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Forex-trading-signals

EXPLAINING LIQUIDITY IN SIMPLE WORDSLiquidity plays a vital role in shaping market prices, particularly among large market players such as banks, hedge funds, and other influential entities. These entities, often referred to as market makers, manipulators, and others, are driven by their pursuit of liquidity. In fact, liquidity is the foundation upon which successful trading is built, and it's where traders should begin their journey. In the context of Smart Money Concepts (SMC), liquidity refers to the levels of asset price where multiple market participants have placed limit orders, stop orders, and liquidations. Stop orders are essentially reverse orders designed to mitigate losses by buying back positions that have gone against a trader's expectations. When a trader sets a Stop-Loss order, they're essentially trying to limit potential losses if the market moves against them. The concentration of stop orders creates a gravitational effect, making it attractive for larger players to gain an advantage. By identifying areas with high concentrations of stop orders, big players can exploit these liquidity zones to collect profits from retail traders who are unaware of these market dynamics. As a result, the movement of prices from one liquidity zone to another is driven by the actions of these powerful entities, ultimately shaping the market landscape. ❓ HOW TO IDENTIFY LIQUIDITY ON THE PRICE CHART? Before we dive into trading and trades, we must first identify obvious liquidity pools. These will be our closest target for the price to converge upon. There are several types of liquidity in the market: Equal highs and lows (EQH/EQL), which mark significant turning points Swing structural points, including notable highs and lows that can be significant drivers of market activity Boundaries in sideways price movement, such as ranges or sideways trends, where liquidity is concentrated Trend movement, where liquidity tends to accumulate below or above the trendline 📊 SIGNIFICANT PRICE HIGHS AND LOWS The SMC features six key extrema that significantly impact trading: • The previous month's high and low values • The previous week's high and low values • The previous day's high and low values • The current trading day's high and low values • Equal highs and lows, which can be particularly significant in determining market trends 📈 Equal Highs (EQH) or Equal Lows (EQL) 📉 The double bottom or double top candlestick formation is a common indicator of a potential price reversal. When the price reaches these formations, it typically signals a change in direction, with the price moving in the opposite direction. For retail traders, equal highs and lows are crucial levels of support and resistance, prompting them to place stop orders at these levels. These levels act as a gravitational force, attracting large capital flows and creating a significant amount of liquidity. When the price approaches these levels in reverse, it's not uncommon to see a cluster of stop orders forming, as traders anticipating a bounce from the level wait for the price to react. However, large players often take advantage of this expectation by executing stop-loss orders through a false breakout, ultimately triggering a price reversal. 💲 SIGNS OF A SUCCESSFUL LIQUIDITY GRAB Let's consider a buy scenario as an example. Traders identify a strong low price, and large capital players recognize an obvious accumulation of liquidity at this point. When the price returns to this low and breaks it, but without forming a full candle, the price closes above the broken low. To better understand this concept, let's examine the schematic representation of liquidity grab in buying scenario. Liquidity is a top priority for big players, known as “smart money”. A significant player is actively seeking to find it to secure their position. The reason is that if they were to open trades without sufficient liquidity, they would be exposed to price slippage, as there may not be enough buy or sell orders in the market to execute their trades efficiently. 🔎 IS IT A LIQUIDITY GRAB OR NOT? Distinguishing between a liquidity grab and a breakout of market structure is crucial, as they share similarities. In the case of a liquidity grab, the price fails to close at an important structural highs or lows, instead takes liquidity forming long tailed candles. In contrast, a breakout of the structure sees the price breaks and closes above or below new level. Notably, liquidity grab often precedes a price reversal, whereas breakout of the level typically perpetuates the underlying trend. 📍 TREND LIQUIDITY In a clear trending market, liquidity forms in both directions, at the lows and highs. Let's take a closer look at a downward trend movement. When we see the price moving downwards, we initially take liquidity at the lows, which has been building up since the price reached its maximum. Then, we take liquidity at the minimum, creating a natural flow. At the highs, we deliberately leave liquidity on purpose, allowing it to build up and eventually be taken away naturally. The liquidity at the lows acts as a price magnet, attracting a large player who begins to accumulate their position. In some cases, the price may form equal lows, known as a double bottom in technical analysis. This signals to traders that it's time to enter a trade, and they place stop losses above these levels. At this point, a major player manipulates the price, taking this liquidity and reversing the trend. The first target is then the trend highs, where liquidity is located – it was left earlier to be taken away. 📝 HOW TO WORK WITH LIQUIDITY? When working with liquidity, it can be a valuable tool for entering a trade, as well as helping to set a stop loss by avoiding arbitrary price levels. Instead, you can use liquidity to guide your trading decisions and create more informed stop-loss strategies. Moreover, take profits can also be placed on liquidity levels, as the price is constantly moving between these levels, making it essential to take profits before they're taken away. 💎 CONCLUSION The benefits of liquidity analysis extend to any time frame, whether it's weekly, daily, or even 1-minute charts. This means that liquidity can be effectively applied to analyze forex market, indices, cryptocurrencies and shares of companies for investment purposes, making it a versatile tool for traders and investors alike. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
23
XAUUSD Analysis (13th May 2024) Market Analysis PT2/2 (13th May 2024) XAUUSD Analysis On the daily timeframe, we have created a Change of Character to the upside at the 2352 level. Currently price is creating a pullback towards that key level. What i want to see is for price to come down lower towards the 2352 level before deciding whether to long or short. If price fails to create a 15 minute change of Character with a Body candle close above, i will be patient on longs and will be more short biased. However, if price action confirmations a retest of the 2352 level and creates a 15 minute Bullish CHOCH, i will be actively looking for longs to target the 2400 level.
FOREXCOM:XAUUSD
by CallistoFX
WHAT ARE REAL WORLD ASSETS (RWA)?Just 3-5 years ago, the concept of "real assets" was clear-cut - physical items that could be owned such as stocks, gold, and currency. On the other hand, "derivatives" referred to intangible assets like swaps, options, and CFDs that allowed for profit-making. However, the emergence of cryptocurrencies and blockchain technology has completely transformed this landscape. Not long ago, cryptocurrencies were seen as a separate entity, often labeled as a risky and unsecured financial scheme. But today, they are being recognized as valuable commodities and even as securities. What's even more fascinating is the rise of a new category - Real World Assets. 💡 Real World Assets are a unique category of financial instruments that are based on blockchain technology. 💹 Real World Assets is a market where real world assets are tokenized on the blockchain. These tokenized assets, which we refer to as real assets, are essentially moving traditional assets into decentralized financial applications. The goal is to leverage technology to potentially lower fees and management costs associated with these assets. 📍 REAL WORLD ASSETS EXAMPLES: ➡️ Stablecoins are a type of cryptocurrency that are centralized and backed by real assets. For instance, Tether's USDT is backed by stocks, government bonds, and fiat currencies, and undergoes some level of auditing. This process is known as tokenization, where the value of the collateral is denominated in stablecoins equivalent to fiat money. The pegging ratio is 1:1, meaning that the value of the stablecoin is directly tied to the value of the underlying assets. Any fluctuations in the value of the assets are balanced out by adding more collateral to maintain the stability of the stablecoin. 🔴 One major drawback of this model lies in the vulnerability to fluctuations in exchange rates of the real asset. In the event that stocks experience significant drawdowns of 20-30%, it is essential for the collateral to be able to mitigate this risk. Furthermore, as the stock value increases, Tether continues to issue additional USDT. Traders are already familiar with the challenges of decoupling stablecoins from their corresponding assets, particularly in the case of centralized stablecoins as opposed to algorithmic ones. ➡️ Private lending, specifically in the form of decentralized lending, has seen a significant player emerge in the form of DAO MakerDAO, the issuer of the DAI stablecoin. In a major move, this startup secured a hefty $100 million credit line with a US bank in mid-2022, backed by real assets as collateral. The startup was able to profit from this arrangement with an impressive 3% annual return. It is noteworthy that regulators did not pay attention to this deal. ➡️ Government bonds are a popular choice for investors seeking stability. Some companies have taken this a step further by issuing stablecoins that are backed by government securities. For example, Ondo Finance offers the USDY stablecoin, while Mountain Protocol offers USDM, which is based on Ethereum. These startups manage stablecoins backed by U.S. Treasury bonds, considered one of the most reliable instruments in the market. Investors can also earn passive income of 5% on top of the stability these investments offer. ➡️ Tokenized securities are on the rise, although the market has not yet reached its full potential. Bitfinex exchange is at the forefront of this trend, with their subsidiary launching the first tokenized bonds in October 2023. These bonds offer investors a tempting yield of 10% and a three-year maturity period. In essence, these tokenized securities work much like traditional bonds, where investors trade tokens for a share of the security and receive passive income in return. 🔴 Investors should be intrigued by the inquiry into how the issuer plans to allocate the funds raised and where the profit is being generated from. This question remains unanswered, as the tokenization process is still evolving. By 2024, HSBC, the British bank, is gearing up to introduce a service for managing tokenized bonds. In October 2023, JPMorgan and Barclays, along with investment firm BlackRock, unveiled a platform for transforming shares into digital assets called the Tokenized Collateral Network. ➡️ Green tokens are an emerging trend in the world of digital assets, with artificial intelligence specifically identifying them as a key player in the future. An interesting fact is that KlimaDAO, a startup backed by billionaire Mark Cuban, ultimately did not succeed in its mission to raise funds to incentivize companies to reduce their emissions. Despite this setback, the concept of green investments and tokens is likely to become a prominent tool in the future. This new form of investment may revolutionize the way companies approach sustainability and incentivize environmentally conscious behaviors. Stay tuned for more developments in the world of green tokens. ➡️ Paxos, a startup in the cryptocurrency industry, has made a connection to precious metals through the creation of gold tokens. Pax Gold has successfully replicated the value of physical gold, allowing investors to easily participate in the gold market without the need to purchase actual bullion or deal with brokers and confusing financial instruments like CFDs and swap fees. By purchasing PAXG cryptocurrency, investors can securely store it in a cold wallet, minimizing the risks associated with exchange bankruptcies or broker insolvencies. ➡️ In January 2023, the real estate startup MarketDAO facilitated a $7 million loan in cryptocurrency DAI to a French conglomerate. The loan was backed by mortgage bonds worth $40 million in US dollars. While this practice is still inconsistent, it marks the beginning of a promising trend in the real estate industry. ➡️ Paintings, sculptures, and other works of art, as well as collectibles, have long been valued for their beauty and uniqueness. The original concept behind NFTs was to revolutionize ownership by tying it to the blockchain, thereby ensuring copyright protection. In 2021-2022, we witnessed the initial steps towards digitizing and transferring paintings onto the blockchain. The future of this trend remains uncertain, but the concept has proven to be functional and shows promise for the art world. 🔴 The prospects for Real World Assets are significant and promising. However, accurately assessing these prospects is currently difficult as the tool is still in development and has not yet found its niche. Several factors are necessary for its success. 1️⃣ Firstly, there needs to be greater user engagement in cryptocurrency and digital technologies. Despite the widespread availability of the internet, not everyone has sufficient knowledge about these topics, let alone blockchain technology. 2️⃣ Secondly, there needs to be real interest and potential benefits from the tool. This can manifest in various ways, such as generating profit or simplifying certain actions. For example, the tool could speed up data transfers, protect copyrights, and make it more accessible for everyday users. Users must see the usefulness of the tool for it to be successful. 📍 CONCLUSION Currently, the reality is that the global market is valued at hundreds of trillions of dollars, a figure that the cryptocurrency market cannot compete with. For instance, as of 2020 estimates, the worldwide real estate market is valued at approximately $326 trillion in US dollars. According to RWA.xyz, the funds locked in blockchain technology total $4.5 billion, with just over $500 million in loans issued. However, the revolution of Real World Assets technology is on the horizon. In the next 1-2 years, this tool will begin gaining traction among the masses, similar to the rise of artificial intelligence in 2023. It is predicted that in 5 years, RWA technology will reach its peak of popularity. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
2
“DRAGON” PATTERN IN TRADINGAs we dive into studying price action, we can't help but be intrigued by the interesting names given to various patterns. Names like "Two Rivers" and "Shooting Star" not only sound captivating but also accurately describe the patterns they represent. In this post, we'll introduce you to another powerful pattern known as the Dragon. This pattern, belonging to the reversal patterns, is not only commonly found in the Forex market but is also highly effective. 💡 HOW THE DRAGON PATTERN IS FORMED? The pattern has known points, without which the formation is not possible: HEAD LEFT FOOT RIGHT FOOT HUMP TAIL Each of the points, should be placed in the specified place, without distortions and various force majeure. The Dragon pattern is a reversal pattern in the forex market. In order to successfully trade the Dragon formation, it is crucial to have a clear understanding of the important data associated with it. 📍 Firstly, in a downtrend, you must identify the last local lower high, which will serve as the head of the Dragon pattern. Subsequently, the market will continue to decline and reach a specific level that it cannot surpass, marking the left foot of the formation. 📍 The Dragon's Hump is then formed through a corrective movement from point 1 to point 2. It is essential that this correction does not exceed 38.2% to 50%. Following this correction, the market should attempt to retest the previous lows, ideally failing to do so. This failure indicates a potential shift in momentum, allowing for a buying opportunity. 📍 Drawing a trendline from the head to the hump serves as a signal line. Once this trendline is broken, the Dragon pattern is confirmed, signaling a long position entry. 📍 Setting a Stop Loss below the dragon's feet helps to manage risk, while the first target is set at the level of the hump and the second target at the head. Take Profit levels can be set at these targets to maximize profitability. Another possible scenario is when the bears successfully bring the market below the initial support level. Personally, I find this detail somewhat undermining to the pattern. In such a situation, it can be interpreted as follows: if the bears succeed in pushing the market to new lows, it indicates that they may not be as weak as they seemed at first, which encourages caution in buying. However, if the price returns above the last local low and creates a false breakout with a bullish divergence, it can be considered a strong signal. The bullish reversal pattern Dragon has its counterpart in the bearish reversal pattern known as the Inverted Dragon. Just like its bullish counterpart, the Inverted Dragon follows similar patterns and characteristics, so there is no need to describe it separately. As mentioned earlier, these patterns are named for their resemblance to real-life examples, and I have included a chart overlay in the screenshot below for reference. It is essential to have a strategy and a set of rules when considering any reversal combination in forex market. As many books suggest, patterns often form at the bottom of the market. Although the market bottom may shift quickly, it is important to stay disciplined and adhere to the rules. The concept of identifying the market bottom involves recognizing key levels where the market has previously rebounded. If a price has bounced off a certain level in the past, there is a higher probability of it happening again in the future. Therefore, it is crucial to look for potential patterns, such as the Dragon pattern, when the price nears a support level (for bullish patterns) or a resistance level (for bearish patterns). 📒 TO AVOID MISIDENTIFYING PATTERNS, IT CAN BE HELPFUL TO FOLLOW THESE GUIDELINES: 1️⃣ Start by identifying the current trend movement. In a downtrend, look for a dragon pattern, while in an uptrend, look for an inverted dragon pattern. 2️⃣ Remember that price reversals are more likely to occur at important levels. Without a significant level, there may not be a reversal. 3️⃣ Pay attention to the hump of the dragon pattern, ensuring it does not exceed 38.2% to 50% of the distance from the head to the left foot. 4️⃣ Consider the length of the right foot, which should be 5-10% of the distance from the left foot. Ideally, the right foot should be higher, but it can also be lower. 5️⃣ If there is a trendline breakout, take your time before opening a trade. Assess the potential gain and compare it to the expected loss. If everything checks out, go ahead and take the trade. 📊 USING THE DRAGON PATTERN IN TRADING As you can see, identifying the pattern is not difficult at all. Remember the key rules: The hump should be between 38.2% and 50% of the head, indicating left foot movement. The right leg should be aligned as closely as possible with the left foot. Most importantly, pay attention to the pattern at significant levels. The appearance of a pattern does not guarantee that the trend will reverse, but it is considered a strong signal. It is important to make sure that the pattern is formed on a sufficient amount of data. Take into account other factors such as fundamental analysis and the market context. ✅ BOTTOM LINE The Dragon pattern is widely recognized as a strong indicator of a trend reversal, making it a valuable tool for traders looking to capitalize on market movements. While it can be a helpful guide for entering trades in line with the anticipated trend, it is important to remember that no technical indicator is foolproof and a pragmatic approach is always advised. In addition to the suggested rules, it is essential to incorporate your own money management strategies to ensure profitable implementation of the Dragon pattern. Your feedback and any further perspectives are welcomed. Thank you for your time and input. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
WHAT ARE THE DIFFERENT TYPES OF STABLECOINS?👋 Hello everyone, today we will be discussing stablecoins, which currently have a market capitalization of around $160 billion. Those who are not very familiar with cryptocurrencies often use stablecoins for various purposes such as making payments, storing money in a stable currency as an alternative to the US dollar, and for international transactions as well. However, stablecoins actually have a wide range of potential uses beyond these basic functions. In this post, you will learn about the different types of stablecoins available in the market. 💎 DIFFERENT TYPES OF STABLECOINS, THEIR APPLICATIONS, AND POTENTIAL RISKS The type of stablecoin and its purpose are typically defined by the developer, who also establishes the asset to which it is pegged, and creates the system for issuing and burning coins. Stablecoins that are listed on the top 20 exchanges globally in terms of capitalization are the ones that garner the most interest. 💎 SECURED BY FIAT WITH A PEG TO A SPECIFIC CURRENCY Binding can be done in various currencies such as USD, EUR, and others. One of the most well-known coins for binding is Tether. According to its developers, the coin is fully backed by real currency, stocks, bonds, and low-risk assets. ⚠️ However, there are risks involved with backing. For instance, Tether has faced challenges with verifying its backing. The company was not forthcoming in providing all necessary information to auditors. As a result, there are doubts about whether the security can serve as a protection fund in times of unexpected events. In another example, the second largest USDC stablecoin pegged to the USD fell below 87 cents in early March 2023. This drop was widely attributed to the bankruptcy of Silicon Valley Bank, where the startup had held approximately $3.3 billion in collateral. While the situation has since been stabilized, the potential for another bank failure to affect the value of a stablecoin remains a concern. 💎 SECURED BY A SPECIFIC ASSET One example of this is the PAXG coin, which is backed by physical gold. This means that the value of the coin is directly linked to the price of gold, eliminating the need for complicated stock market investments or futures trading. By simply purchasing the coin, you can potentially earn money. ⚠️ However, there are risks involved, particularly regarding security. The price of PAXG is not determined by traditional supply and demand forces, as it is tied to the value of gold regardless of the number of tokens in circulation. The algorithm controls the number of tokens, but there is uncertainty about whether the startup behind the coin will fulfill its obligations in case of unforeseen circumstances. 💎 ALGORITHMIC STABLECOINS One of the most complex models of operation to comprehend is the concept of stablecoins. These digital currencies are built on computer code, which is essentially an algorithm that governs the creation and destruction of coins. There are primarily two types of algorithmic stablecoins 1️⃣ The first type operates without any external backing. When the price of the stablecoin rises, the algorithm mints more coins. Conversely, when the price drops, it burns existing coins. This mechanism seems logical from an economic perspective, but it becomes problematic during times of crisis when everyone rushes to convert their virtual coins into real money. ⚠️ There are inherent risks associated with algorithmic stablecoins as they lack any physical backing. When you purchase stablecoins by providing USD, the developers may use the funds as they see fit. You can only expect to retrieve your investments if someone else injects more USD into the system. The story of Do Kwon and his Luna stablecoin serves as a cautionary tale of such a pyramid scheme. 2️⃣ The second type of algorithmic stablecoins introduces a more sophisticated concept, exemplified by the workings of DAI created by the startup MakerDAO. The innovative approach involves a redundant reservation system, where the responsibility of securing the collateral lies with the user rather than the developers. Each user can mint a DAI coin, pegged to the value of 1 USD, by locking up another cryptocurrency as collateral in excess of 100%. This surplus serves as a safety net in case the value of the pledged cryptocurrency experiences a significant drop, potentially by 50% or more. If the value of the collateral falls below the 100% threshold, the investor's position is automatically liquidated. Notably, developers have no control over the issuance of DAI, with the stability of its price reliant on the collateral provided by users. ⚠️ Despite the innovative approach, there are inherent risks involved. A sudden decrease in the value of the collateral cryptocurrency can result in standard "slippages", where users not only lose their collateral asset but are left with a stablecoin experiencing a drastic devaluation from 1 USD to just a few cents. 💎 WRAPPERD STABLECOINS One popular example is Wrapped Bitcoin (WBTC). Bitcoin and Ethereum are the two largest platforms, but they are not compatible with each other. Developers who deploy startups on Ethereum find that their users also work with BTC as a reliable investment tool. WBTC was created as an intermediary to bridge this gap. The coin is deployed on the Ethereum network and is tied to WBTC in a 1:1 ratio. ⚠️ However, there are risks involved in using WBTC. As it belongs to people, there is a lack of decentralization. Only the portion of WBTC that is in demand is secured, leading to a smaller capitalization compared to bitcoin. The extent to which this network can be trusted is a complex question that requires careful consideration. ✅ CONCLUSION Stablecoins are an effective asset when utilized as a medium of exchange rather than as an investment, unlike gold-backed coins which function more as an investment tool. These coins provide protection against price fluctuations as they are linked to a stable asset. However, they still carry similar risks to altcoins such as detachment from the collateral, a decrease in the collateral's book value, and potential fraud by developers. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
BTC Analysis (27th April 2024) Crypto Analysis (27th April 2024) BTCUSD Analysis On the 4 hour timeframe, price action has swept the buyside liquidity and created a bearish Change of Character, leaving behind a large 4 hour bearish FVG. Price retraced into the fvg, respected it and continued to create a 4 hour Bearish BOS. Dropping to the 1 hour timeframe, price has created a 1 hour Bearish unmitigated orderblock we can look to take sells from if bearish confirmations shows after testing the OB. Else, if price decides to break past the bearish OB, we can capitalise on a break and retest to continue higher.
BINANCE:BTCUSDShort
by CallistoFX
SIMPLE STEPS IN CREATING A TRADING SYSTEMTrading system and strategy are often equated, but this is not quite right. Both a strategy and a trading system is a single algorithm of actions, including the process of searching for signals and opening trades. But strategy is often understood as following certain rules, while a trading system is a combination of technical, fundamental and psychological components. In other words, the creation of a trading system implies a combination of several strategies that work depending on the situation and their combination with external factors (emotions or news). 📊 CREATING A TRADING SYSTEM Creating a trading system is the basis of trading. No one prevents you from finding interesting strategies on the Internet, but a trading system is the very core that defines a trader's personality. After all, all people are different. A system is a set of rules, which takes into account the risk appetite, psychological qualities, and way of thinking. The market is influenced by hundreds of different variables, and in order not to drown in the flow of information, it is necessary to identify the basic path and the most influential factors. Building a trading system starts with choosing a narrow niche, which can/should then be gradually expanded. 📝 THE TRADING SYSTEM SHOULD ANSWER THE FOLLOWING QUESTIONS: • What is currently happening in the market? • What can happen in a fixed period of time? • How can a trader use the obtained information and forecast at the moment? There are several basic variants of price action, which most often form the basis of trading systems: 1️⃣ TREND FOLLOWING When it comes to trend following, the key is to pinpoint the start of a trend and monitor any corrections without mistaking them for a trend reversal. This strategy typically utilizes tools such as wave analysis, patterns, and support&resistance levels. Trend following strategies are commonly implemented on an intraday basis. 2️⃣ BREAKOUT OF RESISTANCE AND SUPPORT LEVELS The direction of the trend is not the key focus. What truly matters is the price breaking through significant levels. The primary challenge lies in distinguishing between a genuine breakout and a false one. 3️⃣ TRADING INSIDE THE CHANNEL This is an alternative to the second option. If the price does not break through the level, it returns to its average value. The main tools are the same levels, oscillators, channel indicators. Additionally, it is important to consider time allocation when creating a trading system. It is crucial to determine the timeframe that best suits your trading style and objectives. Different timeframes, such as intraday, mid-term, and long-term, offer various opportunities and challenges in the market. Understanding how to effectively allocate your time based on your chosen timeframe will help you make well-informed trading decisions: Intraday. Trades are opened and closed within the day with savings on swaps. They can also include scalping. But if scalping is a high-frequency exhausting trade, then intraday means strategies with the frequency of opening trades up to 3-5 per day. Mid-term. Can be held for several days, less often - several weeks. They have a strong dependence on the fundamental factor. Long-term. One of the investment options, providing for the creation of a diversified portfolio of different types of assets. ✔️ The trading system should also answer the following questions: Which asset optimally corresponds to individual preferences (level of average daily volatility, liquidity, winrate, principle of using leverage/margin percentage). What are the main parameters of the risk management system: risk level per one trade and for all open positions, lot calculation formula, etc. What timeframes and technical/fundamental analysis tools to use. What signals correspond to a successful point of opening a trade. At what moment to close trades. ✔️ All these points are obvious, but it is the lack of a clear plan that causes mistakes and panic. A trading system plan is a kind of "road map", which provides for: Different combinations of risk management system parameters. It is not necessary to stick to one risk control strategy. Sometimes an increase in risk is justified. Flexibility is important. Scenario in case of deviation of actual results of the trading system from statistical results (obtained during testing). Behavior in different emotional states. Sources of reliable information. Order of actions in case of force majeure. 📍 In conclusion , developing a trading system is essential for any trader looking to achieve success in the financial markets. A well-thought-out trading plan with a systematic approach helps traders make informed decisions, manage risks effectively, and stay disciplined in their approach. To trade without a plan is to hope for luck, and luck is not comparable with the theory of probability. Therefore, do not neglect the trading plan.
Education
by Lingrid
5
GBPJPY Analysis (16th April 2024) Market Analysis PT2/2 (16th April 2024) GBPJPY Analysis On the 1 hour timeframe, price action created a bearish Change of Character after rejecting off a psychological level at 192.700. In the process of forming a 1 hour CHOCH, price also created as 15 minute orderblock that hasnt been tested. I am expecting price to retrace towards the 15 minute unmitigated orderblock before looking for potential sell confirmations during the london session. Do keep a lookout for this potential set up!
Short
by CallistoFX
BITCOIN HALVING MYTHSIn a week, another bitcoin halving is expected to take place, which is expected by many cryptocurrency traders. Cryptocurrencies are still a dark horse for traders: sharp price fluctuations in both directions, high volatility attract traders with the supposed simplicity of making money. And although many consider the industry a bubble, there are still enthusiasts willing to take risks. What Is Halving In Simple Words? 📜 Halving is a reduction for rewarding miners for performing operations on the bitcoin blockchain network. Currently, the reward for solving equations for a block of data on the blockchain is 6.25 bitcoins. After halving, it will be cut exactly in half to 3.125 bitcoin. Basically, miners act as accountants in the blockchain network or as an equivalent of the collective Central Bank in the blockchain and serve as a guarantee of transparency and veracity of information: it is impossible to fake it in one block without other miners noticing it, but it is necessary to fake the entire chain of operations in the entire blockchain, which is practically impossible. Miners are responsible for processing all transactions: if there were no miners, there would be no new bitcoin transactions. How Bitcoin's Halving In 2024 Will Affect The Price? 📈📉 Bitcoin's halving in 2024 is one of the most expected and discussed events of the first half of this year. In most cases, analysts cannot clearly explain why the price of BTC (and subsequently other alts) changed, finding unconvincing reasons in hindsight. Therefore, the upcoming event is a reason to try to predict the future behavior of the price before it happens. Halving is a halving of miners' profits. That is, a miner bought expensive equipment, spends electricity in the hope that each block will be rewarded with 6.25 BTC. But then halving occurs and now the reward per block is 3.125 BTC. In theory, halving means that fewer coins will be mined and some miners will leave the market altogether. This will be followed by an increase in the scarcity of BTC, and therefore an increase in its price. At least, this is how optimists explain the growth of BTC price after halving. But the question is: how will the reduction in the volume of its production contribute to its price increase? 1️⃣ The Approaching Halving Is Already Priced In . This myth is taken from the fundamental analysis of stock market if investors are sure that, for example, if the Fed's interest rate is going to be exactly changed in a month, they buy or sell dollars in advance. However, this does not work in cryptocurrencies for several reasons: ✔️ Halving is embedded in the blockchain and for BTC it is done every 4 years. But that doesn't mean it is already factored into the pricing. ✔️ There are very few people involved in mining. And it is not a fact that investors are basically aware of what halving is and when it will take place. Short-term speculators may still be interested in this information. Those who bought BTC with the expectation that someday it will rise again (or did not sell it after a fall) are hardly interested in it. ✔️ The role of mining in the share of speculative circulation is not high. Market makers rule the market, which can simply squeeze miners with capital. 2️⃣ Bitcoin's Price Will Fall. The halving of bitcoin in 2024 may indeed affect the prices, but not as drastically as many investors would like. An argument in favor of a fall is the example of LTC, which got cheaper before halving profits. Compare the volumes of LTC and BTC, which occupies more than 54% of the entire cryptocurrency circulation. LTC is a speculative instrument, whereas BTC has a large share of long-term capital. 3️⃣ Halving Will Lead To The Annihilation Of The Mining Industry . Supporters of this myth argue that mining is becoming less and less profitable. In addition, more and more startups are being developed on more modern algorithms that do not involve mining. In reality, existing miners aren't going anywhere. Those who have already invested money in it will continue to "recoup" their costs. There will be no influx of new miners, so the mining industry will eventually disappear on its own. But halving will definitely not be to blame for this. ✅ Conclusion Halving bitcoin's price can affect the price significantly. The price may shift to one side or the other, but there are enough fundamental factors for growth, but not for a fall in price. Therefore, it is very likely that this event will be noticed.
Education
by Lingrid
4
EURJPY Analysis (12th April 2024) Market Analysis PT2/2 (12th April 2024) EURJPY Analysis On the 4 hour timeframe, price action has created a a nice support and resistance of about 40 pips wide. This tells us that price on EJ is currently consolidating. There are 2 potential scenarios here: 1) Price pushes higher, breaking through the 4 hour resistance, and retesting it before going higher. I am leaning towards a bullish Bias due to how the higher timeframe on the weekly and daily is also bullish. 2) IF price decided to break the support, i will wait until the over all Daily Orderblock fails, before looking for potential Sells.
by CallistoFX
DEMO KING SYNDROME: DISADVANTAGES OF A DEMO ACCOUNTThis post is directed towards novice traders who harbor the belief that honing trading skills and mastering profit-making strategies is achievable solely through practice on a demo account. However, the unforgiving reality of statistics paints a stark picture: approximately 65-80% of novice traders find themselves facing financial losses within the initial months of transitioning to a real trading account. Surprisingly, the extent of practice on a demo account beforehand appears inconsequential in mitigating these losses. If your aim is to cultivate profitable trading abilities while safeguarding your account from losses, relying solely on a demo account will inevitably fall short of achieving this goal. DISADVANTAGES OF A DEMO ACCOUNT 🚫 A demo account works like a simulator, allowing you to do everything you would on a real account, but with virtual money instead of real funds. In essence, it's designed to help you get comfortable with the trading platform. PSYCHOLOGY 🧠 Trading on a demo account provides a risk-free environment, shielding traders from the consequences of losing real money and thus alleviating mental strain. Consequently, traders might exhibit a tendency towards more aggressive decision-making compared to their approach on a live account. In the absence of mental pressure and the fear of missing out (FOMO), errors are less likely to surface. IT IS IMPOSSIBLE TO STUDY THE PSYCHOLOGY OF TRADING 📝 One of the pivotal aspects of successful trading lies in the adept management of emotions. Yet, it's widely acknowledged that the emotions experienced on a demo account pale in comparison to those felt on a live one, making it challenging for traders to grasp how these emotions influence their decision-making. When a trader initiates a trade, it's akin to embodying a different persona altogether. A demo account falls short in providing a crucial element: it fails to address the fear associated with taking the first step into live trading; instead, it perpetuates hesitation. Every time a trader deliberates on transitioning to a real account, excuses surface: "I'm not quite prepared yet," or "I need to further refine my strategies," and so on. Despite spending an indefinite amount of time on a demo account, the leap to real trading remains elusive. NO NEED TO CAREFULLY OBSERVE RISK MANAGEMENT 📊 There's often a tendency to overlook the importance of diligent risk management. Why bother calculating the risk percentage for each trade or determining the stop loss length when there's no fear of losing money from a demo account? After all, it's easy to replenish virtual funds at any time. Consequently, even if a trader sets out to learn about risk calculation, they may approach it with less seriousness at a subconscious level. Consider this: A trader may achieve impressive gains, perhaps even exceeding 20%, in a single trade on a demo account. But can they replicate the same success on a real account? SLIPPAGES 🔢 Slippage is a critical consideration in trading dynamics. On a live account, brokers source quotes from providers, and ensuring that traders receive these quotes with millisecond precision is technically advantageous for the broker. This precision becomes paramount in algorithmic trading, where even a split-second delay can translate into a significant price shift of several pips. Conversely, in the controlled environment of a demo account, trades are executed seamlessly. However, it's essential to note that slippages, especially those spanning several points, can markedly impact outcomes, particularly in high-frequency trading strategies like scalping. The primary distinction lies in the timeliness of quote delivery: traders on live accounts benefit from real-time, accurate quotes, whereas those on demo accounts may encounter delays. COMMISSIONS $ On a demo account, commissions are often not fully accounted for. ALL FUNCTIONS OF THE TRADING PLATFORM ARE NOT ALWAYS AVAILABLE 🖥️ It's worth noting that not all features of the trading platform are consistently available on demo accounts. Certain brokers might opt to limit access to specific functions on these trial platforms, perhaps as a means of encouraging traders to transition to a live account. However, it's important to recognize that a demo account holds intrinsic value. It serves as a practical tool for grasping the fundamental concepts of trading. Particularly for those who are new to the platform, a demo account offers a risk-free avenue for gaining familiarity. Moreover, viewing demo trading as a game of chance is not uncommon. Just as some individuals enjoy racing or strategy games, others find satisfaction in virtual trading simulations. Over time, engaging in this activity can gradually pique interest in trying one's hand in the real market. CONCLUSION 💡 Novice traders often perceive a demo account solely as a simulator for mastering the art of profitable trading, which is a misconception that frequently results in losses when transitioning to a real account. However, the true purpose of a demo account is twofold: first, to acquaint oneself with the functionalities of the platform, such as executing trades, calculating trade volumes, and utilizing indicators; and second, to test trading strategies. If a strategy proves to be unprofitable on a demo account, it's highly likely to yield losses on a real account as well. Conversely, even if a strategy yields positive results during demo testing, there's no guarantee of success on a real account. The true mastery of trading with financial assets can only be attained through experience on a real account. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
6
WHAT IS THE BEST TRADER MINDSET?Optimism, pessimism and realism which trader's mindset is better? The answer seems obvious: optimism. Optimistic traders overestimate their strength and the situation, pessimists do not believe in their strength, so the best is common sense realism. The realistic version of the world perception implies assumption of both favorable and unfavorable variants of the event outcome. But on the other hand, realist traders miss the opportunities that optimists see and underestimate the risks. All three types of trader's thinking have their own strengths and weaknesses. WHICH TYPE OF TRADER'S MINDSET IS THE MOST PRODUCTIVE? 1. Optimism "Think positive", "Set yourself up only for success" such motivational mottos are in every trading book. An optimistic attitude has many advantages: Optimist traders are better motivated. They believe in success, so they set the bar higher. Optimist traders are better at dealing with negative emotions. Optimist traders are more confident in their abilities. Optimist traders' brains are programmed in advance for a positive outcome. All of this is good as long as it is within the bounds of common sense. And often the boundary between common sense and unhealthy thinking of a trader is not visible. And as soon as optimism crosses the boundaries of adequacy, problems begin: Ignoring danger. Imagine a person who confidently drives through a red light, thinking that nothing will happen to him. The only thing left to do is to convince other drivers of this. Overestimating possibilities. The set goals turn out to be unattainable. And trying to achieve them leads to burnout. Denial of the need to solve problems. The optimist believes in the best, but problems do not go anywhere. And someday their volume will become critical. Everything is good in moderation. An optimist is inclined to work harder, but he is also inclined to take unreasonable risks. 2. Pessimism The strength of pessimism is the ability to assess risks and minimize them. Pessimist traders are more cautious. They try to double-check everything 10 times, so they are less likely to take risky actions. However, they also earn less. A pessimist trader tries to diversify risks, thinks through several ways of retreat. Pessimism goes to the extreme, when a trader thinks that everything is bad and it will be even worse in the future. They blame others for failures, as they cannot find the strength to admit his mistakes. They have no motivation; they live in constant expectation. 3. Realism The sweet spot? Not a fact. The realist trader does have a sober assessment of the risks without going overboard. But they also have extremes: Fatalism. While optimistic traders believe in the best, realists follow the path of pessimistic traders. They accept reality, believing that this is fate. Realist traders do not fall into stress, but do not believe that the situation can be changed for the better. Pragmatism. Realist traders think that a bird in the hand is worth two in the bush. They effectively solve current problems, but trying to look at something bigger is out of the question. Rationalism. Algorithmic, schematic thinking of the trader is manifested in other aspects of life. Which type of trader's mindset is the most productive? All three types in one trader, from which the best is taken. Moderate optimism in achieving goals, moderate pessimism in assessing risks, moderate realism in building a system. And extremes are best avoided. In conclusion, each of these traits has its strengths and weaknesses, but when combined in moderation, they can create a well-rounded approach to trading. Optimism provides motivation, confidence, and a positive outlook, which can help traders set higher goals and persevere through challenges. Pessimism, on the other hand, can help traders assess and minimize risks, promoting caution and careful decision-making. Realism offers a sober assessment of situations and helps traders develop practical solutions to problems. Ultimately, the most constructive trader's mindset is one that leverages the strengths of each of these traits while avoiding their extremes. When you lose a trade, don't think too negatively. When you win, try not to get euphoric. Extreme emotional swings will push you into the abyss. Therefore, the most constructive trader's mindset is a balanced combination of optimism, pessimism, and realism. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
9
WHAT PIVOT POINTS ARE IN SIMPLE TERMSLet's start with the fact that Pivot points are quite an old tool and have been used for a long time. The difference is that in the early days traders had to build Pivot points themselves, but today there are indicators that build these points. ✴️ BASIC CONCEPTS Pivot points are key points of price chart reversal, i.e. the place from which the price chart is most likely to reverse. Different pivot points have different calculation formulas. This is very similar to Fibonacci, as there are no clear criteria and several possible courses of action. The following is a list of the most popular calculation of data: 1. Traditional is the very first method of calculation, still popular in the stock exchange; 2. Classic derived from traditional, slight differences in calculations; 3. DeMark is the formula developed by the SAC Capital Advisors fund; 4. Woody the formula heavily references the previous day's closing price; 5. Camarilla derived from the classic one, slight differences in calculations; 6. Fibonacci is based on the Fibonacci formula. Of course, the points don't always work and they have false signals, but how to filter let's figure it out. There are also Pivot points like this, these are just the ones built using the traditional formula: ✴️ TRADING STRATEGIES We intentionally did not write each formula, as this information is fully available on the Internet and not everyone is interested in it. The most interesting thing is to learn how to use these indicators in practice, which we will do now. If we think logically, there can be only two strategies: Strategy for level breakout; Strategy for the level rebound. That's all, there is nothing else to think of. ✴️ LEVEL BREAKOUT STRATEGY For the breakout of any level, you need to take into account several details: 1. The quality of the breakout, i.e. the presence of an impulsive movement; 2. The trend moves in the direction in which the breakout occurred, i.e. the exclusion of a false breakout; If these factors are met, then we can say that the breakout is real and it is worth looking for an entry point. Ideally, it should be like this: Obvious consolidation above the control resistance by pivot points. Stop in this case is placed slightly below the breakout candle, take profits can be stretched by a grid between the Pivot points above. That is, if there was a trade, it would look like this: ✴️ LEVEL BREAKOUT STRATEGY The strategy for level breakout should also be accompanied by some additional model. For example, it can be a pinbar, RSI divergence and so on. That is, you can choose many variants, the main thing is the presence of a reversal level nearby. In the simplest form, it should look like this: As you might expect, there are 3 factors to enter the trade and not to buy here would be a much bigger risk than to stay on the sidelines. There is RSI divergence, there is double bottom by candlestick analysis, there is Pivot level, risk/profit ratio is very good. It looks like this: ✴️ CONCLUSION The pivot point indicator is a great way to find trend reversal points and corrections, for example, you can combine it with Fibonacci levels and find out the end of a correction more precisely. Try it, trade, the indicator is very easy to use and understand. Successful trading and good luck in the markets!
Education
by DeGRAM
1
FAKE BREAKOUTS IN CRYPTO MARKETSHello traders! 👋 How often has it happened to you that you watch a certain level and wait for its breakout, and when the price breaks this significant level, the price does not tend in the direction of the breakout? After a while, it goes back down, putting your balance at risk of heavy losses. Now let's talk about what a fake breakout is in the crypto market in particular.. Definition And Types 📝 A fake breakout is a breakout of some horizontal or sloping level, after which the price immediately or gradually moves away in the opposite direction of the breakout. The candlestick that broke the level is called a breakout candlestick. The most common fake breakouts in trading: A fake breakout of a trendline. A fake breakout of support or resistance. A fake breakout of the borders of a technical pattern. Now that we have a complete layout of possible breakouts, let's take a closer look at them. In the description of the breakout, I will immediately describe the trading principle of this pattern. Fake Trend Breakout 📊 On the chart of BINANCE:ETHUSD I managed to find a great fake trend breakout during a bull run. The point was that the price started a great growth, then a trend line was formed, from which most traders bought the asset until all the buyers were dropped off the train. But for the others, who understood the principle of fake breakouts, it was, on the contrary, a great opportunity to enter the market. We see an excellent trend breakout, a well-defined breakout candle. Here any trader has two options: 1. Enter in the direction of the trend. And since we have broken the trend line, the trend has changed to a downtrend. 2. Wait for a possible rebound and return above the trend line. Let's start with the fact that it is not profitable to enter trades immediately after the trend breakout, as there is a high chance of such confusing cases. Therefore, it is advised to wait for a strong rebound and the continuation of the movement in the direction of the breakout. And what to do if the market has a situation as shown in the picture, i.e., the price breaks through and returns back above the trend line? Everything is even simpler here: You wait for the return above the trend line. As soon as it happens, you place a limit order on the upper or lower boundary (depends on the trend direction) of the breakout candle. You wait for the market to fill up your order. You place a stop-loss under or over the trend line (depending on the trend direction). A Fake Breakout of Support or Resistance 📈📉 This type of breakout is the most popular, but it has its own interesting trick. As a rule, in such situations, the price chart hints that it wants to break some significant level and all traders freeze waiting for the breakout. The breakout happens, but there is no profit. This is a classic in the current realities, at least in the cryptocurrency markets. The principle of trade entry is exactly the same. Only the nature of the breakout differs. By the way, as you can see from the post, and if you look at the charts of coins, the largest and strongest movements are usually accompanied by fake breakouts before them. This is due to the fact that thanks to a fake breakout, most panic traders or those who have extremely short stop loses are dropped off. Fake Breakout of A Pattern 🔎 This fake breakout is the most rare, but it still occurs. Its essence is that when you see one of the technical analysis figures and, according to its own rules, understand in which direction this figure is most likely to break, it breaks in the opposite direction. On the BINANCE:SOLUSDT chart, I managed to find a good example of this algorithm. A descending triangle with a flat bottom was clearly drawn on the chart, which, according to the classic technical analysis, should break towards the flat side, but they decided to give us a "haircut". The algorithm of entering the trade is exactly the same as in the other two cases. But here you can resort to one more variant of entry, in addition to overcoming the top or bottom of the breakout candle. Also, if it is pattern from the classic technical analysis, you can simply enter the trade on the crossing of the pattern. In cryptocurrency markets, the following picture often occurs: • An important level is formed. • The price breaks it and fixes itself above or below it. • There is a pullback to the previous zone with a small continuation of the reverse movement (fake breakout). • The price returns to this zone again and starts to consolidate. • A true breakout occurs. As a result, the stops of both those who did not earn on shorting and those who did not earn on the long position were accumulated. There is only one recommendation to avoid this case, just tighten the stops and do not be greedy. Remember the main rule, the more tests of the level, the more likely it is to break through. And here is another simple truth: levels are created in order to break them. In conclusion , fake breakouts are a common phenomenon in trading, particularly in the cryptocurrency markets. They can occur in various forms, such as fake trend breakouts, fake breakouts of support or resistance, and fake breakouts of technical patterns. Understanding these scenarios and adapting appropriate trading strategies can help potentially capitalize on market opportunities. Recognizing and managing fake breakouts can contribute to more successful trading experiences. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
10
WHAT IS SMART MONEY TECHNIQUE DIVERGENCE?✴️ WHAT DOES SMART MONEY DOING: ACCUMULATING OR DISTRIBUTING? SMT (Smart Money Technique) Divergence is the divergence of prices of correlated assets or the relationship to inversely correlated assets. Analyzing the SMT Divergence allows you to determine the institutional structure of the market to determine what the smart money is doing accumulating or distributing. Currency pairs are easy to analyze using the DXY US Dollar Index. Every price fluctuation must be confirmed by market symmetry. The occurrence of price asymmetry signals the formation of an SMT Divergence and a likely trend reversal. SMT DIVERGENCE IN ACCUMULATION SMT DIVERGENCE IN DISTRIBUTION ✴️ WHICH PAIR TO CHOOSE FOR TRADING? As traders, we need activity in the markets, volatility is what makes trading easier. The news background is the driver that drives this, which is why the trading day starts with a look at the economic calendar. If GBP news is scheduled to be released, it does not mean that, for example, GBPUSD will be preferred over EURUSD. The logic is that closely correlated pairs are likely to move symmetrically. But when SMT divergences are formed, one of the pairs will show strength or weakness, which signals the approaching high volatility on such a pair. GBPUSD updated the high, while EURUSD failed (showed weakness) which results in opening short positions on EURUSD. As a result, despite the important news on the GBP, EURUSD showed a higher amplitude of movement (volatility). In the following example, EURUSD updated the high, while GBPUSD failed (showed weakness) that as a result we open short positions on GBPUSD.
Education
by DeGRAM
2
THE PSYCHOLOGY OF CHART ANALYSIS:THE ILLUSION OF CONTROLThe psychology of chart analysis is the ability to quickly find patterns and key levels on a chart. It is the ability to quickly switch timeframes and see the main trend. But traders often fall into the other side of the equation. They turn into hypnotized people who do not take their eyes off the magic of charts. The trader hypnotizes the chart and the chart hypnotizes the trader. And it is difficult to break this vicious circle, but it is necessary. Psychological Dependence On The Price Chart 📉🧠 Chart hypnosis has a major problem when it comes to graphical hypnosis constant monitoring of charts takes away time that could be used more productively. It drains the trader's energy: eyes get tired, attention gets tired. The trader takes wishful thinking for reality and makes mistakes. PSYCHOLOGICAL PITFALLS OF GRAPHICAL ANALYSIS: 📊 Constant Monitoring 👀 The chart is captivating, especially when a trade is open. You can follow the price movement for hours, enjoying inwardly when it goes in the right direction and worrying when it reverses. The brain is switched off. A person does not think, does not even analyze the meaning of the changing pictures. This is the most real hypnosis. You can watch water flow forever, fire burn forever. And you can watch price charts forever. Remember how much time you spend watching essentially useless shorts on YouTube? And how much time uselessly watching charts? The only difference is that video relaxes you, while constant price monitoring leads to stress, because your money is at stake. The Nervous Chef Phenomenon 😓 Another psychological trap of chart analysis is constant checking of price changes. It would seem that a trade has been opened within the framework of risk management, stops have been set, take profit has been set. Why do you need to look at the chart every five minutes? But a trader persistently checks every 5 minutes "is the water boiling?" or "are the potatoes boiled?". Such dependence is not only in trading. Similarly, every 5 minutes we check social networks and phone: "What if someone wrote a comment under my photo?", "What if someone sent me a new message?". It is logical that after checking the chart every minute extra money will not appear on the account. But there will be a false sense of control, not counting the loss of time. The more often you open the lid of the pot, checking the boiling of water, the longer the water takes to boil. Emotional Mistakes 📌 Statistics show that 70% of the time the price moves chaotically. Trying to constantly look for a trend or pattern on the chart, you fall into the trap of emotions. Under the emotional influence you open a trade in a bad time zone or close it prematurely, although initially there was a clear direction; to strictly follow the risk management, the established rules of the trading system. Illusion Of Control 💡 According to statistics, a person has a much higher chance of losing their life in a traffic accident than flying in an airplane. But people continue to fear airplanes more than cars. To the person behind the steering wheel, it's like: "I'm buckled up, I know the traffic regulations, I'm in control." This is called the illusion of control. There is a classic experiment in psychology. One group of participants is asked to choose a lottery ticket, the second group is given one. Then they are offered to exchange tickets. The second group goes to the exchange without questions, while the first group is less willing to exchange. The experiment shows that people who made an independent decision feel responsible for it and therefore are more confident in winning. There is a similar trap in trading. The trader thinks that she/he has mastered technical analysis, has considered all the risks, and therefore opened the trade correctly. And now she/he watches the chart every 5 minutes to make sure that she/he is right. In psychology, this is called "thirst for control". How to Overcome It? ✅ Catch yourself thinking that you've already fallen into one of these traps. And if so, force yourself to simply turn off the screen. Convince yourself that all the rules of risk management have been followed, which means you don't need to spend time on constant monitoring. Force yourself away from the monitor. Watch TV, take care of the garden, do some repairs, go for a bike ride. In other words, there is a temptation to constantly sit at the monitor - try to be as far away from it as possible. In summary, the psychology of chart analysis in trading is crucial for identifying patterns and key levels and understanding the overall trend. However, overdependence on charts can lead to psychological pitfalls like constant monitoring, causing mental fatigue and mistakes. To overcome these challenges, we should recognize when we fall into these traps, trust our risk management strategies, and engage in other activities to maintain a balanced life. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
21
WHAT IS THE POWER OF THREE (PO3)?Lets look at the basic model of manipulation for the purpose of accumulation and distribution within separately taken time periods the power of three. Understanding this model is a fundamental skill for working through the methodology of trading disciplines such as swing, short-term and intraday trading. ✴️ WHAT IS THE POWER OF 3? The power of three is a candlestick/bar formation stages relevant for all timeframes, especially applied within daily and weekly trading ranges, where the opening price is considered to be the beginning of the period. For intraday trading, we only need to apply the weekly and daily powers of three, but we should also pay attention to the monthly candle, as the zones of interest on the higher timeframes increase the chances of success. ✴️ WEEKLY POWER OF 3 The logic of the weekly PO3 is useful for constructing a trading bias. Bullish Bias. Expect a move below the opening price early in the week, which would be a weekly manipulation (Judos Swing). The low of the week is usually formed between Monday and Wednesday, most often on Tuesday or Wednesday. If the price moves back above the opening level after leaving it, a reversal scenario is possible. Bearish Bias. We expect a move above the opening price at the beginning of the week, which will be a weekly manipulation (Judos Swing). The high of the week is usually formed in the interval between Monday and Wednesday, most often on Tuesday or Wednesday. If the price moves back above the opening level after leaving it, a reversal scenario is possible. ✴️ DAILY POWER OF 3 The opening price level is used to determine a favorable opening zone to take a trade. Manipulation (Judas Swing). We wait for the completion of the liquidity grab before making a decision. Expansion is a price action that traders capitalize on. Distribution is an area in which we take profits.
Education
by DeGRAM
1
WHAT ARE FRACTALS IN FOREX TRADING?👋 Hello forex traders! It is unlikely that you will find a single beginner in the Forex market who would not know what a fractal is. And even outside the market, many people have heard about this concept. Fractals have been known for almost a century, are well studied and have numerous applications in life. Fractals have been used on financial markets for quite a long time - even classic trading strategies contain references to them. For example, the famous trading strategy of Bill Williams Profitunity uses fractals as one of the elements of the system. To begin studying this method of analysis, we need to define what a Fractal is. Here is the most complete and understandable definition: "A fractal is a set that has the property of self-similarity. An object that exactly or approximately coincides with a part of itself, i.e. the whole has the same shape as it or more parts. In our familiar markets, this concept is slightly modified, but the concept remains the same." Transferring this definition to price charts, we can get approximately the following: "A fractal is a constantly repeating pattern that is not included in any list of common patterns. In other words, if you watch the chart of a certain instrument for a very long time, you will start to notice the fact that its movements in a certain period of time are constantly repeating. This pattern was discovered by the well-known Bill Williams. This trader claimed that the whole market is chaotic and only sometimes it changes into a stable and bright trend." Why Fractal Analysis Is Necessary 📊 In fact, the trader himself determines the necessity of this kind of analysis. If you have a perfectly working and profitable strategy, then probably this post is not for you, but if you have some problems with finding a profitable trading strategy, then you can read to the end so that this post will give you an idea. I have not been able to find any clear information as to why it has been noticed only now, but I personally believe that it is due to the fact that more and more traders started to spend a long time at the monitor and notice some patterns and features of each currency pair. Translating all of the above into simple language, fractal analysis is needed to find the biggest patterns in the market and apply on. “Once is a fluke, twice is a coincidence, and three times is a pattern”. How To Apply In Trading 📈📉 Now that we have sufficiently understood the general concepts of Fractal, it is time to understand how this technique is applied in the financial markets and learn how to trade using it. Let's start with the fact that fractal structures were originally found with the help of machine running of charts and finding certain patterns. That is why it may be difficult to find fractals with your own eye. But we are glad that we live in the 21st century and all developed platforms have such indicators for a long time. Immediately after applying this indicator, the chart will look like this: Fractal Start A fractal start is a situation in which after a fractal in one direction, a fractal in the opposite direction is formed. Fractal Signal After the fractal start, on its reverse side, the appearance of the fractal signal takes place Fractal Stop The fractal stop is located behind the farthest of the two extreme fractals. Using this technique allows you to minimize the number of stop-losses. The Practical Use Of Fractals 💡 1. Method of breakouts, often indicating the continuation of the existing trend. To enter a trade, a pending stop order is set at the breakout point of the nearest fractal to the price. 2. It is not always possible to determine how accurately these levels were built. Bill Williams' fractals are a tool to effectively identify significant support and resistance levels. 3. Fractals can also be used as a useful method of identifying reference points when plotting trend lines. These anchor points can serve as important indicators of market behavior. 4. Fractals can help traders identify the prevailing trend in the market. Identifying a trend is a simple process if you take into account the definition of an uptrend as a sequence of increasing local highs and lows, while a downtrend is characterized by a series of decreasing extremes. 5. If the price does not overcome the previous fractal, it may indicate the emergence of a sideways movement. To confirm this signal, it is necessary to wait for the formation of the opposite fractal. Advantages And Disadvantages Of Fractal Analysis ↕️ Like other techniques, fractal analysis has both disadvantages and advantages. For its effective use it is necessary to be able to analyze several timeframes and synthesize the overall picture. Market entry should be determined by the trend on the higher timeframe, because the Bill Williams system is trending. In conclusion, the fractals provide numerous potential entry points on the chart, catering to different preferences and often appearing quite reliable. However, it is essential to recognize that this method of analysis is not simple or unambiguous. Consequently, it is not recommended for beginner traders to use it as the sole factor in decision-making. The Fractal indicator's effectiveness is dependent on its use in conjunction with other indicators on time intervals from an hour and above. Strategies that incorporate the Fractals indicator must analyze several timeframes. Despite these considerations, the indicator should not be dismissed, as it can provide valuable support when used in combined strategies. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
11
COST OF BREAKING TRADING RULESJesse Livermore is one of the most famous and successful traders of the last century. During his lifetime he was nicknamed "The Great Bear" because he actively sold stock assets during the Great Depression and managed to make a multimillion-dollar fortune. Wikipedia mentions that Livermore made and lost significant sums on the stock market more than once during his lifetime. He was distinguished from his contemporaries by his aggressive manner of intraday trading. Today we want to tell you about Livermore's life and his own rules of trading on financial markets. ✴️ THE BEGINNING OF HIS CAREER The ascent of the trading legend began with the stock exchange offices in Boston. Livermore did not take part in trading, but only recorded constantly updated asset prices on a special board. It is important to realize that at the beginning of the 20th century, prices on stock exchanges were transmitted by telegraph. Having a good capacity for exact knowledge and impeccable memory for numbers, Livermore was the first to discover patterns in trend reversal models. Contemporaries note that Livermore was not sociable. All the young trader's attention was focused on price changes of liquid assets. It is noteworthy that he used only numerical sequences to make trading decisions, especially not being interested in the reasons for rising or falling prices. Having gained a little experience in exchange offices in Boston, Livermore began to keep a notebook in which he recorded all the identified patterns in the dynamics of asset pricing. Biographical literature notes that at that time he was not interested in trades with large sums. The young trader was fascinated by the patterns in the behavior of prices, confirmations of which he was constantly looking for in practice. Some time later, his friend offered to buy a share of the company "Burlington". Having checked his records and convinced that the price would rise in the near future, Livermore invested 5$ in the mentioned brand, earning more than 3$ in a couple of days. This was Livermore's first and highly successful trade. ✴️ WALL STREET CAREER At the age of 21, the talented trader moved to New York with the aim of conquering the stock market, having $2500 earned in small stock exchange offices in Boston. Livermore could not open an account with any of these companies because his name was on the rumor. Even then, he claimed to close a trade with a profit 7 times out of 10. No small brokerage firm wanted him among their clients, as he could easily bankrupt it. Eventually he was able to open an account on Wall Street, investing all the money he had into the trade. To everyone's surprise, it ended with a complete loss of deposit. The reason is as follows: Livermore was a hardened proponent of short-term trading, capitalizing on minor price fluctuations. Information about the actual value of assets was transmitted by liquidity providers to Wall Street with significant delays, which led to inaccurate short-term trading. While in Boston, small firms used telephone tape orders and processed customer orders almost instantaneously, this was impossible in the real market conditions of the time. The manager of a Wall Street brokerage house was kind to the young trader and saw potential in him. When Livermore lost his capital due to technical reasons, he lent him $500 to disperse his deposit in illegal brokerage houses. Livermore then heads to St. Louis, where he makes $2,800 in a matter of days. The company removes him from the number of clients, and also notifies all brokerage houses in the vicinity about the appearance of an overly successful participant of trades. Back in New York, Livermore managed to earn another $5,000 while trading at one of the illegal brokerage houses in New York, and then reopened an account on Wall Street. Livermore managed to make good money on the global growth of the US stock market in 1901. On his account was the sum of 50 000$. However, later, against the background of high volatility, Livermore lost all his money and was forced to go to his hometown to earn money. After some time, Livermore again started to ruin brokerage houses in Boston, acting through his friends. He managed to save the necessary amount for a third return to New York and open another account on Wall Street. ✴️ THE 1907 MARKET CRASH AND THE GREAT DEPRESSION In 1906 Livermore foresaw a global decline in the prices of railroad company stocks under the influence of natural disasters. In 1907, there was indeed a decline in prices, but not as rapid as the trader saw it. Then big banks managed to support the value of shares of industrial companies. Trying to sell in a growing market, Livermore again lost almost all of his fortune. He decided to stop trading and wait for a signal to enter the sell-off with all his remaining funds. Just as Livermore had anticipated, the railroad companies were going through a tough time and the stock rushed downward. The economic situation in the country was so critical that the companies were ready to sell their shares to investors in installments with the participation of banks, but the latter were not sure that investors would be able to fulfill their financial obligations in the near future. As a result, in 1907 there was a global collapse of the stock market in the U.S., and Livermore managed to earn 250,000$. In October of the same year, the panic of businesses reached its peak and banks started sending their representatives to Livermore asking him to stop selling stocks as it could lead to global economic problems in the US. Under this influence Livermore closed short positions, opening all capital to buy at the point of trend reversal. This trade brought him 3,000,000$ net profit in 9 months. During the period from 1907 to 1929, trading volumes on the U.S. stock market increased significantly. Almost every resident of the country invested in stocks. The reason for the growth of financial literacy of the population and popularity of the stock market was the large-scale advertising campaigns of private brokerage firms. Nevertheless, in 1929 there was a large-scale market crash. The reason for the downtrend, among other things, was a multimillion sell trade, which was conducted by dozens of brokers under the leadership of Livermore. This trade brought him more than 100,000,000$ of profit, which by today's standards can be compared to a billion. ✴️ JESSE LIVERMORE'S TRADING RULES Today the following Livermore's rules of capital management in financial markets may sound cliché, but at the beginning of the last century every trader was familiar with them. Let us pay attention to them too: 1. Don't average losses. It is important to realize that the principles of pricing liquid assets have changed significantly since the beginning of the last century. 2. Do not exceed risk tolerance. Livermore used to set the maximum risk per trade at about 10% of capital. 3. There is no need to quickly secure in profits if the trend is moving in your direction. The reason for closing an order can only be objective factors that indicate a correction or reversal. 4. Withdraw 50% of profits after each trade. Livermore had an unwavering rule to withdraw part of the profit. The investor himself explained it by the unpredictability of the market. 5. One should enter the market only when there are appropriate signals. ✴️ CONCLUSION Perhaps it is worth mentioning that in 1930, Livermore broke his own rule by investing all his funds in one trade, after which he became bankrupt. In those years, he no longer had the strength to start over, and he decided to write a book on stock trading with the simple title "How to Trade Stocks?" He hoped that the work would become a bestseller, which would give him recognition and wealth. However, this did not happen, and in 1940, Livermore shot himself in one of the hotels in New York. The official reason for the shooting, if Wikipedia is to be believed, was depression. Livermore was a truly great trader who, during his lifetime, had a significant impact on both the decline and growth of the U.S. economy.
Education
by DeGRAM
3
RUMINATION IN TRADING👋 Hello, Forex traders! Let's talk about rumination in trading. What is rumination? Rumination in trading is the process of going over previous trades and market situations in your head. Trying to understand what went wrong and to think of a better way of doing things. In "moderate doses" it is analysis. But when a person thinks about it all the time and in a negative way, analysis turns into mania and "self-beating" for mistakes made. Differences Between Rumination and Analysis ❓ Analysis is an essential part of learning to trade. It involves fixing all actions in a table editor, on paper, or uploading history from the platform. Traders analyze their best and worst moments, identify mistakes, changes in risk level, and successful trades. They also look for ways to optimize their trading system. Rumination, on the other hand, is obsessive thinking with an emphasis on the negative. It involves constant "chewing" of negative moments without searching for a solution. A stock or crypto you bought went down sharply, and all your thoughts are occupied with why it happened and how to fix it. Rumination in trading is the habit of endlessly worrying about and analyzing your trades, mistakes, losses or missed opportunities. It can lead to negative thinking, pessimism, depression, anxiety, impulsiveness and inactivity. Rumination prevents a trader from focusing on the present and the future and following his trading strategy and discipline. Rumination, instead of analyzing, improving and solving a problem, only makes the situation worse. Causes of Rumination in Trading 📋 • Lack of confidence. A trader who is insecure is constantly trying to look for mistakes in his previous trades to justify his failures. • Fear of failure. A trader who is afraid of losing money is constantly running through possible failure scenarios in his head to try to avoid them. • Striving for perfection. A trader who strives for perfection is constantly trying to find ways to improve his or her results, even if they are already quite consistent with expectations. Consequences of Rumination in Trading ⭕️ • Decreased trading efficiency. A trader who is constantly replaying past trades in his head cannot focus on the present and make the right decisions. • Loss of money. Rumination can lead to impulsive trading decisions that can lead to losses. • Mental Distress. Constantly running negative thoughts through your head can lead to stress, anxiety, and even depression. How To Avoid Rumination In Trading ✅ 1. Set limits on the time you spend analyzing past trades. 2. Focus on what you can control. 3. Develop positive thinking and self-esteem. 4. Determine your trading goals, rules, risks, and plans in advance and stick to them. 5. Keep a trading diary where you record your trades, results, mistakes, lessons learned, and emotions. 6. Limit the time spent analyzing charts, news, and forums. 7. Take time away from trading, pursue other interests, hobbies, friends, and family. 8. Find ways to relax and de-stress: meditation, sports, music, reading, etc. 9. Mentally prepare yourself for the worst-case scenario before entering a trade. 10. Every night before you go to bed, think of three good things that happened to you during the day. Example ✍️ You buy EURUSD with the expectation of growth. But there is a downside risk. Prepare yourself mentally for the fact that there are all the prerequisites for the fall of the pair, and you are ready to accept losses. If the price has reached the stop loss, take it with the thought "It is good that it is so, otherwise you could have lost even more" and go to rest. Ask yourself: what is the worst that can happen and how can I deal with it? In conclusion , rumination in trading can be detrimental to a trader's success. By understanding the differences between rumination and analysis, identifying causes, and implementing strategies to avoid rumination, we can improve our mental well-being and trading performance. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
16
SWAP ZONES IN FOREX MARKET👋 Hello, Forex traders! In a market situation, swap zones in trading are formed as a result of a change in market direction. When the trend changes, the price often returns to the previous support or resistance line. This is due to the fact that participants often use the lines as reference points for trading decisions. Swap zones can be used by traders to identify optimal entry-exit points for trades. For example, a trader can open a long position when the price is approaching support or a short position when the price is heading towards resistance. What is a Swap Zone? 🧐 Swap zone in trading is a price level that was previously a support and then became a resistance, or vice versa. It represents a part of the chart where the price pauses or rolls back. It is formed as a result of a change in the trend direction. Swap zone is easy to use to identify reversal points. For example, if a price is in a rising market and is pulling back to support, it is a signal that the trend may resume. In order to increase the accuracy of swap zone, it is important to use it in combination with other tools of technical analysis. Swap zone is suitable for deciding whether to open a position. For example, if a price is in a sideways movement and approaches swap zone resistance, it is a signal that the price may break through the level and start a new trend. We can open a long position if the price breaks the resistance, or a short position if the support level is broken. The assistant is useful in various trading systems, including price action and volume analysis systems. In price action strategies, it is suitable for determining potential support and resistance, and in volume analysis it is suitable for determining trend strength. Here Are A Few Strategies To Give You An Example ✍️ Level Breakout. It consists in entering the trade after the price breaks through the swap zone. This is a signal that the trend will continue, you can open a long or short position. Rebound from the level. Entry into the trade after the price bounces off the level. For example, if the price is in a falling market and bounces off the resistance swap zone, this is a reversal signal and you can open a short position. Double Test Level. Opening a position after the price tests the swap zone twice and you can open a short or long position. Pullback after a level breakout. Entry after the price rolls back after a breakdown of the level. It can be a sign that the trend is slowing down. When using the tool, it is important to consider the market direction, trend strength and trading volume. Advantages And Disadvantages Of Swap Zone 📈📉 Before using a pattern, it is important to consider its strengths and weaknesses. Pros: • An effective tool for identifying support and resistance, as well as moments of opening and closing a position; • use together with other tools of technical analysis to improve trading accuracy; • easy to use and understand; • possibility of earning with different tools and in many strategies. Cons: • They are not completely reliable and the market can go in a different direction; • It can be influenced by other factors: news, fundamental data or changes in the mood of market participants; • They do not always provide effectiveness. In summary, swap zones are perhaps the simplest and most effective tool in a trader's arsenal. Levels are the most reliable piece of information you could possibly get about an asset and its price. No amount of analysis will ever tell you more truth than levels can. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
HARMONIC PATTERN BUTTERFLY ✴️ Harmonic patterns are prevalent in consolidation markets. These patterns can be used as additional confirmation to enter a trade. Today let's study the Butterfly Pattern. The Butterfly Pattern in trading is a 5-point trend reversal pattern, which consists of two corrections that form the shape of a butterfly. The pattern can be formed on any timeframe, but most often occurs on daily and hourly charts. It has high accuracy, but like any other indicator, it does not guarantee profit. To increase the probability of success, it is necessary to use the pattern in combination with other indicators and methods of market analysis. ✴️ WHAT IS A BUTTERFLY PATTERN? Butterfly pattern in trading is a reversal trend pattern, which is formed from two corrections with the formation of a corresponding shape. It is used to determine a possible market reversal. The formation was first described by Harold Gartley in his book New Wave Theory (1932). He is an American trader and analyst who developed several harmonic patterns, including the Butterfly, Delta and Harmonic Triangle. The Butterfly pattern in trading can appear on any timeframe, but is often caught on daily and hourly charts. For the formation of the pattern, it is necessary that the following point conditions are met: X - the start of an bullish or bearish movement; A - the end of a bullish or bearish movement and it's a start of correction; B - maximum decrease or increase of the price during the market change; 61.8 - 0.786 retracement. C - end of correction (retest of the A point area) and start of a new movement; as long as it does not exceed the A point. D - 127% - 161.8% fibo extension of the XA distance. Gartley's butterfly in trading can have two directions. To determine the Butterfly pattern, you need to find all five points of the formation. X and C are the beginning and the end of the basic movement, and A and B are the top and the lowest point of the correction. Point D is at 127% of the XA distance. If all five elements are present and meet the specified conditions, we can talk about a probable trend reversal. At the same time, it is desirable to use an indicator that would confirm the entry. The butterfly shape does not always have to be perfect. Sometimes the AB correction can be steeper than the BC. The formation conditions are not always perfectly met. Often the XA distance can be slightly more or less than 127%. Stop-loss can be placed not only below point D. The Butterfly pattern is considered a powerful tool that helps traders improve results. But it is important to use it in combination with other market analysis techniques to increase the probability of success. ✴️ HOW TO TRADE A BULLISH BUTTERFLY This is a 5-wave trend reversal pattern that represents two corrections that form a butterfly shape. Features of the design by points: X - start of a rising movement; A - end of growth and correction; B - fall of the price during the correction; C - the end of the process and the start of a new movement; D - 127% - distance of the XA. Entry into the trade is made at the level of point D, and stop-loss is set below point D. The target price is within A-D distance. ✴️ HOW TO TRADE THE BEARISH BUTTERFLY Exit is made after reaching the target price or when trend reversal signals appear. This is a 5-wave market reversal pattern that represents two corrections in the shape of a butterfly. To create it, the following requirements must be met: X - start of a falling movement; A - end of growth and correction; B - increase of the price during the correction; C - the end of the process and the start of a new movement; D - 127% - XA distance. The entry in the bearish butterfly is made at the level of point D, and stop-loss is set above point D. The target price for the pattern is within the Fibonacci levels 38.2% and 61.8% of the A-D distance. Exit is performed after reaching the target price or when there are signals of trend reversal. In both cases discussed above, it is important to combine the pattern with other methods of market analysis, such support and resistance levels, to increase success. You should not enter a trade if the pattern does not meet all conditions. Set a stop loss at a level that will limit losses in case of a failed trade. Also, you can move stop loss to break even once the price hits 38.2% Fibonacci level. ✴️ CONCLUSION The experience of using the Butterfly Pattern has shown that it is quite accurate when trading in a sideways movement or opening trades with a trend. It can be used on any timeframe, but it is more effective in combination with other methods of market analysis. At the same time, the pattern does not always correspond to the conditions and can give false signals. For this reason, it is recommended to check it with the help of indicators. Harmonic patterns should follow the basics of technical analysis. In the first place, of course, is the market structure.
Education
by DeGRAM
2