's not the best habit for our mental health and it's certainly not how our ancestors used to sleep. People in the pre-industrial era, when there was no electricity yet, would go to sleep around 8pm, then at around 2am wake up for a couple of hours, do some creative work, go visit neighbors and then go back to sleep until morning. A similar story happens during the day. The fact is that our brain prefers to fall asleep and wake up more often than once a day. From 2pm to 4pm is the so-called "Nap Zone", a time period ideal for daytime naps. It is known that the ancient Romans in the first century BC liked to nap in the afternoon, such breaks they called Meridiari, then they began to call them Sexta (sixth hour, according to their time measurement), well, and the word Sexta over time transformed into Siesta. Many studies show the positive effects of a short nap during the day. Concentration improves, attentiveness improves, you can do more things. Moving on. The following interesting keys are given to us by a 30-year study of people who are outstanding in their fields - musicians, athletes, writers, etc. Number 1 : it is only possible to perform at peak performance for about an hour without rest. This is worth taking note of for scalpers who follow the market intensively. If you have traded for an hour, take a break. Number 2 : people who have achieved great results in their fields practice/train about 4 hours a day on average. Increasing the workload time only leads to burnout and injury (in the case of athletes). Therefore, it makes little sense to trade more than 4 hours a day. And of course, the most effective period is from morning until lunchtime. If you have any business that requires extreme attention and concentration it is better to do it in the morning. If we summarize all of the above, then: • We do the most important thing in the morning • It is possible to work hard, at the limit of your capabilities without resting for only about an hour, feel free to take small breaks • It is pointless to practice trading/sports for more than 4 hours a day • Between 14 and 16 hours it would be good to allocate 15-20 minutes for a short nap An important note, if you have entered the flow you do not need to stop through force. If, for example, you are happily testing a new system until one o'clock in the morning, this is a good sign. ✴️ How to rest properly The best way to relax is something involving physical and mental activity, with deep immersion in the process. For example: rock climbing, painting, golf. The goal is to completely disconnect and not think about work/trading, etc. Of course, if you are wildly tired then sleep, watch TV series, play video games when it's simply not physical strength. And perhaps you should focus more on athletics If you want to play a sport. As for vacation in general, scientists agree that it should ideally be about one week every three months. Hard work or trading without weekends and vacations will only lead to health problems. You can't make all the money you want anyway. So, health is wealth. ✴️ Conclusion It is understandable that not everyone can apply the above tips. But if this post made you at least think about the importance of rest and breaks in work and trading, then this post was written for a reason. I myself thought for a long time that it was cool and great to be busy all the time, even sometimes I felt guilty during weekends or vacations when I didn't do anything, but as it turned out, there is nothing to feel guilty about without rest and breaks, productivity is simply impossible. Keep in mind the market will be here tomorrow. And if you feel that you want to take a break from trading for a day/week/month then go ahead. Nothing bad will happen, even on the contrary during this time you will surely come up with new, cool ideas on how to improve your trading.
Education
by DeGRAM
7
SIGNAL PROVIDER TESTIMONIALSWhen choosing signal providers, it is a difficult task to determine the quality of the provider. One way of course is to look at testimonials. Testimonials are a common tool used by signal providers to showcase success stories or attract potential customers. While testimonials can provide valuable information about a provider's performance, they should be approached with caution. It is important to study them thoroughly. Here are a few key factors to consider when you read forex signal provider testimonials: 1. Authenticity First of all, you need to make sure that the testimonials are genuine and not fabricated. This is where details are important. Look for specific details such as the trader's name, location and trading experience. General or vague testimonials without any identifying information should alert you. 2. Verifiability Check if testimonials can be verified through independent sources. Reputable signal providers often provide links to their clients' social media profiles or trading accounts, which allows you to cross-check the information provided. Such transparency indicates a higher level of trust, as testimonials without verification are not a good sign. 3. Consistency Analyze the consistency of testimonials. Do they all sound the same or use identical wording? For example, identical and short sentences. Such testimonials may indicate that they are scripted or fake. Genuine testimonials should reflect individual experiences and vary in tone and content. 4. Duration Pay attention to the duration of the testimonials. Are they recent or written several years ago? Testimonials that cover a significant period of time indicate consistent performance and reliability. But too old testimonials, say left 3 - 5 years ago, may not accurately reflect the current work of the provider. 5. Third-party testimonials Look for independent reviews as we do for example or testimonials about the signal provider in reputable sources like Trustpilot. Such reviews can provide an unbiased point of view and verify the claims made in the testimonials. Internet forums, social media groups, and specialized review websites are excellent resources for finding such information. 6. Track record Evaluate the overall track record of the signal provider. Does it have a track record of generally providing accurate and profitable signals? Look for evidence of long-term success, including consistent positive testimonials from numerous clients that reflect the provider's profitability. In conclusion, while testimonials can be a valuable tool for assessing the reliability of signal providers, you should approach them with skepticism. Considering factors such as authenticity, verifiability, consistency, longevity, third-party testimonials, track record and trial period give informed decisions on which signal providers to trust. One must remember that thorough research and due diligence are crucial when choosing a reliable signal provider.
Education
by UnknownUnicorn15614419
5
UNDERSTANDING COMPLEX PULLBACKWhat is a two-legged pullback ? A two-legged pullback in the market is a pattern of price action in which the market retreats in two separate steps or movements before resuming its primary trend. This is a counter-trend move. After a strong trending move, price needs to sort of take a break and there is a double attempt to reverse the trend. When the price hits a strong zone, the price pulls back from it and if the trend does not continue, a second pullback occurs. Here the second pullback is approximately equal to the first one. We use this model for 2 purposes in the market: - Projection of the next move - End of pullback If you look at the market, it likes power of two, be it a double top/bottom, a double test of the uptrend, followed by a breakout. Let's look at the example of the recent movement on EURUSD. As we can see the asset has been in a strong bearish trend for a long time. The price bounced off the support and made the first pullback and then the second one. Note that the first pullback ended where there were no strong levels. But when we have the second pullback, we can see that it ends right at the strong resistance. This was an additional signal to enter a trend trade. A two-legged pullback in the context of the market Traders using the two-legged pullback strategy usually wait for both legs of the pullback to complete before entering a trade. It is very important to look at the context of the market here. If it happens that the second leg breaks through the lower high or higher low, it is a reason to be wary because it is usually a sign of a trend shift. The first leg can be projected and wait for the price at these levels. If it coincides with a strong level, it is a trade with a high probability of success. Let's look at some examples The recent example of gold shows well the interaction of a two-legged pullback with a strong level. The first time we got a pullback A. The price paused and then went up. The question remains where we should wait for price. We simply take the A pullback and project it and get the approximate end of the C pullback. This pullback ended on a strong resistance, which led to the price reversal . The EURUSD, too, after a strong bearish movement, rolled back to the resistance, making a two-legged pullback. Note that the EURUSD touched a strong level and fell. Although it did not lead to a complete reversal of the price, but we got a reaction and a short term trade. Here you can see a perfect example that there can be a third leg, which exactly led to the price reversal. The UKOIL example perfectly shows a trending trade. The price bounced off the resistance, and as you noticed there was a two-legged move before that. When A and B have formed, we use the projection method to wait for the price at the end of C. The last example is a great example of a perfectly formation of the two-legged pullback. The price has not yet triggered the level. But what do we have here? A downtrend, a two-legged pullback and a strong resistance at 1.66000. Will the trend continue, what do you think? Let's see. Traders, If you liked this educational post, give it a boost and drop a comment.
Education
by Lingrid
7
WHAT IS A PRICE DECELERATION?✴️ What Is A Price Deceleration? A price deceleration is when the market slows down after a trend movement. It occurs when the price of an asset begins to slow down its ascending or descending impulse. It usually occurs at key levels, such as support and resistance. The price finds it difficult to make highs at resistance and lows at support. It all looks like an upward or downward wedge at levels or just channels. Price deceleration can occur at the end of a trend movement or at the end of a pullback. When the price approaches key levels, the bulls are reluctant to buy and the bears are reluctant to sell, which is characterized by price deceleration and poor highs and lows trading. As a result, this leads to a pullback or a complete reversal of the trend. Therefore, this one works well for price reversals. ✴️ Price Deceleration Identification One of the key features of a deceleration and then a price reversal is divergence. The pattern is formed when the price touches the channel border for the fourth time. Thus, we determine the first clues of the future price reversal or price continuation. Another important sign of deceleration is a decrease in the slope angle or steepness of the trend line, as well as a decrease in the size of price swings. It means that the price is squeezed before the impulse movement. Price usually shoots up and accelerates after the squeeze. ✴️ Confirmation Of Price Deceleration Oscillators are used to confirm the deceleration. For example, the relative strength index (RSI) shows divergence very well. Price, after a strong movement like a big ship, still makes some motion moving forward. So, it does not stop immediately. At this time, RSI shows that there is no strength in this movement and goes in another direction, confirming divergence and a soon reversal. Once we have four touches forming the channel, we can look for entry opportunities. Usually the 3rd or 4th touches of the border lead to reversal IF it is confirmed by RSI divergence. ✴️ Plan Your Entry and Exit Points Once we have identified the price deceleration, we need to plan entry and exit points. If the price touches the upper channel and the oscillator shows a bearish divergence, it can be called a confirmation. Usually, if there is a divergence, the price immediately goes in the opposite direction. The engulfing candlestick or pinbar can be used as a trigger to enter the market, as it perfectly shows the current market sentiment and the dominance of one of the sides, be it bulls or bears. The optimal risk/profit ratio in trades is 1:2, because if the trade is counter-trend, there is a probability that the price will go further along the trend. More Examples BTC/USD USD/CAD XAU/USD
Education
by DeGRAM
25
Joe Ross Trading StrategyHello everyone This post will be devoted to the trading methods of the famous trader Joe Ross. There is very little information about Ross on the internet, mostly copied from his books, so let's try to study this situation more deeply. The information is not for beginners. Support and resistance, trend lines, the concept of flat market, all this should be already worked out. You should already know and be able to apply them. You should also take into account that this Ross strategy used only in a trending market. It is not applicable in a sideways movement or choppy. 1-2-3 Setup 1-2-3 setup according to Ross is a reversal formation, that is, its development is information for thinking about the change of the current trend. This setup works absolutely on any timeframe and asset, which once again confirms its quality and flexibility. Bullish Setup This setup is formed at the end of the downtrend and consists of 3 key points. EURUSD chart, 1 hourly timeframe will be used as an example. What is the point of the setup; after the bearish movement, when the price consistently made new lower highs and lows, a breakout of the last local high was formed. This means that there may have been a change of movement and market sentiment. The setup is considered complete after the breakout of point 2. It is not the closing of the candle above point 2 that is considered a breakout, but the creation of a new high above this mark. After that it is taken as a condition that there is a new bullish trend. So, what we have in the case of a set-up occurring: • A clear 1-2-3 pattern • The pattern is finally formed and considered formalized after breaking the high/low at point 2 We identify the peaks, then we look for some sort of 1-2-3 formation to begin to emerge. If the last high is broken in a bullish setup, we look to see if this formation is clearly visible. If yes, we can enter the trade. Bearish Setup How this formation is built and what to pay attention to when marking charts. As we can see on the 1st chart, point 1 has formed a new low with its shadow. And here, when moving to the potential point 2 and then to point 3, the most important thing to pay attention to when marking this setup (for the example, we take a bullish setup) is hidden, namely: • The highs of the candles from point 1 to point 2 must be higher than the previous ones. In other words, each new candle makes a new high. As soon as the next candle is formed without making a high - we have point 2 • When moving from point 2 to point 3, each candle should make deeper lows, while the upper highs of the candles should not be higher than point 2. If shorter, we have a decline going down like a ladder • As soon as the next candle closed without forming a new low - ready, we have point 3 Ross Hooks (RH) The next step, and it is the main one in trading this method, is Ross's Hooks. This is the fundamental part of his strategy, which, by the way, uses it more than half a century. So, we have a 1-2-3 setup. There is a breakout of point 2 and the price goes up further. Each new candle makes a new low, while the highs does not go above the point 3. As soon as the next candle fails to make a new low, we have a Ross Hook (RH). Let's look at an example for clarity: We broke through point 2, created a new low and rolled back. The first RH and confirmation of the trend change to a downtrend appeared. Further price movement will be based on attempts to break through RH and pullback after the breakthrough and further attempts to establish new lows. It would be interesting to note that at the current stage we do not care what candles formed this trend, there is no need to pay attention to Price Action setups. Even this simplified view shows the development of the trend, its growth and direction. Later we will see how to apply hooks and trade with them in combination with Price Action setups. Ross Reversal Hooks Ross Reversal Hook (RRH) is formed by a pullback from RH and the formation of a new low in the current trend. Let's take a look at the same example above: Ross Trend Detection Methods So, let's summarize the main methods of determining the Ross trend and its pros and cons. Cons: • Firmly identifying a trend change happens quite late. In other words, a part of the trend movement is lost. • It is extremely rare that a 1-2-3 formation is formed, then RH, and the trend changes sharply to the opposite. Pros: • Despite the late entry, we have fairly reliable entries with low risks to our capital. • We have a strict orderly system and we can clearly see if there is a trend on the current timeframe or not. • The 1-2-3 and Rh formation works perfectly on any timeframe. • The period of trend change can be detected at an early stage if we apply filtering and Price Action methods. Now let's discuss trend detection methods in conjunction with basic Price Action methods. Forex trading is highly dependent on a few major factors. These are leverage size, spread size, lot size to trade, asset to trade. Now, as for the definition of trends. Ross' principles are applicable to any timeframe, so, having defined your trading timeframe (let's say 1 hour), you should proceed to 4 hourly, 1 daily, 1 weekly timeframes. On each of them, in accordance with the rules of technical analysis, mark the trend lines, starting from the higher timeframe. As a result, we get a picture on the trading timeframe, within which we can see the price movement at the current moment of time. And, having a complete picture, we mark 1-2-3 setups, hooks (if any) and the potential for further price movement. Finding the Best Trend Depending on the Timeframe How to determine if a trend is good? How to quickly and easily determine the timeframe, which is most interesting when trading using the Ross technique. Simply put, there should be a good growth, then a pullback of no more than 3 bars, possibly with the formation of RHR and a break of RH. If we see choppy market, a bunch of dojis, inside bars, incomprehensible moves; this timeframe is not quite well chosen. In particular, on GBPAUD a good timeframe can be seen on the 4 hourly timeframe, but on the hourly one the same trend does not look so good. Let's see: 4H 1H And it happens that on the hourly timeframe there is a perfect trend, but when you switch to the 4-hour or daily timeframe, there are confusions. The same is true for 15 minutes, and so on. The main thing is to learn to determine whether a trend is ""nice"" or not by just looking at it. It is also very useful to look at the previous trends on the selected timeframe. History repeats itself and trends can behave similarly precisely because there will be support and resistance lines in approximately the same places. RHs Filtering Methods Here we come to one of the most difficult parts of the Ross trade. RH filtering is something you need to pay the most attention to. Even if you don't trade Ross, but know his filtering methods - it helps a lot in terms of identifying such moments, what we call "false breakout", "collecting stops" and so on. Support and resistance line Trend line A price break or gap Accumulation The first and easiest way of filtering is, of course, in support and resistance lines. If we see that the hook hit the monthly resistance when trading on a 4 hourly timeframe, it is a good reason to think about whether a trend change will follow. But on the other hand, a breakout of the maximum of such a hook combined with strong resistance can be a good buy signal. Also, if the trend is long enough and the hook is formed at the resistance level, there is a good chance that the trend will turn sideways. The next way of filtering is the trend line or channel lines. They are good for determining the end of a pullback in a trend and the formation of reversal setups. This post is a simplified representation of Joe Ross's strategy, there are so many nuances, subtleties, and filters. Ross in his books shows combinations of his hooks with such indicators as Stochastic, ATR, Bollinger Bands, moving averages and much more. In practice, as soon as there is some "confusion" of the price, which is out of the framework of the normally current trend, you should put this tactic aside and use other ones. Hooks work exclusively in a trending markets. Traders, If you liked this educational post, give it a boost and drop a comment.
Education
by Lingrid
12
ACCUMULATION/DISTRIBUTION INDICATOR ✴️ Accumulation/Distribution (A/D) is a standard pack of technical analysis tools of many trading platforms. Today we will get to know this tool in detail and see how it works on Forex. This indicator can be especially interesting for supporters of the VSA method, as it takes into consideration trading volumes in its analysis. The author of the tool, world-known theorist and practitioner of technical analysis of stock markets Mark Chaikin, managed to describe the market phases with the help of volumes and price behavior: Accumulation - purchases of shares by investors and speculators; Distribution - sales of stocks at fixation of income. The forex market looks somewhat different: the accumulation or growth phase is interpreted by the A/D curve as an increase in the strength of the bulls, while the distribution or decline is perceived as an increase in the pressure of the bears' positions. ✴️ How indicator works Accumulation/Distribution is considered a technical tool for confirming or rejecting a trend. The growth or fall of prices on the chart must necessarily coincide with the direction of the indicator curve. All divergences are interpreted in the direction of A/D, i.e. any divergence is considered as a signal of the soon reversal of the currency pair. Indicator divergences from price are the most popular signals in technical analysis, but only A/D indicators have a high leading predictive accuracy. The indicator formula uses real volume indicators compared to price range changes, thanks to which Chaikin has achieved the best algorithmic display of VSA theory principles on the chart. ✴️ How to use the indicator in trading The most common strategy for applying Accumulation/Distribution is considered to be the oscillator method proposed by the author himself. It consists in finding the difference between two exponential moving averages with a period of 3 days and 10 days, taken from A/D values. Due to the settings of A/D to generate leading signals of trend change, the Chaikin oscillator (CHO) indicator has an important feature of signals synchronized with the current change in prices, despite the use of exponential averages, which traditionally lag due to averaging the result of calculations. The strategy of trading on the oscillator signals is to open positions: Long - the CHO curve crosses the zero line from bottom to top; Short - the CHO curve falls below the zero line. M. Chaikin suggested using divergence signals, divergence of tops and bottoms of the chart and oscillator trends as a trade filter, interpreting them in favor of CHO. The chart above shows how an uptrend is not confirmed by the next top of the curve, which means that we open a Short position at the zero line crossing from top to bottom. The situation is similar with a falling trend: if it is not confirmed by new CHO lows, we open a Long position after the indicator crosses the zero line. Positions are closed by reversal on the reverse signal, it is possible to insure the open order with a stop-loss moved to the breakeven zone. At the first opening of the trade, it is located at the nearest maximum or minimum, usually coinciding with the top CHO. Some traders who trade exclusively counter-trend divergence signals choose Accumulation/Distribution. As soon as a divergence is identified on the chart - a pending order is placed: Sell limit at the maximum not confirmed by the A/D indicator; Buy limit at the minimum at which the A/D divergence occurred. In other cases, the Accumulation/Distribution indicator is used as part of trading systems as an overbought/oversold oscillator filter. The picture below shows a simple MA + RSI strategy, where one of the conditions for a sell signal is the A/D divergence in the overbought zone. Having confirmed the trend reversal in this way, the trader waits for the prices to cross the MA and opens a Sell order on the market. ✴️ In conclusion Accumulation/Distribution is a sample of perfect synchronization of trading volume indicators with the dynamics of market quotes. The indicator is easy to interpret and use, it will not cause problems with its application even for a beginner, as it has no settings that would have to be selected. Like any other tool of the chanalysis, A/D indicators are better used as a part of trading systems or together with other developments of Mark Chaikin. They are published on the Chaikin Analytics website, repeatedly recognized as the best portal for quantitative analysis of financial markets.
Education
by DeGRAM
2
CONTRACTING AND EXPANDING TRIANGLESTriangle patterns are powerful technical indicators that provide traders with valuable insights into potential market trends and price movements. Among the various types of triangle patterns, horizontal triangles, contracting triangles, and expanding triangles are widely recognized for their reliability and effectiveness. Horizontal triangles, also known as symmetrical triangles, occur when the price consolidates between two converging trendlines. These trendlines are drawn by connecting a series of lower highs and higher lows. Horizontal triangles signify a period of indecision in the market, as buyers and sellers battle for control. There are two types of horizontal triangles: Contracting Triangles and Expanding Triangles. Contracting Triangle: Contracting triangles, also known as descending or ascending triangles, are characterized by converging trendlines with one trendline slanting upward or downward. These patterns indicate a gradual decrease in price volatility and suggest an imminent breakout. Characteristics: 1. Converging Trendlines: One trendline is drawn horizontally, acting as support or resistance, while the other trendline slants in the opposite direction. 2. Decreasing Range: The price range between the trendlines gradually narrows as the pattern progresses. 3. Breakout Anticipation: Traders expect a breakout in the direction opposite to the slant of the converging trendlines. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline (in descending triangles) or below the lower trendline (in ascending triangles) to enter a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to mitigate potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Expanding Triangle: Expanding triangles, also known as broadening triangles, are characterized by diverging trendlines, indicating increased volatility and uncertainty in the market. These patterns often precede significant price reversals. Characteristics: 1. Diverging Trendlines: The upper and lower trendlines move in opposite directions, creating a widening pattern. 2. Increasing Range: The price range between the trendlines expands as the pattern develops, reflecting growing market volatility. 3. Breakout Anticipation: Traders anticipate a breakout in the direction opposite to the widening of the triangle pattern. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline or below the lower trendline to initiate a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to limit potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Horizontal triangle patterns offer traders valuable insights into potential market trends and price movements. By understanding the characteristics and formation of these patterns, traders can effectively identify entry and exit points, set appropriate stop-loss orders, and determine target prices. However, it is essential to combine triangle patterns with other technical analysis tools and indicators for a comprehensive trading strategy. With practice and experience, traders can harness the power of triangle patterns to enhance their trading decisions.
Education
by UnknownUnicorn15614419
5
WHAT EXACTLY IS A TRADING EDGE?In the world of the forex market, having a trading edge can make all the difference between success and failure. A trading edge refers to a set of unique advantages or strategies that give us an increased probability of making profitable trades. It is the secret weapon that separates the winners from the losers in the highly competitive trading arena. In this post, we will explore some key elements that contribute to a trader's edge and how they can be effectively utilized. One of the crucial components of a trading edge is the ability to identify and execute high-probability setups. These setups are specific market conditions or patterns that have historically shown a higher likelihood of resulting in profitable trades. Traders with well-defined setups can quickly assess the market and take advantage of favorable opportunities. However, having a setup alone is not enough; we must develop a comprehensive strategy to guide our decision-making process. A trading strategy encompasses our overall approach to the market, including entry and exit rules, risk management parameters, and trade management techniques. A well-thought-out strategy provides a systematic framework to follow, reducing emotional decision-making and increasing consistency. To maximize our trading edge, we must pay attention to both pre-market and post-market analysis. Pre-market analysis involves evaluating market conditions and news events before the opening bell. This allows us to anticipate potential price movements and adjust our strategy accordingly. Post-market analysis helps review trades, identify strengths and weaknesses, and make adjustments for future trades. Keeping a trading journal is another essential tool for enhancing our trading edge. A journal serves as a record of all trades, including entry and exit points, reasons for entering the trade, and lessons learned. By regularly reviewing the journal, we can identify patterns in the decision-making process and refine our strategy accordingly. The market itself plays a significant role in our trading edge. Understanding the overall market sentiment, trends, and key levels of support and resistance can provide valuable insights for making informed trading decisions. Traders who stay informed about market dynamics are better equipped to adapt their strategies to changing conditions. The time of day and time frame chosen for trading can also contribute to our trading edge as well. Different trading strategies may work better during specific times of the day (sessions) or on particular time frames. Some traders prefer short-term intraday trades, while others focus on longer-term swing trades. Identifying the most suitable time frames and trading hours can significantly increase our chances of success. News events are another factor that can impact a trader's edge. Economic releases, corporate earnings announcements (for stock traders), and geopolitical developments can cause significant market volatility. Traders who stay updated on news events and understand their potential impact on the market can adjust their strategies accordingly or even capitalize on these events. Effective money management and risk management are vital aspects of maintaining a trading edge. Money management involves determining the appropriate position sizing and risk per trade, ensuring that losses are controlled and profits are maximized. Risk management techniques, such as setting stop-loss orders and trailing stops, help protect against excessive losses and preserve capital. Our first job is not to make a profit but to preserve our capital. Establishing a routine and following specific rituals can also contribute to our trading edge. A routine helps to maintain discipline and consistency in trading. Routines, such as reviewing charts, analyzing news events, and mentally preparing before each trading session, can help us get into the right mindset for making sound decisions. What do you do in the morning after waking up? Go straight to the chart? Meditate for 15 minutes? What are you going to do if a family incident occurs or if the power goes out? Creating a watchlist and trade plan is the final piece of the puzzle for enhancing our edge in the markets. A watchlist consists of potential trade opportunities that meet our setup criteria. By having a pre-defined list of stocks or forex pairs to focus on, we can avoid being overwhelmed by numerous options. A trade plan outlines the specific steps to be taken for each trade, including entry and exit points, risk management parameters, and profit targets. In conclusion, a trading edge is a combination of various elements that contribute to our success in the financial markets. By developing a set of high-probability setups, implementing a well-defined strategy, staying informed about market dynamics and news events, and effectively managing money and risks, we can gain a significant advantage in the markets. Maintaining a routine, following rituals, and having a watchlist—all of these become part of the trade plan that gives us an edge in the markets. And if we apply discipline and consistency to it, we have a much higher chance of being successful in trading. Traders, if you liked this educational post, give it a boost and write in the comments.
Education
by Lingrid
13
CHECKLIST AS PART OF THE TRADING PLANHello, friends! We all know that it is important to have a trading plan and a profitable strategy, and, of course, to follow them. Now, the issue of discipline and following your own trading rules is where most of the problems start. However, there is one simple tool, literally a piece of paper, that can help you significantly improve your discipline in trading and, as a result, your key performance indicators and profits. With that simple tool being the checklist. In this article we will talk about why it is important, why it is important for a trader and how to properly compile and apply it. Why do traders plan their trades? Great traders and world-famous investors plan how, when and why they are investing. They realize that to achieve their ultimate goal, they need a map outlining the route of their trading plan that will help guide them to make the right decisions at the right time. A trading plan will provide you with structure and help you develop discipline in your trading actions. It will help you track your trading process, assign responsibility and measure your success. It will provide you with a framework to clearly visualize your current situation at any given time, and will help you identify your goals, outline your strategy, and determine your risks and returns. Whether you are an experienced trader or just a beginner, a well thought out trading plan is sort of the vehicle you need to get to your destination. Not only is it important to have your trading plan, but it is equally important to stick to it. Some of us easily stick to it, while others are in a constant struggle with their concept and the reality of carefully following the rules, they have defined in their strict trading plan. Do you really have a trading plan that you would follow by properly executing your market entries and exits? I'm a big advocate that we should all have a clear system to support our decision making that will help us remain objective and unbiased about when to buy and sell. However, should any good system that you should follow be so unambiguous? Should you trust it or doubt it? Your discipline and commitment to your trading plan can be measured, reviewed and improved. You can incorporate key performance indicators into your trading strategy and determine how closely you follow your rules and trading plan. The number of mistakes you make based on aspects such as noise, emotion or oversights can be counted and questioned - as a result, you can improve your trading plan. Identify your mistakes by comparing when your system gives you a buy or sell signal, when and why you actually executed it. If most of your trades are not executed according to your system or rules, you may be managing your positions intuitively rather than following the rules. This approach to trading lacks consistency and will negatively impact your returns in the long run. At the same time, there are cases where trading based on emotion will minimize losses and lock in profits, but only a narrow range of professional traders have intuitively mastered this ability on a consistent basis. In the end, for the remaining traders, emotion-based trading does not work because it cannot be replicated, and it only leads to insolvency and frustration. What may work today will not work tomorrow and always. In addition, this kind of trading increases stress and creates bad habits for repeated indecision. If your trading plan is solid most of the time, then it is worth sticking to it. Thus, it is important to make an effort to check the reliability and stability of your trading plan before you start trading or increase your risks. Traders often abandon their plans when they do not have enough personal experience to follow the plans and thus naturally lack confidence. What would make it easier to follow your plan? So how do you follow your plan? One of the things that gets in our way is, oddly enough, our brain. We think and guess too much. From this we can assume that if we reduce the activity of our wandering mind and leave only logic, efficiency will increase. A good way to accomplish this is to make and print out a checklist for entering and exiting trades. What is a checklist? A checklist contains a number of necessary items for any work. In our case for trading. The checklist is used to check if all the conditions are in line with your market entry strategy. You tick each of the conditions, if at least one of them is not fulfilled, do not enter the market. Everything is very simple. Suppose your strategy is based on two indicators combined with support/resistance levels, you trade intraday, one of these indicators is a trend indicator and the other is an oscillator. Then your checklist could look like this: 1) Now American / London session? - Yes/No 2) Is there an entry signal on the X indicator? - Yes/No 3) Is the Y indicator in agreement with the signal of the X indicator? - Yes/No 4) Does the signal have a level support? - Yes / No 4) Isn't there another level in the way of the proposed trade, which will prevent it from reaching the target? - Yes / No 5) Is there no important news coming out in the next half an hour? - Yes / No 6) Am I feeling well right now (i.e. I am not sick, depressed, tired)? - Yes / No You run through this list and mark the items with a pencil. If the answer to all questions is YES then enter the trade. If there is at least one NO do not enter. Everything is so simple and you do not need to think. By thinking I mean the wandering mind mode, which leads to unnecessary trades, early entries/exits, etc. The checklist removes these mental "what ifs", "I guess", "it seems", etc. All items on the checklist match - enter. If at least one item doesn't match - don't enter. How to Make a Checklist for Your Strategy How to make a checklist? Very simple. Take the rules of your strategy and reduce them to a list of items so that against each item you can put a check mark, if the conditions on the chart correspond to it, or answer one-word Yes / No. I also advise you to include a point about your current moral state, because it is not worth trading when you are tired, sick, depressed, etc. Conclusion A checklist is essentially a checklist of items from your trading strategy and trading plan. Its purpose is to reduce the influence of a "wandering mind" on your trading. Also, the checklist helps you not to forget about anything. Every time, before opening a trade, run through each point on your list: if even one item does not correspond to the current situation - do not enter the market. And may the profit be with you!
Education
by DeGRAM
3
UNDERSTANDING DIVERGENCEWhat is divergence? Divergence in trading is one of the key tools used by us traders to analyze the market and make decisions about entering or exiting trades. It is based on observing differences between two different indicators such as price and oscillator. The advantage of using divergence in trading is that it allows us to identify possible market reversals in advance and take measures to protect positions. It can also be used to confirm other signals such as support and resistance levels or trend lines. However, it should be noted that divergence is not always a sufficient signal to enter or exit a trade. It should be confirmed by other tools and market analysis. It is also important to remember that divergence can be false and signal of a temporary deviation from the main market movement. We’ll explain it later below. How can we identify a divergence? We will use a bearish divergence as shown above as an example. A bearish divergence occurs when the price makes a new high, but the oscillator does not confirm this movement and makes a higher high. This indicates that the strength of buyers is weakening and a bearish trend is possible. We can use various oscillators such as RSI (Relative Strength Index), MACD (Moving Average Convergence/Divergence) or stochastic oscillator to identify bearish divergence. We have to observe the price movement and the oscillator values. If the price forms a new high but the oscillator forms a lower high, this could be a bearish divergence signal. However, for the divergence to work it must be at significant levels as mentioned earlier. We use market analysis techniques such as support and resistance, trend lines or trading volume if you trade stocks. This will help us to make sure the signal is reliable and make an informed trading decision. Types of divergences There are usually 2 types of divergence that can be used by traders to analyze the market: Trend Reversal Divergence and Trend Continuation Divergence . 1. Trend Reversal Divergence. This is the most common type of divergence that occurs when the price of an asset forms a new high or low and the oscillator does not confirm this movement and forms a lower high or higher low. That is, the price moves in one direction, but for example RSI in another direction as if hinting that this price movement does not have the strength that it had before. 2. Trend Continuation Divergence. This type of divergence occurs during a correction in a major trend. It can indicate that the primary trend may continue after the pullback is complete. If we have a market in moving against the main trend, this pullback should also have the strength/momentum that it should end. For example, if the price makes LL then HL, and RSI makes LL then another LL, it is a sign that the bearish movement (pullback) has no strength to move lower. There are several forms of divergence that can indicate different trend strength. Let's look at bearish divergence as an example: 1. Strong Divergence. In this case, the price forms a new high and the oscillator forms a much lower high. This is considered the most reliable bearish divergence signal and can indicate strong buyer weakness and the possible onset of a bearish trend. 2. Medium Divergence. Here the price barely makes a new high or turns into a double top and the oscillator on another hand makes a lower high. There is no super strong divergence in this case, it may indicate a less strong and weakening of the buyers and a possible trend shift. 3. Weak Divergence. In this case, the asset price forms a new high and the oscillator also forms a lower high, but the difference between the two is minimal. This can be a less reliable signal of a bearish divergence and in many cases, it can be a signal of trend strength. That is, we can expect a possible small pullback. Below you can see that UKOIL has made new highs but the RSI barely made lower high which confirms the strength of the trend. Example of hidden divergence In conclusion, divergence in trading is a powerful tool for analyzing the market. It allows traders to detect possible market reversals and make appropriate trading decisions. it is important to note that divergence can be a warning signal of a possible trend change, but it does not guarantee it. We should use additional tools and analysis methods to confirm the signal and make an informed trading decision.
Education
by Lingrid
15
PRICE ACTION: DOJI PATTERNWhat to do with Doji? Beginning forex traders, having come across the candlestick pattern Doji, get lost and start making rash actions. They close and open positions, change stop-loss, etc. Naturally, such rush leads to losses. So how to be with doji, what to do when such a candlestick appears on the chart? What is Doji? A doji is a candlestick that has equal or almost equal opening and closing prices. There should also be shadows on both sides of the candlestick that are about the same size. A doji indicates an agreement between buyers and sellers, or the absence of players, or a testing of a level. This formation can either be a reversal formation or it can lead to a continuation of the trend. We can say that the Doji is the yellow color of a traffic light. How to trade the Doji? The Doji candlestick pattern can be taken as a reversal signal only in one case. If the following conditions are met (simultaneously): • Doji was preceded by a strong, and clearly visible extended trend. • Before the doji there was a full-body candlestick of medium or large size (relative to the current chart) in the direction of the trend. • There is a confirmation, i.e. after the doji there was a candle opposite to the dominant trend. • Only if these three conditions are present, we can consider an entry against the trend after the doji appears. In all other cases, the doji is simply ignored. Stop Loss is placed behind the doji's extreme point, Take Profit at the nearest support/resistance level. Since the doji pattern is not strong, we do not take big targets. Important Points • It is highly desirable to have a support/resistance level as well as for any Price Action setup. • The doji maximum is a level, the break of which will mean that the trend is still in force. • Other timeframes should not be overlooked • On timeframes less than H1 the doji means NOTHING. • Always wait for confirmation • If the market is moving sideways, just ignore the doji. • Only the FIRST doji is important • Short shadows are desirable for a reversal UKOIL EURUSD Conclusion The Doji pattern is mostly just a confusing trading pattern. In 95% of cases, it should simply be ignored. You can only trade the Doji if you fulfill 3 conditions at the same time: a clear trend, a full-body, non-small candlestick in the direction of the trend before the Doji, and a confirming candlestick against the trend after the Doji.
Education
by DeGRAM
4