Support and Resistance levelsSupport and resistance levels, the bedrock of technical analysis, are fundamental elements. They serve as critical points that delineate potential price movements and are pivotal in decision-making processes for traders and investors alike
The basis:
There are several fundamental concepts in trading that remain the same over a long period of time. Among them, the concepts of support and resistance levels stand out. When used correctly, support and resistance levels improve trading efficiency in financial markets.
Today we will delve deeper into these concepts.
Price behavior:
The fundamental principle of price behavior lies in the concept of supply and demand, governing the existence and operation of any market.
When demand outweighs supply, it prompts an upward push in prices, while in reverse circumstances, a decrease is observed. By identifying levels of supply and demand, traders significantly enhance their success rate.
A support level indicates a price range where strong buying positions are concentrated, typically defined by two minimum price points.
A resistance level, conversely, denotes a price range around which strong selling positions are clustered, often marked by two maximum price points.
It's important to note that support and resistance levels should not be viewed as precise lines. Prices may not necessarily adhere to these levels point by point; often, they may not even touch the level directly, sometimes piercing through it. This variability is normal, so these levels should be perceived more as zones of support and resistance. The width of these zones can vary, with the magnitude of dispersion dependent on the timeframe in which trading occurs. The higher the timeframe, the potentially broader the range of support and resistance levels.
Once again for strengthening:
Support and resistance levels represent specific price ranges on a chart (often represented by rectangles in my analysis) where the direction of price movement has historically changed. These ranges attract traders' attention because they provide clear points for setting stop losses and entering trades. In addition, these levels usually attract large buyers or sellers whose limit orders contribute to market dynamics.
Essentially, the level denotes the price area in the market where traders perceive the price to be either overpriced or underpriced, depending on the prevailing market conditions. Therefore, it is extremely important to closely monitor key levels where the role of support and resistance has changed or where significant price reversals have occurred.
Blending levels signify pivotal points on a price chart where price action can prompt a reversal in the opposite direction. In the presence of a robust trend, price movements may penetrate through these supply and demand levels, leading to potential shifts in direction. Such occurrences typically coincide with heightened transaction volumes. The interplay of price adjustments, heightened market activity, and trading volumes collectively influence market direction.
When resistance is breached and the price retraces to its previous level, there's a likelihood that bulls will once again push it upwards. Conversely, if the price retraces to the breached level after breaking through support, bears are likely to actively drive it downwards. Support and resistance levels can be identified as areas in the market where traders are more inclined to buy or sell, depending on current market conditions. This creates a zone of collision between buyers and sellers, often prompting the market to change its direction.
Retest:
A retest of a level refers to a brief return of the price to the breached support or resistance line for testing purposes. Following the retest, the price typically continues its movement in the direction of the breakout.
On higher time frames, support and resistance levels become more powerful:
It is important to observe the price action around levels:
If the price swiftly reverses from a level into the opposite trend, it indicates significant importance of that level.
If the price tests a specific area multiple times with minor retracements, it's likely that the level will eventually be breached.
Swing zones refer to areas where the price retraces to the previous pullback in either a downtrend or uptrend. In less robust trends, the price tends to return to the boundary of the previous correction before continuing its movement.
Of course, support and resistance are dynamic concepts that require constant attention and analysis as their meaning changes depending on prevailing market conditions. Moreover, it is critical to consider multiple confirmations such as volume analysis and breakouts to confirm the strength of these levels.
Thank you for your attention!
Fundamental Analysis
Post-trade psychology!
In the trading market, being anxious cannot solve the problem.
But be prepared for a long time, don't rush for success, and don't be afraid of being a late bloomer.
Take your time and master the process, don’t rush the results.
Whether it is the trading market or other industries, it all requires a process, and it requires step by step and continuous efforts to achieve it.
Give the process time, and please give yourself time. I think time will definitely give you a better answer.
Accumulation over time will make you gain more and more.
Don't be anxious, just take it step by step.
Although the process is slow, if you keep going, slow and perseverant, you will eventually reach the goal you want.
Usually the more anxious you are in trading, the easier it is to deviate from your original intention, and most of the results are counterproductive.
In nature, you will find that a lot of life is slow.
The sun rises little by little and sets little by little, the flowers bloom one by one and wither petals.
The flowers will not bloom before the season, and the fruits cannot be picked if they are not ripe.
The journey of life is very long, you don’t have to seize the day, persistence is the only way to win in the end.
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.
Trading Psychology and Your Losses
Hey traders,
In this post, we will discuss a common fallacy among struggling traders: overestimation of a one single trade .
💡The fact is that quite often, watching the performance of an active trading position, traders quite painfully react to the price being closer and closer to a stop loss or, alternatively, coiling close to a take profit but not being managed to reach that.
Fear of loss make traders make emotional decisions :
extending stop loss or preliminary position closing.
The situation becomes even worse, when after the set of the above-mentioned manipulation, the price nevertheless reaches the stop loss .
Just one single losing trade is usually perceived too personally and make the traders even doubt the efficiency of their trading system.
They start changing rules in their strategy, then stop following the trading plan, leading to even more losses.
❗️However, what matters in trading is your long-term composite performance . A single position is just one brick in a wall. As Peter Lynch nicely mentioned: “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
There are so many factors that are driving the markets that it is impossible to take into consideration them all. And because of that fact, we lose.
The attached chart perfectly illustrates the insignificance of a one trading in a long-term composite performance.
Please, realize that losing trades are inevitable, and overestimation of their impact on your trading performance is detrimental.
Instead, calibrate your strategy so that it would produce long-term, consistent positive results. That is your goal as a trader.
Why both Gold & U.S. Dollar Index are rising ? (IMPORTANT)The Intricate Dance of Gold and the U.S. Dollar
The relationship between the U.S. Dollar Index (DXY) and Gold prices is a fascinating study in economics. Typically, these two have a reverse correlation. The reason for this inverse relationship is that gold is priced in U.S. dollars. Therefore, when the dollar strengthens, gold becomes more expensive for investors using other currencies. This can decrease demand for gold and subsequently lower its price.
However, this correlation is not set in stone. There are times when both the DXY and gold prices can increase simultaneously. This can occur due to a variety of factors such as geopolitical tensions, market uncertainty, or changes in monetary policy.
For instance, from early 2022 to the beginning of 2024, the correlation between gold and the DXY has seen periods of both synchronicity and divergence. This indicates that other factors are influencing gold prices.
Currently, despite the rising DXY, gold prices are also on an upward trend. This could be attributed to investors seeking safe-haven assets amidst economic or geopolitical uncertainty. This increases the demand for gold, driving up its price even as the dollar strengthens. Additionally, expectations of changes in monetary policy, such as interest rate cuts, can also affect gold prices.
In conclusion, while the DXY and gold prices often move in opposite directions, there are times when they dance to the same tune. This intricate dance is influenced by a myriad of factors, making the relationship between the DXY and gold prices a complex and intriguing aspect of global economics.
Prepared by : Arman Shaban
Why Gold and DXY Rise Together in Times of UncertaintyIn times of market uncertainty, investors often seek refuge in assets considered safe havens, such as gold and the US Dollar Index (DXY). While traditionally these two assets exhibit a negative correlation, meaning when one rises, the other tends to fall, their simultaneous ascent during periods of uncertainty might seem counterintuitive at first glance. However, a deeper understanding reveals the underlying dynamics driving this phenomenon.
Firstly, let's explore gold's role as a safe haven asset. Gold has long been revered as a store of value and a hedge against economic instability and geopolitical turmoil. During times of uncertainty, investors flock to gold as a reliable store of wealth, driving up its price. This demand surge can outweigh any negative impact from a stronger US dollar, leading to both gold and DXY rising concurrently.
On the other hand, the US Dollar Index (DXY) also garners safe haven status during times of uncertainty. The US dollar is widely considered the world's reserve currency and is backed by the largest and most stable economy globally. Consequently, investors often seek refuge in the US dollar during periods of market turmoil, further boosting its value.
Moreover, the correlation between gold and the US dollar is not solely determined by economic factors but also influenced by investor sentiment and market dynamics. During times of heightened uncertainty, investor behavior can drive unusual correlations as market participants prioritize capital preservation over traditional market relationships.
Furthermore, it's crucial to consider the broader macroeconomic landscape. Factors such as central bank policies, geopolitical tensions, and global economic outlook play significant roles in shaping investor sentiment and asset prices. Changes in these factors can lead to shifts in the relationship between gold and the US dollar, especially during times of uncertainty when market participants reassess risk and allocate capital accordingly.
In conclusion, while gold and the US dollar may traditionally exhibit a negative correlation, their simultaneous rise during times of uncertainty underscores their status as safe haven assets. Understanding the complex interplay of economic fundamentals, investor sentiment, and market dynamics is essential for comprehending the nuances of asset relationships, particularly during turbulent times in the financial markets.
Bitcoin Halving 2024 – This Time It’s DifferentREPORT HIGHLIGHTS:
The fourth bitcoin halving event, scheduled on or around April 19, 2024, heralds a significant transformation in the cryptocurrency landscape. This halving, marked by the reduction of bitcoin supply subsidy, the emergence of a liquid investment ecosystem via CME Group futures and options, the advent of spot Bitcoin ETFs and the introduction of Ordinals, brings forth novel dynamics that could reshape prevailing narratives around bitcoin economics.
The Halving Mechanics
At its core, the quadrennial halving event entails a reduction in the reward granted to miners for each block mined on the bitcoin blockchain (the block subsidy) as determined by the bitcoin protocol. It is scheduled to occur roughly every four years, or every 210,000 blocks until the entire 21 million bitcoin supply is mined, approximately by 2140.
As part of bitcoin's deflationary approach to its capped supply, the upcoming halving will reduce the bitcoin supply subsidy from 6.25 bitcoin per block to 3.125 bitcoin, fostering a more stringent supply landscape. By gradually decreasing the number of bitcoin entering into circulation, and, so long as the adoption of bitcoin grows over time, the halving mechanism ensures that the laws of supply and demand will consistently impact the value of the asset.
Satoshi Nakamoto, in the bitcoin whitepaper's Incentives section, noted:
“In a few decades when the reward gets too small, the transaction fee will become the main compensation for nodes. I’m sure that in 20 years, there will either be very large transaction volume or no volume.”
Impact on Price Dynamics
Source: CME CF Bitcoin Reference Rate
Historically, each halving event has been accompanied by a significant surge in bitcoin price in the months preceding and following the event. Notably, in the 365 calendar days after the November 28, 2012, halving, bitcoin prices rose 8,447%, when the reward was cut from 50 bitcoin to 25 bitcoin. In the year following the July 9, 2016 halving, bitcoin prices rose a more modest, but still impressive, 283%, and the block reward was reduced to 12.5 bitcoin. In the 12 months after the May 11, 2020 halving, where the reward was cut to 6.25 bitcoin per block, bitcoin prices jumped 527%.
The pre-halving rally has shown a diminishing trend over time, likely due to miners selling off their bitcoin holdings to secure profits ahead of the impeding reward reduction. Nevertheless, the historical pattern suggests the potential for bitcoin to reach new all-time highs in the aftermath of the 2024 halving.
Impact of Bitcoin Spot ETFs
The landscape surrounding bitcoin has evolved significantly, particularly with the approval of spot Bitcoin ETFs and the influx of institutional capital into the market. These ETFs have generated substantial daily demand, surpassing the pace of new bitcoin supply even before the halving and have the potential to absorb a considerable portion of the limited new issuance,
To put the spot Bitcoin ETF inflows into perspective, at the current rate of block rewards, the bitcoin network produces about 900 new coins per day, or around $54 million worth of bitcoin (assuming an average price per coin of $60k). In April 2024, issuance will fall to 450 coins, or about $27 million worth of bitcoin. During the month of February, net inflows into the U.S.-listed spot Bitcoin ETFs averaged $208 million per day, far outstripping the pace of new supply, even before the halving.
This imbalance between new demand and limited new issuance has likely contributed to the strong upward pressure on the price.
Evolution of a Large Liquid Derivatives Market
The emergence of a robust, regulated derivatives market facilitated by CME Group Bitcoin futures and options marks a fundamental shift in the narrative surrounding the halving for three key reasons: it enables price risks to be hedged, facilitates the management of bitcoin demand risk and provides market participants with actionable price discovery.
Miners typically sold their bitcoin for fiat currency as they mined them, to pay for operational costs. This constant selling meant that price appreciation was measured. After a halving event, miners would have fewer bitcoin to sell, meaning the price could go up.
Mining is now dominated by larger, often publicly traded, companies and with a liquid regulated derivatives market, it is possible for these firms to hedge and lock in future bitcoin prices to cover expenses without selling their coins. If this is the case, then selling pressure from miners is less likely to act as a drag on bitcoin prices going forward.
Through the emergence of a healthy options market, investors can take price signals and consensus estimates about market expectations. Options could allow for additional income to be earned by miners or enhance long bitcoin positions, which would further cushion the impact of the upcoming halving.
A higher number of investors and traders means better liquidity and enhanced price stability for bitcoin. It’s worth noting that bitcoin has become less volatile in recent years, with fewer extreme moves both to the upside and to the downside (link to Erik.N’s article).
Growing institutional participation drove Bitcoin futures average daily open interest to over $11 billion so far in March (+29,000 contracts). Year- to- date average daily volume in Bitcoin futures at CME Group is roughly $4 billion (+15,400 contracts). Large Open Interest Holders (a LOIH is any entity that holds at least 25 Bitcoin futures or Micro Bitcoin futures contracts) reached a record of 272 holders, indicating growing institutional interest for bitcoin exposure.
Impact on Miners
The impeding halving poses challenges and opportunities for miners, as evidenced by shifts in miner behavior and industry dynamics. Decreased bitcoin reserves held by miners, coupled with heightened competition and record high hashrates, underscore the need for operational efficiency and strategic adaptation.
The number of bitcoin held in wallets associated with miners has dropped to the lowest level since July 2021, suggesting that miners are perhaps capitalizing on bitcoin's recent price surge, running down their inventory ahead of the halving or leveraging them to raise capital for upgrading machinery and mining facilities.
The bitcoin hashrate, a measure of network security, is near an all-time high and a sign of high competition, meaning miners need to marshal ever more computing power to earn new rewards. The difficulty in mining a single block is also at a record, and with high energy prices, the mining landscape remains tough.
In previous cycles, there weren't many large-scale miners and even fewer publicly traded ones. The halving may catalyze merger and acquisition activities among mining firms, driving industry consolidation and fostering innovation in sustainable mining practices.
Several publicly listed mining firms have already indicated they will use the halving to capitalize on strategic opportunities as mining rewards decrease and competition among miners intensifies. Depending on the operational cost of each miner, less efficient, unprofitable miners may be forced to leave the network or merge with larger companies to survive. In a more competitive landscape, miners will be driven to enhance their overall operational efficiency, including machine optimization, enhanced security and best-in-class risk management practices. This could likely spur increased innovation throughout incumbent mining technologies and methodologies, ultimately benefiting the industry as a whole.
As the world becomes increasingly conscious of environmental impact, bitcoin miners that are at the forefront of adopting eco-friendly, sustainable practices and renewable solutions, such as carbon capture and heat waste recycling, will likely ensure that the future of crypto aligns with global sustainability and ESG goals.
The rise of Ordinals
The recent surge in retail demand can be attributed in part to the rise of bitcoin Ordinals BRC 20 tokens, which are reshaping the crypto landscape. These tokens, often likened to “NFTs for Bitcoin,” have the potential to drive on-chain activity and increase transaction fees, thereby bolstering miners’ revenue streams amidst declining block rewards post-halving.
Long Term Outlook
Bitcoin’s designation as digital gold underscores its role as a store of value, particularly amidst the scarcity reinforced by halving events. Institutional investors who view bitcoin as a hedge against inflation may find the halving supportive of its perceived value.
Shifts in central bank policies, such as prolonged higher interest rates and potential quantitative easing measures, could further bolster bitcoin’s appeal as a hedge against currency devaluation.
Looking ahead, the implication of bitcoin’s programmed scarcity intersecting with evolving demand dynamics remains intriguing. With 28 more halving events expected over the next 112 years, the future trajectory of bitcoin adoption and network growth warrants close monitoring – especially when broader retail and institutional access to bitcoin was only made possible in the U.S. less than 90 days ago with the approval of spot bitcoin ETFs.
In conclusion, while past having cycles, with the associated price rallies offer valuable insights, the 2024 halving presents a unique confluence of factors that could usher in a new era for bitcoin. As institutional and retail interest converges with regulatory developments and macroeconomic shifts, maintaining a balanced perspective is imperative to navigating the evolving landscape of cryptocurrency.
If you have futures in your trading portfolio, you can check out on CME Group data plans available on TradingView that suit your trading needs www.tradingview.com
By Payal Shah, Director of Equity Research and Product Development at CME Group.
*CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc.
**All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
How the CPI Affects All Markets, Including Cryptocurrencies## Unveiling the Multifaceted Impact of CPI on All Markets: A Deep Dive
The Consumer Price Index (CPI) stands as a powerful economic barometer, influencing a vast array of markets beyond traditional stocks and bonds. Understanding its ripple effects across asset classes is crucial for investors and traders navigating the ever-shifting currents of the financial landscape.
**Decompiling the CPI:**
At its core, the CPI measures the average price changes of a basket of goods and services representative of typical consumer purchases. It serves as a critical gauge of inflation, reflecting the impact of rising prices on purchasing power over time. Governments and central banks rely on CPI data to assess the health of their currencies, make informed monetary policy decisions, and monitor overall economic stability.
**CPI's Influence Across Asset Classes:**
* **Stock Market:** A rising CPI can paint a picture of robust economic growth, potentially leading to higher corporate profits and a bullish stock market outlook. However, the story isn't always rosy. High inflation can also erode company profits by increasing production costs and squeezing margins. Additionally, it can reduce investor purchasing power, leading to a decline in stock prices. To curb inflation, central banks may raise interest rates, making borrowing more expensive and potentially slowing down economic activity, further impacting stock market performance.
* **Bond Market:** The bond market generally fares poorly in inflationary environments. Bonds offer fixed interest payments, and when inflation rises, the purchasing power of those fixed payments diminishes. Investors seeking protection against inflation may abandon bonds, leading to a decline in bond prices.
* **Real Estate Market:** Real estate can act as a hedge against inflation. Property values often rise alongside inflation, making real estate investment trusts (REITs) and direct ownership of property attractive options during inflationary periods. Investors seeking a shield against inflation may flock to this asset class, potentially driving up real estate prices.
* **Cryptocurrency Market:** The relationship between CPI and cryptocurrencies is a topic of ongoing debate. While some cryptocurrencies, like Bitcoin, are touted as hedges against inflation due to their limited supply, their price movements are highly volatile and influenced by a complex interplay of factors beyond inflation. While inflation might nudge some investors towards cryptocurrencies, their inherent volatility necessitates a cautious approach.
* **Commodities Market:** Commodities like gold and oil are traditionally viewed as inflation hedges. Their prices tend to rise alongside inflation, attracting investors seeking to preserve purchasing power during inflationary periods. This flight to commodities can drive up their prices, potentially creating new opportunities for investors.
**Beyond Headline Numbers: A Deeper Look**
The impact of CPI extends far beyond headline numbers. Here's why a nuanced understanding is key:
* **Sector Performance:** Within each market, different sectors react uniquely to CPI fluctuations. For example, rising CPI might benefit utility companies that can pass on cost increases to consumers through higher electricity bills. Conversely, consumer discretionary sectors like retail might see a decline in demand due to inflation-driven budget tightening by consumers. By understanding sector-specific sensitivities to CPI, investors can tailor their strategies to capitalize on potential opportunities.
* **Investor Sentiment:** High inflation can breed anxiety and risk aversion among investors, potentially leading to a sell-off across various markets. Investors spooked by rising prices might pull their money out of stocks, bonds, or even cryptocurrencies, seeking safer havens. Understanding how investor sentiment might shift based on CPI data can help investors anticipate market movements.
* **Global Events:** The global stage is a dynamic one, and unforeseen events like geopolitical tensions or supply chain disruptions can significantly impact inflation and, consequently, various markets. Investors who stay informed about global developments can potentially adjust their strategies to navigate market fluctuations triggered by these events.
**Harnessing the Power of CPI:**
By demystifying the impact of CPI on different markets, investors and traders gain valuable insights. Closely monitoring CPI data, combined with analyzing sector-specific performance and broader economic trends, empowers them to make informed investment decisions. Remember, the CPI is just one piece of the puzzle, but a crucial one. A comprehensive analysis that incorporates various economic indicators, market-specific dynamics, and global events will provide a more complete picture, ultimately leading to better investment strategies.
MFI INDICATOR - STRATEGY FOR TRADINGIndicator MFI — model
Incorporating technical indicators into your trading system requires a clear understanding of their fundamental principles.
An innovative solution developed by Gene Cuong and Avrum Sudak allows the use of volumetric data in metric analysis.
The Cash Flow Index serves as a graphical representation of the "cash ratio", requiring a preliminary derivation of the "cash ratio" and subsequent calculations, including the determination of typical price and cash flow.
Similar to the relative strength index, the cash flow index is based on the concept of a “typical price,” calculated as the average of the high, low, and closing prices over a specified period of time. For example, if the daily time frame has a high of 70,000, a low of 65,000, and a closing price of 68,000, the typical daily price is calculated as follows:
Typical daily price = (70000 + 65000 + 68000)/3 = 67666
Cash flow is then determined by multiplying typical price by volume:
Cash Flow = Typical Daily Price * Volume.
Comparing the resulting cash flow with the previous day's cash flow makes it easier to identify positive or negative trends. Positive cash flow indicates an increase, while a negative cash flow indicates a decrease. Cases of equivalent cash flow values are not taken into account.
When positive and negative cash flows can be distinguished, the cash ratio is calculated by dividing the former by the latter:
Cash Ratio = (Positive Cash Flow / Negative Cash Flow).
Using this data, the cash flow index (MFI) can be calculated using the formula:
MFI = 100 - (100/(1 + Money Factor)).
Gene Cuong and Avrum Sudak have delineated three primary signals employed by the Cash Flow Index:
Overbought or Oversold Levels: Traders strategically monitor for overbought or oversold conditions as indicators of unsustainable price extremes, signaling potential market corrections.
Bullish and Bearish Divergences: Analysis of bullish and bearish divergences serves as a predictive tool for identifying potential trend reversals. Discrepancies between the direction of price movements and corresponding Cash Flow Index trends can offer valuable insights into shifting market dynamics.
Fluctuations at 80 or 20 Levels: Observing fluctuations in the indicator readings around the 80 or 20 thresholds enables traders to discern potential market reversals. These pivotal levels serve as crucial points of reference, guiding traders in assessing market sentiment and making informed trading decisions.
Determining overbought and oversold zones using the cash flow index
While the relative strength index (RSI) and other oscillator-type technical indicators are capable of identifying overbought and oversold market conditions, the money flow index (MFI) stands out for its effectiveness in this area. Including additional volume information allows the MFI indicator to filter out false signals from overbought and oversold conditions, increasing its reliability, especially for traders looking to counter prevailing trends.
Like most momentum indicators, the Money Flow Index ranges from 0 to 100. A Money Flow Index reading below 20 indicates an oversold signal. Conversely, a Cash Flow Index reading greater than 80 suggests an overbought scenario.
One limitation of trading based solely on overbought and oversold signals is the inability to counter the current trend merely due to signals generated by the Money Flow Index (MFI). Optimal trading strategy involves exercising patience and waiting for a price action pattern to validate a shift in the prevailing trend before taking a position. By employing this approach, traders can make more informed decisions and reduce the risk of entering positions prematurely based solely on MFI signals.
The MFI Indicator and Divergence
Beyond its function in pinpointing overbought and oversold conditions, the Money Flow Index (MFI) indicator serves as a valuable tool for detecting divergence within the market. In essence, divergence manifests when the price moves in one direction while the indicator readings depict a contrary trend. Traders regard this occurrence as a strong indication that the price is poised to reverse in alignment with the technical indicator's trajectory.
Utilizing the MFI indicator enables traders to readily recognize such signals, whether they manifest as bullish or bearish divergence.
Bullish Divergence:
Bearish divergence:
What Should You Consider?
By integrating volume into its mathematical framework, the Money Flow Index is adept at generating highly precise trading signals concerning overbought and oversold market conditions. Additionally, it demonstrates a notable ability to pinpoint emerging divergences within the market. However, like any technical indicator, it possesses inherent limitations.
A primary constraint of the Money Flow Index is its propensity to persist in overbought or oversold states for extended durations, potentially leading to false signals. Yet, by crafting a trading strategy that incorporates price action signals, traders can harness the MFI indicator to identify potential reversal zones.
Armed with this insight, traders can anticipate shifts in directional price movement with ease and strategize their trades accordingly.
Summing It Up:
The Money Flow Index stands out as a unique indicator amalgamating momentum and volume within the RSI formula. Its strength lies in its adeptness at identifying potential reversals through overbought or oversold levels, as well as bullish or bearish divergences. Nonetheless, prudent utilization of the Cash Flow Index entails supplementing its readings with additional technical indicators rather than relying solely on its signals.
BUY, SELL, with white Plot Waves but on a 4hr TF Tutorial Same formula settings as Buy and Sell. Added a 4th plot MA for a longer time frame. This will help exit the trade much earlier for greater profits otherwise without this 4th plot wave, traders may be at risk of losing out for greater profits.
4hr TF Buy, Sell, with wave settings, are the same settings with 30min TF.
FOR 30MIN TIMEFRAME (Green Wave)
Make sure the 4th white MA is unchecked when using a 30min TF.
1. Wait for Buy
2. After the Buy label, the green Wave Confirms Entry BUY Above the orange and yellow waves.
3. Follow the green wave with candlesticks
4. Wait for the green wave to move underneath the orange and yellow waves to confirm to exit the trade.
FOR 4HR TIMEFRAME (White Wave)
Go to settings and click by adding the 4th white MA, all four MAs must be active
1. Wait for Buy
2. After the Buy label, the White Wave Confirms Entry BUY Above the green, orange, and yellow waves.
3. Follow the white wave with candlesticks
4. Wait for the white wave to move underneath the green wave to confirm to exit the trade.
Please read the comment on the chart referring to Sell Signal arriving late. Instructions applied.
You may get a Sell label before the white wave falls beneath the green wave. Does not mean you should exit (up to you) but I'll take the sell signal label as guidance knowing the white wave will fall beneath the green wave soon.
Just like the buying label, doesn't mean I should buy when the buying label appears but I should wait until the white wave moves above the green, orange, and yellow waves.
Anything else I might have missed, I'm not responsible. Backtest it, and do your research. This is not intended for financial advice. Agreeing to use this tutorial strategy, means you are solely making your own decisions to enter and exit a trade. You also agree not to hold me responsible in case of financial loss.
The Buy, Sell, and Waves have specific settings to make it work. I'm only sharing input settings for those who request along with indicator names. I'll private message you with them.
Any trader making changes to these two indicators must know, that trading is a risk and profits are not guaranteed. Nothing in trading is 100% guaranteed to win.
Be strategic, Avoid Traps, and ConsolidationThis idea links to other ideas called Buy and Sell. This strategy is about 90% to 95% win rate.
I'm adding an oscillator to help with that area where a trader can avoid traps, consolidation, major losses, etc.
I've created two scenario ideas.
In this case, relating to both sides, a trader enters a trade after already confirming entry. But they don't realize it's a trap. The oscillator can help offset having to wait for sell confirmation.
Please view carefully what this oscillator does:
Helps read reversals and divergence
The oscillator's first red column is to be used to help exit the trade rather than having to wait for sells label and plot crossover. View both examples.
Pay attention to:
1. Buy label but not confirmed for entry
2. Green wave above orange and yellow confirms entry
3. View both red divergence trend lines from candlesticks and oscillator
4. As you read divergence, view yellow and orange plot waves and view the price BTC might fall
5. Realize the Green wave is too far apart from the orange and yellow waves and BTC is headed
downward.
Why am I using this strategy?
Because the entry was not long ago and the trend is starting to dip so I must react quickly.
Why should I react rapidly?
1. Diverage in process
2. My profit is not much to have a good space to stay in the trade longer
3. The oscillator column is red for exit
or
I can remain in the trade at a greater RISK.
As you learn divergence and reversals you'll catch the fall sooner than having to wait for the red column. All this is due to the major fact, that you bought early and the dip is beginning to fall.
Anything else I might have missed, I'm not responsible. Backtest it, and do your research. This is not intended for financial advice. Agreeing to use this tutorial strategy, means you are solely making your own decisions to enter and exit a trade. You also agree not to hold me responsible in case of financial loss.
The Buy, Sell, and Waves have specific settings to make it work. I'm only sharing input settings for those who request along with indicator names. I'll private message you with them.
Any trader making changes to these two indicators must know, that trading is a risk and profits are not guaranteed. Nothing in trading is 100% guaranteed to win.
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
Understanding the Differences Between Stock Market and Crypto P2Thank you very much for your support, as I told when we will get 20+ likes on Part 1, than I will make Part 2. Here you get the summary of each, with the other points:
10. Market Infrastructure: The infrastructure supporting traditional stock markets, including trading platforms, clearing systems, and market data providers, is well-established and interconnected, whereas the infrastructure for the crypto market is still evolving and fragmented, with multiple competing platforms and protocols.
11. Market History: Traditional stock markets have a long history dating back centuries, with well-documented market cycles and economic trends, whereas the crypto market has a relatively short history, with significant price movements driven by technological developments and market speculation.
12. Regulation of Investment Products: Traditional stock markets offer a wide range of investment products, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs), all subject to regulatory oversight, whereas the crypto market primarily offers cryptocurrencies and tokenized assets with varying degrees of regulatory clarity.
13. Market Correlation: Stocks and traditional financial assets often exhibit correlations with broader economic indicators such as GDP growth and interest rates, whereas the crypto market may demonstrate correlations with factors such as Bitcoin dominance, market sentiment, and technological developments.
14. Market Participants: Traditional stock markets attract a diverse range of participants, including retail investors, institutional investors, hedge funds, and pension funds, whereas the crypto market has a more diverse participant base, including retail traders, technology enthusiasts, speculators, and early adopters of blockchain technology.
15. Market Fragmentation: The stock market operates as a unified marketplace with standardized trading rules and regulations, whereas the crypto market is fragmented across multiple exchanges, each with its own trading protocols, liquidity pools, and pricing mechanisms.
16. Market Impact of News Events: News events such as corporate earnings releases, economic data reports, and geopolitical developments have a significant impact on stock market movements, whereas the crypto market may react more strongly to news related to regulatory developments, technological advancements, and adoption trends.
17. Market Efficiency: The efficiency of traditional stock markets is supported by established trading mechanisms, liquidity providers, and market makers, leading to relatively stable price discovery and reduced arbitrage opportunities, whereas the crypto market may experience inefficiencies due to lower liquidity, market manipulation, and regulatory uncertainties.
Stock Market:
Pros:
Stability: Stock markets have a long history and are generally stable investment options.
Regulation: They are heavily regulated, providing a level of security for investors.
Diversification: Investors can choose from a wide range of stocks across various sectors and industries.
Dividends: Many stocks offer dividends, providing a source of passive income.
Access to Information: There is a wealth of financial information available for analysis and research.
Cons:
Limited Trading Hours: Stock markets operate during specific hours on weekdays, limiting trading opportunities.
High Entry Barriers: Some stocks may require a significant investment, making it inaccessible for small investors.
Market Volatility: While generally stable, stock markets can still experience significant volatility during economic downturns or market crises.
Slow Settlement: Settlement times for stock transactions can take several days, delaying access to funds.
Limited Accessibility: Access to certain stocks may be restricted based on geographical location or regulatory requirements.
Crypto Market:
Pros:
24/7 Trading: Cryptocurrency markets operate 24/7, allowing for round-the-clock trading.
Accessibility: Anyone with internet access can participate in the crypto market, promoting inclusivity.
Potential for High Returns: The crypto market has seen explosive growth, offering the potential for high returns on investment.
Decentralization: Cryptocurrencies operate on decentralized networks, reducing dependency on centralized authorities.
Technological Innovation: The crypto market is at the forefront of technological innovation, with developments in blockchain and decentralized finance (DeFi).
Cons:
Volatility: Cryptocurrencies are highly volatile and can experience rapid price fluctuations.
Lack of Regulation: Regulatory uncertainty in the crypto market can lead to investment risks and market manipulation.
Security Risks: Cryptocurrency exchanges and wallets are susceptible to hacking and cyberattacks.
Limited Adoption: Despite growth, cryptocurrencies still face challenges in widespread adoption as a mainstream form of payment.
Complexity: Understanding cryptocurrencies and blockchain technology can be challenging for newcomers, leading to potential investment mistakes.
Summary:
Both the stock market and the crypto market offer unique opportunities and challenges for investors. The stock market provides stability, regulation, and a wide range of investment options, while the crypto market offers accessibility, potential for high returns, and technological innovation. Deciding which market is better depends on individual preferences, risk tolerance, and investment goals. Diversification across both markets may provide a balanced approach to building an investment portfolio.
The whole truth about trading - playing against fateIt is apparent that your interest in trading stems from a desire to transcend the conventional 9 to 6 work regimen or to establish an additional revenue stream for enhanced financial stability. Regardless of the impetus, trading imbues one with a sense of hope—a hope for attaining financial autonomy and catering to the exigencies of one's familial responsibilities.
Nevertheless, hope unaccompanied by acumen proves inadequate in the realm of trading.
Are you prepared to delve into the intricacies of trading in its entirety?
Can you harness the mechanisms of trading to your advantage and prosper therein?
Trading is a means of slow enrichment
For many, the following assertion may not be warmly received, yet it warrants acknowledgment: Trading serves as a gradual enrichment scheme.
While anecdotes exist of traders who commenced with modest capital and ascended to seven-figure balances, such instances are rare. The reality is stark: the odds of such success are exceedingly slim. The allure of amassing substantial wealth swiftly is tempting, but it often necessitates assuming excessive risk. Only those blessed with exceptional luck may realize significant gains in short order.
Conversely, the vast majority—99.99%—who pursue this path find themselves depleting their initial investment. Merely a fortunate minority attain even modest profits, and their success is often attributed more to chance than skill.
Consider the perspective of Warren Buffett, whose wealth is renowned:
"My wealth is a product of American residency, fortuitous genetics, and the power of compound interest."
The crux lies in compound interest—the gradual accumulation of profits over time. Buffett's ascent to becoming the world's wealthiest investor spanned decades, not mere weeks or months.
Hence, if one views trading as a shortcut to affluence, disillusionment is inevitable.
You need money to make money from trading
One of the most pervasive trading fallacies is the belief that possessing a profitable trading strategy guarantees the potential to amass millions in the market—a notion that has ensnared many traders.
While it is feasible to develop a lucrative strategy, its profitability alone does not guarantee the attainment of vast wealth. Why? Because the magnitude of your initial deposit plays a pivotal role.
Consider this scenario: Suppose you possess a trading strategy yielding a 20% annual return.
With an account balance of $1,000, your potential earnings amount to $200 per year.
With $10,000, your potential earnings escalate to $2,000 annually.
Scaling up further, with a $1 million account, potential earnings soar to $200,000 per year.
This illustrates that while a trading strategy is undeniably significant, it represents only one facet of the equation. Equally crucial is the size of your trading account.
This elucidates why hedge funds attract vast sums—often in the millions, if not billions of dollars—since substantial capital is indispensable for maximizing returns from trading endeavors.
Trading is one of the worst ways to earn a regular income
Trading is often sought out by individuals seeking an alternative income stream, aiming to liberate themselves from the confines of a conventional 9 to 6 job in pursuit of pursuing their passions. However, it is crucial to confront a sobering reality: trading stands as one of the least reliable avenues for securing a consistent income.
Why? The dynamics of financial markets are inherently mercurial. A strategy that yields profits one week may falter the next. This isn't to suggest that such strategies become entirely obsolete, but rather that market conditions necessitate adaptability. Realigning a strategy to suit evolving market dynamics demands time—a commodity not readily available in the fast-paced world of trading. This adjustment period could extend over several weeks or even months.
Consequently, anticipating profits on a daily, weekly, or even monthly basis proves unrealistic. Success in trading hinges upon one's ability to capitalize on market opportunities as they arise, accepting the yields bestowed by the market, and refraining from unrealistic expectations of consistent returns.
You're always studying the markets
Continuous learning is indispensable for success in trading. Reflecting on my own journey, I initially gravitated towards indicators and price action trading, convinced that these tools alone would suffice for profitability. However, this mindset hindered my progress, as I neglected broader market perspectives.
Recognizing the limitations of my approach, I embarked on a journey of exploration. I delved into the practices of accomplished traders, discovering diverse strategies such as trend trading, system trading, and mean reversion trading.
Today, my repertoire encompasses multiple trading strategies across various markets. This diversified approach has engendered a more consistent capital curve, enhancing my overall returns.
The pivotal lesson gleaned from this experience is clear: achieving profitability in trading does not signify the culmination of one's learning curve. On the contrary, ongoing education and exploration of the markets remain imperative for sustained success.
How do you become a successful trader when all the odds are against you?
Embrace Existing Solutions:
Attempting to forge your own path in trading can prove both time-consuming and costly. Instead, seek out established trading algorithms equipped with tested and proven trading rules. Consider investing in algorithms like mine, which come backed by historical testing results.
Maintain Financial Stability:
Relying solely on trading for income places undue psychological pressure on yourself. The imperative to generate monthly income often leads to hasty and ill-advised trading decisions. Many seasoned traders, therefore, diversify their income streams. For instance, some engage in mentorship or operate hedge funds that levy management fees irrespective of market performance. By securing a stable income through alternate means, you can focus on trading without financial anxiety.
Harness the Power of Compound Growth:
Albert Einstein hailed compound interest as the eighth wonder of the world. Yet, I propose introducing you to the ninth wonder: the regular infusion of funds to augment profits. Consider this scenario: with an initial $5,000 investment earning an average annual return of 20%, you would amass $191,688 over 20 years. However, by adding an additional $5,000 to your account annually and compounding profits, your total would skyrocket to $1,311,816 over the same period. Witness the transformative potential of consistent contributions and compounding gains.
Liquidity as the Key to understanding the MarketLiquidity in the market is a key factor in price movement especially in the cryptocurrency market. Understanding how and where liquidity appears is fundamental to being able to determine the future price movement of an asset.
Liquidity:
I would like to start by showing what liquidity is and how it can be detected.
In our case, liquidity is the accumulation of buy or sell orders, and the more of them there are, the greater the opportunity to turn a currency into an asset and vice versa.
According to technical analysis, an asset has so-called price levels from which further downward or upward movement occurs. Exactly from these levels on the chart, which are seen by all traders without exception, trades are opened, and stop-losses are set for the nearest minimum or maximum. Thus, liquidity is accumulated behind the levels, which acts as a magnet for the price as it is of great interest for big players to fill their orders.
90 percent of traders' stop losses are very close to each other, therefore, with a significant force of price movement in one direction and subsequent interaction with the level of support or resistance, positions are liquidated and a sharp purchase or sale of an asset at stop losses occurs.
Please pay attention to the main point. Liquidity is a tool for price movement used by big players. Always keep this in mind.
Gap:
A gap is a result of low liquidity in the market and a high trading volume of the stock. Gaps are important for technical analysis because they signal shifts in the supply and demand equilibrium. Major gaps indicate a substantial imbalance between buyers and sellers, causing a swift repricing.
It is always important to remember that gaps are visible to every market participant and many people when a gap appears start opening trades directed towards its filling thus provoking the emergence of liquidity. In turn, this can lead the price in the opposite direction to the one where the gap is located in order to liquidate recently opened positions of cunning traders. But as a rule, the price eventually comes to the gap and fills it partially or completely removing inefficient pricing. You can think of it as a magnet for price.
Fair Volume Gap:
FVG (Fair Volume Gap) has the same meaning as a gap (i.e. a magnet for price) but not all traders are focused on this kind of inefficient pricing. In this case it is also significant that according to the common technical analysis the level of 0.5 major candles is used as a strong level of support and resistance and therefore liquidity will be near these levels. Thus FVG filling is achieved also at the expense of ordinary traders buying or selling from these levels.
Luquidity pools:
It is also worth mentioning the so-called liquidity pools. These are often staggered liquidity clasters combined with zones of inefficient pricing, which together lead to very significant and rapid price movements.
Let's look at the essence of this by the example of how a sharp upward growth occurs. Gradually, a major player moves the price down, leaving liquidity on top and not touching it at all, since we will still need it. When long positions are sufficiently liquidated, we can start collecting liquidity from above. And since this liquidity has not been affected at all, sharp liquidation of short positions level by level occurs. It is worth noting the significant impact of inefficient pricing zones through which the asset, as if accelerating faster, reaches clusters of liquidations and, accordingly, a very rapid growth of the asset occurs.
These are the basics that I hope will help you improve your trading.
I plan to continue developing the topics of liquidity, pricing and the principles of determining price movements. What do you think about it?
Rising and Falling The Bitcoin StoryAs we zoom in on the intricate details of this Bitcoin chart, we’re essentially time traveling through the life story of a revolutionary currency. This isn't just a tale of wild price swings; it’s a deep dive into how Bitcoin has weaved itself into the fabric of global finance. We've seen it grow from a digital seedling into a towering tree in the financial forest, its roots spreading far and wide.
Our story begins when Bitcoin was just whispers in cyberspace, valued at mere cents. It’s akin to finding an old treasure map, leading to a chest that's now worth billions. Then 2013 hit, and Bitcoin grabbed the world’s attention — not all for good reasons, mind you, with the Silk Road and Mt. Gox putting it through its paces. Those were testing times, but Bitcoin showed its mettle, bouncing back each time.
Marching down the timeline, we encounter pivotal moments like when Germany gave Bitcoin a regulatory nod, the halving events that sharpen Bitcoin's scarcity edge, and the growing wave of institutional investments. Each of these milestones is like a stepping stone that Bitcoin used to cross the river of uncertainty, inching closer to the mainstream shore.
Fast-forward to 2017, and we find Bitcoin riding a wave of enthusiasm, propelled by a flood of ICOs. It’s a dizzying climb, with a peak that had everyone talking. But then, as the adage goes, what goes up must come down, and 2018 brought the sobering chill of the crypto winter. This was the market's way of saying, “Take a breath, reassess, and plan your next move.”
In 2021, Bitcoin came back with a vengeance, reaching dizzying new heights. This wasn’t just about investors jumping on a bandwagon; it was about big players, from corporations to hedge funds, recognizing Bitcoin’s potential. But then, the tides turned in 2022, as macroeconomic pressures, from inflation concerns to tightening monetary policy, caused the market to shiver and shake off some of its gains.
And just when we thought we had seen it all, the Bitcoin saga continued into 2022 and 2023, years that would test the mettle of investors and the resilience of the crypto ecosystem. The narrative took a dramatic turn as the market faced the headwinds of change. Inflation was no longer a specter looming on the horizon; it became a stark reality, sending central banks into a frenzy of monetary tightening. The ripples of this new economic stance were felt throughout the Bitcoin market, sending shivers down the spine of the crypto world and triggering a sell-off that would see Bitcoin shed a significant portion of its value.
But even as the value wavered, the technology didn't stand still. Innovations within the blockchain space continued, with improvements to scalability and security, not to mention the ever-expanding universe of decentralized finance (DeFi) and non-fungible tokens (NFTs). Skepticism was still a frequent guest at the table, but for every doubter, there was an innovator, pushing the boundaries of what crypto could be.
As we turned the page to 2024, the crypto community was holding its breath in anticipation. Would this be the year of recovery, the year when Bitcoin would defy the odds and rebound? Or would it be another year of challenges and character-building for the world's premier cryptocurrency? The introduction of more sophisticated regulatory frameworks began to pave a clearer path for institutional adoption, and whispers of the next halving event started to stir the market's imagination.
Bitcoin's dance with mainstream finance became more intricate. There were stumbles, sure, but every step was a lesson learned. The chart became not just a reflection of past price movements, but a ledger of Bitcoin's ongoing maturation—a digital asset growing up in a world still grappling with its implications.
Behind the scenes, this chart captures the tug-of-war between innovation and skepticism. For instance, the social media giants, with their advertising clampdown, had Bitcoin on the ropes for a bit. Yet, each technological milestone, each regulatory hurdle crossed, has added to Bitcoin's credibility.
Then, we have the environmental subplot, where Tesla's dance with Bitcoin highlighted the growing pains of an industry grappling with sustainability. It’s like watching a fledgling industry mature, grappling with its identity and its impact on the planet.
Why are we sharing this story in all its technicolor detail? Because it’s about more than just investment and market speculation. It's a historical document for future market historians, a lesson book for current investors, and a crystal ball for those trying to catch a glimpse of the future.
This chart is a saga of resilience, bursting with tales of technical revolutions, economic shake-ups, regulatory cliffhangers, and the tireless human spirit driving it all. It’s the chronicle of an underdog that’s fighting for its place in the financial hall of fame.
But wait, there's more. This isn't just about recounting past glories and missteps. It's about sketching out the forces that may shape Bitcoin's journey ahead. It’s about seeing the patterns, the peaks, the troughs, and gearing up for the next chapter in this blockbuster saga.
In wrapping up this lengthy, winding narrative, we come back to where we are now: Bitcoin, standing tall amidst the shifting sands of finance and technology. This chart isn't just a snapshot; it’s a living, breathing tale of an asset that's as enigmatic as it is exciting. It’s about understanding the past to navigate the future’s uncertain waters. So here’s to Bitcoin, the digital enigma, the currency of tomorrow, and here’s to the unwritten chapters that we’ll be charting next.
Understanding the Differences Between Stock Market and Forex P2Because of your strong support on the Part 1, I decided to make Part 2 (as I already told in the last Part). Today lets see the other 17 differences between Stock market & Forex market. You must know them before investing/trading.
1. Market Size: The stock market represents ownership in companies, whereas the forex (foreign exchange) market deals with trading currencies. The stock market is typically larger in terms of market capitalization, as it encompasses a wide range of companies with varying sizes, while the forex market is the largest financial market in the world in terms of daily trading volume.
2. Market Participants: In the stock market, participants include individual investors, institutional investors, hedge funds, mutual funds, and pension funds. On the other hand, the forex market primarily involves central banks, commercial banks, institutional investors, corporations, and retail traders.
3. Market Influence: Stock markets are influenced by company-specific factors such as earnings reports, mergers, acquisitions, and corporate governance issues. In contrast, forex markets are influenced by macroeconomic factors such as interest rates, inflation, geopolitical events, and central bank policies.
4. Market Transparency: Stock markets are relatively more transparent due to regulatory requirements for companies to disclose financial information regularly. Conversely, the forex market operates over-the-counter (OTC), which can lead to less transparency and information asymmetry.
5. Market Structure: The stock market operates through exchanges where buyers and sellers are matched electronically or physically, whereas the forex market is decentralized and operates 24 hours a day through a global network of banks and financial institutions.
6. Market Access: Access to the stock market often requires a brokerage account, and trading is conducted through regulated exchanges. In contrast, the forex market is accessible directly through banks or online brokers, offering greater ease of entry for retail traders.
7. Market Liquidity: While both markets are liquid, the forex market generally offers higher liquidity due to its immense size and constant trading activity. This liquidity allows for rapid execution of trades without significant price slippage.
8. Market Correlation: Stocks tend to have positive correlations with economic growth and corporate performance, whereas currency pairs may exhibit different correlations based on factors such as interest rate differentials, trade balances, and geopolitical events.
9. Market Risk: Stock market investments are subject to company-specific risks such as management decisions, industry trends, and competitive pressures. In forex trading, risks include currency fluctuations, geopolitical instability, and central bank interventions.
10. Market Analysis: Fundamental analysis is essential in both markets, but the focus differs. In the stock market, analysts evaluate company financials, management quality, and industry dynamics. In the forex market, analysts assess macroeconomic indicators, interest rate differentials, and geopolitical developments.
11. Market Trends: Trends in the stock market can be influenced by investor sentiment, economic cycles, and industry trends. Forex trends are influenced by macroeconomic factors and shifts in global capital flows.
12. Market Participants' Goals: Stock market investors typically seek long-term capital appreciation and income through dividends, while forex traders may aim for short-term profit opportunities by speculating on currency price movements.
13. Market Entry and Exit Strategies: Stock market investors often employ buy-and-hold strategies or use technical analysis to identify entry and exit points. Forex traders frequently utilize leverage and short-term trading strategies such as scalping or swing trading.
14. Market Regulation Impact: While both markets are subject to regulation, regulatory changes may have different effects. Stock market regulations primarily focus on investor protection, market integrity, and disclosure requirements, while forex market regulations often target leverage limits, margin requirements, and risk management.
15. Market Sentiment Indicator: In the stock market, sentiment indicators include measures of investor confidence, such as the VIX (Volatility Index) and surveys of investor sentiment. In the forex market, sentiment indicators may involve positioning data from futures contracts, surveys, or sentiment indexes specific to currencies.
16. Market Impact of Economic Data Releases: Economic indicators such as GDP growth, employment reports, and inflation data can significantly impact both markets but may have different effects depending on the asset class and prevailing market sentiment.
17. Market Accessibility: The stock market is often perceived as more accessible to the general public, with familiar companies and brands driving investor interest. In contrast, the forex market may seem more esoteric to some due to its focus on currency pairs and macroeconomic factors.
Now as I told lets discuss about what is better. And the Pro & Cons of each market summarized:
(before we continue like, Follow, Share it to your trader buddies......
Determining which market is "better" depends entirely on an individual's investment objectives, risk tolerance, and trading style. Both the stock market and the forex market offer unique opportunities and challenges, catering to different types of investors and traders.
Stock Market:
Pros:
Ownership in companies: Investing in stocks allows you to become a partial owner of companies, offering potential for capital appreciation and dividends.
Transparency: Stock markets are regulated and require companies to disclose financial information regularly, providing transparency for investors.
Long-term growth: Historically, the stock market has generated substantial long-term returns, making it suitable for investors with a buy-and-hold strategy.
Diversification: With thousands of stocks across various sectors and industries, investors can build diversified portfolios to manage risk.
Cons:
Volatility: Stock prices can be highly volatile, influenced by factors such as economic conditions, industry trends, and company-specific news.
Company-specific risks: Investing in individual stocks carries the risk of company-specific events such as poor earnings, management issues, or regulatory changes.
Market cycles: Stock markets are subject to economic cycles, including periods of recession and market downturns, which can affect investment returns.
Forex Market:
Pros:
Liquidity: The forex market is the largest financial market in the world, offering high liquidity and tight spreads, allowing for swift execution of trades.
Accessibility: Forex trading is accessible 24 hours a day, five days a week, providing flexibility for traders to participate in global currency markets.
Leverage: Forex trading offers high leverage, allowing traders to control large positions with a relatively small amount of capital, potentially magnifying profits (but also losses).
Diverse opportunities: With a wide range of currency pairs and trading strategies, forex markets offer diverse opportunities for traders to profit in various market conditions.
Cons:
..........& Comment your Opinion)
High volatility: Currency markets can be highly volatile, influenced by geopolitical events, central bank policies, and economic indicators, leading to rapid price fluctuations.
Risk of leverage: While leverage can amplify gains, it also increases the risk of significant losses, especially for inexperienced traders who may overleverage their positions.
Lack of transparency: The forex market operates over-the-counter, which can lead to less transparency compared to regulated exchanges, potentially exposing traders to counterparty risk and manipulation.
Summary:
In summary, there is no definitive answer to which market is "better" as both the stock market and the forex market have their advantages and disadvantages. The choice between them depends on individual preferences, investment goals, risk tolerance, and trading style. Investors seeking long-term growth and ownership in companies may prefer the stock market, while traders looking for short-term profit opportunities and high liquidity may favor the forex market. Ultimately, it's essential for investors and traders to conduct thorough research, understand the risks involved, and align their investments with their financial objectives.
Understanding the Differences Between Stock Market and Crypto P1Hey there, welcome to 'Stock Market VS Crypto Market'! Our goal? To break down the complexities and highlight the fascinating differences between traditional stocks and the exciting world of cryptocurrencies, making it easier for traders and investors to navigate both landscapes. This is Part 1: (In Part-2 I will tell where to invest and how much)
1. Market Maturity: Traditional stock markets have been established for centuries, with robust infrastructures and historical data available for analysis, whereas the crypto market is relatively young, experiencing rapid growth and evolving regulatory frameworks.
2. Market Size: The global stock market has a significantly larger market capitalization compared to the crypto market, reflecting the extensive presence of publicly traded companies and institutional investors.
3. Volatility: While both markets experience volatility, the crypto market tends to exhibit higher levels of volatility due to its speculative nature and rapid price fluctuations.
4. Transparency: Stock markets typically provide greater transparency in terms of financial reporting, corporate governance, and regulatory disclosures compared to the crypto market, where transparency can vary widely among different projects and exchanges.
5. Counterparty Risk: In the stock market, counterparty risk is mitigated through centralized clearinghouses and regulatory oversight, whereas the decentralized nature of the crypto market may expose investors to higher counterparty risk, such as hacking incidents or smart contract vulnerabilities.
6. Market Manipulation: Instances of market manipulation, such as pump and dump schemes, are regulated and monitored more closely in traditional stock markets compared to the crypto market, where regulatory enforcement may be less stringent.
7. Market Psychology: The psychology of investors in the stock market is influenced by traditional financial metrics and investor sentiment, whereas the crypto market often exhibits a unique blend of technological optimism, speculative frenzy, and fear of missing out (FOMO).
8. Custody Solutions: Custody of traditional stock assets is typically managed by regulated financial institutions, whereas custody solutions for cryptocurrencies range from self-custody through private wallets to third-party custodians and institutional-grade solutions.
9. Accessibility to Information: Stock market participants have access to a wealth of financial information through established platforms such as Bloomberg and Reuters, while information in the crypto market is often decentralized and distributed across various forums, social media platforms, and blockchain explorers.
If we get 20+ likes, I´ll make Part-2 (including the summary, where to invest and which is better).
So like (boost), follow, comment and share it for increasing the knowledge of your friends!
What LOSER Traders Say – 6 PhrasesI like to say…
Go where winners thrive and excuse givers die!
If you’ve ever uttered the following phrases below – I urge you to stop saying them from today.
And when you do utter these below phrases, you’re going to manifest losing, despair and hopelessness.
But it’s not your fault. It’s the conditions and echo of amateur traders – that other traders listen to.
I don’t believe for one second you want the loser mentality.
I believe you want to embrace the mindset of a true trading champion.
So let’s stop saying the below:
The Market is Wrong: A Blame Game for the Weak
Newsflash: the market isn’t out to get you.
Another newsflash, the market is NEVER wrong.
It goes up, down and sideways.
What you’re seeing in the charts is HISTORICAL.
So, what comes out in the future is untold but the truth.
There should be NO ego for ever saying – The market is wrong.
Take control of what the market is currently doing and what it has done and analyze your approach.
I Suck at Trading: The Pity Party Pitfall
Negative self-talk is the fastest route to trading mediocrity.
We are ALL bad at something when we start.
We continue to be bad at something if we don’t practice hard, work at it and have persistence.
If you’re convinced you suck at trading, it’s time to silence that inner critic.
Trading is no different from picking up another skill, vocation, endeavour and hobby.
Maybe I Should Just Give Up: The Quitters’ Anthem
Throwing in the towel is the easy way out.
In fact, I don’t believe traders lose.
They simply quit.
But winners persevere.
If thoughts of giving up dance in your mind, consider this:
Success often comes to those who refuse to quit.
Risk less.
Tweak your strategy.
Have your game plan with a solid back tested journal.
Reassess your goals.
Take a deep breath and remember that every setback is a setup for a comeback.
Damn, This is a Slow Process: Impatience, the Silent Killer
Trading success is not a sprint; it’s a marathon.
Complaining about the slow process won’t expedite your journey to financial triumph.
Whether you’re holding gold and waiting for the market to rally to new highs – It will come – you just need patience.
Winners understand that patience is a trader’s virtue.
So either you run the marathon, or give up trying knowing it’s going to be a long road.
I Can’t Do It
Your mind is a powerful tool.
And when there are challenges and doubts, you’ll find that you’ll keep telling yourself – you can’t do it.
Think of thoughts as tiny branches of a tree.
The more you think a certain way, the bigger the tree becomes.
And this will set yourself up for failure.
Random thought: This is why when a woman says I’m fat 1,000 times. No matter how thin she is, you can’t convince her that she is thin. Because of the tree she has build in her mind about her self-image.
Same with trading.
Stop saying negative thoughts.
Be kinder to yourself and who you are.
Winners replace “I can’t” with “I will.”
Winners replace Should, Would, Could with DO!
Cultivate a positive trading mindset, believe in your abilities, and watch how your confidence transforms your trading outcomes.
I’ll Start Tomorrow
Procrastination is the biggest thief of success.
Tomorrow is the favorite day of the loser.
If you constantly push your trading plans to the next day, you’re delaying your success.
You’re delaying profit opportunities.
You’re delaying your learning process.
Winners take action today.
Start now, stick to your plan, and relish the progress you’ll make.
Tomorrow’s victories are earned through today’s actions.
FINAL WORDS:
So from today, say and manifest a more optimistic and positive mindset.
Don’t say any more loser phrases.
And let’s cultivate a winning mentality and tree of positive branches to your mind.
Let’s sum up the phrases you must NOT say:
The Market is Wrong: A Blame Game for the Weak
I Suck at Trading: The Pity Party Pitfall
Maybe I Should Just Give Up: The Quitters’ Anthem
Damn, This is a Slow Process: Impatience, the Silent Killer
I Can’t Do It
I’ll Start Tomorrow
Understanding the Differences Between Stock Market and Forex P1Get ready for an exhilarating adventure as we unveil the intriguing disparities between two titans of the financial world: the Stock Market and the Forex Market. These dynamic arenas captivate the attention of traders and investors alike, each offering a unique tapestry of opportunities and challenges. Join us on an exhilarating exploration of 27 key differences between these powerhouse markets, igniting your curiosity and empowering you to master your investment journey with flair. Let's dive in and discover the secrets that set these markets apart!
1. Trading Hours:
The stock market adheres to specific opening and closing times, such as the US stock market's operational hours from 9:30 AM to 4:00 PM Eastern Time. Conversely, the forex market operates round the clock, 24 hours a day, five days a week, providing unparalleled accessibility and flexibility. Thus, in terms of availability, the forex market takes the lead.
2. Days in the Week:
While both markets are open for trading five days a week, the stock market observes government holidays, leading to occasional closures. In contrast, the forex market remains operational throughout the year without interruption, offering continuous trading opportunities. Hence, the forex market excels in terms of consistency and accessibility.
3. Instruments Traded:
The stock market boasts a diverse range of instruments, including shares, derivatives, bonds, and more. In contrast, the forex market primarily deals with currency pairs, such as EUR/USD or USD/INR, offering a narrower scope of trading options. Therefore, the stock market holds an advantage in terms of instrument variety.
4. Trade Volume per Day:
The forex market stands as the largest financial market globally, with an impressive daily trading volume exceeding trillions of dollars. In comparison, the stock market's trade volume pales in comparison, highlighting the immense liquidity and opportunity present in forex trading.
5. Market Volatility:
While both markets exhibit liquidity, the forex market boasts even greater liquidity, making it highly conducive to swift and efficient trading. With increased liquidity comes enhanced market stability and reduced slippage, positioning the forex market as the preferred choice for many traders.
Before we delve deeper into the distinctions, let's familiarize ourselves with the fundamentals of forex trading:
1) Base Currency: The base currency is the first currency listed in a currency pair. It is the currency against which the exchange rate is quoted. For example, in the currency pair EUR/USD, the euro (EUR) is the base currency.
2) Quote Currency: The quote currency is the second currency listed in a currency pair. It is the currency in which the exchange rate is quoted in relation to the base currency. Using the same example, in the currency pair EUR/USD, the US dollar (USD) is the quote currency.
So, in summary, the base currency is the currency being bought or sold, while the quote currency is the currency used to express the value of the base currency. In forex trading, the exchange rate indicates how much of the quote currency is needed to purchase one unit of the base currency.
Let continue:
6. Manipulation:
In the stock market, instances of manipulation may occur at a smaller scale, potentially impacting individual stocks or sectors. Conversely, manipulation in the forex market tends to be more macroscopic and infrequent, providing traders with a more transparent and fair trading environment.
7. Leverage:
Forex trading offers significantly higher leverage compared to the stock market, allowing traders to amplify their positions with relatively small capital outlays. While leverage can magnify profits, it also heightens risk, necessitating prudent risk management strategies.
8. Capital Required:
Unlike the stock market, which often demands substantial capital investments to yield significant returns, the forex market offers the flexibility of trading with smaller initial capital. This accessibility is further augmented by the availability of leverage, albeit with associated risks.
9. Stocks/Pairs:
The stock market boasts a vast array of individual stocks available for trading, providing investors with diverse investment opportunities. In contrast, the forex market primarily revolves around trading currency pairs, limiting the variety of assets available for trading.
10. Regulatory Body:
Regulatory oversight plays a crucial role in maintaining market integrity and protecting investors' interests. In the stock market, entities like SEBI oversee regulatory compliance, whereas The forex market is largely decentralized, but it's still subject to regulation in many countries. Regulatory bodies such as the Commodity Futures Trading Commission (CFTC) in the United States and the Financial Conduct Authority (FCA) in the United Kingdom oversee forex brokers and ensure fair trading practices.
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Level breakdown. The most effective setupsWhat is a level breakout?
A breakout is the price's consolidation above a certain level followed by further movement in the direction of the breakout. But the immediate question that should arise in your mind is about the consolidation of price, as it might be difficult for inexperienced individuals to understand. However, there is nothing overly complex about it either; consolidation refers to the candle closing above the level
A breakdown can occur at a horizontal or inclined level.
Bullish breakout:
We observe a trending market encountering resistance at a horizontal level. After two unsuccessful attempts, the price breaks through the level.
Bearish breakout:
Why do level breakouts work?
Imagine a scenario: a strong resistance level on the chart is heavily defended by bears, preventing the price from breaking through. Despite several attempts, the bears hold their ground until the bulls come to the rescue. They overpower the bears, but their strategy doesn't end there. Instead of retreating, they press forward, driving the opposition towards the next resistance level, where the cycle repeats.
Breakouts occur when the price breaches a significant level. Observing price movements on a chart reveals that prices often consolidate and encounter specific levels.
When the price reaches a level and swiftly reverses, it indicates the strength of that level. Upon a price retest of this level, careful monitoring is essential to anticipate a potential breakout.
Repeated tests of the same level signify its strength, yet eventually, the price will break through any level. This is when traders should be prepared to initiate a breakout trade.
Breakouts offer lucrative trading opportunities because they often mark the inception of new price movements and trends. By entering trades at the onset of emerging trends, traders position themselves for potential profits.
Moreover, reliable breakouts typically occur during periods of robust price momentum when traders seek to capitalize on rapid price fluctuations.
Breakouts occur at important price levels. It can be:
Support or resistance levels.
Patterns
Market highs or lows.
Trend lines.
Price channels.
Moving averages.
Fibonacci levels.
One reason breakouts can lead to rapid price movements is due to the attention they attract from market participants monitoring key levels. When one group of traders capitalizes on a breakout, another group is compelled to swiftly exit their losing positions, resulting in sharp price fluctuations post-breakout.
There exist various types of breakouts, and as traders, our objective is to identify high-probability breakout opportunities and initiate trades. However, this task is not always straightforward. Consequently, levels marked at potential breakout points should be regarded as zones rather than rigid lines.
Identifying Psychologically Important Levels:
Repeated testing of a specific zone by the price often signifies its significance.
Having reached a certain level, the price enters a sideways movement, forming a consolidation. Using a rectangle, we outline the area encompassing the lower wicks of the candles, delineating our support/resistance area. When trading breakouts, it is wise to wait until the candle closes outside the support or resistance area to confirm the breakout.
Triangles are chart patterns indicating price compression, often culminating in a breakout. The direction of the breakout is typically uncertain.
Within the circle, you can observe the precise location of a potential breakout. Notably, there is a robust breakout momentum evidenced by several full-bodied candles. Subsequent to breaching the upper level of the triangle, the price retraces to test the previously breached resistance, now acting as a support area. This pullback serves as a crucial confirmation signal.
Breakouts and false breakouts:
Typically, candlestick shadow breakouts are not considered true breakouts. A true breakout occurs only when the price finally closes outside the level. This approach provides a more secure entry point, making it easier to open positions in the appropriate direction.
The upper rectangle constantly holds down the price, with the exception of some candles, characterized as a pin bar. This represents an initial false breakout as only one candle breaks the resistance area but fails to close, leaving its body above that area. Therefore, we classify this signal as false.
However, the subsequent pin bar pushes the price higher, causing the candle to close above the resistance area. This is a genuine breakout signal, especially enhanced by the presence of a strong, saturated breakout candle.
Trading Breakouts:
Trading market breakouts carries inherent risks due to the prevalence of false breakouts, which are statistically more common. Therefore, it is extremely important to understand the market structure and monitor the movement of prices to the appropriate level.
Markets operate in cycles, moving between trending phases and periods of consolidation. The duration of market consolidation correlates with the strength of subsequent breakouts and subsequent trends.
Prolonged consolidation periods are not only observed by you, but by traders worldwide. Among them, some opt for trading bounces from levels, while others prefer trading breakouts. Extended consolidation behind a resistance level can trigger stop-loss orders for many bears and prompt numerous bulls to initiate new buying positions. Consequently, after prolonged periods of flat movement, prices frequently surge explosively following a breakout, ushering in a robust trend.
The breakout trading strategy offers multiple entry approaches, allowing traders to select the one that aligns best with their preferences and objectives.
Entering the breakout after the price has consolidated beyond the zone:
One strategy assumes that the breakout occurred when the candle closed outside the level. While this pattern can be effective, I personally find it risky due to the many nuances associated with this strategy. Instead I prefer a different approach...
Breakout entry with retest:
This tactic is a bit more challenging as it requires patience and discipline.
What particularly appeals to me in this strategy is that I rely on additional data during a potential retest (with a 60-70% likelihood after the zone is breached).
Breakout of the symmetrical triangle pattern:
As the market tightens its consolidation, it eventually breaches the support of the triangle, followed by a retest of this level as new resistance.
For the stop-loss placement, it's advisable to position it inside the triangle above the breakout candle.
Regarding take profit, we target the nearest level, ensuring the risk-to-reward ratio remains acceptable.
Best Breakout Trading Method:
Accumulation of positions/liquidations - consolidation.
When a tight consolidation occurs near a resistance level, it tells us that buying pressure remains high for a long period of time and sellers do not have enough strength to reverse the price from the level.
When the price breaks through a resistance level, traders with short positions cut their losses. At the same time, the pressure from buying traders who will open breakout transactions is increasing. All these factors cause the price to rapidly move up without significant pullbacks.
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I have only covered a portion of the basics. Of course, trading involves various elements such as price action, indicators (divergences), but that would make this post too long ;)
If you enjoy my educational articles, please leave comments, and I'll continue writing them.
📈Mastering Stock Selection:A Journey to Long-Term Wealth💰Part1Interested in selecting high-quality stocks and growing your wealth through long-term investing? Today, I'll guide you through effective stock selection methods, including the top-bottom and bottom-top approaches. Remember, as Warren Buffett famously said, "The stock market is designed to transfer money from the active to the patient." 💼📈
Let's start with the top-bottom approach. First, you choose an economy, such as Indian, US, or UK. Next, select a sector within that economy, like Financial Services, IT, or Pharma. From there, narrow down to an industry within the sector, such as AI, Clean-technology, or Hardware. Finally, choose a company within the industry. Don't worry if it seems complex – I'll provide examples and guidance throughout. 💡🔍
Conversely, the bottom-top approach flips this order. We start by selecting a company, then move up to its industry, sector, and finally, the economy. 💼🔄
Let's put theory into practice with the top-bottom approach: (a random example)
1. Choose India as the economy.
2.Select the IT sector for its promising future.
3. Opt for AI as the industry due to its potential.
4. Select Infosys as a company.
Now, it's your turn! Share examples of top-bottom or bottom-top approaches in the comments for practice. 💬💡
In the upcoming discussions, we'll delve into the fundamentals of sector, industry, and company analysis. Don't worry—I'll explain everything from market cap and cash flow to return on equity (ROE). 📊✨
Target of likes (boosts): 25+ (if we achieve our target than I will make Part 2) 🎯🚀
Follow for more such ideas & learning content! 🔍
Market Concentration and Systemic RiskMarket Data:
In March 2024, a total of 9,095 tickers were traded.
The top-traded ticker, NVDA, with a trading value of USD 1.098 trillion, accounted for a significant portion of overall activity.
The top 5 tickers (NVDA, SPY, QQQ, TSLA, AMD) collectively represented 22.4% of the total trading value.
The top 100 tickers (including 30 ETFs and 70 stocks) accounted for 55.22% of the total trading value.
The top 200 tickers captured 65.53% of the total trading value.
Does this concentration cause more risk or not?
The concentration of trading among a small number of tickers can potentially increase systemic risk in the market. Here are some factors to consider:
Market Liquidity: Concentration of trading in a few tickers can lead to liquidity issues, especially during periods of high volatility or market stress. If there is a sudden sell-off in one of the top-traded tickers, it may be challenging to execute trades at desired prices, leading to wider bid-ask spreads and increased transaction costs.
Correlation Risk: When a few tickers dominate trading, their price movements may become highly correlated. This can increase systemic risk because if one of these tickers experiences a significant price decline, it may trigger sell-offs in other correlated tickers, leading to broader market declines.
Market Manipulation: A high concentration in trading among a few tickers may attract market manipulation efforts. Traders or entities with large positions in these tickers may attempt to manipulate prices for their benefit, leading to distorted market prices and increased risk for other market participants.
Diversification: Investors who hold portfolios concentrated in the top-traded tickers may face increased risk if those tickers underperform or experience adverse events. Diversification across different assets or sectors can help mitigate this risk by spreading exposure to individual ticker-specific factors.
Regulatory Scrutiny: Regulators may closely monitor markets with a high concentration of trading volume among a few tickers to ensure fair and orderly trading. Any market manipulation or abusive trading practices may lead to regulatory intervention, which could further disrupt market stability.
Overall, while the concentration of trading among a few tickers may provide profit opportunities, it also carries heightened risks that investors need to consider and manage effectively to maintain market stability and integrity.
Additional Information:
The data also reveals interesting insights into the top 10 tickers with the highest trading value to market capitalization ratio in March 2024. This highlights the potential for significant volatility in specific sectors, even for companies with a large market cap.
Top 10 tickers with the highest Trading value to Market cap in March 2024:
MARA: 482 %
MSTR: 444 %
SMCI: 312 %
COIN: 125%
AMD: 94 %
TSLA: 59 %
PLTR: 57 %
MU: 51 %
SNOW: 51 %
NVDA: 48 %
