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16 Golden Risk Management Rules for TradersTo build your portfolio. You need to learn to manage your risk. And over the last 16+ years, I’ve given you maybe five ideas on how to do it. Well, today I have 16 of the most essential Risk Management rules I could come up with in just one seating. They might not all apply to you. But most of them I believe will definitely resonate with you, your portfolio and with your risk profile. So, I have taken the time, energy and effort to jot down the 16 most powerful Risk management rules, you can apply to your trading. Starting today… Here they are… RULE #1: The 2% Rule Never risk more than 2% of your total trading capital on a single trade. This rule will help you to limit the impact of any single trade on your portfolio. RULE #2: The Probability Rule – Classify trades as high, medium, or low probability This depends on your trading strategy. If you know how to spot a: High probability trade (HPT) (good chance of winning). Medium probability trade (MPT) (lower chance of winning). Low probability trade (LPT) (very low chance of winning). I have a very simple rule. With a HPT, risk 2% of your portfolio. With a MPT, risk 1.5% of your portfolio. With a LPT, risk 1% of your portfolio Only risk according to the state of the probabilities of the trade – right? RULE #3: 20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps If that inevitable Drawdown kicks in. And your portfolio drops 5%, 10% and then down to 20%. Halt trading. Don’t stop! Instead, move over to paper trade your account until the conditions turn up and the system works again. And when you do start, only start risking 1% at a time until you are confident again with your strategy and with your frame of mind. This rule alone, you’ll save you from blowing your account. RULE #4: NEVER risk money you can’t afford to lose If you feel emotionally tied to your money. Or you need the money for daily living expenses or retirement savings. Don’t trade with it. You will feel like a wreck. Instead of enjoying the trading journey and process. Trading will be an emotional rollercoaster during both winning and losing streaks. RULE #5: The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses If a trade doesn’t reach its profit target within a specific timeframe – Close the trade. I have a 7 week time stop loss before I consider closing trades. Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned. This prevents capital from being tied up in stagnant trades. NOTE: There are times where I might NOT implement a time stop loss. For example, when I short (sell) a trade which earns interest income each day. RULE #6: The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits Once a trade hits a 1:1 risk-reward ratio. I might trail my stop loss up to just above break even. This way I will bank a minimum gain, should the trade turn against me. My win rate will go up, for the portfolio. And emotionally it’s easier to hold a trade where you’ve secured a minimum profit. RULE #7: Half off Rule – Take half your profits early to secure gains If the trade is moving nicely in my favour. And it reaches a R:R of 1 to 1. Sometimes I’ll close half my position. I’ll then trail my stop loss to above breakeven. This way I’ll bank a decent profit. And I would have left room for the market to continue rallying to my initial take profit. This rule alone is God-sent. RULE #8: The 1% Margin Rule – Limit margin use to 1% of your account to control risk For those who are worried about HIGH leveraged instruments. This one is for you. The rule is, if you’re trading on margin (leverage). Never risk more than 1% of your trading account on a single trade. This way: You’ll have majority of your portfolio to trade with. You’ll have less money exposed to risk in any one trade. You’ll be able to track your risk better, for if the market gaps. RULE #9: The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day If you take on an intraday trade i.e. Smart Money Concepts trading a Forex Pair or index. Set a daily loss limit or a maximum number of losses. If you reach this amount, stop trading for the day to prevent your portfolio from spiralling into more losses. Come back the next day, to slay. RULE #10: Forex NEWS Rule – Stay off the market during high-impact news events This happens during high-volatile events. And this applies with mainly Forex! If there are any high impact news events such as major economic announcements. It can significantly increase trading risks. When these days come, I don’t take any Forex trades. Here’s are the main High-Impact-News events: CPI (Consumer Price Index) news report days CPI measures the changes in prices of a basket of goods and services over time as a measure of inflation. NFP (Non Farm Payrolls) A monthly report released (on the 1st Friday of the month) by the US Department of Labor. It shows the number of jobs added or lost in the non farm sector. This is a measure of the health of the US economy. PPI (Producer Price Index) A measure of the average change over time in the prices that domestic producers receive for their goods and services. This is another measure of inflation and economic growth. First with CPI and then with PPI. FOMC (Federal Open Market Committee) When the FOMC the US Federal Reserve meets to set monetary policy, (decision on interest rates and the money supply). RULE #11: The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5 If you do NOT see a trade with a Risk to Reward of at least 1:1.5. It is NOT a good idea to trade. Anything less than 1:1.5, and your risk will be similar to what you are looking to gain. And remember, you still need to cover costs, brokerages and daily interest charges. It’s not worth buying and selling trades with a R:R of 1:1.5. I prefer to trade with risk to rewards of 1:2 instead. That way, even with a 40% win rate, I’ll be profitable. RULE #12: The 20% Golden Rule – Never expose your portfolio to more than 20% Trading is a risky biscuit. So, even though you have money in your account. Doesn’t mean you should have all of your money in different markets. I like to limit my capital to a maximum of 20% of my total investment portfolio. Remember, you are gearing up when you trade. While leverage can magnify gains, it can also magnify losses. It’s crucial to know how to use leverage effectively. Also, it’s our job to and avoid taking on more debt than we can handle. Because when you trade on margin (leverage), you’re exposing yourself to MORE than what you deposit. So protect most of the capital at a time in your portfolio. RULE #13: The Hedgehog Rule – Don’t be too long or too short – Hedge your positions I like to say hedge your positions. Don’t HOG on too many longs. Or too many shorts. When a main index is showing strong signs of moving in a certain direction (up or down). You may feel the absolute need to buy as many stocks as possible, to ride the trend. However, you need to remember the market can change the trend direction just as fast. And your winning positions can instantly turn to losers. So, when you are holding a high number of longs, make sure you trade a couple of shorts. When you are holding a large number of shorts, make sure you trade a few longs. This way you can hedge your positions in case the market does make a turnaround. Effective hedging strategies can protect your portfolio from market volatility. RULE #14: Multi-Account Rule – Use different accounts for different markets Every market acts differently. Forex works differently to stocks. So, I like to have two different accounts for each. I like to track and trade Forex for one account and stocks for another. Having too many eggs in one basket, will skew the portfolio and your track record – due to the sporadic and different movements with each set of markets. So, diversify your portfolios across different asset classes and markets to manage risk. RULE #15: Check Up Rule – Regularly monitor your portfolio’s performance The markets are always changing including: Algorithm New volume being injected in the markets Dynamics of demand and supply This causes a shift in different market environments and echoes into the financial world. Therefore, you need to regularly review your portfolio. This will help you to realign it with your goals, statistics, drawdown & reward management as well as your risk tolerance and goals. RULE #16: Correlation Rule – Understand and monitor the correlation between assets Markets are generally positively correlated. This means, they tend to move in the same direction. If you see a large bank company going up in price and you go long, the chances are good that other banking companies are also going up in price (within the main stock market). When you understand correlation between stocks, forex, indices, commodities etc… You can find more high probability trades which will better diversify your portfolio, reduce your risk and you’ll be exposed to other market opportunities in similar markets. Told you it will be worth it! Save this, print it out and keep it by you. These are the most important money management rules I believe are necessary to know as a trader. Below is the summary of them again, with the subheading. If you found this helpful, please send let me know in the comments. 16 Most NB* Money Management Rules RULE #1: The 2% Rule – Never risk more than 2% of your trading capital RULE #2: The Probability Rule – Classify trades as high, medium, or low probability RULE #3: 20% Drawdown Rule – Halt trading at a 20% loss to avoid deeper slumps RULE #4: NEVER risk money you can’t afford RULE #5: The Time Stop-Loss Rule – Apply a time-based stop-loss rule to limit losses RULE #6: The Trailing 1:1 Rule – Use a 1:1 trailing stop-loss to protect profits RULE #7: Half off Rule – Take half your profits early to secure gains RULE #8: The 1% Margin Rule – Limit margin use to 1% of your account to control risk RULE #9: The Intraday Stop Rule – Set an intraday rule to know when to stop trading for the day RULE #10: Forex NEWS Rule – Stay off the market during high-impact news events RULE #11: The Risk-Reward Rule – Aim for a risk-reward ratio of at least 1:1.5 RULE #12: The 20% Golden Rule – Never expose your portfolio to more than 20% RULE #13: The Hedgehog Rule – Don’t be too long or too short -Hedge your positions RULE #14: Multi-account Rule – Use different accounts for different markets RULE #15: Check Up Rule – Regularly monitor your portfolio’s performance RULE #16: Correlation Rule – Understand and monitor the correlation between assets
JSE:J200Education
by Timonrosso
My Personal Encounter With The Gambler's Fallacy in Trading I wanted to share a personal experience that taught me a valuable lesson about the gambler's fallacy in trading. It's a cautionary tale that highlights the importance of staying rational. So, picture this: I was on a losing streak in my nasdaq100 trades. I had suffered a string of losses that hit my confidence hard. I was frustrated, and the urge to 'make it all back' was gnawing at me. This is where the gambler's fallacy crept in. The gambler's fallacy is the false belief that past outcomes affect future probabilities. In trading, this translates to thinking that after a series of losses, the next trade must be a winner. So, against my usual strategy, I put all my eggs in one basket. Mind you, this was when nasdaq100 was drastically sinking. In my mind, it was "due" for a reversal, and i was convinced that this trade was my ticket out of the losing streak. I blatantly ignored the fact that each trade is independent and the market doesn't care about my past losses. I went all-in on that trade, ignoring risk management, stop-loss orders, and any logical reasoning. the result? the market continued its downward trend, and my account took a massive hit. The money I had worked so hard to accumulate vanished in a matter of hours. It was a humbling experience, to say the least. I had fallen into the trap of emotional trading, allowing frustration and the gambler's fallacy to guide my decisions. Instead of focusing on a solid trading strategy, i let impulsive thinking dictate my moves. The takeaway here is crystal clear: trading is not about "making up for losses" in one grand trade. It's about strategic planning, risk management, and staying rational even in the face of losses. The market doesn't owe us anything. I've since rebuilt my trading approach from the ground up. I emphasize disciplined strategies, risk management, and staying emotionally detached from trades. It's been a tough lesson, but one that's made me a more informed and emotionally mature. The gambler's fallacy is a powerful psychological trap that can cost you dearly. Always remember that each trade is a new opportunity, independent of past outcomes. Let's keep learning and growing together in the world of trading. Remember, the gambler's fallacy is a real thing and it's a very "ignored" psychological trap in trading.
PEPPERSTONE:NAS100Education
by lazyluchi
Inflation Wears Out Its Welcome in JapanHas anybody ever told you to be careful what you wish for because you might get it? Well, the Bank of Japan appears to be in one of those situations today. Japan spent three decades oscillating into and out of deflation. As such, when inflation started to rise in 2022, the BOJ was initially thrilled. Finally deflation was coming to an end, and inflation was heading up to a target of 2.5%. The problem is that inflation didn’t stop heading higher at 2.5%. It’s now up to 4.2% excluding fresh food and energy. In a nation with a large elderly population where many people are on fixed incomes, having inflation too high is just as bad has having it too low. But why should the rest of the world care what happens to Japan’s inflation rate? For starters, Japan has the world’s fourth largest economy, and what happens to the yen and to Japanese bond yields is of worldwide consequence. Beginning in 2012, the BoJ launched a mega quantitative easing program – four times bigger than what the Federal Reserve did relative to the respective size of their economy. This QE program sent the yen plunging as the BoJ also capped 10-year Japanese government bond yields. But recently, they have softened the cap, sending not only Japanese bond yields higher but raising the cost of long-term borrowings all around the world, including in the United States and Europe. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **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.
TVC:JP10YEducation
by CME_Group
Decoding Forex Currency Nicknames: Stories Behind the Symbols 💰 In the dynamic realm of forex trading, currencies often go by intriguing nicknames that reflect their historical, cultural, or economic significance. Understanding these popular currency nicknames not only adds a touch of flair to your trading knowledge but also provides insights into the stories behind the market's most traded pairs. This article delves into the fascinating world of currency nicknames, offering a glimpse into the unique monikers that traders use daily. Decoding Currency Nicknames Currency nicknames offer a glimpse into the cultural and economic fabric of a nation, often deriving from historical events, national symbols, or prevailing sentiments. Here are two prime examples: 1."Greenback" - United States Dollar (USD): The United States dollar earned the moniker "greenback" due to its distinct green color on the back of the banknotes. This nickname emerged during the American Civil War when the U.S. government issued fiat money in the form of Demand Notes, which had a green tint. The greenback represents one of the most widely recognized and traded currencies globally. 2."Pound Sterling" - British Pound (GBP): The British pound earned its nickname "pound sterling" from the Latin word "libra," which referred to a unit of weight. The term "sterling" originated from Old English and meant "strong" or "of high quality." Together, they emphasize the currency's historical ties to both weight and value. The pound sterling's rich history and its use as a benchmark in global finance make it a prominent player in the forex market. Significance of Currency Nicknames 1.Cultural Insight: Currency nicknames provide a cultural window into the countries they represent. Understanding these nicknames can offer a deeper appreciation of the economic and historical factors that shape a nation's identity. 2.Quick Communication: Traders often use nicknames for efficiency and convenience in communication. Referring to currencies by their nicknames streamlines conversations and allows for more seamless transactions. 3.Market Insight: Some nicknames can also provide insight into a currency's performance. For instance, a nickname that implies strength might suggest the currency's positive economic outlook. Examples of Currency Nicknames 1."Loonie" - Canadian Dollar (CAD): 2."Aussie" - Australian Dollar (AUD): Currency nicknames offer a window into the rich tapestry of history, culture, and economics that shape the global forex market. By understanding these monikers, traders gain not only a unique perspective but also a deeper connection to the currencies they trade. As you navigate the exciting world of forex, remember that each currency has its own story to tell, and their nicknames add a colorful layer to that narrative. 🌏💱🎙 Dear followers, let me know, what topic interests you for new educational posts?
COINBASE:BTCUSDEducation
by SignalProvider
7
KOG - JACKSON HOLE Part 1Jackson Hole Symposium: What is the Jackson Hole Symposium? The Jackson Hole symposium (Economic Policy Symposium) is held in Jackson Hole, Wyoming USA. It is an event attended by the worlds top financial professionals including ministers, bankers and academics. It is a closed event so no press are allowed access to the meetings or talks. Instead, press conferences are held throughout the event where any comments from financial professionals usually move the markets and cause extreme volatility. This is not the usual analysis we provide. Instead, what we wanted to show you is the last 3-4yrs of market data illustrated on the charts, giving you an idea of what this event can do and cause on the markets. In this example, on Gold. So, lets start with last year, 2021. We can see the price was at a similar price point to where we are today, just slightly higher at around the 1780 level. The early sessions were quiet, however, after a retest of the low look at the aggressive move to the upside! Price started at 1780 and the move completed at 1836. 500+ pip move in a matter of days. Lets look at the top right chart, 2020. Again, look at the choppy price action, the whipsaw up and down, then the rested of the low before an aggressive move to the upside. Price started at 1904 and the move completed at 1994. 900pip movement in a matter of days. Now 2019, a slow start in the early sessions, all of a sudden, a rested on the low and then another aggressive move to the upside. Price started at 1491 and completed the move 1557. Over 500pip movement in a matter of days! What we’re trying to show you here is that its going to be a very difficult event to trade for new traders. Its going to be choppy, its going to be volatile, its going to whipsaw and its likely to move. If you’re caught the wrong side of it its going to kill your account. Best practice here is to let the market make the moves it wants to, wait for the price to settle in whatever level they want to drive it to, once this has happened then look for the setup to get in to the trade. Hope this helps. As always, trade safe. KOG
FOREXCOM:XAUUSDEducation
by KnightsofGold
32
Removing the Guesswork from Trading: Is Trading Gambling?Hello traders of @TradingView community! Today, let's delve into a question that often arises in the trading: Is trading really just another form of gambling? While both trading and gambling involve risk and speculation, they differ fundamentally in their approaches and outcomes. Trading, unlike gambling, is not about chance or luck. It's about making informed decisions based on analysis, strategy, and market trends. Successful traders rely on research, technical and fundamental analysis, and risk management to guide their actions. They aim to identify patterns and trends that increase their probabilities of making profitable trades. On the other hand, gambling is typically a game of chance where the outcome is largely unpredictable. Whether you're playing roulette or rolling dice, the result is random, and your chances of winning are often determined by luck. While some aspects of trading might resemble gambling to an outsider, the key difference is the level of control and analysis involved. Traders use various tools and methodologies to minimize uncertainty and make calculated decisions. They set entry and exit points, incorporate stop-loss orders, and diversify their portfolios to manage risk. Traders focus on developing and executing long-term strategies, steadily building profits over time. In contrast, gambling often entails short-term bets with instant outcomes. Unlike gambling, trading emphasizes risk management. Traders implement stop-loss orders and diversification to protect their investments, showcasing their control over potential losses. In conclusion, trading is far from gambling. It's an intricate practice that requires education, analysis, discipline, and continuous learning. While both involve risk, trading is grounded in strategy and knowledge, allowing traders to manage their risk and work towards achieving their financial goals.
INDEX:BTCUSDEducation
by Vestinda
The Forex Trader: A Mirror Reflection of Your Soul Do you agree with my "text"? Do you believe you are only as rich as you make yourself. I promise that only makes sense if you read it 5 times. I was dancing through my notes and I thought about this one great topic. Because I remember looking a very clear mirror and I could see every pore on my face. The thing about mirrors are: They never lie! What you see is basically what you get. I'm about to dive into the intriguing concept that a forex trader might just be a mirror reflection of their soul. Picture this: you're sitting in front of your computer screen, sipping on your favorite coffee, analyzing currency pairs, and making those split-second decisions that could either boost your account balance or send it plummeting. It's a rollercoaster of emotions – excitement, fear, elation, frustration – all bundled into a few moments. But have you ever considered that your reactions to these market movements might reveal something deeper about who you are? Just like the forex market, life is a series of ups and downs. Your ability to weather through drawdowns and stick to your trading strategy reflects your resilience in the face of adversity. If you're quick to jump ship at the first sign of trouble, you might be reflecting a tendency to avoid challenges in your personal life as well. Hmm, The real question is, Are you? Let me scrabble through more points: Risk Appetite: How much risk are you comfortable taking? Do you prefer the adrenaline rush of high-stakes trading, or do you opt for a more conservative approach? Your risk tolerance in trading can be a reflection of your general outlook on life – are you a risk-taker or someone who prefers the safe path? Emotional Control: Ah, emotions – the heart and soul of every forex trade. How you manage your feelings when a trade goes south or when a huge profit lands in your lap mirrors your emotional regulation in other life situations. Can you keep your cool, or do you tend to let your emotions dictate your decisions? Little secret, It's the later for me. I'm working on it though. Adaptability: The forex market is known for its unpredictability. Successful traders know how to adapt to changing circumstances and switch strategies when needed. This ability to pivot can mirror your openness to change and innovation in your personal life. Self-Reflection: Every trade offers a lesson, whether it ends in profit or loss. Traders who take the time to analyze their decisions and learn from their mistakes are likely to be reflective individuals outside of trading as well. This introspective nature can lead to personal growth and development. In the end, forex trading can be seen as a microcosm of life itself (everyone says this). The way you navigate the market's highs and lows, your risk management strategies, and your emotional responses are all windows into your character. Just like a mirror reflects your physical appearance, your trading behavior might be revealing more about your inner self than you realize. So, the next time you are analyzing charts and making trading decisions, take a moment to reflect on what your trading style might say about you. Are you a bold risk-taker, a patient strategist, or something entirely different? Embrace the journey of self-discovery that forex trading offers – after all, the market might just be reflecting your soul back at you. Happy soul-searching! Haha..
PEPPERSTONE:NAS100Education
by lazyluchi
1
The Metaphorical Part Of Forex Trading Hey there, I saw a cool picture on google and thought I share. PS: It has nothing to do with this post. Unless of cos', You see me as a friend. Today, I'm diving into the exhilarating world of forex trading, where currencies dance to the rhythm of global markets. Now, you might be wondering, what in the world does forex trading have to do with life? Well, my curious friend, let's embark on a metaphorical journey that will unveil the uncanny similarities between trading currencies and the art of navigating our own lives. Imagine life as a grand voyage, and within this voyage, we're all explorers seeking to make the most of our experiences. Just like forex traders, we're confronted with an array of choices, decisions, and opportunities that mirror the fluctuating exchange rates of various currencies. So, grab your compass of curiosity and let's set sail! In the forex realm, currencies are the heartbeats of trade. Similarly, relationships are the currencies of our lives. Just as we assess the potential of a currency pair, we evaluate relationships to determine their value and potential for growth. Like trading, some relationships might yield high returns, while others may not pan out as expected. Learning when to hold on and when to let go becomes a critical skill in both markets. Forex markets are notorious for their volatility, swinging wildly with the ebb and flow of economic news. Our lives are no strangers to volatility either – unexpected challenges, surprises, and opportunities can come at any time. Just as traders develop resilience to market fluctuations, we learn to adapt and thrive amidst life's unpredictability. Forex traders are masters of risk management, carefully calculating their exposure to potential losses. In life, we also juggle risks – the risk of stepping out of our comfort zones, of pursuing dreams, of investing in ourselves. Both forex and life teach us that taking calculated risks, while daunting, can lead to incredible rewards. Forex traders pore over charts and patterns to predict price movements. Similarly, we can engage in introspective "technical analysis" to evaluate our past choices, identify patterns, and make informed decisions for the future. Recognizing personal trends and behaviors can be as valuable as spotting trends in the market. This is my all time favourite, The forex market rewards patience and timing. Similarly, life's opportunities often come to those who wait and seize the right moment. Just as traders wait for the perfect entry point, we wait for the right chances to unfold before taking action.Successful forex traders keep their eyes on the long-term horizon rather than getting caught up in short-term gains or losses. Likewise, we should focus on our life's big picture and values, rather than being bogged down by temporary setbacks or momentary victories. So, there you have it, whether you're delving into forex trading or navigating the intricate pathways of life, remember this metaphor: just like in the forex market, we must equip ourselves with knowledge, resilience, and a willingness to learn . As we trade our way through life's currencies – relationships, opportunities, challenges – let's embrace the journey, grow from our experiences, and craft a life portfolio that reflects the richness of our existence. Happy new week. Let's kill it!
PEPPERSTONE:NAS100Education
by lazyluchi
Empowering Financially Deprived Female Traders: A Letter of Hope Introduction Dear Fellow Trader, I hope this letter finds you in good health and spirits, despite the challenges you might be facing on your journey as a financially deprived female trader. I want you to know that you are not alone in this struggle, and your determination to navigate the world of trading is truly inspiring. In this letter, I aim to offer you guidance, support, and practical insights to help you overcome the hurdles and seize opportunities in the trading landscape. Acknowledging Your Strength First and foremost, let me commend your courage. Being a female trader in a field traditionally dominated by men is an accomplishment in itself. Your presence challenges stereotypes and contributes to the diversification of the trading world. Embrace your uniqueness and the fresh perspectives you bring to the table. The Power of Education Education is your greatest asset. In a rapidly evolving market, staying updated with the latest trends, tools, and strategies is crucial. Fortunately, the digital age has made education more accessible than ever. Take advantage of online courses, webinars, and educational resources tailored to traders of all experience levels. Knowledge will empower you to make informed decisions and minimize risks. Building a Support Network Surround yourself with like-minded individuals who understand your journey. Join trading communities, both online and offline, where you can exchange ideas, seek advice, and share experiences. A strong support network can provide emotional encouragement, practical insights, and valuable connections that can significantly boost your trading career. Setting Realistic Goals Dream big, but ground your aspirations in reality. Set achievable short-term and long-term goals that reflect your financial situation, risk tolerance, and market knowledge. Tracking your progress against these goals will help you stay focused and motivated, even during challenging times. Mastering Risk Management One of the most critical aspects of trading is managing risk effectively. Protecting your capital should be your top priority. Never invest more than you can afford to lose, and diversify your portfolio to spread risk. Utilize stop-loss orders and position sizing techniques to limit potential losses while allowing room for gains. Leveraging Technology Technology has revolutionized trading, leveling the playing field for traders of all backgrounds. Make use of trading platforms, analytical tools, and algorithms to enhance your decision-making process. Automated trading systems can help execute trades even when you’re not actively monitoring the market. Embracing Resilience Financial markets are inherently volatile, and losses are a part of the game. What sets successful traders apart is their ability to bounce back from setbacks. Develop resilience by learning from your mistakes, analyzing your failures, and adapting your strategies accordingly. Remember that every loss is a lesson that brings you closer to success. Continuous Adaptation Adaptability is key to survival in the trading world. Market conditions change, and strategies that worked before might not be effective today. Stay flexible and open-minded, willing to adjust your approach based on new information and evolving trends. Seeking Mentorship Mentorship can provide invaluable guidance based on the firsthand experiences of seasoned traders. Finding a mentor who understands your challenges and aspirations can accelerate your learning curve and help you avoid common pitfalls. Their insights can be a beacon of light during uncertain times. Navigating Bias and Discrimination Unfortunately, bias and discrimination still persist in the trading world. As a female trader, you might encounter skepticism or condescension from some quarters. Use these experiences as fuel to prove your capabilities. Let your performance speak louder than any prejudices. Conclusion In closing, dear trader, remember that your journey is a testament to your strength, resilience, and determination. The financial struggles you face today do not define your future. With the right knowledge, mindset, and support, you can overcome challenges and achieve success beyond your wildest dreams. Embrace each day as an opportunity to grow, learn, and thrive in the world of trading. Stay focused, stay hungry, and never lose sight of your potential. Sincerely, A Supportive Fellow Trader
PEPPERSTONE:NAS100Education
by lazyluchi
3
TRADING IN PRICE CHANNELSPrice spends most of its time in trading ranges. On the chart, this results in the formation of a horizontal, ascending or descending trading channel. Trading channels are one of the most common and important chart patterns. Indeed, in most cases, price tends to consolidate in a limited range, which is a manifestation of buying activity by market participants. What is a Trading Channel? A trading channel, whether upward or downward, is simply the range in which price moves. It creates areas of resistance and support in the market where buy and sell orders cause a rebound to the center of the range itself. Building a trading channel is very simple. Just draw a trend line, then project a parallel one. Once a trading channel is formed, you can enter the market whenever price touches one of the channel boundaries. This approach works best inside horizontal trading channels. If you are in an ascending or descending trading channel, I suggest you only trade in the direction of the main trend. How to use trading channels to determine the best entry points into the market? Let's discuss the subtleties of this trading style. We will talk about how to build a trading channel, what are the pros and cons of trading in these channels. The Idea of Trading in Price Channels The price of a pair on the currency market fluctuates within a certain corridor, which can be represented as a channel. Moving price in the channel is the main principle on which all channel trading strategies are built. Trading in the price channel brings profit in case of a clear definition of the channel in which the price moves. For this purpose, a certain timeframe is taken, and on it the levels, to which the price reached but did not cross them, are determined. These levels are the upper and lower boundaries of the corridor. And herein lies the main problem for many traders - the correct building of the price channel. In fact, a regular chart building is enough for trading, and a regular chart corridor is already the simplest trading strategy that does not require additional tools for confirmation. Nevertheless, many traders find it necessary to use a variety of ways to confirm the signal. These can be candlestick patterns, various level indicators, divergences, etc. Two Situations Are Considered In Trading In Channels: price has broken the channel border; price did not break the channel border. At the same time, each strategy has its own breakout criteria and its own rules for opening positions. In addition, the type of channel used for trading plays a very important role. The most common types of channels are ascending and descending channels. The Advantages Of Including Channels In Your Trading Arsenal: - low trading risks; - simple rules, understanding of which will not be a problem for a beginner; - high profitability. However, like any other method, the trading in the channels requires clear adherence to the rules of opening positions and compliance with money management. There Are A Number Of Key Points To Keep In Mind When Trading In Channels: - the best timeframes for trading are M30 and higher; - positions are opened at bounce from the borders inside the channel; - the channel is built in the direction of the trend: upward - by two minimums and one maximum, downward - vice versa; - a position is opened only after the price reaches the channel boundary; - it is allowed to place a pending order outside the channel in case of its breakout. In many cases, the effectiveness of trading signals in the trading channels depends on the stability of the channel. If there are signs of a trend change or the end of the channel, it is better not to trade. If the price breaks the channel border and goes outside of it, in most cases, the price movement will be approximately equal to the width of the previous corridor. This gives the trader an opportunity to plan and open a trade in time. The efficiency of trading in channels increases if you use oscillators, with the help of which you can determine price reversals. As well as the validity of the breakdown of the corridor boundaries. Some examples: One recent example is gold. Gold is in a descending channel. And it was possible to sell when the price reached the upper border of the descending channel. The upper border of the channel coincided with resistance, which was a double confirmation. Let's also focus on the oil. The price has formed a beautiful channel. The price bounced from round levels and from the channel border. In the article about demand and supply I mentioned that the price is at the supply zone and it can bounce from the zone and the price did go down breaking the ascending channel which can be a sign of a trend reversal. On the New Zealand dollar, we had two beautiful selling opportunities. Here too, as in gold, the channel border coincides with resistance, which gives additional confidence in the trade.
Education
by Lingrid
11
What are Fakeouts, Shakeouts and Whipsaws?Let's get straight into the three cronies of trading disaster when taking and holding a position. Fake-out: (When the price makes a false breakout of a chart pattern) A fake-out occurs when the price of a market appears to break out of a certain chart pattern. This could be a trendline, support, or resistance level. But then quickly reverses and retreats back within the pattern. Shake-out: (Where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades) A shake-out is a scenario where the market becomes highly volatile and the price moves rapidly to levels that trigger the stop-loss orders of many traders. Stop-loss orders are pre-set risk levels at which traders automatically exit their positions to limit their losses. A shake-out is designed to "shake out" weak or inexperienced traders from the market. When stop-loss orders are triggered, it can create a temporary spike in the opposite direction of the prevailing trend. Once these traders are "shaken out," the market might resume its original trend. You’ll see this most commonly with low liquid, high volatile markets like Penny Stocks or Penny Cryptos. Whipsaw: (This is where the market will change its most prominent direction within the day). Whipsaw refers to a situation where the market quickly changes its direction within a relatively short period, often during a single trading day. This can cause confusion and losses for traders who are caught off-guard. Whipsaws can occur due to various factors, such as sudden news releases, economic data surprises, or changes in sentiment. They are characterized by sharp price movements that can make it difficult to make accurate trading decisions. Whipsaws are especially common during periods of high market uncertainty or when there's a lack of a clear trend. Let’s create a quick summary of the three: Fake-out: (When the price makes a false breakout of a chart pattern) Shake-out: (where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades) Whipsaw: (This is where the market will change its most prominent direction within the day).
JSE:J200Education
by Timonrosso
The Power of the 3 Seconds Rule in TradingIn the fast-paced world of financial trading, time is often the difference between success and failure. One effective strategy that I’ve found incredibly beneficial is the 3 Seconds Rule. This rule, adaptable to virtually any life scenario and business. It’s simple… Before you make a crucial decision, you count to three. 1, 2, 3 This will help you streamline the process to execute. It’ll also stop you from hesitating, over analyses or overthinking. Let’s delve into how this can be applied. Trade Lines Up: Preparation is Key The first stage in this strategy involves setting up your trade. This includes preparing your charts, drawing the lines, placing indicators, and identifying potential entry points. This will help you to map out your trade plan in advance/ Also you’ll be able to respond quickly. The 3 Seconds Rule here encourages swift action. Once your analysis is complete and everything lines up, count to three, and finalize your setup. This helps to avoid second-guessing your analysis, which can lead to paralysis by analysis. Place Your Trading Levels: Define Your Parameters Next open your trading platform and count to three. 1, 2, 3. Then put in your trading levels. These levels include the entry point, stop loss, take profit point, volume of trade, and whether it’s a long or short position. This ensures that your predefined strategy is implemented promptly. This is critical in a market environment where prices can change rapidly. Just Take the Trade: Execution is Crucial The final stage involves actually executing the trade. You’ve done your analysis, prepared your charts, identified your levels, and now it’s time to make the trade. Again, you apply the 3 Seconds Rule. 1, 2, 3 And then click the button to execute. Like I said before, this will eliminate the fear or hesitation that can often occur at the moment of execution. By forcing yourself to take action within three seconds, you are not allowing time for doubt or fear to prevent you from following your carefully crafted trading plan. The Benefits of the 3 Seconds Rule In the world of financial trading, the 3 Seconds Rule offers numerous benefits: Eliminates hesitation: When you commit to taking action within three seconds, you will avoid becoming trapped in a cycle of overthinking that can lead to missed opportunities. Encourages decisive action: The 3 Seconds Rule compels you to make a decision quickly. Reduces stress: By making a plan and sticking to it within a set timeframe, you can minimize the anxiety and stress of waiting too long. So you got the power of the 3 Seconds Rule? 1, 2, 3, – GO!
JSE:J200Education
by Timonrosso
ORDER FLOW SIMPLIFIED✴️ What is Order flow in trading? In brief, it is the flow of trades of a major player. Order flow is searched for after liquidity has been captured or if the price enters the area of interest. Price is fractal and therefore the same areas of interest can be applied to different timeframes. The Order Flow trading method allows you to enter a trade even if you missed the original entry into the position. ✴️ How order flow is applied in trading A large market participant is able to create a zone of interest in any market, and when the price goes to this zone - it places a large flow of buy and sell orders to move the price in one or another desired direction. When the price reaches the area of interest, the large participant will start putting pressure with orders. For example, if the price comes to the sell zone of interest, a large player may start spamming sell orders, which will rebalance the orders and force the price to move in the desired direction. A trader who takes order flow into account is able to determine the direction in which the large player is pouring orders. This will allow you to enter trades in the direction of the current pressure of the large market participant, and reduce your risks. When the bearish order flow is working, the minimums are being reprinted. The situation is the opposite with a bullish order flow. ✴️ How the order flow works - So, the order flow is a manipulation of a large market participant for a position set and price movement in the desired direction. That is, we distinguish the entire momentum without pullbacks as order flow. - Very often a large player holds two trades simultaneously, one of which is a deceptive position in order to gather liquidity from the crowd. - It is difficult to enter from Order Flow point by point; it is much more effective to find an order block. - Price most often tests the Order Flow zone. - The Order Flow zone works only for one touch, you should remember that! You should not trade Order Flow when re-entering it, the efficiency will be much lower. - On higher timeframes, Order Flow looks like an order block. ✴️ How the order flow is formed To find a sell order flow, you need to check the following signs: - A structure has broken down, or there has been a liquidity grab - Liquidity has been taken - A new low has been formed, below the previous low. Confirmation of bearish order flow comes when the price touches the sell zone of interest, confirming the interest of a major market participant. Here's what to look out for to find bullish order flow: - The downward structure has been broken - Liquidity has been taken - A higher price high has been formed. In the case of a bearish confirmation, everything is exactly the same as with a bullish confirmation, only it is the other way around. When the price starts to come back after an unclosed trade of a big player and touches the bullish interest zone, leaving the order flow zone, this is the entry point. ✴️ Bearish Order Flow When a bearish order flow of a major market participant is functioning the price falls below the previous lows. During the correction we will be able to catch the entry point to buy, at the moment of liquidity refresh, when the price will recover to the orders of a large player. The price follows liquidity. Of course, it is possible that the structure will break and there will be no new lows, but statistically most often we will see movement in the past direction of the downtrend. Our goal with bearish order flow is to open smart short positions. Ideally, we should wait for a liquidity update and a test of the zone of interest. Just don't put stops too close, because close stops are often a delicious target for large market players. It is more reasonable to put a stop where the whole downtrend pattern will be broken for sure. A stop that is too close is likely to be hit by the price and you will take a loss. ✴️ Bullish Order Flow Bullish order flow occurs when asset prices rise and exceed previous highs. During correction periods, price will take liquidity off sellers. Our objective here is to catch the correction to the zone of interest to enter long positions as carefully as possible. Our priority is long trades after the test of the zone of interest and taking out the sellers' liquidity. The main thing, as in the previous case, is not to put a stop too close. Remember that stops right behind the zone will be a target for big players. According to market mechanics, large market participants need liquidity to fill their positions to one side or the other. If you want to enter a trade very precisely - it is worth paying attention to the zone of interest itself, for example, an imbalance or a order block. ✴️ Conclusions Order Flow is the traces of a major player on the price charts. When we retest from the money flow zone, we are waiting for a pullback from it in the direction of the major trend. It is more reasonable to enter pointwise from the order blocks because it is very difficult to put a short stop on the Order Flow zone and a long stop is not so favorable for us in the long term. Also, a good entry point can be an imbalance to buy or sell in imbalance points concentrated large aggregate demand or supply. The order flow in this situation will act as the main complementary indicator for entering a position.
Education
by DeGRAM
9
6 Quantifiable Trading Goals to KnowThere is one thing that will separate the winners from the losers. Knowing your numerical trading goals. When you have a back-tested and solid strategy, everything else becomes easier. You have the past and the potential future in your vision. And all you need to do is follow the rules and then keep them in check. To do this, you need to have written down your goals, drawn from your trading statistics and back-tested journals. This will give you the spine of your trading strategy and ultimately guide you on the path to sustainable profitability. There are many numbers to take in but I’m going to kickstart you with probably six of the most critical trading goals. This will help you set your own milestones for success. Number of Trades to Take in a Year (e.g., 120) You need to have some type of idea of the number of trades, you’ll execute in a year. This number can be derived from your trading strategy, time frame choice, risk tolerance, and market analysis. For instance, if you’re a swing trader focusing on weekly chart patterns and SMC, you might aim for 120 trades in a year. This equates to 10 trades per month. Maybe you want to take 60 trades with stocks, indices and commodities. Maybe you want to take another 60 trades between Forex and crypto. Make sure you have a rough number according to your stats, so you can keep on track. Number of Winners Winners and losers come with the game. So you need to identify the number of winning trades you intend to achieve in a year. Let’s say you’re aiming for a win rate of 62.5%. With the earlier goal of 120 trades in a year, you’re targeting approximately 75 winning trades (120 * 0.625). Number of Losers Losing trades are an inherent part of trading. You need to have an acceptable number of losing trades in mind. This will help you to manage risk effectively and maintain emotional equilibrium. In our example, if you’re aiming for 120 trades a year, you should look at taking around 45 losing trades. If 62.5% is your win rate then 37.5% is your losing rate (100% – 62.5%). Win Rate Your win rate represents the percentage of trades that yield profits. With a target win rate of 62.5%, this means you aim to close over half of your trades with a profit. Sure, you’re not going to bank 62.5% every week, month and year. You might have a 70% win rate one year. You might have a 55% win rate the next year. Remember, consistency is key here. But with consistency, you’ll find it’ll balance to around 62.5% win rate per year. Percentage Return Trading is relative. Doesn’t matter if you have a $10,000 (R200,000) or a $300,000 (R6,000,000) account. You need to think in percentages and not dollars. For example, if your starting capital is $10,000 and your goal is a 32% annual return, you’re targeting a profit of $3,200 (R64,000) by year-end (0.32 * $10,000). Expected Drawdown % Then we need to prepare for the drops. Drawdown refers to the reduction in your trading capital after a series of losing trades. When your portfolio goes from an all time high and takes a dip, that’s a drawdown. An expected drawdown of 20% means that you should be prepared for a decrease of up to $2,000 (R40,000) in your starting capital of $10,000 (R200,000) during the course of the year. It might come in May. It might last ‘till August. This will enable you to track your performance, manage risk effectively, and maintain focus on what truly matters. Remember consistency leads to long-term profitability.
JSE:J200Education
by Timonrosso
DOUBLE BOTTOM FORMATIONThis model is a W-shaped pattern. It is formed at the "bottom" of the market. It serves as a reversal model. When identifying a double bottom formation, look for price patterns that occur when a price has reached a support level twice and failed to break through it. For example, consider a chart with two distinct lows, with a trough in between. The price may then make a sudden upward movement, which would be followed by two more lows. More on this below: Set entry and exit points: Once the double bottom pattern has been identified, it's important to set entry and exit points. The entry point should be when the market breaks above the high between the two bottoms. The stop loss should be placed below the lower bottom and the take profit should be placed a few pips above the high between the two bottoms. There are 3 methods of entry on it. 1. On the breakout of the neck level. - The breaking candle should not be a candle of indecision, even if it closes above/below the neckline. The breakout candle should be without big spikes. 2. On a pullback to the broken neckline. - Signals from price action like (Pinbar, Inside Bar, PPR, etc.) should appear. Without them, in fact, just on the bounce from the level, you should not enter, there is a big risk. 3. On the 2nd peak level (the riskiest method). - Candlestick patterns or built-in price action formations should be formed. Built-in formations are the pattern that formed inside some more significant pattern. That is, we have a W-shaped pattern. The price makes the second peak and another pattern can be formed on this second peak. It can be 1-2-3 formation or Head and Shoulders, etc. Monitor the trade carefully. Monitor the trade closely and adjust the stop loss and take profits as necessary. If the double bottom pattern fails and the price breaks below the lower bottom, close the trade and re-evaluate the market. If the double bottom pattern fails, it is important to re-evaluate the market, because this could mean the end of the current trend.
Education
by UnknownUnicorn15614419
8
Timing Triumph:Unraveling the Art of the Straddle Forex StrategyIntroduction In the dynamic realm of forex trading, where market movements can be as unpredictable as they are enticing, traders often seek innovative strategies to capitalize on volatility. One such strategy that has garnered attention for its ability to thrive in uncertain market conditions is the Straddle Forex Strategy. This article delves into the intricacies of the Straddle Strategy, exploring its core principles, execution, benefits, and potential drawbacks. So...Sit back, relax, and enjoy this enlightening article about the incredible Straddle Strategy. Remember to show your support by hitting the LIKE button and subscribing! Your journey into the world of the FOREXN1 Strategy is about to begin. The Essence of the Straddle Strategy The Straddle Forex Strategy is a versatile approach designed to exploit significant price movements, regardless of their direction, during times of heightened market uncertainty. It operates on the foundation that major news releases, economic data announcements, or geopolitical events can trigger substantial market fluctuations. The strategy aims to capture the potential gains from these abrupt price swings by simultaneously opening two opposing positions: a long (buy) position and a short (sell) position on the same currency pair. Execution of the Straddle Strategy Preparation: Traders must identify upcoming high-impact events or news releases that are likely to cause substantial market volatility. These events could include central bank interest rate decisions, employment reports, GDP releases, or geopolitical developments. Positioning: Just before the event, the trader places both a buy and a sell pending order above and below the current market price, effectively creating a "straddle." These orders are executed if the price moves significantly in either direction due to the news event. Activation: Once the market reacts to the news and triggers one of the pending orders, the corresponding position is opened, while the other order is canceled. This ensures that the trader is positioned to profit from the price movement in either direction. Risk Management: To safeguard against potential losses, traders often implement stop-loss and take-profit orders for both positions. The stop-loss limits potential losses, while the take-profit locks in gains if the price moves significantly. Here is an example of an advanced straddle strategy with a real-life illustration.Remember that you can customize and modify this idea and approach of your strategy, such as determining where to place pending orders, setting take profits, and establishing stop-loss levels based on your discretionary judgment or the results of your backtesting. Suppose we are nearing the announcement of a significant "Red Flag" news item concerning the US Dollar, specifically the Unemployment Claims report. This news is expected to exert a strong influence on the EUR/USD currency pair, resulting in pronounced volatility due to its nature of reflecting the count of individuals who have applied for initial unemployment benefits in the previous week. Given that such data releases strongly affect currency pairs involving the US Dollar, the EUR/USD pair is likely to experience heightened volatility, thus magnifying the significance of this news release due to its anticipated impact. One of the most effective approaches to employing the Straddle Strategy prior to a news release is by placing two pending orders in both directions of the market. This entails setting a buy stop order and a sell stop order, both positioned a few pips above a price structure. In the ideal scenario, these orders would be strategically placed just above and below key support and resistance levels. Once we have determined the optimal placement for the pending orders, it is equally crucial to establish both the stop loss and take profit levels. While leaving the take profit open to allow the news to drive the price movement is a viable option, setting a stop loss is essential for risk management, not only within the context of this strategy but also as a fundamental practice across various market tools, helping to mitigate potential significant losses. In this scenario, the news had a negative impact on the USD Dollar and subsequently positively influenced the EUR, resulting in a robust upward surge that breaches the resistance level. This development triggers the activation of the pending BUY STOP order, leading to a rapid attainment of our take profit target. Before delving further into the details of this remarkable Forex strategy, it's important to grasp certain key points: 1 ) FOREX is never as easy and straightforward as it might appear in books and articles, including ours. It's a complex endeavor that demands careful consideration. 2 ) Every strategy must undergo extensive testing in a demo account to ascertain its compatibility with our individual personality, available time, money management approach, and other relevant factors. 3 ) Backtesting is unequivocally the most accurate means of developing a suitable strategy for future use. The Straddle Strategy is undeniably intriguing and holds the potential to be an excellent approach under specific circumstances. However, it's imperative that you tailor it to your unique requirements and preferences. Benefits of the Straddle Strategy Volatility Advantage: The Straddle Strategy thrives in volatile markets, allowing traders to benefit from significant price movements resulting from news releases or unexpected events. Directional Neutrality: Unlike traditional trading approaches that require predicting price direction, the Straddle Strategy focuses on capturing market movement without bias, making it particularly appealing in uncertain times. Potential for Large Gains: When executed correctly, the strategy can lead to substantial profits in a short period, especially during high-impact news events. Drawbacks and Considerations Cost of Implementation: Straddle trades often require tighter spreads and lower trading costs due to the need for frequent entry and exit points. High transaction costs can eat into potential profits. False Breakouts: In some cases, market reactions to news events might be short-lived, leading to false breakouts that trigger positions but result in limited price movement. Timing and Liquidity: Precise timing is crucial in executing the Straddle Strategy. Entering the market too early or too late could lead to missed opportunities or unfavorable price movements. Additionally, liquidity fluctuations during news releases can affect order execution. Conclusion The Straddle Forex Strategy stands as a powerful tool in a trader's arsenal, providing a way to harness the potential of volatile markets without the need to predict price direction. By capitalizing on significant price movements triggered by high-impact news events, traders can aim to secure profits irrespective of market turbulence. However, like any trading approach, the Straddle Strategy requires a thorough understanding of market dynamics, meticulous planning, and effective risk management to maximize its benefits and minimize potential drawbacks. As with any trading strategy, it is essential for traders to practice on demo accounts and gain hands-on experience before implementing the Straddle Strategy in live trading scenarios.
Education
by FOREXN1
11
Fundamental vs Technical Analysis📊🔍 Fundamental vs Technical Analysis: Unveiling the Differences and Advantages 🔍📊 In the exciting world of trading, two distinct yet equally important methodologies dominate the landscape: Fundamental Analysis and Technical Analysis. Both approaches provide valuable insights, but they stem from different philosophies and offer unique advantages. Let's dive into the heart of this debate to explore the contrasting attributes of these two analytical powerhouses. Fundamental Analysis: Delving into the Essence Fundamental analysis revolves around the study of a company's intrinsic value by assessing its financial statements, economic indicators, and market trends. This approach examines the broader economic context that influences the asset's price, making it a staple for long-term investors. By scrutinizing earnings reports, balance sheets, and macroeconomic factors, fundamental analysis seeks to identify whether an asset is overvalued, undervalued, or fairly priced. 🔍 Advantages of Fundamental Analysis: • Provides a holistic view of the asset's health and potential future growth. • Useful for long-term investment decisions. • Helps investors understand market trends driven by economic events. Technical Analysis: Unveiling Price Patterns Technical analysis, on the other hand, is all about decoding price patterns and historical data. It relies on charts, indicators, and patterns to predict future price movements. The emphasis is on understanding market sentiment, trends, and psychological factors that impact buying and selling decisions. Technical analysts believe that historical price data can indicate potential future price direction. 🔍 Advantages of Technical Analysis: • Well-suited for short-term trading decisions. • Helps traders identify entry and exit points more precisely. • Focuses on price action, which reflects market sentiment and behavior. The Synergy of Both Approaches: A Balanced Strategy While fundamental and technical analysis may seem to belong to separate worlds, combining both can yield powerful insights. Successful traders often utilize a hybrid approach, leveraging fundamental analysis to understand the broader context and technical analysis to fine-tune entry and exit points. This combined approach can enhance decision-making and help traders navigate the complexities of the market more effectively. 🌟 Conclusion: The Path to Informed Trading Fundamental analysis and technical analysis are like two sides of the same coin, each offering distinct benefits. The choice between them often depends on your trading style, time horizon, and risk tolerance. As you delve deeper into the world of trading, consider incorporating elements of both approaches to develop a more comprehensive understanding of the market dynamics and make more informed trading decisions. Remember, understanding the nuances of both fundamental and technical analysis can be a valuable asset on your trading journey. Stay curious, stay informed, and keep refining your analytical toolkit. Happy trading! 💙💛 Feel free to share your thoughts and experiences in the comments below. Let's support and inspire each other on this exciting trading path. Your Kateryna💙💛
BITSTAMP:BTCUSDEducation
by RocketBomb
How Bearish Bitcoin Calendar Spread Trades WorkShort BTCUSDt September futures contracts + Long BTCUSDt perpetual swaps (OKX) This trade will work the best if prices go down or sideways between now and settlement, here are the possible outcomes for this spread trade: If prices go down slightly then the spread is likely to close faster and funding rates are likely to decrease. This could result in substantial profits. If prices go down substantially, then the spread could go negative and funding rates could also be substantially negative, leading to increased profit margins. If prices go sideways then the spread will close at or before settlement time, and funding rates are likely to remain near the average for the last 90-days. This could result in modest profits. If prices increase slightly then the spread will still close at the settlement date but could temporarily increase, and funding rates may be higher than the 90-day average. This could result in either a slight gain or loss, or breakeven profits. If prices increase substantially you may lose substantially on this trade because of increased funding rates and increased time for the spread to close. Example: Short 10 BTCUSDt Sept 29th futures contracts at 29,574 + Long 10 BTCUSDt perpetual swaps at 29,330 Initial Costs & Profits: Gross profit from the spread for 10 BTC = $244 x 10 = $2,440 Trading fees = 0.04% of $587,000 = $235 (actual fees paid when exiting will depend on market price) Net profit after trading fees = $2,440 - $235 = $2,205 Breakeven funding rates: If spread = 0 in 20 days f x 293,500 × 10 × 20 = 2,205 f = 2,205/(293,500 x 20) f = 0.0375% If spread = 0 in 30 days f x 293,500 × 10 × 30 = 2,205 f = 2,205/(293,500 x 30) f = 0.0248% If spread = 0 in 46 days f x 293,500 × 10 × 46 = 2,205 f = 2,205/(293,500 x 46) f = 0.0163% (Based on these calculations, as long as the average daily funding rate is below 0.0163%, then you will breakeven or earn a profit, assuming your maker fees are 0.02% per trade) Based on the 90-day average daily funding rate of 0.01204%, your net profit (x) would be as follows: If spread = 0 in 20 days: x = 2205 - 0.01204% x 293,500 x 20 x = $1,499 (+0.255%) If spread = 0 in 30 days: x = 2205 - 0.01204% x 293,500 x 30 x = $1,146 (+0.195%) If spread = 0 in 46 days: x = 2205 - 0.01204% x 293,500 x 46 x = $573 (+0.098%) (Assuming you use 100x leverage on these trade, you would multiply your percentage profits by 100, leading to a profit of 9.8% to 25.5%. When using leverage, You must ensure that your margin does not drop below the maintenance margin requirements if the spread temporarily increases or it will result in a forced liquidation. )
BEducation
by Intuit
Boom And Bust Cycle of BitcoinGreetings, esteemed members of the @TradingView community and all Vesties out there! The financial markets is a complex and dynamic arena where investors seek to capitalize on opportunities and generate profits. One recurring phenomenon in the financial world is the "boom and bust cycle", characterized by periods of rapid asset price escalation followed by sudden and often dramatic declines. Understanding this cycle is crucial for investors to make informed decisions and navigate market volatility effectively. In this article, we will delve into the life cycle of a bubble within the context of the financial markets, using the Bitcoin price chart as a compelling example. Additionally, we will explore how Bitcoin's circulating supply contributes to its perceived value. The Anatomy of a Bubble: A bubble refers to a speculative phase during which the prices of assets, such as stocks or cryptocurrencies, soar to unsustainable levels fueled by investor euphoria, media hype, and the fear of missing out (FOMO). These bubbles are often followed by a sharp correction or crash, resulting in significant losses for those caught up in the frenzy. The cycle typically consists of four key phases: a) Stealth Phase: Prices begin to rise slowly, driven by fundamental factors or innovative breakthroughs. Initial interest is limited, and only a few astute investors take notice. b) Awareness Phase: Media coverage and public attention increase as prices gain momentum. More investors start to notice the rising prices and may begin to invest, contributing to further price appreciation. c) Mania Phase: FOMO sets in as a growing number of investors rush to buy the asset, driving prices to astronomical heights. Speculative behavior dominates, and valuations become detached from underlying fundamentals. d) Blow-Off Phase: The bubble reaches its peak, and prices begin to plummet as profit-taking and panic selling ensue. The market experiences a rapid decline, erasing gains made during the boom phase. Bitcoin's Boom and Bust Cycle Example: Bitcoin, the pioneering cryptocurrency, has experienced multiple boom-bust cycles since its inception. One particularly notable example is the bubble of 2016-2017-2018 period: a) Stealth Phase: Bitcoin's price had been steadily increasing due to growing interest and adoption within the tech and financial communities. b) Awareness Phase: Media coverage intensified, drawing mainstream attention to the soaring Bitcoin prices. Retail investors started entering the market. c) Mania Phase: The price skyrocketed to nearly $20,000 per Bitcoin, fueled by widespread FOMO. New investors poured money into the market, believing the rally would continue indefinitely. d) Blow-Off Phase: The bubble burst, and Bitcoin's price tumbled, ultimately losing over 80% of its value. Many inexperienced investors who bought at the peak faced substantial losses. The Role of Bitcoin's Circulating Supply: Bitcoin's circulating supply, the total number of coins available for trading in the market, plays a crucial role in shaping its perceived value. The scarcity of Bitcoin is often cited as a driving factor behind its price appreciation. With a fixed supply of 21 million coins, the principle of supply and demand suggests that as demand for Bitcoin increases, its price should rise over time. a) Halving Events: Approximately every four years, Bitcoin undergoes a "halving" event, where the rate at which new Bitcoins are mined is cut in half. This scarcity-inducing mechanism further accentuates the notion of limited supply, potentially driving up prices. b) Investor Perception: Investors often view Bitcoin as a store of value and a hedge against traditional financial markets. As this perception grows, demand for Bitcoin increases, putting upward pressure on its price. Understanding the life cycle of a bubble is essential for investors to make informed decisions and mitigate the risks associated with market volatility. By examining the case of Bitcoin's boom and bust cycle and considering the impact of its circulating supply, we gain valuable insights into how market dynamics and human behavior can shape asset prices. As the financial world continues to evolve, these lessons remain relevant, serving as a reminder of the importance of rational investment strategies and a clear understanding of market fundamentals.
INDEX:BTCUSDEducation
by Vestinda
6
IMPULSE AND CORRECTIVE MOVEMENT What is an impulsive price movement? This is a situation when the market moves with great force in one or another direction, passing large distances in a short period of time. What is a corrective price movement? It is a price stop. After an impulsive movement, the price needs a rest. Unlike an impulsive movement, a corrective movement lasts long enough and is often just in consolidation (sideways movement). There are exceptions, when the price after a strong movement is not in a sideways, but rather in a microtrend against the main movement with a weak price impulse and goes a short distance up\down (depends on the trend direction). On the chart you can see the descending price channel, I have marked the important places. Next, I will describe everything in order. First, I will tell you how to determine a true or false breakout of a level in the trend and how to work from these levels using impulses (these levels are called mirror levels (swing) that change their level from resistance to support). A: there was a break of the support level with good momentum, up to this point there was a bullish movement and sideways movement. The break of level A broke the rising highs and we can already say that there was a trend reversal. Where we will proceed from the mirror levels of the trend. A mirror level is a level that from support became resistance and vice versa. After breaking the level, a corrective movement to the same broken level began. Do you remember what I was talking about in the beginning? About the fact that the price does not always go sideways after the breakout, it can also go against the general movement, but with less impulse. But in this case as you can see price went sideways after it broke through the level, then slowed down and started to roll back to the broken level, this is exactly the place where we can look for an entry into the trade. B : As I said, there was an impulsive break of the level and then a corrective movement against the main downward movement, after which the price approached the broken support level and broke it again. Most likely, the breakout was due to some news, most often the price makes a reversal without such sharp movements. This is the place where all candlesticks are filtered and decisions are made. Pay special attention to what candles are formed at such levels. Ideally, it should be like this: candles decrease in size and form dojis (i.e. candles of uncertainty). You can expect a pinbar or maribose in such places. Now remember the 2 types of corrective movements: - price moves against the main direction, but with less momentum - price is in consolidation after the breakout In this example the price is just in a sideways movement and does not make impulsive movements, it is simply resting after breaking another support level in place. In this case we also have 2 moments to enter. 1. When approaching the broken support level, which is now a resistance level. We have all the right conditions for entry: the price has no momentum, respectively, it will most likely bounce off the resistance level and continue moving downwards; uncertainty candlesticks have appeared (in this case they were dojis); and the last criterion is the appeared Outside bar setup (B point). 2. In the second case, the entry is made on the breakout of the support C Unlike the place where the price goes against the movement, in our case (sideways) the price after the breakout can go further without correction to the broken level, but there are also criteria for this: the candle that breaks through the C level should be without big spikes; the price must breakout with good momentum (notice how the price stopped out at the support level, so we should expect a true breakout with good momentum, as was the case in this example) Next example when the price rolled back immediately after breaking out of a level without sideways move at the D point. Pay attention to how the price gives signals that it has no strength to move further. These are small candles that were then engulfed by one big red candle and the price made an impulsive movement downward. Impulse and corrective moves: conclusions Impulse movement • Candlesticks have large bodies. • Price moves a long distance in a short period of time. • Each subsequent candle closes higher/below the previous one (a clear sign of a good impulse). • Candlesticks have the same color and sentiment (In a bullish trend is green/blue candlesticks. In a bearish trend is red/black. Well, or any other colors that you use). A corrective movement • Candlesticks have small bodies. • Candles of uncertainty are formed (dojis, haramis). • Price moves small distances over a long period of time. • Candlesticks have a combined color (different colors). When the price approaches the support and resistance levels or trend line borders, you should pay attention to these factors and, if they are met, you can enter the trade.
Education
by Lingrid
16
The Power of Trading Tunnel VisionAs humans. It’s tough. In this day and age, it feels impossible to just focus on one task at a time. You’re already shifting your attention. As you read this! You’re thinking about: What to eat, what you’re missing on Facebook, how boring this article is going to be, what’s on TV tonight, bills you have to pay, how else can you make bread for your financial future. Right? You can’t help it. It’s a disease. It’s affecting most people. It affected me for most of my life. And I think it’s one of these reasons why people are: NOT happy, NOT succeeding with their goals and NOT building their lives the way they want to. It needs to stop TODAY! Just do me one favour… Try and focus on one goal at a time. Get through this article first, move onto the next thing. Think of a racehorse. For them to be focused, avoid danger, remain undistracted and see the goal… They need to wear blinkers. So let’s put on our blinkers and let’s see why tunnel vision is the very skill you need to succeed. Not just with trading. But with every endeavour you embark to achieve and succeed. #1: Sharper Focus Tunnel vision allows you to concentrate and direct your attention to one thing at a time. Your analysis. Your setups. Your execution. Your modifications. Your reporting and reviewing. #2: Less distractions When you cut out your distractions, you will make more better decisions as a trader. It’s a skill. Put your phone away. Close your social media windows right now. Clear your desk and cupboards. Take the dog or cat out. Switch off the TV. Focus on your trading each day or when you do trade. #3: Better Risk Management When you are just about to take the trade. Make sure you double check your maths, volume trading size – according to what your portfolio is currently valued at. You don’t understand how many people make mistakes with: Wrong sizes, miscalculated levels and incorrect risk and reward. Protect and safeguard your trades with careful risk management consideration. #4: Speed up results and optimise your tasks: When you focus on one task at a time, this might be surprising but. You will finish sooner than you thought. When you put in your full – time, capital, and mental energy – you’ll be more efficient, productive and more laser focused. #5: Reduced Stress Of course when there are less distractions, less worry and less things to deal with at a time – this drops your stress. And I know you have stress right now. It’s the state of the world with the fast-paced connectivity and exponential developments. But when you narrow your life down to one thing at a time, I promise your stress will drop which will help with your trading decisions. #6: Superior strategy understanding By concentrating on a particular strategy or system, you will find that you’ll build a more profound understanding to where, why and how you’re putting your money. Master the strategy and only that one and you’ll see how far you’ll go. #7: Consistency and perseverance When you adopt tunnel vision in your life, you will begin to be more disciplined with your approach. This will lead to more consistency in your trading results. And you’ll find it will promote a stable growth of your portfolio. #8: Clearer Goals to achieve Like the horse sees the goal ahead. When you focus your attention on your goals and what you need to do to achieve them, one step at a time. You can track your progress more effectively. You can steer your trading in a better direction. You can take control of your trading with lightning focus. #9: Keeps you in the Now Time is fleeting. Before you know it, you’re in bed ready to wake up and repeat the routine. But what if, because you’re living so much in your head, that’s why time is going so quickly. I mean, right now I am only focusing on writing this article. And I’m putting in all my heart, energy and soul. And because there are no distractions, I FEEL the present. I feel time going slowly with each typing. So maybe you should to. Do everything in the present. Do it with full focus. Do it with heart. Do it with optimism and care. And this will have a positive effect on your trading.
TVC:SA40Education
by Timonrosso
U.S. Economy Less Interest Rate SensitiveDespite the fastest rise in interest rates since 1981, and an inverted yield curve where short-term rates are much higher than long-term bond yields, the United States has not (at least yet) experienced the recession forecast by the vast majority of market pundits and economists. Why not? The relatively few contrarians that did not forecast a recession, including myself, had many reasons for a more optimistic view. However, the most critical reason appears to have been an appreciation of how the U.S. economy has changed over decades and become much less sensitive to interest rates. In the 1950s, 1960s and 1970s, the U.S. economy was driven by housing and manufacturing. The only choice to finance a home was the 30-year fixed rate mortgage, provided by a savings and loan institution, that deliberately borrowed short-term from savers and lent long-term, taking considerable interest rate and yield curve risk. Further, there was no such thing as financial futures or interest rate swaps to allow for the efficient hedging of interest rate risk. Fast forward to the modern economy of the 2020s. The U.S. is an economy driven by the service sector, and services are considerably less sensitive to interest rate swings than housing and automobiles. Home mortgages come in every size and flavor, from floating rates to fixed rates. Mortgages are originated by specialists and then packaged and sold to pensions, endowments and investors willing to take the risk. There are no savings and loan institutions. Financial futures, swaps and options are available for efficient hedging and management of interest rate risk. In short, the U.S. economy does not dance to interest rates like it once did. Make no mistake, though; interest rate shifts have a profound impact on asset values, from equities to bonds, to housing. It is just that the impact on the real economy is much more subdued than it once was, and a rise in rates does not automatically mean a recession is around the corner. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available here: www.cmegroup.com **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.
CBOT:ZN1!Education
by CME_Group