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Fundamental Analysis

SWAP ZONES IN FOREX MARKET👋 Hello, Forex traders! In a market situation, swap zones in trading are formed as a result of a change in market direction. When the trend changes, the price often returns to the previous support or resistance line. This is due to the fact that participants often use the lines as reference points for trading decisions. Swap zones can be used by traders to identify optimal entry-exit points for trades. For example, a trader can open a long position when the price is approaching support or a short position when the price is heading towards resistance. What is a Swap Zone? 🧐 Swap zone in trading is a price level that was previously a support and then became a resistance, or vice versa. It represents a part of the chart where the price pauses or rolls back. It is formed as a result of a change in the trend direction. Swap zone is easy to use to identify reversal points. For example, if a price is in a rising market and is pulling back to support, it is a signal that the trend may resume. In order to increase the accuracy of swap zone, it is important to use it in combination with other tools of technical analysis. Swap zone is suitable for deciding whether to open a position. For example, if a price is in a sideways movement and approaches swap zone resistance, it is a signal that the price may break through the level and start a new trend. We can open a long position if the price breaks the resistance, or a short position if the support level is broken. The assistant is useful in various trading systems, including price action and volume analysis systems. In price action strategies, it is suitable for determining potential support and resistance, and in volume analysis it is suitable for determining trend strength. Here Are A Few Strategies To Give You An Example ✍️ Level Breakout. It consists in entering the trade after the price breaks through the swap zone. This is a signal that the trend will continue, you can open a long or short position. Rebound from the level. Entry into the trade after the price bounces off the level. For example, if the price is in a falling market and bounces off the resistance swap zone, this is a reversal signal and you can open a short position. Double Test Level. Opening a position after the price tests the swap zone twice and you can open a short or long position. Pullback after a level breakout. Entry after the price rolls back after a breakdown of the level. It can be a sign that the trend is slowing down. When using the tool, it is important to consider the market direction, trend strength and trading volume. Advantages And Disadvantages Of Swap Zone 📈📉 Before using a pattern, it is important to consider its strengths and weaknesses. Pros: • An effective tool for identifying support and resistance, as well as moments of opening and closing a position; • use together with other tools of technical analysis to improve trading accuracy; • easy to use and understand; • possibility of earning with different tools and in many strategies. Cons: • They are not completely reliable and the market can go in a different direction; • It can be influenced by other factors: news, fundamental data or changes in the mood of market participants; • They do not always provide effectiveness. In summary, swap zones are perhaps the simplest and most effective tool in a trader's arsenal. Levels are the most reliable piece of information you could possibly get about an asset and its price. No amount of analysis will ever tell you more truth than levels can. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
Getting Paid? With the USD/TRY Carry Trade?The USD/TRY has one of the highest Roll Over Interest out there should you choose to take on this highly volatile pair. It isn't so much that it is volatile, it has to do more with price just moves one direction, and that is up. The way we want to go is down (short) or at least sideways (ranging). Why is this interesting? It is because the Rollover Interest for going short stands at a whopping annualized rate of 28.94%. With 1:4 Margin Requirement for trading a standard lot on the TRY (based off the broker I use), $25,000 could earn me $28,940 yearly, which would be a staggering 115% return at the end of the year. Compounded, I would be a multimillionaire in no time, Buying up yachts, private jets, gourmet food, luxury cars, a pony that shoots lasers, Space X Starship, and countless other items. But hold up, is there a downside or something that makes this too good to be true? Yes, there is price movement as well as changes in interest rates as well as capital in the account. Having only $25,000 in the account, going full throttle and placing one huge position is sure to activate a margin call within seconds (as price can move thousands of pips against you quickly) and/or cause you to lose more than you put in. Now, we don't want that. You would need to have at least double the amount in the account in order to allow for price movement. The return would be halved, but making over 50% yearly isn't too bad either, is it? With price movement, the USD/TRY (I just call it the TRY), price moved higher over 57,000 pips in 2022, and over 100,000 pips in 2023; that is $18,240 and $32,000 respectively. Interest have just reached 45%, so things definitely would not have been good. Now, with funds in your account, not to many of us have $25,000 lying around to utilize in the markets, nor do we want to just tie up $25,000 into something really risky. Yet if used correctly and price does stabilize, then the TRY carry trade could payout (similar to the EUR/HUF). What could be done to reduce the risk? For starters, position sizing. Don't use the full force of your account and go "YOLO." Manage expectations. With a $25,000 account size, only getting into a position at around $3,750 (which is about 15% of the account used and a 15k position), would be around $3,650 return, which would be about a 14.6% return (still not bad. How many people can do this). If things go sour and price does move up at the end the year by 100,000 pips against you ($0.05 move per pip), that would be -$5,000 reduced to $1,350 because of the gained rollover interest (which would be only a 5% hit to your account instead of 20%). Putting some hedges in could also reduce some of the risk. Additionally, research and analysis, this could push you to make a more informative speculation on if getting into the pair is a good idea. Furthermore, to really ensure you don't lose any money, is to not get into the pair at all. For myself, I am utilizing around 41% of my Forex account in this pair, about 14% of my overall accounts. There are hedges in place to reduce the impact of price moving against me as well as my position being small enough to not cause any traumatic moves, even if price moves 100,000 pips against me (of course don't want that to happen). The decision is also made to stay in this pair for the long term or until there is some major changes. There is additional funds in reserves if needed, if things don't go well, in order to put another plan into play to get out of my positions in an orderly fashion. You all have some great trading out there.
Education
by DollarSaenz
2
HARMONIC PATTERN BUTTERFLY ✴️ Harmonic patterns are prevalent in consolidation markets. These patterns can be used as additional confirmation to enter a trade. Today let's study the Butterfly Pattern. The Butterfly Pattern in trading is a 5-point trend reversal pattern, which consists of two corrections that form the shape of a butterfly. The pattern can be formed on any timeframe, but most often occurs on daily and hourly charts. It has high accuracy, but like any other indicator, it does not guarantee profit. To increase the probability of success, it is necessary to use the pattern in combination with other indicators and methods of market analysis. ✴️ WHAT IS A BUTTERFLY PATTERN? Butterfly pattern in trading is a reversal trend pattern, which is formed from two corrections with the formation of a corresponding shape. It is used to determine a possible market reversal. The formation was first described by Harold Gartley in his book New Wave Theory (1932). He is an American trader and analyst who developed several harmonic patterns, including the Butterfly, Delta and Harmonic Triangle. The Butterfly pattern in trading can appear on any timeframe, but is often caught on daily and hourly charts. For the formation of the pattern, it is necessary that the following point conditions are met: X - the start of an bullish or bearish movement; A - the end of a bullish or bearish movement and it's a start of correction; B - maximum decrease or increase of the price during the market change; 61.8 - 0.786 retracement. C - end of correction (retest of the A point area) and start of a new movement; as long as it does not exceed the A point. D - 127% - 161.8% fibo extension of the XA distance. Gartley's butterfly in trading can have two directions. To determine the Butterfly pattern, you need to find all five points of the formation. X and C are the beginning and the end of the basic movement, and A and B are the top and the lowest point of the correction. Point D is at 127% of the XA distance. If all five elements are present and meet the specified conditions, we can talk about a probable trend reversal. At the same time, it is desirable to use an indicator that would confirm the entry. The butterfly shape does not always have to be perfect. Sometimes the AB correction can be steeper than the BC. The formation conditions are not always perfectly met. Often the XA distance can be slightly more or less than 127%. Stop-loss can be placed not only below point D. The Butterfly pattern is considered a powerful tool that helps traders improve results. But it is important to use it in combination with other market analysis techniques to increase the probability of success. ✴️ HOW TO TRADE A BULLISH BUTTERFLY This is a 5-wave trend reversal pattern that represents two corrections that form a butterfly shape. Features of the design by points: X - start of a rising movement; A - end of growth and correction; B - fall of the price during the correction; C - the end of the process and the start of a new movement; D - 127% - distance of the XA. Entry into the trade is made at the level of point D, and stop-loss is set below point D. The target price is within A-D distance. ✴️ HOW TO TRADE THE BEARISH BUTTERFLY Exit is made after reaching the target price or when trend reversal signals appear. This is a 5-wave market reversal pattern that represents two corrections in the shape of a butterfly. To create it, the following requirements must be met: X - start of a falling movement; A - end of growth and correction; B - increase of the price during the correction; C - the end of the process and the start of a new movement; D - 127% - XA distance. The entry in the bearish butterfly is made at the level of point D, and stop-loss is set above point D. The target price for the pattern is within the Fibonacci levels 38.2% and 61.8% of the A-D distance. Exit is performed after reaching the target price or when there are signals of trend reversal. In both cases discussed above, it is important to combine the pattern with other methods of market analysis, such support and resistance levels, to increase success. You should not enter a trade if the pattern does not meet all conditions. Set a stop loss at a level that will limit losses in case of a failed trade. Also, you can move stop loss to break even once the price hits 38.2% Fibonacci level. ✴️ CONCLUSION The experience of using the Butterfly Pattern has shown that it is quite accurate when trading in a sideways movement or opening trades with a trend. It can be used on any timeframe, but it is more effective in combination with other methods of market analysis. At the same time, the pattern does not always correspond to the conditions and can give false signals. For this reason, it is recommended to check it with the help of indicators. Harmonic patterns should follow the basics of technical analysis. In the first place, of course, is the market structure.
Education
by DeGRAM
2
LEARN THE MOST IMPORTANT FOREX FUNDAMENTALS 📰 Even though I am a pure technician and I rely only on technical analysis when I trade, we can not deny the fact that fundamentals are the main driver of the financial markets. In this post, we will discuss the most important fundamentals that affect forex market. You can check coming fundamental news on TradingView in the economic calendar. The calendar button on the right side will display the coming news. Click "only high importance" button and the system will display only the most important news. Here are the most important fundamental releases that you should pay close attention to: 📍Unemployment rate. Unemployment rate reflects the percentage of people without a job in a selected country or region. Rising unemployment rate usually signifies an unhealthy state of the economy and negatively affects the currency strength. 📍Housing prices. Housing prices reflect people's demand for housing. Rising rate reflects a healthy state of the economy, strengthening purchasing power of the individuals and their confidence in the future. Growing demand for housing is considered to be one of the most important drivers in the economy. 📍Inflation. Inflation reflects the purchasing power of a currency. It is usually measured by evaluation of the price of the selected basket of goods or services over some period. High inflation is usually the primary indicator of the weakness of the currency and the unhealthy state of the economy. 📍Monetary policy. Monetary policy is the actions of central banks related to money supply in the economy. There are two main levers: interests rates and bank reserve requirements. Higher interest rates suppress the economy, making the currency stronger. Lower interests rates increase the money supply, making the economy grow but devaluing the national currency. 📍Political discourse. Political discourse is the social, economical and geopolitical policies of the national government. Political ideology determines the set of priorities for the ruling party that directly impacts the state of the economy. 📍Payrolls and earnings. Payroll reports reflect the dynamic of the creation of new jobs by the economy, while average earnings show the increase or decrease of the earnings of the individuals. Growing earnings and payrolls positively affect the value of a national currency and signify the expansion of the economy. Pay closes attention to these fundamentals and monitor how the market reacts to that data. What fundamentals do you consider to be the most important? ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
1
HOW-TO use Bitcoin 5A Strategy@LilibtcIn our long-term strategy, we have deeply explored the key factors influencing the price of Bitcoin. By precisely calculating the correlation between these factors and the price of Bitcoin, we found that they are closely linked to the value of Bitcoin. To more effectively predict the fair price of Bitcoin, we have built a predictive model and adjusted our investment strategy accordingly based on this model. In practice, the prediction results of this model correspond quite high with actual values, fully demonstrating its reliability in predicting price fluctuations. When the future is uncertain and the outlook is unclear, people often choose to hold back and avoid risks, or even abandon their original plans. However, the prediction of Bitcoin is full of challenges, but we have taken the first step in exploring. Table of contents: Guide Step 1: Identify the factors that have the greatest impact on Bitcoin price Step 2: Build a Bitcoin price prediction model Step 3: Find indicators for warning of bear market bottoms and bull market tops Step 4: Develop a Bitcoin 5A strategy Step 5: Verify the performance of the Bitcoin 5A strategy Opportunities Usage Restrictions Guide: 1. On the main interface, modify the code, find the BTCUSD trading pair, and select the BITSTAMP exchange for trading. 2. Set the time period to the daily chart. 3. Select a logarithmic chart in the chart type to better identify price trends. 4. In the strategy settings, adjust the options according to personal needs, including language, display indicators, display strategies, display performance, display optimizations, sell alerts, buy prompts, opening days, backtesting start year, backtesting start month, and backtesting start date. Step 1: Identify the factors that have the greatest impact on Bitcoin price Correlation Coefficient: A mathematical concept for measuring influence In order to predict the price trend of Bitcoin, we need to delve into the factors that have the greatest impact on its price. These factors or variables can be expressed in mathematical or statistical correlation coefficients. The correlation coefficient is an indicator of the degree of association between two variables, ranging from -1 to 1. A value of 1 indicates a perfect positive correlation, while a value of -1 indicates a perfect negative correlation. For example, if the price of corn rises, the price of live pigs usually rises accordingly, because corn is the main feed source for pig breeding. In this case, the correlation coefficient between corn and live pig prices is approximately 0.3. This means that corn is a factor affecting the price of live pigs. On the other hand, if a shooter's performance improves while another shooter's performance deteriorates due to increased psychological pressure, we can say that the former is a factor affecting the latter's performance. Therefore, in order to identify the factors that have the greatest impact on the price of Bitcoin, we need to find the factors with the highest correlation coefficients with the price of Bitcoin. If, through the analysis of the correlation between the price of Bitcoin and the data on the chain, we find that a certain data factor on the chain has the highest correlation coefficient with the price of Bitcoin, then this data factor on the chain can be identified as the factor that has the greatest impact on the price of Bitcoin. Through calculation, we found that the 🔵number of Bitcoin blocks is one of the factors that has the greatest impact on the price of Bitcoin. From historical data, it can be clearly seen that the growth rate of the 🔵number of Bitcoin blocks is basically consistent with the movement direction of the price of Bitcoin. By analyzing the past ten years of data, we obtained a daily correlation coefficient of 0.93 between the number of Bitcoin blocks and the price of Bitcoin. Step 2: Build a Bitcoin price prediction model Predictive Model: What formula is used to predict the price of Bitcoin? Among various prediction models, the linear function is the preferred model due to its high accuracy. Take the standard weight as an example, its linear function graph is a straight line, which is why we choose the linear function model. However, the growth rate of the price of Bitcoin and the number of blocks is extremely fast, which does not conform to the characteristics of the linear function. Therefore, in order to make them more in line with the characteristics of the linear function, we first take the logarithm of both. By observing the logarithmic graph of the price of Bitcoin and the number of blocks, we can find that after the logarithm transformation, the two are more in line with the characteristics of the linear function. Based on this feature, we choose the linear regression model to establish the prediction model. From the graph below, we can see that the actual red and green K-line fluctuates around the predicted blue and 🟢green line. These predicted values are based on fundamental factors of Bitcoin, which support its value and reflect its reasonable value. This picture is consistent with the theory proposed by Marx in "Das Kapital" that "prices fluctuate around values." The predicted logarithm of the market cap of Bitcoin is calculated through the model. The specific calculation formula of the Bitcoin price prediction value is as follows: btc_predicted_marketcap = math.exp(btc_predicted_marketcap_log) btc_predicted_price = btc_predicted_marketcap / btc_supply Step 3: Find indicators for early warning of bear market bottoms and bull market tops Warning Indicator: How to Determine Whether the Bitcoin Price has Reached the Bear Market Bottom or the Bull Market Top? By observing the Bitcoin price logarithmic prediction chart mentioned above, we notice that the actual price often falls below the predicted value at the bottom of a bear market; during the peak of a bull market, the actual price exceeds the predicted price. This pattern indicates that the deviation between the actual price and the predicted price can serve as an early warning signal. When the 🟠Bitcoin price deviation is very low, as shown by the chart with 🟩green background, it usually means that we are at the bottom of the bear market; Conversely, when the 🟠Bitcoin price deviation is very high, the chart with a 🟥red background indicates that we are at the peak of the bull market. This pattern has been validated through six bull and bear markets, and the deviation value indeed serves as an early warning signal, which can be used as an important reference for us to judge market trends. Step 4: Bitcoin 5A Strategy Formulation Strategy: When to buy or sell, and how many to choose? We introduce the Bitcoin 5A strategy. This strategy requires us to generate trading signals based on the critical values of the warning indicators, simulate the trades, and collect performance data for evaluation. In the Bitcoin 5A strategy, there are three key parameters: buying warning indicator, batch trading days, and selling warning indicator. Batch trading days are set to ensure that we can make purchases in batches after the trading signal is sent, thus buying at a lower price, selling at a higher price, and reducing the trading impact cost. In order to find the optimal warning indicator critical value and batch trading days, we need to adjust these parameters repeatedly and perform backtesting. Backtesting is a method established by observing historical data, which can help us better understand market trends and trading opportunities. Specifically, we can find the key trading points by watching the Bitcoin price log and the Bitcoin price deviation chart. For example, on August 25, 2015, the 🟠Bitcoin price deviation was at its lowest value of -1.11; on December 17, 2017, the 🟠Bitcoin price deviation was at its highest value at the time, 1.69; on March 16, 2020, the 🟠Bitcoin price deviation was at its lowest value at the time, -0.91; on March 13, 2021, the 🟠Bitcoin price deviation was at its highest value at the time, 1.1; on December 31, 2022, the 🟠Bitcoin price deviation was at its lowest value at the time, -1. To ensure that all five key trading points generate trading signals, we set the warning indicator Bitcoin price deviation to the larger of the three lowest values, -0.9, and the smallest of the two highest values, 1. Then, we buy when the warning indicator Bitcoin price deviation is below -0.9, and sell when it is above 1. In addition, we set the batch trading days as 25 days to implement a strategy that averages purchases and sales. Within these 25 days, we will invest all funds into the market evenly, buying once a day. At the same time, we also sell positions at the same pace, selling once a day. Adjusting the threshold: a key step to optimizing trading strategy Adjusting the threshold is an indispensable step for better performance. Here are some suggestions for adjusting the batch trading days and critical values of warning indicators: • Batch trading days: Try different days like 25 to see how it affects overall performance. • Buy and sell critical values for warning indicators: iteratively fine-tune the buy threshold value of -0.9 and the sell threshold value of 1 exhaustively to find the best combination of threshold values. Through such careful adjustments, we may find an optimized approach with a lower maximum drawdown rate (e.g., 11%) and a higher cumulative return rate for closed trades (e.g., 474 times). The chart below is a backtest optimization chart for the Bitcoin 5A strategy, providing an intuitive display of strategy adjustments and optimizations. In this way, we can better grasp market trends and trading opportunities, thereby achieving a more robust and efficient trading strategy. Step 5: Validating the performance of the Bitcoin 5A Strategy Model accuracy validation: How to judge the accuracy of the Bitcoin price model? The accuracy of the model is represented by the coefficient of determination R square, which reflects the degree of match between the predicted value and the actual value. I divided all the historical data from August 18, 2015 into two groups, and used the data from August 18, 2011 to August 18, 2015 as training data to generate the model. The calculation result shows that the coefficient of determination R squared during the 2011-2015 training period is as high as 0.81, which shows that the accuracy of this model is quite high. From the Bitcoin price logarithmic prediction chart in the figure below, we can see that the deviation between the predicted value and the actual value is not far, which means that most of the predicted values can explain the actual value well. The calculation formula for the coefficient of determination R square is as follows: residual = btc_close_log - btc_predicted_price_log residual_square = residual * residual train_residual_square_sum = math.sum(residual_square, train_days) train_mse = train_residual_square_sum / train_days train_r2 = 1 - train_mse / ta.variance(btc_close_log, train_days) Model reliability verification: How to affirm the reliability of the Bitcoin price model when new data is available? Model reliability is achieved through model verification. I set the last day of the training period to February 2, 2024 as the "verification group" and used it as verification data to verify the reliability of the model. This means that after generating the model if there is new data, I will use these new data together with the model for prediction, and then evaluate the accuracy of the model. If the coefficient of determination when using verification data is close to the previous training one and both remain at a high level, then we can consider this model as reliable. The coefficient of determination calculated from the validation period data and model prediction results is as high as 0.83, which is close to the previous 0.81, further proving the reliability of this model. Performance evaluation: How to accurately evaluate historical backtesting results? After detailed strategy testing, to ensure the accuracy and reliability of the results, we need to carry out a detailed performance evaluation on the backtest results. The key evaluation indices include: • Net value curve: As shown in the rose line, it intuitively reflects the growth of the account net value. By observing the net value curve, we can understand the overall performance and profitability of the strategy. The basic attributes of this strategy are as follows: Trading range: 2015-8-19—2024-2-18, backtest range: 2011-8-18—2024-2-18 Initial capital: 1000USD, order size: 1 contract, pyramid: 50 orders, commission rate: 0.2%, slippage: 20 markers. In the strategy tester overview chart, we also obtained the following key data: • Net profit rate of closed trades: as high as 474 times, far exceeding the benchmark, as shown in the strategy tester performance summary chart, Bitcoin buys and holds 210 times. • Number of closed trades and winning percentage: 100 trades were all profitable, showing the stability and reliability of the strategy. • Drawdown rate & win-loose ratio: The maximum drawdown rate is only 11%, far lower than Bitcoin's 78%. Profit factor, or win-loose ratio, reached 500, further proving the advantage of the strategy. Through these detailed evaluations, we can see clearly the excellent balance between risk and return of the Bitcoin 5A strategy. Opportunity: Capturing factor changes Changes in factors provide us with valuable trading opportunities. The 🟠orange line in the chart below represents the factor indicator when its value on February 20, 2024 is -0.32, which is greater than the threshold of -0.9. This could be a signal worth paying attention to. Opportunities like this do not come up often, so we need to stay alert and act fast. Usage Restrictions: Strategy Application in Specific Situations Please note that this strategy is designed specifically for Bitcoin and should not be applied to other assets or markets without authorization. In actual operations, we should make careful decisions according to our risk tolerance and investment goals.
BITSTAMP:BTCUSDEducation
by lilibtc
3
Why the Bitcoin Halving Historically Increases PriceThe bitcoin halving, which occurs every four years, is encoded into Bitcoin itself. Its purpose is to cut in half the amount of Bitcoin that is rewarded for every block that is mined, meaning you must double the processing power every four years to mine the same amount of Bitcoin. (A block reward refers to the number of bitcoins you get if you successfully mine a block of the currency . Investopedia 2023 ) This means that it becomes twice as hard for bitcoin miners to mine the same amount of bitcoin they were mining four years earlier with the same hardware. This creates what is known as a drop in supply or supply shock, where market demand either stays the same or increases, and the price of bitcoin must increase to meet the demand. If the demand stays the same or increases, the price still has to increase because the supply of bitcoin being mined daily is half what it was in the previous four years. There are fewer coins to buy, so the market must compete by paying higher prices. Because this event is exponential, eventually hardware will not be able to keep up with the halving if miners want to be profitable. This may seem like an oversimplification of the most basic economic principles. However, that is what is fundamentally encoded into bitcoin, which guarantees an increase in price by cutting supply every four years (guaranteed only if demand stays the same or increases). That is why bitcoin halving is referred to as a market-moving event, because not only historically has it proven to increase prices and cut supply, but fundamentally it has too. Now let’s look at a real-life example for comparison. Gold does have real-world use in technology and jewelry. However, its main value and use are as a store of value. Most gold is bought and accumulated because it will retain its value, which is the same use case as bitcoin. What do you think would happen if the entire gold production market was slashed in half overnight and this process was repeated every four years? The price of gold would increase exponentially as the finite resource becomes more and more scarce because it is harder to mine. Now apply the same logic to bitcoin, and hopefully you will begin to see the picture. The next bitcoin has just under 60 days coming up in mid-April 2024, so mark your calendars.
COINBASE:BTCUSDEducation
by altsandislands
Our Strategy For "The Leap"Hey guys! Today, we explore 'The Leap', and our strategy for the competition. It's easy to register if you haven't done so already. In this video, we cover; 1.) DIRECTIONAL BIAS 2.) WHERE TO TRADE 3.) WHERE TO RISK 4.) POSITION MANAGEMENT for the strategy we'll be using. It's a simple breakout strategy we're going to bring to a lower timeframe, so we can get enough trades in before the competition expires. Good luck to all, we look forward to competing with you! Want more high-quality trade ideas? Follow us below. ⬇️⬇️
Editors' picks
AMEX:SPYEducation
by PropNotes
17
The most subjective facet of my decision-making systemIn the previous publication I started talking about my decision-making system. I use it when investing in stocks. This system allows me to answer three questions: - which stocks to choose? - at what price to make a trade? - and in what quantity? In this post, I will continue to answer the question Which stocks to pick? and tell you about another facet of my crystal. As you can see, my decision-making system is quite formalized. What do I mean? It has clear criteria for which a company must be checked before investing in its stocks. If we go deeper into this idea, we can say that the state of affairs in any public company can be assessed using numbers from its statements and stock exchange prices for its stocks. All this can be visualized, put into a form that is readable for the investor, and accelerate the decision-making process many times over. However, there is an area with information that hovers around the companies, directly or indirectly influences it, but is poorly formalized: this is News . News can be called a message related to a company and distributed through its website, media, and social networks. This message triggers an almost knee-jerk reaction among stock investors (and traders). They will try to interpret the information received, make a forecast, and in some cases even make a trade. It is for this reason that the moment the news is published is often accompanied by a sharp movement in the stock price and an increase in trading volume. The order book now has a lot more players than before. These are traders excited by the news, confident of what will happen next. Here I can’t help but recall the allegory about Crazy Mister Market from Benjamin Graham. It presents the market as a partner who is constantly knocking on your door and offering you crazy ideas (stock prices). Where does this mister get his madness from? My answer is simple — from the news. Despite this, I cannot help but pay attention to the news, I cannot help but interpret it, to build predictions in my head. This happens reflexively, as a reaction to boiling water hitting my skin. However, will I make a trade under the influence of this information? We'll talk about this at the end of the post. Let's find out what news is available and where to find it. In this publication, I will only consider matters relevant to the stock market. That is information that can directly or indirectly affect the state of affairs in the companies. As I work, I divide the news flow into two categories: macro-event and corp-event . A macro-event is something that can indirectly impact the state of affairs in a company since it impacts the external environment in which it lives. For example: 1. In the third quarter, US GDP grew by 4.9% year-on-year, which was better than expected (*). GDP Dynamics are a general economic indicator of economic growth in a particular country. This event only indirectly affects the business of the US companies. In other words, a company can be unprofitable even if the GDP in the country of its business is growing. (*) In the news, you will often see the following wording: - better than expected - worse than expected - as expected These are significant clarifications since it is believed that the exchange price already considers expectations for future events. Therefore, the coincidence with expectations will most likely be perceived calmly by market participants. Conversely, price fluctuations can be significant if the news can be qualified as a “surprise”. 2. The EPA is setting rules for a proposed “methane fee” on waste generated by oil and gas companies. This news also refers to macro events, as it impacts an entire industry: the oil and gas business. Moreover, please note that methane fee is only suggested. That is, it is not at all a fact that it will ultimately be implemented. Unlike macro events, a corp-event directly affects the state of affairs in the companies. Let's look at some of them. For example: 3. Hilton's (HLT) 3rd quarter Profit was in line with revenue forecasts. The news contains information about Hilton's financial results for the 3rd quarter. Of course, this directly impacts investors’ assessment of the company's prospects, and therefore the volume of investment in it. 4. Devastating wildfires have forced California's largest utility, Pacific Gas and Electric Company, to plan the sale of gas assets. Based on the news headline, we can conclude that the company is considering selling a significant part of its business (since the word “gas” even appears in the company name) to compensate for the damage from the devastating fires. Of course, this directly points to the difficult situation in the companies. Well, we figured out which news is considered a macro-event and which is a corporate event. Now let's find them where we need to. First, let's look at the event calendars that are available on TradingView. They are convenient because they inform us in advance what event to expect on the date in question. Let's start with the ⁣Economic calendar . You can find it in the main TradingView Products menu (Products -> Economic calendar ). This calendar shows upcoming publications of key macroeconomic indicators such as GDP, ⁣ interest rate, unemployment, and inflation. It will also reflect national events — for example, presidential elections. Thus, you will only see macro events in it. Click on globe and select the country you are interested in, a group of countries, or the whole world: this way you will filter events by geography. If you are interested in tracking only important events, there is a special button for this High importance . There is also a three-column importance indicator next to each event. If all are shaded, the event is of maximum importance. You can expand any event, read information about it, view statistics, and even add it to your personal calendar. In terms of importance, the higher the importance of the event, the stronger the market reaction may be after the information is released. Furthermore, the strength of the reaction will depend on how much reality diverges from expectations for this event (with the forecast). Please note that the current value published is published to the left of the forecast, and the value for the previous period is published to the right. This allows you to evaluate the released metric over time. So, my standard set of filters for the economic calendar is: - Geography: all over the world; - High importance; - This week; - All categories. The economic calendar has been set up. There is another calendar on TradingView: this is Earnings calendar . It is located in the interface for working with Supercharts and, of course, is intended for analyzing corporate events. Once you go to the chart, click on the calendar icon in the menu on the right, and the events panel will open in front of you. The Earnings calendar will contain the names of the companies, their next reporting date, and analysts' estimates of earnings per share: EPS. In its meaning, this estimate is an average expectation or forecast. Therefore, any strong discrepancy between current data and the forecast value can greatly change the value of the company's stocks. By the way, you can check this simply by clicking on the company's name in the calendar: the window with the stock price chart will update instantly. The released earnings per share value can be viewed both on the chart itself and in the company's information (the top menu button on the right). The current value will be marked with either a red circle (below the forecast) or a green circle (above the forecast). The gray circle indicates the forecast itself. Calendars are convenient because they present us with the main essence of the news in a compressed, digitized form. The description of such news is not as important as the value of the key indicator. However, if you want to read classic text news about a related company, simply click on the lightning bolt icon on your chart. You can also find news grouped by asset class, region, news agency, etc. in the main menu of the TradingView site's root page. Of the groups presented, I most often use News Flow to get a general context of what is happening. Returning to my decision-making system, there is news (let's call it critical ) that can trigger the closure of a position or non-opening of a position in the shares of a particular company, even though the main indicators do not suggest this. To determine such news, I ask myself three questions: 1. Do I trust this news source? We are surrounded by many sources of news: social networks, news sites, television, etc. It’s easy to check everyone’s reputation on the Internet. Therefore, to take the news into account, you must trust its source. If you see significant news about a company, but it is not in reputable media resources and/or on the company's website, this is a reason to think whether the source is trying to increase its popularity through a loud headline and unverified content. 2. Does this news describe an accomplished fact? Even in reputable publications, you can find publications with versions of events, forecasts, and opinions. This is good food for thought. However, when deciding, I constantly try to separate the standpoint from the fact confirmed by a reliable source. Only facts can be considered when deciding. 3. Is an accomplished fact capable of leading the company to bankruptcy? This is a difficult question that requires an assessment of the company's economic damage, and its comparison with the level of total debt to creditors and current assets. Even if a company is facing bankruptcy, it can be saved by providing assistance from the government or other businesses. Answering this question, I can listen to the opinions of analysts and my intuition. Therefore, this is the most subjective facet of my decision-making system. I just have to tell myself: “Yes, this fact can lead the company to bankruptcy” or vice versa: “No, this news is bad, but it does not pose a critical threat to the business.” So, if I answer “yes” to all three questions, then I can close a position in the shares of a particular company or not open it, guided simply by my “yes, this should be done.” The fact is that critical news comes out now, and reporting on a specific date in the future: there is a time gap between these events. Therefore, I find myself in a situation where I just need to decide and evaluate it later, in the future, based on published reports. It is similar to flying an airplane that fails during transit. The pilot may not fully understand what happened, but the choice must be made right now. If I answer “no” to any of the three questions, then I continue to use other facets of my “crystal” in standard mode, and leave the news “just for my information.” In future publications, I will continue to elaborate on my decision-making system and share my approach to choosing the price and quantity of a stock trade.
SP:SPXEducation
by Be_Capy
7 Monopoly Lessons for TradersYou can learn a lot from the classic board game we all know and love: Monopoly. And as a trader, if you decide to play it again with your spouse or children – you’ll find the game to be very different. That’s because you have a better sense of risk, reward, probabilities and money management. You have the patience to grow a sizeable portfolio and eventually WIN! But before you do delve into your past, I want to share 7 important lessons I learned about trading from Monopoly. Hold Cash: The higher earner has the upper hand In Monopoly, the richer always has a stack of cash at the ready. Just like the Casino (where the house holds most of the money). And where the money is, is where the advantage lies. Similarly, in the trading arena, the money you have on hand is your golden ticket to seize profit opportunities. You know when they say, we are still counting our money? It’s because you have cash in hand rather than tied up in different assets. So with trading and with Monopoly, cash is king. You always need money to: Have funds to buy or sell more markets Be able to control your risk and money management Work on your Drawdown control methods Peace of mind you’re in it for the long haul No matter how many trades or positions I take, I always make sure to have at least 90% of cash in the portfolio at any one time. Be Patient: Not every roll is a winner Impatience is the enemy of traders. In Monopoly, you don’t win by making reckless moves at every turn. It’s about waiting for the right moment to strike. It’s about being patient to wait for the right property to buy and take advantage of. It’s about waiting for your opponent to land on your property for you to get paid. All in good time my friend., Apply the same philosophy to trading. The market will throw its share of doubles and snake eyes your way, but success lies in patience and strategic precision. You need to be patient for: The high probability trade to line up The markets to play out The drawdowns to end eventually Your portfolio to grow at a slow but steady rate Patience is EVERYTHING. Monopoly teaches us the value of holding onto our hard-earned cash. Similarly, in trading, preserving your capital is the name of the game. Avoid risky moves that could bankrupt your portfolio, and remember, sometimes the best move is not the flashiest one. Don’t blow on the most expensive stuff Just because Boardwalk has an expensive hotel doesn’t mean it’s the winning move. Similarly, the most expensive stocks or markets like Brent Crude or Indices like JSE ALSI 40 aren’t always the path to success. First, you might not have enough funds to accommodate the positions. Second, the markets might not have aligned perfectly to your strategy. Third, a high price market might be in a BUBBLE which is ready to pop. Fourth, it might be stressful putting in a large margin of funds to hold a more expensive stock i.e. Facebook, Berkshire Hathaway, Apple etc… Astute traders know that value can be found in unexpected places. You might find even better profit opportunities in other Blue Chip stocks that don’t even cost 1/10th of the price. Diversification and Opportunism: Building houses on every colour Monopoly teaches us the power of diversification. There are different properties with a variety of prices and conditions. You need to learn how to spread your investments wisely, and be opportunistic. Just as building houses on every color can secure your Monopoly victory, diversifying your portfolio across sectors, markets and positions can mitigate your risk and boost your chances of success. Strategic planning trumps luck I have to admit that, luck does play a role in both Monopoly and trading. It is luck to not roll the dice and land on “Go to Jail”. It is luck to not pick up a Chance card saying “You have to pay rates and taxes”. Same with trading. It is luck getting into a high probability trade and then the market actually playing out. It is luck being in a strong and favourable market environment for your trading system. It is luck having the market price shoot up past your take profit due to some external event. But trading and Monopoly are both very much strategic planning processes. You need to plan your moves carefully. You need to act on your moves, based on probabilities. You need to risk accordingly to not go bankrupt. You need a strong and well-thought-out trading plans. Conduct thorough analyses, and stick to disciplined strategies. And this is how strategy and luck will help you increase the chance of success. Negotiation mastery Monopoly is not just about rolling the dice; it’s about negotiation. You are playing against opponents of different advantages and styles. You need to learn how to negotiate, aid and help each other – before you beat them! I don’t know how else to explain this :D. Trading also involves striking deals. You’re hitting bids (when selling) and offers (when buying). You’re betting against your counterparty (investor, trader or market maker). You’re negotiating prices and moves. The choices you make will give you the significant edge and help streamline your profitable journey. Passive Income Key: Collect $200 as You Pass Go The exciting and genius of Monopoly lies in the sweet reward of $200 every time you pass Go. You know that feeling of waiting and playing your turns. Going through the good Chance cards and the Bad (going to jail). But when you are out and you pass Go, you can to collect your wage of $200. This is your special passive income secret weapon. You don’t just stick to what you have, you build on it and use what you newly have to grow your portfolio. The same works with trading. Each month, you receive a salary. And you spend, save and invest. So if you want to grow your trading portfolio using the compounding strategy, you might as well build on it. You might as well accelerate your trading journey. You might as well let your money work for you! Embrace the power of compounding, re-investing and depositing, and you might find yourself collecting much more than $200 as you navigate the trading board. Let’s sum up the Monopoly Lessons Traders Can learn: Hold Cash: The higher earner has the upper hand Be Patient: Not every roll is a winner Don’t blow on the most expensive stuff Diversification and Opportunism: Building houses on every colour Strategic planning trumps luck Negotiation mastery Passive Income Key: Collect $200 as You Pass Go FINAL WORDS: The trading board is yours – now go bankrupt the market, one strategic move at a time!
TVC:SA40Education
by Timonrosso
VWAP INDICATOR EXPLAINED👋Hello traders! In this post, I would like to introduce you to the VWAP indicator, which is used by major market participants in their trading. Moving averages are one of the most popular basic tools of technical analysis. More than 10 variations are known: EMA, LWMA, etc. All of them, in one way or another, use the same principle of data averaging; the difference is in the coefficients applied to each period. The VWAP indicator is also an analog of the MA indicator, which differs in the fact that the values of periods are weighted by trading volumes. This makes it possible to see a more real picture in contrast to what MA indicators show. Advantages And Disadvantages Of The Vwap Indicator 📊 In a nutshell, let us recall the principle of calculating a simple moving average (and the rules of their application): the arithmetic mean. If there are three last candles with closing prices (you can choose another price): "5", "3", and "8", then the simple moving average will be equal to (5+2+8)/3 = 5. Now let's imagine that we get to the market. The seller offers 100 apples at the price of 5 euros and 1 pear at the price of 50 euros. If we follow the MA formula, the average price would be (5+50)/2 = 27.5. And this price would be regardless of how many pieces of apples or pears there are. But, agree, this somehow does not accurately reflect the real average price. It would be more correct to also take into account the quantity of goods sold. And then the formula would look like this: (5*100 + 1*50)/101 = 5.44 euros. That is, in this case, one single pear will not dramatically affect the average price. What is VWAP? 🤔 The Volume Weighted Average Price (VWAP) indicator is a technical analysis tool, in which the price of each period is weighted by trading volumes of the same period. If on a 5-minute chart one candlestick during 5 minutes trading volumes conditionally amounted to $1 million, and on the second candlestick to $10 thousand, the influence of the second candlestick on the indicator value will be minimized. Features Of The Vwap Indicator 📝 • VWAP is a trend indicator that works on the same principle as moving average indicators. • VWAP shows the level of liquidity. The higher the volumes of this or that period, the greater the liquidity in this area. Accordingly, a decrease in the indicator value indicates a decrease in liquidity, either because there is a flat period or traders temporarily minimize open trades. • VWAP has a minimum of settings and is a confirming indicator for trend strategies. The VWAP indicator could be a great tool for technical analysis, if not for one question: where to get data on volumes? At an individual broker, it is tick data, which is far from the real market volumes, which distorts the final result so much that it is easier to use classic moving average data. Since each broker has different volume data with almost the same quotes, VWAP will draw different lines on different platforms. From a professional point of view, it is unacceptable. But on the other hand, if you use VWAP as a confirming signal, you can "adjust" to its chart, finding regularities. The indicator signals are interpreted separately for long-term and short-term trends. In preliminary analysis, the long-term trend is evaluated first: if VWAP is below the price line for a long time (it is best seen on a line chart), the trend is upward or downward. On the lower timeframe, the logic is somewhat different. If the current price is below the VWAP, it means that the asset can now be bought at a more favorable price than the average market price. However, there is no guarantee that the price will not continue to go down, so the strategy should be based on the main trend indicator, where VWAP will be an additional tool. If the VWAP indicator crosses the price several times, the market is flat. Conclusion ✅ It is possible to build a successful trading system based on the VWAP indicator. VWAP is not the Holy Grail, but it can be used to build a strategy with a positive mathematical expectation, which is the ultimate goal of forex trading. The VWAP indicator is interesting for those who work with large volumes of trades on the stock market with direct access to the U.S. exchanges, from where VWAP will pull the initial data. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
7
RAILWAY TRACKS CHART PATTERN Railway Tracks Pattern is a secondary formation (unlike pinbars and inside bars) of Price Action, but no less frequent on the chart of price movement of a certain underlying asset. It occurs mainly during the correction of the main trend movement. That is, it is necessary to catch the pattern on a pullback from the main trend. ✴️ THERE ARE TWO TYPES OF PATTERN • Bullish pattern is formed in a downward movement and indicates a change from a bearish trend to a bullish trend; • Bearish pattern is formed in an upward movement and indicates a change from a bullish trend to a bearish trend. ✴️ THE SHAPE OF THE RAILWAY TRACKS PATTERN The pattern consists of only two candles (bars). The following conditions are necessary for the pattern formation. Each candlestick should be facing different directions. That is, there must be bearish and bullish candles. The bodies of the candles should be long and make up at least 70% of the entire length of the candle. By the way, if you switch to higher timeframe of the chart when the Railway Tracks Pattern is formed, you can find a pinbar, which is also a reversal pattern in the Price Action trading system. For example, on the 15-minute chart of the GOLD a bearish Railway Tracks Pattern was formed, which led to a trend reversal: And if you look at the 30-minute chart, you can see a pinbar: These are the nuances of the pattern that can play into the hands of a trader, especially beginners. ✴️ WHAT THE RAILWAY TRACKS PATTERN INDICATES If we look at the pattern itself, we can realize that the market has changed its mood sharply. At the same time, as a rule, this abrupt change of mood is short-term. The pattern indicates a reversal of the current trend, but that does not mean that it will be long-term. Most often, after the pattern in question, the price moves in the direction opposite to the previous trend, for a short distance, a relatively small range. After a sharp change of mood in the market, as a rule, a flat move follows. In the resulting sideways trend, you can usually recognize the next pattern of trend continuation or reversal. ✴️ HOW TO TRADE RAILWAY TRACKS PATTERN In order to apply Railway Tracks Pattern in trading, you need to consider only a high-quality pattern. In addition, the signal from the pattern should be confirmed by any of the following technical analysis tools: • support and resistance levels • Fibonacci levels • trend lines or trend channel • divergence In addition, the pattern is considered to be of higher quality the longer the bodies of its candlesticks are. It is most profitable to trade it at the end of the correction of the main trend. That is, trading will be conducted in the direction of the main trend. The formation of the pattern is a signal in itself. If there is a confirming factor, it is necessary to enter the trade. For the Forex market, the target price is the nearest potential support or resistance level. The order should be pending in the direction of the potential movement. Stop Loss should be at the level of the opposite extremum the highest point in a bearish setup and the lowest point in a bullish setup. ✴️ BOTTOM LINE The Railway Tracks Pattern is a reversal formation in indicator-free trading. It serves as a confirming factor about the trend reversal rather than a full-fledged trading signal. Therefore, the pattern must be confirmed by other tools of technical analysis of the chart.
Education
by DeGRAM
1
Trading Sessions in Forex | Free Market Sessions Indicator Hey traders, In this post, we will discuss trading sessions in Forex . Let's start with the definition: Trading session is daytime trading hours in a certain location. The opening and closing hours match with business hours. For that reason, trading hours are varying in different countries because of contrasting timezones. ❗️Please, note that different markets may have different trading hours. Also, some markets have pre-market and after-hours trading sessions. In this post, we are discussing only forex trading hours. The forex market opens on Sunday at 21:00 GMT and closes on Friday at 21:00 pm GMT. There are 4 main trading sessions in Forex: 🇦🇺 Australian (Sydney) Session Opens at 21:00 GMT and closes at 06:00 GMT 🇯🇵 Asian (Tokyo) Session Opens at 12:00 GMT and closes at 9:00 GMT. 🇬🇧 UK (London) Session Opens at 7:00 GMT and closes at 16:00 GMT. 🇺🇸 US (New York) Session Opens at 12:00 GMT and closes at 21:00 GMT. Asian trading session is usually categorized by low trading volumes while UK and US sessions are categorized by high trading volumes. Personally, I trade the entire UK session and US opening and usually skip Australian and Asian sessions. There is a free technical indicator on TradingView that allows to underline trading sessions on a price chart. It is called "Market Sessions". Being added, it displays the market trading sessions. What trading sessions do you trade?
OANDA:XAUUSDEducation
by VasilyTrader
2
The Cores of Price Analysis: Trend Following vs. Mean ReversionIn the world of financial markets, predicting future price movements is akin to unlocking a treasure chest. Two of the most prominent methodologies used by traders and analysts to decipher market movements are Trend Following and Mean Reversion. Each approach offers a unique perspective on how markets behave and provides strategies for capitalizing on this behavior. In this article, we'll dive into the core concepts of these methodologies, explore how they can be implemented, and touch on basic processing techniques like smoothing and normalization, which enhance their effectiveness. Trend Following: Surfing the Market Waves Trend Following is based on the premise that markets move in trends over time, and these trends can be identified and followed to generate profits. The essence of trend following is to "buy high and sell higher" in a bull market, and "sell low and buy back lower" in a bear market. This method relies on the assumption that prices that have been moving in a particular direction will continue to move in that direction until the trend reverses. How to Implement Trend Following 1. Identifying the Trend: The first step is to identify the market trend. This can be done using technical indicators such as moving averages, MACD (Moving Average Convergence Divergence), or ADX (Average Directional Index). For example, a simple strategy might involve buying when the price is above its 200-day moving average and selling when it's below. 2. Entry and Exit Points: Once a trend is identified, the next step is to determine entry and exit points. This could involve using breakout strategies, where trades are entered when the price breaks out of a consolidation pattern, or using momentum indicators to confirm trend strength before entry. 3. Risk Management: Implementing stop-loss orders and adjusting position sizes based on the volatility of the asset are crucial to managing risk in trend-following strategies. Basic Processing Techniques - Smoothing: To reduce market noise and make the trend more discernible, smoothing techniques such as moving averages or exponential smoothing can be applied to price data. - Normalization: This involves scaling price data to a specific range, often to compare the relative performance of different assets or to make the data more compatible with certain technical indicators. Mean Reversion: Betting on the Elastic Band Contrary to trend following, Mean Reversion is based on the idea that prices tend to revert to their mean (average) over time. This methodology operates on the principle that extreme movements in price – either up or down – are likely to revert to the mean, offering profit opportunities. How to Implement Mean Reversion 1. Identifying the Mean: The first step is to determine the mean to which the price is expected to revert. This could be a historical average price, a moving average, or another indicator that serves as a central tendency measure. 2. Identifying Extremes: The next step is to identify when prices have moved significantly away from the mean. This can be done using indicators like Bollinger Bands, RSI (Relative Strength Index), or standard deviation measures. 3. Entry and Exit Points: Trades are typically entered when prices are considered to be at an extreme deviation from the mean, betting on the reversal towards the mean. Exit points are set when prices revert to or near the mean. Basic Processing Techniques - Smoothing: Similar to trend following, smoothing techniques help in clarifying the mean price level by reducing the impact of short-term fluctuations. - Normalization: Especially useful in mean reversion to standardize the deviation of price from the mean, making it easier to identify extremes across different assets or time frames. Conclusion Trend Following and Mean Reversion are two fundamental methodologies in financial market analysis, each with its unique perspective on market movements. By employing these strategies thoughtfully, along with processing techniques like smoothing and normalization, traders and analysts can enhance their understanding of market dynamics and improve their decision-making process. As with any investment strategy, the key to success lies in disciplined implementation, thorough backtesting, and effective risk management.
INDEX:BTCUSDEducation
by AlgoAlpha
Smart Money Orderflow M15 ApproachIn this context, we define an intelligent order flow, which is a convergence of flows, in this case, downwards, leading the price to create congestions, i.e., internal breaks, and then consolidation phases, i.e., external breaks, which bring the price into the demand zone, where we should consider opening a long position subsequently. The pattern is clear: demand zone on H4 after a defined structural change with the main consolidation phase, and then we expect a retest in the demand zone, where it is highly likely that the price may reverse its direction, especially when analyzing the market from an M15 perspective. I remain available for further clarifications, greetings, and happy studying to all.
Education
by Forex48_TradingAcademy
1
Mitigation + BOS M15 Setup In this scenario, we examine a very common approach: trend continuation. The particular aspect of viewing it in this light compared to simply looking at trendlines is how we can identify demand zones and structural changes called BOS. Prices always tend to retrace in these zones before continuing. Personally, I identify demand or supply zones at H4, and once the price retraces, I look for rebounds at M15. In that timeframe, I aim to identify a structural change to the upside if I'm looking for a long position. Sometimes during an uptrend, it's very common to identify inefficiencies or FVG, which in turn support the price during retracement. Best wishes and happy trading to all.
Education
by Forex48_TradingAcademy
1
Setups, Planning and RISK: How to MANAGE your RISK vs REWARD📉Hi Traders, Investors and Speculators of Charts📈 For today's post, we're diving into the concept " Risk-Reward Ratio " We'll take a look at practical examples and including other relevant scenarios of managing your risk. What is considered a good risk to reward ratio and where can you see it ? This applies to all markets, and during these volatile times it is an excellent idea to take a good look at your strategy and refine your risk management. Let's jump right in ! You've all noticed the really helpful tool " long setup " or " short setup " on the left-hand column. This clearly identifies the area of profit (in green), the area for a stop-loss (in red) and your entry (the borderline). It also shows the percentage of your increases or decreases at the top and bottom. It looks like this : 💭Something to remember; It is entirely up to you where you decided to take profit and where you decide to put your stop loss. The IDEAL anticipated targets are given, but the price may not necessarily reach these points. You have that entire zone to choose from and you can even have two or three take profits points in a position. Now, what is the Risk Reward Ratio expressed in the center as a number.number ? The risk to reward ration is exactly as the word says : The amount you risk for the amount you could potentially gain. NOTE that your risk is indefinite , but your gains are not guaranteed . The risk/reward ratio measures the difference between the entry point to a stop-loss and a sell or take-profit point. Comparing these two provides the ratio of profit to loss, or reward to risk. For example, if you're a gambler and you've played roulette, you know that the only way to win 10 chips is to risk 5 chips. Your risk here is expressed as 5:10 or 5.10 .You can spread these 5 chips out any way you like, but the goal of the risk is for a reward that is bigger than your initial investment. However, you could also lose your 5 and this will mean that you need to risk double as much in your next play to make up for your loss. Trading is no different, (except there is method to the madness other than sheer luck...) Most market strategists and speculators agree that the ideal risk/reward ratio for their investments should not be less than 1:3 , or three units of expected return for every one unit of additional risk. Take a look at this example: Here, you're risking the same amount that you could potentially gain. The Risk Reward ratio is 1, assuming you follow the exact prices for entry, TP and SL. Can you see why this is not an ideal setup? If your risk/reward ratio is 1, it means you might as well not participate in the trade since your reward is the same as your risk. This is not an ideal trade setup. An ideal trade setup is a scenario where you can AT LEAST win 3x as much as what you are risking. For example: Note that here, my ratio is now the ideal 2.59 (rounded off to 2.6 and then simplified it becomes 1:3). If you're wondering how I got to 1:3, I just divided 2.6 by 2, giving me 1 and 3. Another way to express this visually: In the first chart example I have a really large increase for the long position and you can't easily simplify 7.21 so; here's a visual to break down what that looks like: If you are setting up your own trade, you can decide at what point you feel comfortable to set your stop loss. For example, you may feel that if the price drops by more than 10%, that's where you'll exit and try another trade. Or, you could decide that you'll take the odds and set your stop loss so that it only triggers if the price drops by 15%. The latter will naturally mean you are trading at higher risk because your risk of losing is much more. Seasoned analysts agree that you shouldn't have a value smaller than 5% for your stop loss, because this type of price action occurs often during a day. For crypto, I would say 10% because we all know that crypto markets are much more volatile than stock markets and even more so than commodity markets like Gold and Silver, which are the most stable. Remember that your Risk/Reward ratio forms an important part of your trading strategy , which is only one of the steps in your risk management program. Dollar cost averaging is another helpfull way to further manage your risk. There are many more things to consider when thinking about risk management, but we'll dive into those in another post. A little bit more in-depth explanation on Dollar-Cost-Averaging here: And Finally, the last tool I'll give away today is an absolute MUST for all traders . Here's how to successfully set-up your own portfolio ratios: If you found this content helpful, please remember to hit like and subscribe and never miss a moment in the markets. _______________________ 📢Follow us here on TradingView for daily updates📢 👍Hit like & Follow 👍 CryptoCheck
Education
by CryptoCheck-
Unveiling the Golden Opportunity: Why XAUUSD/Gold is My FavoriteJoin me on an immersive journey as I delve into the unparalleled allure of trading XAUUSD/Gold. In this comprehensive exploration, I'll unravel the intricacies of trading gold, from its status as a timeless safe-haven asset to its remarkable resilience in the face of market volatility. Delve deeper into the historical significance of gold, its correlation with global economic trends, and the unique opportunities it presents to traders. Through expert analysis and insightful commentary, I'll showcase why XAUUSD/Gold remains my preferred pair for unlocking consistent profits and navigating the ever-evolving landscape of financial markets. Buckle up and discover the golden secrets to trading success with me.
PEPPERSTONE:XAUUSDEducation
by ControllaFX
Pullback After Breakout Entry M15 ApproachIn this model, we define an approach that I personally use a lot, namely the creation of a demand or supply zone on the H4. In this case, we are observing a demand zone. Once the zone has been plotted on the chart, we wait for a retracement on the M15, and as soon as the market shows a structural change, in this case to the upside during the three London, pre-NY, and NY sessions, always considering to have the midnight open behind us, we can enter the market. The target will be the nearest swing high level, always considering to have at least a risk/reward ratio of 1.5. Best regards and have a good day everyone.
Education
by Forex48_TradingAcademy
2
5 Important Trading Protection LevelsREMEMBER No matter what stock, index, Forex or other markets you’re trading, every trader needs 5 protection levels. Stop loss to stop yourself from furthering losses Time stop loss to get you out of non-performing trades Adjusted stop loss to lock in profits when the market moves in your favour. Risk % per trade to only lose a certain amount of your portfolio % of Drawdown before you HALT trading – when the market is not in a favourable environment to your strategy. Short and sweet but VERY powerful to apply to your trading. Do you have any other protection levels?
TVC:SA40Education
by Timonrosso
1
Markets are dynamic journeys, not linear sprints.The market's dance is a complex waltz, not a straight-line dash. Ideas, fueled by innovation and market forces, often blossom slowly, requiring patience and a keen understanding of different timeframes. While the allure of catching the exact bottom or selling at the precise peak might be tempting, it's important to remember: Long-term vision prevails: Your investment journey should be guided by a well-defined plan, one that considers your individual goals, risk tolerance, and the fundamental strengths and potential growth paths of the assets you choose. Don't fall prey to short-term fluctuations or the fear of missing out (FOMO). Timeframe is your compass: Day traders dance to the rhythm of minutes, while value investors follow the melody of years. Each strategy has its place, but aligning your approach with the timeframe it's suited for is crucial. Imagine trying to analyze a company's long-term prospects based on hourly price movements – it's simply not the right tool for the job. Reality over rainbows: Remember, markets are inherently volatile, and expecting guaranteed outcomes is like chasing a pot of gold at the end of a rainbow. Instead, focus on making informed decisions based on sound research, risk management strategies, and a realistic understanding of potential returns and setbacks. Long-term (Years): 2011: Imagine buying Bitcoin at around $1 in 2011 when it was still a nascent technology. While there were many ups and downs in the years that followed, holding onto it through various market cycles would have resulted in significant returns despite not catching the exact bottom. This exemplifies a long-term investment strategy based on believing in the potential of the technology. 2021: Even if you bought Bitcoin near its all-time high of $69,000 in November 2021, with a long-term perspective and a belief in its potential future adoption and value, there's a chance it could still generate returns over the years, provided the underlying technology and adoption continue to grow. This emphasizes the importance of considering your investment horizon and risk tolerance. Mid-term (Months): 2023: In June 2023, Bitcoin dipped below $20,000. A swing trader might attempt to "buy the dip" based on technical analysis suggesting a potential trend reversal and hold for a few months in anticipation of a price increase before selling. This highlights the use of technical analysis and shorter-term strategies, but still within a broader context of understanding overall market trends and risk management. Short-term (Days/Hours): Scalping: A day trader might try to capitalize on intraday price fluctuations in Bitcoin within minutes or hours, using technical analysis to identify quick entry and exit points. This showcases a highly active and risk-intensive strategy requiring advanced knowledge and skill, not suitable for everyone. Key takeaway: These examples illustrate how different timeframes require different approaches and risk tolerances. It's essential to choose a strategy aligned with your goals, knowledge, and risk tolerance. Remember, even within timeframes, there are no guarantees, and past performance is not necessarily indicative of future results.
CRYPTOCAP:BTC.DEducation
by ParabolicP
DECODING GANN FAN: HOW TO USE IT IN TRADING👋 Hello, Forex traders! In this post we are going to talk about Gann angles, which many of you know as the Gann Fan. Essentially, they are the same thing. We will learn how to build these angles, what are their essence, and most importantly - how we can apply Gann's Fan in practice in our trading. What Are Gunn Angles ? 📢 Gann Angles, or Gann Fan, is one of the standard tools present by default in TradingView. The Gann fan indicator includes a sequence of straight lines drawn at different angles with the base at the pivot point. The resulting picture resembles a fan, from which the name of the tool was derived. Each of these lines indicates possible support or resistance levels as the price approaches it. William Gunn notes that his indicator cannot 100% predict and that the market always will change the trend direction. It only shows the moments when there is the highest probability of market reversal or consolidation. Widespread use of Gann angles as part of analytical work in the market is one of the most popular and, at the same time, complex methods of technical analysis. Nevertheless, the skills of structural assessment and forecasting of currency market dynamics, based on the theory of William Gunn's angles are in demand in the tools in the arsenal of every professional trader. It is worth mentioning that Gann angles are often confused with trend lines, which is not true, despite the characteristic similarity. The key difference between the Gann line and the trend line is that the Gann line is characterized by dynamic features that allow it to move both along the x-axis (vertical axis) and y-axis (horizontal axis), which opens up wider functionality for the trader. For example, it is possible to analyze an asset by plotting it in charts, which makes it possible to determine the angles of fluctuations of a market instrument and, subsequently, to mark the limits of its dynamics. The key assumptions of market dynamics, within the framework of the Gann theory, are the following: • Price, time and range of market fluctuations; • Geometric structure of the currency market, the analysis of which allows to predict the factors of further formation of its dynamics; • The fundamentally cyclical nature of market dynamics. Gann compared the nature of the market with the nature of human beings, analyzing the past and present of which, one can make a series of essential conclusions regarding its future. Gann Fan In Forex Trading 📊 Now it's time to tell you how Gann angles are applied in practice. The peculiarity of applying Gann's theory in practice is to focus on two, classic for his theory, models, designed to help the trader in predicting market movements: • The research time model, which implies fixing cyclically repeating dates; • The price range model, which includes support and resistance lines, as well as pivot points. Since such techniques require deep knowledge and experience from a trader, let us note the most essential technical aspects that should be kept in mind first of all. A trader should decide on the models that she/he will use when analyzing the market with the help of Gann fan. The most common of them are models 1, 1×2 and 2x1, each of which implies a certain slope of the lines. However, there are many more among these models and, accordingly, angles: 1 × 1 - 45 degrees 1 × 2 - 63.75 degrees 1 × 3 - 71.25 degrees 1 × 4 - 75 degrees 1 × 8 - 82.5 degrees 2 × 1 - 26.25 degrees 4 × 1 - 15 degrees 8 × 1 - 1.5 degrees There is nothing complicated about these parameters: the first one corresponds to a unit of time, the second one to a unit of price, and the formula, accordingly, shows the relation between price and time interval. Of particular note is the 45 degree model, also known as 1×1. According to Gann, the 1×1 line represents the long-term trend line: up or down. In this model, the disposition of price above the ascending line indicates a bullish trend and below the descending line a bearish trend respectively. The disposition of the price crossing the line indicates an anticipated trend reversal. It is important to emphasize that the 1:1 line represents the balance between price and time ranges. It is not uncommon in the market that when price approaches the line, time and price are balanced. How To Draw Gann Angles On A Chart? 📈📉 Let's try to apply the Gann Fan in practice. Gann angles are drawn from the top of the trend. In this case, it is the lowest point. We draw a line 1x1 at an angle of 45 degrees. How to determine the angle of 45 degrees? Very simple. You can use the Trend Angle insturment to calculate 45 degrees. Under this line you will immediately begin to touch the trend. It is almost impossible to make a mistake with the construction of the angle. All other lines are pulled up automatically. Note! Once built, this fan has a large number of points of touch and points of touch with the trend in the future. In other words, these angles can be used as an additional tool for technical analysis in the form of support and resistance levels. We strongly do not recommend trading using only one of these tools. Also, the Gann theory has a number of similarities with fan lines based on Fibo coefficients. In light of the market moving up or down, the angles transform within the existing trend, forming resistance and support levels. As you may have already realized, this tool is not associated with any specific trading strategies, but it can serve as a good additional tool to identify support/resistance levels as well as trend reversal points. Another key is to look for time and price discrepancies. Price will always tend towards the mean line. In summary, Gann angles, also known as the Gann Fan, can be found on TradingView and are a standard tool frequently utilized by Forex traders. They are comprised of a sequence of straight lines that derive from a pivot point and form a shape resembling a fan. Each line indicates potential support or resistance levels as the price approaches them. Gann angles are not deterministic, and their purpose is to show when there's a high probability of market reversal or consolidation. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
12
Types of Orders in Forex Trading. Everything You Need to Know Hey traders, In this post, we will discuss types of orders that we use in Forex trading. ➖ Market order. Trading position is opened at a current price level. Buying the asset, you will open a trading position at a current ask price. Selling the asset, you will open a trading position at a current bid price. Even though market order is the most preferable type of orders among newbie traders, I highly recommend not to use that, especially if you are a day trader. ❗️The main problem is that prices constantly fluctuate and there is a certain delay between order execution and position opening. For these reasons, the position will be opened from a random price level within the range where the market is currently staying, affecting a risk to reward ratio. ➖ Limit order. Trading position will be opened only from a desired price level. With buy limit , you will buy the asset from a certain level. (current price remains above the order) With buy stop order, you will buy the asset from a certain level. (current price remains below the order) With sell limit, you will sell the asset from a certain level. (current price remains below the order) With sell stop , you will sell the asset from a certain level. (current price remains above the order) I prefer to trade with limit orders. Limit order helps you to trade from a desirable level, automatically executing the order once it is reached, letting you preliminary set it. ❗️However, remember that there is one big disadvantage of that order type: there is no guarantee that the price will reach the desired price level to activate a trading position. For that reason, occasionally you will miss the trades. Setting a sell limit order on Gold on 2049 level, the trade would be missed because the price respected 2048 level and dropped immediately then. Try these order types on a demo account to learn how they work in practice. Which order type do you prefer?
OANDA:XAUUSDEducation
by VasilyTrader
3