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Fundamental Analysis

What Traders and Boxers Have in Common 📊🥊 Hello TradingView Family, I've been doing some thinking lately about trading and how it surprisingly shares quite a few parallels with the sport of boxing. It might sound a bit unconventional, but bear with me - there's more to it than meets the eye. 🥋 Strategy is Key: In both trading and boxing, success is heavily dependent on strategy. Boxers carefully plan their moves, anticipating their opponent's actions, and traders meticulously analyze the market, foreseeing trends and patterns. It's all about staying one step ahead. 🥊 Discipline Matters: Just like a boxer adheres to a strict training regimen, successful traders maintain discipline in their approach. Emotional control, adherence to a trading plan, and the ability to stick to a strategy even when the going gets tough are crucial. 🛡 Risk Management: Boxers can't afford to leave themselves exposed to too many punches, and traders can't afford to expose their entire capital to a single trade. Both require calculated risk management to survive and thrive in their respective arenas. 🔄 Adaptability: No boxing match goes exactly as planned, and the market is just as unpredictable. The ability to adapt to changing circumstances, whether it's a shift in the opponent's strategy or a sudden market twist, is a shared trait. 🥅 Resilience in the Face of Loss: Both traders and boxers experience losses. It's not about avoiding them altogether but about how you bounce back. Resilience, the ability to learn from mistakes, and the determination to get back in the game are keys to long-term success. 🔄 Continuous Improvement: Just as boxers are always refining their techniques, traders are constantly honing their skills. Learning from experiences, staying updated on market trends, and seeking out new strategies are essential for growth. 🧠 Mental Toughness: Boxing requires mental fortitude to withstand the physical and psychological challenges. Similarly, trading demands a strong mindset to navigate the ups and downs without succumbing to panic or overconfidence. So, what do you think? I find these connections fascinating, and it makes me appreciate both the art of trading and the sport of boxing in a new light. 🌟 Let me know your thoughts! Cheers! 📚 Always follow your trading plan regarding entry, risk management, and trade management. Good luck! All Strategies Are Good; If Managed Properly! ~Richard Nasr

Education

by TheSignalyst

Essential Tips for Newbie Day Traders: Forex and Gold Trading Entering the world of day trading can be both exciting and daunting, especially for those who are new to the game. This article aims to provide simple yet valuable recommendations for beginner day traders specifically focusing on forex and gold trading. 💼💰🚀 1. Educate Yourself: Before diving into day trading, it is crucial to understand the intricacies of the forex and gold markets. Take the time to learn about the basic terminology, technical analysis, fundamental analysis, and different trading strategies. Knowledge is your best weapon in this realm. 📚✍️📈 Start by reading books, attending webinars or courses, or even joining online trading communities to gain insight into successful day trading techniques. 2. Practice with a Demo Account: To avoid unnecessary losses, it is highly recommended to practice trading using a demo account. This allows you to gain hands-on experience without the risk of losing real money. Take the time to experiment with different strategies and understand how the market works. 📊📝💡 Tradingview paper trading offers demo accounts where you can simulate real trading scenarios and test your skills. 3. Develop a Trading Plan: A well-defined trading plan is essential for any day trader. Specify your goals, risk tolerance, and trading style. Determine the maximum amount you are willing to risk per trade and set realistic profit targets. Stick to your plan and avoid impulsive decisions. 📝🎯💼 Example: Decide on a risk-to-reward ratio, such as 1:2, which means you are willing to risk $1 to potentially earn $2, and only take trades that meet this criteria. 4. Manage Your Risks: Risk management is a crucial aspect of day trading. Never risk more than you can afford to lose and always set stop-loss orders to limit potential losses. It is important to maintain a disciplined approach to preserve your capital. 💪💸📉 Example: Let's say you have $10,000 as your trading capital. Set a maximum loss limit per trade, such as $200, and ensure your stop-loss order reflects this limit. 5. Keep Up with Market News: Stay informed about global events, economic indicators, and market news that can impact the forex and gold markets. Develop a routine of reading relevant financial news and reports to stay ahead of market trends. 🌍📰💼 Important events like central bank announcements, political developments, or changes in commodity prices can significantly affect currency and gold prices. Tradingview nicely displays the coming news on the horizontal scale of a price shart. Just click on a circle and you will see the coming related events. In conclusion, starting out as a newbie day trader in the forex and gold markets requires a combination of knowledge, practice, discipline, and risk management. By following these simple recommendations, you will be better equipped to navigate the markets and enhance your chances of success in day trading. 💪📊✨

Education

by AnabelSignals

HOW TO RECOGNIZE A SCAM SIGNAL PROVIDER WEBSITE Forex signal providers can be a good resource for traders looking to access the markets. However, not all signal providers are created equal, and some of them act as scammers, preying on unsuspecting novice traders. In this article, we will look at how to recognize a fraudulent signal provider's website and how not to fall victim to their machinations. The provider's website can be a great indicator of professionalism or, on the contrary, a desire to deceive you. 1. Bad website design One of the easiest ways to recognize a fraudulent signal provider website is to check its design. Fraudulent sites often have poor design with low-resolution images and poor grammar. You won't find any information about the provider itself on such sites. Non-working buttons or links are also a reason to be cautious. The sites of legal signal providers are usually well designed, have professional images and clear language. 2. Lack of contact information The websites of fraudulent signal providers often lack contact information or provide fake contact information. In many cases there are icons of almost all social networks, but when you click on the link there is nothing there. If there is even an account in social networks, they are mostly completely anonymous. On the other hand, legitimate signal providers should have a physical address, phone number and e-mail address on their website. Traders should check the contact information provided and make sure it is legitimate. 3. Unverified performance Fraudulent signal providers may provide unverified results or manipulate performance metrics to appear more profitable than they actually are. It can be easy to show fake trading results on a website. You should treat such results with caution. You should always check the accuracy of the performance results before using services from any signal provider. Legitimate signal providers should provide verified performance results from third-party sources. Our team has already checked a huge number of them and found out who is working correctly and who is falsifying the trading results. 4. Lack of social proof Social media is a staple of business these days. Social buttons can lead to the homepage of a website, to an empty profile, or to nowhere at all. Social media proof is a powerful tool that can help traders identify fake signal providers. The websites of fraudulent signal providers often have no reviews or they usually have fake reviews. There are always satisfied customers on their website and social media pages with no way to read the comments. Providers using a well-known consumer review system is usually a good sign. But you still should also check third-party review websites to see what other traders are saying about the provider. If there are a lot of short positive reviews you should also be wary as they may be fake. 5. Check the domain name Domain names registered for a short period of time, say a year, can be suspicious because scammers don't invest a lot of money in their sites. They purchase domain names with short expiration dates to minimize their costs. Websites that are newly created and have a short lifespan are more likely to be fraudulent. In conclusion, recognizing scam signal provider websites is crucial for traders to avoid falling victim to scammers and achieve their trading goals. By checking for poor website design, lack of contact information, unverified performance, lack of social proof, traders can identify legitimate signal providers and avoid being scammed. Be safe.

Education

by UnknownUnicorn15614419

Buy the Breakout✅ Or Have a Hard time Buying Dips❌Hello Traders! 👋 Excited to bring you another insightful post on Tradingview, highlighting a smarter approach to trading cryptocurrencies. This time, we're focusing on the effectiveness of 'Buying the Breakout' ✅ over the uncertainty of 'Buying the Dip' ❌. 🔑 Strategic Analysis: 1️⃣ Bitcoin (BTC): We begin with Bitcoin, showcasing how choosing breakout points over dips can provide more reliable and timely entry points. 2️⃣ Matic (MATIC): Next, we look at Matic, illustrating how its breakout points, when combined with simple technical analysis, offers a clear strategy for market entry. 3️⃣ Fantom (FTM): Lastly, we explore Fantom, a prime example of how a classic crypto breakout strategy can outperform dip-buying, leading to more significant gains. 🧠 Trading Psychology: It's crucial to understand the psychological aspect. Consistently buying dips may lead to missing breakout opportunities, potentially resulting in shorting at the wrong moment... or endlessly like Borat at the end of this post 💡 Smart Profit-Taking: Remember, taking profits partially is key. Secure your gains and keep some positions open for further potential growth, balancing risk and reward effectively. I personally usually set 4 targets for spot at 25% each. The first 2 get me some profit and the last 25% is for my retirement; so i never touch that 25%, ever. 🚦 Managing Fake Breakouts: A vital part of trading breakouts is dealing with the possibility of a fake breakout. Here's where your skills truly shine. By having a calculated exit strategy, you can minimize risks even if the breakout turns out to be false. This approach ensures that your trading decisions are not only proactive but also protective of your capital. This post is crafted to enhance your understanding and application of these strategies, whether you're a veteran trader or new to the game. 📚 It's all about making informed, strategic decisions in the dynamic world of crypto trading. 🌟 When it comes to crypto, it all starts with the fundamentals: selecting assets with solid backing, innovative teams, and a clear, strategic plan. This foundational step ensures that you're investing in cryptocurrencies that not only have potential for technical breakouts but also possess the intrinsic value and growth prospects backed by strong fundamentals. 🔍Join me in this journey as we continue to explore and attempt to conquer the markets. Your thoughts, experiences, and insights are always welcome in the comments section below. Let's keep pushing the boundaries of what we can achieve together in trading! Just remember that Trading should be fun thus we must play with funds we can afford to sacrifice. ❌❌❌Don't be like Borat: ❌❌❌ One Love, The FXPROFESSOR ✅

Education

by FX_Professor

Updated

Can Bitcoin Hedge Against a Falling Dollar?Global inflation often signifies a weakening of global currencies. The question of whether Bitcoin can serve as a hedge against a depreciating dollar has gained significant interest among investors. Or should it still be the Gold? In this study, we will analyse the top 8 cryptocurrencies to determine which one is a more reliable currency hedge. Bitcoin & Its Minimum Fluctuation $5.00 per bitcoin = $25.00 BTIC: $1.00 per bitcoin = $5.00 Code: BTC Micro Bitcoin & Its Minimum Fluctuation $5.00 per bitcoin = $0.50 BTIC: $1.00 per bitcoin = $0.10 Code: MBT Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. 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

Education

08:11

New Traders Ask, Experienced Traders Answer: Q&A Hello TradingView Community! 🔸We're excited to launch a unique Q&A session right here! If you're new to trading and have questions, this is your chance to get them answered by seasoned or just other traders. Whether it's about technical analysis, trading psychology, or managing risks, feel free to ask anything related to trading. 🔸Experienced traders, we invite you to share your wisdom and insights. Your knowledge is invaluable, and this is a great way to give back to the community. Guidelines:👇 - Please keep questions and answers respectful and constructive. How It Works:👇 - New traders: Post your questions in the comments. - Experienced traders: Reply to these comments with your answers. - Let's make this a rich learning experience for everyone involved. We're looking forward to your questions and the insightful discussions they spark! P.S.: All the information shared here will be based on personal knowledge and the personal experience of traders! This is just an opinion, not financial advice! Happy Trading!

Education

by SwallowAcademy

The only constant with trading the markets is...The only thing constant about financial markets is that they change. And since 2007 or so, with the higher availability of trading different instruments and markets world-wide. And not to mention, the ability to go long (buy) and go short (sell). Yes, these everyday possibilities were difficult to find and trade back then. Now I’m speaking my age in the markets. But it’s important to know, the algorithms are changing the game every single year. As long as you’re a trader you need to be able to learn, grow, adapt and evolve with every changing markets. Let’s go into details about WHY the markets are changing… Since around 2007, the landscape has undergone significant transformations, driven by several key factors that shape the dynamic nature of these markets. 1. Globalisation and Technological Advancements Traders now are able to gain access to enhanced connectivity, facilitating participation in markets worldwide. They also have amazing trading and charting platforms like TradingView. This increased speed of information dissemination and transactions has a profound impact on market dynamics. And this helps contribute to the perpetual state of change. 2. Diversification of Instruments and Markets The availability of diverse financial instruments, ranging from stocks and bonds to commodities and cryptocurrencies, has expanded trading possibilities. Each year we seem to have more assets, markets, instruments, structured products and choices. It's building into a trading universe in a way. And each market possesses unique characteristics influenced by distinct factors. This diversity introduces complexity to trading strategies. And this requires traders to navigate a broad spectrum of instruments with different behaviors. As long as there are new and improved assets, the markets will always change. 3. Long and Short Positions Unlike in the past, where shorting certain markets proved challenging, the ability to go long (buy) and short (sell) has become more prevalent. This flexibility allows traders to capitalize on both upward and downward market movements. With the ability to go long and short a variety of markets, this is changing the financial landscape of the markets. Price action no longer moves in a Zig Zag 45 degree motion. There are more dips and rallies without strong trends, like in the past. All because of the intrciacies of long and short positions also adds intricacy to risk management strategies. talking about algorithms. 4. Rise of Algorithmic Trading Algorithmic trading has emerged as a game-changer in financial markets. This involves using computer programs to execute trades based on predefined criteria. The influence of algorithmic trading is profound, contributing to increased liquidity, faster execution, and the development of innovative trading strategies. As algorithms evolve each year, they continually reshape the dynamics of the trading landscape. 5. Market Participants and Strategies The composition of market participants has evolved, with institutional investors, hedge funds, high-frequency traders, and retail traders all playing pivotal roles. All of a sudden we've seen a spike in the new trend of trading with Smart Money Concepts and Inner Circle Trading, in the last two years. These changes in the behavior and strategies of these participants can swiftly impact market trends and volatility. The influx of retail traders, facilitated by online platforms, further adds new dynamics to the markets. So once again, the only constant for traders is the change that is taking place in the financial landscape and market universe. Traders who evolve, adapt, acknowledge and respond effectively to the perpetual state of change are better positioned for success in this dynamic and challenging environment.

Education

9 Elements to Master Algo-Trading There are two types of trading. Discretionary where you buy and sell based on variable factors. Mechanical where you buy and sell on fixed factors. If you want a strong edge with the markets, then you’ll need to consider the latter. And hence we have algorithmic, or algo trading. Algo trading, or algorithmic trading, is the use of computer programs to automate the process of trading financial assets. These programs, or algorithms, execute trades based on predefined rules and criteria. Now when you dissect algo trading to its core, you’ll realise there are important elements you’ll need to consider to master it. Element #1. Database Management & Analysis Algo trading simply begins with a whole bunch of comprehensive and organised data management. You’ll use the financial markets to generate vast amounts of data, including historical price movements, trading volumes, and momentum indicators. Basically, you’ll need this database to create a strong back tested analysis. That way you’ll be able to get the accurate data to tell you how it’s performed, the expectations and the best and worst case scenarios. Element #2: Statistical Analysis Once you have the database of tested information. You’ll be able to work on your statistical analysis to see the inner workings of the system in action. Win & loss rate Best & average winners and losers Drawdown averages Average trade Expectancy formula Biggest and smallest winner & loser Average week, month, quarter and year Basically, all the stats you need that forms the bedrock of successful algo trading strategies. When you have this data you’ll be able to spot trends, correlations, and anomalies within financial data. Element #3. Pattern Recognition Skills Pattern recognition is a core competency in algo trading. We aren’t fully there yet with AI, Machine Learning and Deep Learning. But we’re getting there. With trading expertise combined with algorithmic precision – this will allow computers to find recurring chart patterns, candlestick formations, and technical indicators. These patterns often help give trends, reversals, potential market movements, and opportunities to enter or exit a trade. E lement #4. Machine Learning Machine learning, a subset of artificial intelligence. By using historical data, machine learning algorithms can adapt and improve trading strategies over time. So whether you have a moving average, chart patterns, Smart Money Concepts, Fibonacci or any other trading system. With Machine Learning, it will input more data and will be able to change, add, remove and optimise elements in your strategy to make it MORE successful. In just no time at all, these algorithms will learn from past successes and failures, fine-tuning trading parameters and strategies to optimise your trading performance. E lement #5. Trading EA Strategies Expert Advisors (EAs) are your everyday trading robots. These are algorithmic programs that are developed for trading platforms like MetaTrader and soon TradingView. These EAs help you to execute trades based on your pre-defined rules and criteria. You’ll then be able to design and backtest these strategies to make sure they are viable and profitable in REAL market conditions. And when it’s time to take trades, EAs do it for you. They will be able to automate the execution process – with no emotions or hesitance. This will allow you to capitalise on opportunities 24/7 without any human intervention. And you no what that means. It’s going to do the job! Element #6. Problem-Solving Skills You are going to hit a bunch of obstacles in the way. There are major challenges when it comes to algo-trading. And you’ll need to have strong problem-solving skills to overcome them and succeed. Just like programmers deal with bugs, glitches and problems with code. You’ll also find problems with paramaters, markets, rules, criteria and risk management calculations. If you have strong problem-solving skills you’ll be able to quickly identify and sort out the issues, diagnose causes, and find and implement solutions to maintain consistent performance. Element #7. Attention to Detail You need to have an eye for algo-trading. When the smallest discrepancies or inaccuracy can have major consequences for your portfolios performance. You’ll need to consistently review your strategies, parameters, and data inputs. That way it’ll help to make sure your system is accurate, reliable and trustworthy. Element #8. Risk Management It’s not just about creating a solid trading strategy and system. You’ll need to have effective risk management too. With Algo trading, you’ll need to employ a couple of money management techniques like: Position sizing Stop-loss orders and criteria Portfolio diversification When to close based on over time When to adjust your positions When to risk a certain percentage based on different market environments This will help you to protect, preserve and prosper with your portfolios. Element #9. Market adaptability Markets are dynamic. Markets trend. Markets move sideways. Markets jump in irrational circumstances. As an algo trader, you’ll need to find a way to adapt your system into the programme to identify these market environments. E.g. When the main market is above the 200MA only look for longs When the main market is below the 200MA only look for shorts. When the market is within a box range – Don’t look for any trades. As you can see, there are many elements to being a successful algo-trader. It also takes a ton of innovation. But have this article with you, for when technology and developments improve – You’ll have certain ideas and steps to take to improve your algo trading. Let’s sum up the important elements to algo-trading… Element #1. Database Management & Analysis Element #2: Statistical Analysis Element #3. Pattern Recognition Skills Element #4. Machine Learning Element #5. Trading EA Strategies Element #6. Problem-Solving Skills Element #7. Attention to Detail Element #8. Risk Management Element #9. Market adaptability Do you use Algo-Trading with the markets?

Education

Top 6 Most Tradable Currency Pairs Forex traders have the luxury of more highly leveraged trading with lower margin requirements compared to traders in equity markets. But before you jump headfirst into the fast-paced world of forex, you'll want to know about the currency pairs that trade most often. Here's a look at six of the most traded currency pairs in forex: 1. EUR/USD: Trading the "Fiber" The most traded currency pair is the EUR/USD, most likely because of the global prominence of the economies of the European single market and the United States. It made up 22.7% of overall market share, as of the latest BIS survey. That's down from 24% market share in the previous 2019 survey. The high daily volume and liquidity of this pair ensure tight spreads for traders. The EUR/USD tends to have a negative correlation with the U.S. dollar and Swiss franc (USD/CHF) and a positive correlation with the British pound/U.S. dollar (GBP/USD). This is due to the positive correlation of the Euro, the British pound, and the Swiss franc. 2. USD/JPY: Trading the "Gopher" The next most actively traded pair was the USD/JPY, with high liquidity and a market share of 13.5%, slightly higher than its prior 13.2%.2 This pair has been sensitive to political sentiment between the United States and the Far East. It tends to be positively correlated to the USD/CHF and the U.S. dollar/Canadian dollar (USD/CAD) currency pairs. This relationship is due to the U.S. dollar being the base currency in all three pairs. USD/JPY also responds to changes made to interest rates by the Bank of Japan and the effect on the yen relative to the U.S. dollar. 3. GBP/USD: Trading the "Cable" Trading in the GBP/USD currency pair represented 9.5% of forex market share, a small decrease from the prior survey in 2019. Again, the popularity and volume of trading in this pair reflect the strength of the British and U.S. economies. The GBP/USD tends to have a negative correlation with the USD/CHF and a positive correlation with the EUR/USD. This is due to the positive correlation between the British pound sterling, the Swiss franc, and the Euro. 4. USD/CNY: Trading the Yuan The USD/CNY currency pair represents the relationship between the U.S. dollar and the Chinese renminbi, more commonly known as the yuan. Its market share grew to 6.6% from its previous 4.1% of market share in daily forex trades. The U.S.-China trade relationship has been a volatile one, providing USD/CNY traders with plenty of speculative trading opportunities. Those interested in the USD/CNY should maintain awareness of developments in that relationship, as they could affect the pricing of the pair. 5. USD/CAD: Trading the "Loonie" Market share for the USD/CAD currency pair increased to 5.5% from 4.4% in the previous survey three years ago. Interest rates in the U.S. and Canada will affect the price of this pair, reflecting the effects on the individual currencies. In addition, as oil is a major economic driver for Canada, its price will affect the price of Canadian currency. This in turn can have an impact on the currency pair. The USD/CAD tends to be negatively correlated with the AUD/USD, GBP/USD, and EUR/USD pairs due to the U.S. dollar being the quote currency in these other pairs. 6. AUD/USD: Trading the "Aussie" The AUD/USD currency pair captured 5.1% of forex market share, compared to its previous 5.4%. It tends to have a negative correlation with the USD/CAD, USD/CHF, and USD/JPY pairs due to the U.S. dollar being the base currency in these cases. The value of Australia's currency is closely tied to the role and value of its exports in its economy. Therefore, a downward movement in that value could affect the AUD/USD currency pair value, strengthening the dollar to the loonie. The relationship between the interest rates set by the respective central banks can affect the currency pair price, as well. Conclusion The list of the most actively traded currency pairs starts with the EUR/USD, which has the greatest trading volume. All six currency pairs offer the liquidity that investors who trade them need for profits. However, various factors such as trade relationships, changing interest rates, economic upheaval, and country disputes, including war, can affect individual currencies (and thus pairs). So make sure that you're up to date on such news and information before leaping into the forex market so you can choose the most viable currency pairs to trade.

Education

by tradingconmike

HOW TO TRADE RECTANGLES As we already know, a price trend does not usually reverse instantly. As a rule, upward and downward trends are separated by periods when the price is in a trading range - a sideways trend. To take a simple analogy, imagine a huge ship. It's not easy to slow it down, it takes a lot of time. Now imagine how long it takes to turn around? It's the same with prices. Hence the simple rule that the longer the trend is, the more time it takes for it to reverse. In this case, the process of reversal, aka the horizontal phase of the market is of great importance. Because it is the horizontal range that separates an upward trend from a downward trend (or vice versa). But when the sideways range comes in the shifting phase, the battle between sellers and buyers is equal. Until, for one reason or another, the price does not go down under selling pressure. It is the breakout of the sideways range, with a new low being reached, that indicates to the trader that a trend reversal is taking place. In other words, when the price falls out of the trading range, it is a sell signal. When the bearish trend ends, the reversal process begins. The Reversal Rectangle And The Psychology Behind It When the rectangle is just starting to form, some news is released on the asset and uninformed market participants, who heard about it for the first time, jump in to buy. At this stage, there are positive forecasts everywhere and to go long seems to be the right choice. We remember that absolutely every trade has two participants: the seller and the buyer. At the same time sellers have absolutely different view on the market. They diligently bought much earlier, on rumors of positive news. And now the positive news has arrived, which means what? That's right, it's time to sell. And who is the best person to sell to? Uninformed participants. This is how the well-known principle "buy the rumors, sell the facts" looks to everyone. If price patterns like a rectangle are formed at the bottom of the market, they are called accumulative, and the process itself is called accumulation. Here the psychology is exactly the opposite. Sellers see that the price of the asset is falling and decide to sell when bad news and future forecasts become known to all investors. Potential buyers previously hesitated because they did not want to enter on such bad news. Simply put, the upper reversal rectangle is just a version of the signal that the series of rising highs and lows will reverse. And exactly the opposite is true for the bottom rectangle. You also need to realize that a reversal pattern needs something to reverse. In other words, there should be a clear trend in the opposite direction from the expected reversal before such a rectangle. Accordingly, there should be a strong upward trend up to the top rectangle, and a downward trend down to the bottom rectangle. How Is The Rectangle Formed? In the picture shown above, the upper and lower boundaries of the rectangle are formed by at least 3 touches between two horizontal trend lines. However, the rectangle could actually be made on the first two touches. Don't forget, any sideways trend is just an area where buyers and sellers are fighting. If the battle results in a rectangle with more than two touches, it means that the battle between the two sides has turned intense. It also means that the bearish characteristics of the rectangle in the example above are intensifying. The more touches the rectangle has, the more significant it is As you will notice we use the phrases "touches" and "approaches" this is important because on real charts rectangles will not be so perfect and beautiful. Approaching any trend line , including the horizontal one in a rectangle, is as important as actually touching it. So, if the price reaches the boundary and then reverses, it reinforces this support or resistance zone anyway. Significance Of Any Price Pattern The principles of price patterns are universal. They can be used on any timeframe, from 1-minute candles to monthly candles. However, it is the size and depth of the pattern that influence how significant it is in a particular timeframe. 1. Timeframe The larger the timeframe, the more significant the pattern is If a pattern is drawn on a monthly chart, it means that it is significantly more important than the one seen on an intraday chart. Suppose we are looking at a daily chart and we have noticed two patterns. The first one took 10 days to form, while the second one took 4 weeks. It is understandable that the significance of a 4-week epic battle between buyers and sellers is much higher than a 10-day clash. 2. Significance of price fluctuations The more price fluctuates within a pattern, the more important it is If the price stands still for a long time, traders and investors inevitably get used to buying at one price and selling at another. That is why the price moving beyond the usual prices changes the whole picture dramatically and represents an important event from the psychological point of view. 3. Significance of pattern depth The more in-depth the pattern, the greater its significance A breakout of a wide trading range is much more important than a breakout of a narrow trading range. The bigger (proportionally) the price fluctuations inside the pattern, the stronger the subsequent movement will be. If the pattern is formed by wide price movements, it means that the end of the pattern is likely to be marked by them as well. It is also important to note that if you get a very narrow rectangle, it means that the battle between buyers and sellers is very balanced. This is especially true if there is almost no trading activity. When the balance is broken for one reason or another, the price will often move faster and further than initially expected. How To Measure The Impact Of A Breakout To assess the impact of a breakout, simply measure the distance between the inner boundaries, and then project them downwards. In most cases, the price will go further than the potential target we have highlighted. In very strong movements it will go further by many percent. Moreover, these price range projections often become important support and resistance zones in themselves. Unfortunately, we cannot determine exactly where the next level will be after the price move, because technical analysis, again, does not allow us to accurately determine the duration of the price movement. However, we can well estimate the probability of whether this zone will be support or resistance. To put it plainly, this approach is a minimum expectation of the price movement. Cancellation Effect The minimum distance after a breakout can become a new zone where another accumulation or distribution begins. It usually takes a long period in the new range for the price to move back into the old range. That being said, if there was a breakout of, say, a 2-year rectangle and price reached the minimum target, even though it didn't go any further, it will usually need the same accumulation/distribution period as it did in the previous range. It is only then that price can move back up. False Breakout As we have already found out, a price breakout outside the price pattern, even if it is small, often indicates a trend reversal or its confirmation (if the price was in an accumulation/rectangle). However, it is not uncommon for price to show deceptive, movements, so we need to introduce clear rules to avoid mistakes. It is quite ironic that false breakouts actually confirm the significance of certain support or resistance zones. For example, on a daily chart, you see a confident breakout of a rectangle. But if the price does not hold above the broken line for more than one day, such a signal becomes suspicious. From a technical point of view, such a breakout can be much less significant, because if it does not hold, it means that the momentum is exhausted. If the price has uncertainly broken the level, in most cases it turns in the opposite direction to the breakout A hesitant breakout is often accompanied by further concentration of the price in the range until the price structure is technically prepared for a new breakout. When the price has confidently exited the pattern, this is an indication that the breakout has taken place. Indications of a false upside breakout: price is moving back into the range and breaking the previous lows, the rising trendline connecting the previous lows. Indications of a false downside breakout: price moves back into the range, breaks the previous high, a descending trendline connecting the previous highs. Keep Risk Management In Mind We remember that an upward breakout indicates a possible price rise. However, the same can be said about a pullback. If the price is back in the range, the probability of it reaching higher values decreases rapidly. Unfortunately, there are no quick and easy ways to determine this in any market conditions. Every market situation is different. This is the reason why you need to think everything through in advance, even before opening a trade. Otherwise, if the trade is already open, your emotions will come into play and affect the result. If you do not think over your risks in advance, if things go badly, you will be emotionally stressed and tense when you exit the trade. You will be influenced by some news, sharp price movements and in general anything except a sober, logical plan thought out in advance. Let's Summarize A rectangle is a trading range between two parallel trend lines. We measure the consequences of a breakout: the depth of the pattern is projected in the direction of the breakout. Indications of a false upward breakout: price moves back into the range and breaks the previous lows, the rising trendline connecting the previous lows. Indications of a false downside breakout: price moves back into the range, breaks the previous high, downward trend line connecting the previous highs. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment

Education

HOW-TO apply an indicator that is only available upon request?Recently, I've realized that my typical day involves constant encounters with indicators. For example, when the alarm clock rings, it's an indicator that it's morning and time to get up. I am checking the phone and once again paying attention to the indicators: battery charge and network signal level. I figure out in just one second that such a complex element of the phone as the battery is 100% charged and the signal from the cell towers is good enough. Then I’m going out on a busy street, and it's only because of the traffic light indicator that I can safely cross the road to reach the parking lot. Looking at the on-board computer of my car, with its many indicators, I know that all the components of this complicated mechanism are working properly, and I can start driving. Now, imagine what would happen if none of this existed. I would have to act blindly, relying on luck: hoping that I would wake up on time, that the phone would work today, that car drivers would let me cross the road, and that my own car would not suddenly stop because it ran out of gas. We can say that indicators help to explain complex processes or phenomena in simple and understandable language. I think they will always be in demand in today's complex world, where we deal with a huge flow of information that cannot be perceived without simplifications. If we talk about the financial market, it's all about constant data, data, data. Add in the element of randomness and everything becomes totally messed up. To create indicators that simplify the analysis of financial information, the TradingView platform uses its own programming language — Pine Script . With this language, you can describe not only unique indicators, but also strategies — meaning algorithms for opening and closing positions. All these tools are grouped together under the term "script" . Just like a trade or educational idea, a script can also be published. After this, it will be available to other users. The published script can be: 1. Visible in the list of community scripts with unrestricted access. Simply find the script by its name and add it to the chart. 2. Visible in the list of community scripts, but access is by invitation only. You'll need to find the script by its name and request access from its author. 3. Not visible in the list of community scripts, but accessible via a link. To add such a script to a chart, you need to have the link. 4. Not visible in the list of community scripts; access is by invitation only. You'll need both a link to the script and permission for access obtained from its author. If you have added to your favorites a script that requires permission from the author, you'll only be able to start using the indicators after the author includes you in the script's user list. Without this, you will get an error message every time you add an indicator to the chart. In this case, contact the author to learn how to gain access. Instructions on how to contact the author are located after the script's description and highlighted within a frame. There you will also find the 'Add to favorite indicators' button. The access can be valid until a certain date or indefinitely. If the author has granted access, you will be able to add the script to the chart.

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Canadian ETFs & Currency Hedging Attention, Canadians! If you are Canadian or even an American who trades on the TSX, I want to bring some very interesting discoveries to your attention. If you read my last post on ETFs, those were all American-based. I was researching Canadian-based ETFs for a similar post, and I came across something absolutely interesting that I thought I would share here because it has significant advantages for Canadians, like myself, who actively trade US equities. And what is this discovery, you ask? Well, it's the equally weighted ETFs of the S&P, NDX, and some stocks and crypto, of course! The best part? They are much cheaper than buying SPY or QQQ and much safer than holding UPRO or SPXL longer term because they are meant to be an investment mechanism, unlike UPRO and SPXL, which target speculative traders. So let's get into it! 📈 TSX: QQEQ.F 📈 This is the equally weighted ETF, hedged for CAD, of the NASDAQ (Index: NDX, Futures: NQ1! But better known as QQQ). Currently, it is trading around $20.18 CAD. It's relatively new, hitting the market in May 2021, but it moves identically to QQQ (hence the equal weight). It is actually by the same company that manages QQQ (INVESCO). You can see by the chart that it has pretty low volume at the moment: But if we take a look at the gains on this vs QQQ, we will see that they are fairly comparable: From our October low till now, QQQ did outperform slightly, but there is somewhat of an expected divergence in return relating to the effect of adjusting for currency. The disadvantage is that volume is incredibly low on this, and I mean incredibly low. Looking at Yahoo Finance, on November 20th, only 400 shares were traded. On November 21st, 200 shares were traded, with no shares being traded between November 13 and November 15th. A little bizarre, but I am going to be trying it out because the gains are pretty identical to QQQ. 📈 TSX: EQL 📈 Another INVESCO treat, this has much better volume and is the equal weight of the S&P (AKA SPY) hedged in CAD. Also, very comparable performance: Again, not precisely identical because of the effect of the currency exchange, but pretty good. 📈 TSX: TECH (or FANGMA) 📈 I chuckled at this name, FANGMA. Sounds like some kind of vampire thing. But I get it because the same goes for FAANG in general. This ticker has amazing volume and holds all the big-name tech. It comprises Facebook, Amazon, Netflix, Google, Microsoft, and Apple. This is another equally weighted portfolio meant for investors interested in tech. It moves like any tech stock, averaging about 2 to 3% moves in a day. US volatility from the comfort of the TSX, who would've thought? 📈 TSX: BA 📈 One thing that I learned from uh, doing this little research here is that, in addition to maple syrup, licentiousness, and politeness, Canadians seem to enjoy their tech and airplanes. I suppose my love of BA is a shared delusion amongst us Canucks because the CAD Hedged Boeing shares have great volume and are highly traded on the TSX: Again, pretty on par with the actual BA stock, in fact, pretty close: And all for just $38.52 a share! There are some other, more boring ones like: US Yields: TSX: RUBH But the more impressive one is: ₿ TSX: BTCC.B ₿ You know how the Americans were getting all hot and bothered by that new BTC ETF that is in the works? Well, Canada already had it in February 2021 in the form of BTCC.B: It was the first and I think still is the only one (until the US ones receive approval) released that physically holds BTC. Thus, when you buy this ETF, you are actually holding BTC, vs the current BTC strategy ETFs which don't actually hold BTC. Again, pretty similar, and this is like-to-like (BTCC.B vs BTCCAD). 📈 TSX: NVDA (NVIDIA CDR CAD HEDGED 📈 Yup yup. NVDA! Yay! All at a cost of $44.47 CAD 🤑. With identical gains: [https://www.tradingview.com/x/730KOCQb/ Again, expect a bit of variance in the gains owning to the currency fluctuations, but for the most part, as it is CAD hedged, it is attempted with the best efforts to mitigate extreme variations in currency exchange rates. 🤔 So what exactly is a "currency-hedged" stock and how is it "hedged" exactly? 🤔 This is a fantastic question and in researching this article and talking about these stocks, I was like "huh… what does this even mean?" So, a bit more research later, let me attempt to explain! Currency hedging is a strategy used to mitigate the risk of currency fluctuations when investing in foreign assets. Currency-hedged funds use derivatives called futures to lock in a set exchange rate between two currencies. This means that the changes in the exchange rate between the two currencies will not affect the value of the fund, and investors will only get the movements of the underlying stocks. For example, let's consider a theoretical stock (Ticker XXX) that is listed on the NYSE and its equivalent which is CAD hedged on the TSX. XXX on the NYSE is not currency hedged, which means that the value of the stock will be affected by the fluctuations in the exchange rate between the US dollar and the Canadian dollar (or whatever currency it is hedged on). On the other hand, XXX CAD hedged on the TSX is currency hedged, which means that the value of the stock will not be affected by the fluctuations in the exchange rate between the US dollar and the Canadian dollar. To achieve currency hedging, the fund manager will use something called “currency forwards”, which are essentially futures contracts on currencies. Currency forwards allow the fund manager to lock in a specific exchange rate on a future date, which eliminates the effect of fluctuating exchange rates. This is done in addition to holding the actual stock. Thus, investing in currency-hedged tickers does indeed affect the underlying, as more demand for currency-hedged XXX will increase the fund manager’s or institutions holding of XXX and thus increase the value of XXX through basic supply and demand principles. This also creates the ability, for sophisticated investors and those who read my post on arbitrage and pairs trading, to take advantage of pricing inefficiencies between the currency-hedged version and the actual stock, wink wink, hint hint 😉. So, what are the advantages of holding CAD-hedged ETFs of US equities? 💰❓ There are actually many. First and foremost, if you are like me and very risk-averse, these are, at the end of the day, meant as investment mechanisms. It's not like holding UPRO or TQQQ or SQQQ, where there is inherent decay, and the longer you hold, the worse it gets. If a trade goes against me on a major US index, I can just wipe my hands and be like “Forget it. I’m in it to win it. I got time!” and never sell until I finally am in profit. It’s kind of the purpose of them! But there are some other pragmatic advantages that I don’t think many people think about or even consider, especially Canadians. These include: 🎯 Stability: Currency exchange rates can be volatile and can significantly impact the returns of foreign investments. A currency-hedged ETF aims to reduce or eliminate the impact of currency fluctuations on the investment, providing a more stable return in the investor's home currency. 🎯 Easier Performance Evaluation: Hedging currency risk can make it easier for investors to evaluate the actual performance of the underlying assets in their home currency without the interference of currency movements. 🎯 Risk Reduction: Currency movements can introduce an additional layer of volatility to an investment portfolio. By hedging currency risk, investors can potentially reduce the overall volatility of their portfolio. So should you use these instruments over buying pure SPY, QQQ or whatever else? Well, it depends. It depends on what you want to do with it. For me, this works well. However, for some who like to gain a little extra somethin’ somethin’ on the side and sell options against their shares, it’s probably going to be better to stick with trading the actual, “ official ” instrument. This is something that I used to like to do, but buying 500 shares of SPY or QQQ significantly ties up a lot of capital. For the same capital it would take me to buy 500 shares of SPY, I could buy over 8,226 shares of EQL: Let’s say I invested at the start of the uptrend in that chart above. Investing in EQL (8,226 shares), my profit here would have been $19,166.58 (or 13,982.50 USD adjusted for the current exchange) vs 500 shares of SPY on the same move being $5,630 (or 7,717 CAD adjusted for the current exchange): But you don’t even need to go that aggressive; you do 3,000 shares of EQL, and the profit still is on part of that of SPY at much less cost. So while selling options and such could be an advantage, it's not the only consideration that should be minded. But at the end of the day, the decision as to whether or not it’s the right way for you is a personal question. As a personal anecdote, as far as the indices are concerned, this is the way to go if you’re Canadian. I still invest in some US companies that I am a die-hard fan of (such as GRMN, BA — which will be shifted to equal investment of CAD hedged and actual BA, because I do like selling options on BA — IRDM, MSFT). I can sell options on those stocks already to supplement those earnings or those downfalls. Selling options on indices at this point isn’t all that appealing, especially with the crazy market swings. But again, personal decisions one must make! And those are my thoughts; hope you learned something!

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by Steversteves

LIQUIDITY TYPES There are a huge number of trading strategies in trading, however, there are some that significantly prevail over all others. They are based on the concept of liquidity. Let's look at them in detail. ✴️ STRUCTURED LIQUIDITY Swing High and Swing Low are market highs and lows respectively, and Equal high and Equal low are equal market highs and lows respectively. BSL (Buy Side Liquidity) - liquidity at the highs SSL (Sell Side Liquidity) - liquidity at the lows Trend liquidity. Trend is the most popular trading model all over the world and has been used for decades. No matter what you read, no matter what you watch, everywhere there will be a system of trend detection and trading logic described. It is hard not to guess where market participants, who trade both along the trend and against it, will set stop-losses. ✴️ LIQUIDITY IN A BULLISH TREND Let's consider where liquidity appears behind the nearest maximum in an upward trend. Historically, the most traders set stops above/below some highs or lows. The first participants are sellers who started shorting the market and successfully caught the reversal. These traders set their stop losses behind the nearest maximum, i.e. over the top where the reversal started. Those with experience will start to partially close their orders or get rid of the whole position during the pullback. The second participants are those who trade the reversal, who do not believe in the continuation of the trend. They set their limit orders for a rebound from a significant zone (or jump on the market) and set their stop losses in the same place as the first ones - over the nearest maximum. It is understandable, if it goes higher, it means that the analysis was wrong. And here are the third participants who trade breakouts, who trend trade and enter the battle only when the price updates the maximum. There are two options to enter the trade: buy-stop or manual, where both types of orders are market orders. It's simple, if the price breaks through the resistance zone, then they jump just follow the trend. What have we found out? The first ones set stops behind the level, the second ones set their stops in the same place, the third ones work according to the market. All this crowd set tons of market orders behind the nearest maximum. All these market orders are liquidity. What do you think, if the big player has plans to mark down the price, will it go after this liquidity? ✴️ LIQUIDITY IN A BEARISH TREND Liquidity in a bearish trend is the same, but in reverse. ✴️ LIQUIDITY POOL Equal high (EQH) and Equal low (EQL) are equal market highs and lows, respectively. From technical analysis are support and resistance zones. When price approaches the previous high in a bull market, participants begin to both buy and sell. What happens if the price does not make the high in a continuation of the trend and bounces back? Those who doubted the rebound from this zone start jumping in by the market, putting their stops above this high. What do we have? The first stops were put by those who caught the reversal at the peak, the second ones are those who came in on the rebound, the third ones are those who are still waiting for the breakout and do not believe in the reversal, and the fourth ones are those who start jumping on the rebound. And there are also those who have not decided what to do. How to get them into the market? Simple is to show more rebound from this zone. The more touches of one significant zone are made, the more liquidity accumulates behind this zone. ✴️ TREND LIQUIDITY When the price rolls in one direction, clearly bouncing off the trend line visible to everyone, it does it for a reason. In addition to those who jump on the market structure, there are those who open trades from the trend line. Stops of all participants are distributed below the lows (if we consider the trend line upwards), someone puts thembelow the first, someone below the second, someone fears to put them farther away. More often than not, all this liquidity will be cleaned out in the near future, and very often it happens in one sharp move. Why? To show the effect of surprise and prevent most from jumping out of the trade. Essentially, it's liquidity both structural and trend-following. Since the market is fractal, this happens on all timeframes. You don't think that you have seen a trend and you need to urgently open a trade in the other direction. You need to realize that this liquidity can be collected once, collected by the same movement or not collected at all. It all depends on the market context of the higher timeframe. ✴️ DAILY LIQUIDITY It's simple here liquidity accumulated behind the previous day's high and low. ✴️ SESSION LIQUIDITY Similarly liquidity generated outside the minimums and maximums of the time sessions. Someone trading to collect session liquidity usually hunts for Asian session liquidity.

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Q&A MARGIN CALL - Everything you need to know Today's Q&A I want to answer the most common questions I get about Margin Calls. Let's begin. Q. What is the Margin Call? A margin call is a situation where a trader does not have enough funds in their account to keep a trading position open. Your broker will either phone you or you'll receive an automated message with a margin call warning. Q. What can you do when you hit a Margin Call? If you are ever in this situation, you will be instructed to do two things. Deposit more funds into your portfolio to keep your trading positions opened. Close your current open position/s that are running at a loss, before your trading platform closes them out for you. Tip: When setting up a trading account with a broker find out what their minimum margin requirements are. Q&A: Can you show an example with a Margin Call? Let’s look at an example with a Margin Call Here are the specifics: Equity portfolio: R10,000 Initial margin deposit: R5,500 You buy a CFD trade which says you need to have at least 30% of the margin (initial deposit) in your account, to keep the trade opened. This means, you need R1,650 (30%) in your account to keep your trade opened. The next day comes and the market crashes below your stop loss. Your new account balance is now R1,500… Unfortunately, you’ll hit a Margin Call as your portfolio only has 27% of the initial margin of your trade. = Equity ÷ initial margin deposit = R1,500 / R5,500 = 27% 27% is less than 30% of what you need to maintain an open trade. The broker now has the right to close the trade and to send you a notification about what happened. You will receive a margin call to instruct you to deposit more money into your account or to close your trading positions. Q&A: What if I can't pay back the money when I hit a Margin Call? Essentially, you will be owing the broker as they will not be carrying the risk. If you cannot pay it or refuse to clear the negative balance, you will not be allowed to trade with the broker and/or trading platform again until you pay what you owe. Depending on the size of the debt, if you refuse to pay it then some brokers may have the legal right to pursue the outstanding debt through legal means. This means they could file a lawsuit. They could even take the matter to court, where a judgement may be issued where the trader will be required to repay the debt. What Q&A would you like to see next? If you enjoyed it or found this useful let me know so I can do more for TradingView... Trade well...

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Decoding the SEPA ® Method: Mastering Minervini’s Approach Decoding the SEPA ® Method: Mastering Minervini’s Approach to Swing Trading Introduction In the dynamic and often complex world of stock trading, few names resonate with as much authority and respect as Mark Minervini. A legendary figure in the realm of finance, Minervini has carved out a niche for himself as a veritable guru of swing trading, a technique where traders seek to capture gains in a stock within a period of a few days to several weeks. His reputation is not merely built on success, but on a consistent, methodical approach that has been refined over decades of experience. Minervini's journey from an aspiring trader to a U.S. Investing Champion is a testament to his profound understanding of market dynamics and his unwavering dedication to his craft. Central to Minervini's success and teachings is his Specific Entry Point Analysis (SEPA), a methodology that has revolutionized the way traders approach the stock market. SEPA isn’t just a trading strategy; it's a comprehensive framework that synthesizes technical analysis, fundamental analysis, risk management, and psychology into a cohesive system. This approach focuses on identifying high-potential stocks before they make significant price moves, enabling traders to enter trades at the most opportune moments. At the heart of SEPA is the philosophy that stock trading is not just about picking winners, but doing so in a way that meticulously manages risk and maximizes potential rewards. It's about understanding the nuances of market trends, recognizing the right patterns, and acting on them with precision. Minervini’s methodology stands out for its emphasis on buying stocks that are not just rising, but are poised to continue their ascent, all while maintaining a strict risk management protocol to protect against losses. The significance of SEPA in swing trading cannot be overstated. In a domain where timing is everything, SEPA provides a structured approach to identifying the most opportune moments to enter and exit trades. This methodology empowers traders to make informed decisions, backed by a blend of technical indicators and a deep understanding of market psychology. Whether for seasoned traders or those new to the field, mastering SEPA is akin to gaining a new lens through which the stock market's movements can be deciphered more clearly and profitably. As we delve deeper into the intricacies of SEPA, we uncover the layers that make this methodology not just a set of rules, but a philosophy that guides every decision in the high-stakes world of swing trading. It's a testament to Minervini's genius and a beacon for those navigating the ever-shifting currents of the stock market. Section 1: The Foundations of SEPA The Genesis of SEPA The Specific Entry Point Analysis (SEPA) methodology is the brainchild of Mark Minervini, a renowned figure in the stock trading arena. This approach was born from Minervini's relentless pursuit of a reliable, systematic strategy for swing trading—a pursuit fueled by years of rigorous study, trial, and real-world application. What sets SEPA apart is its genesis in both the triumphs and setbacks Minervini experienced in the early stages of his career. By dissecting each trade and meticulously analyzing market patterns, he distilled a set of principles that would become the cornerstone of SEPA. This methodology isn't just a set of techniques; it's the crystallization of hard-earned wisdom and a deep understanding of market mechanics. The Core Principles of SEPA SEPA is grounded in four foundational pillars: risk management, stock selection, market timing, and entry points. Each of these elements plays a crucial role in the methodology: 1. Risk Management: At the heart of SEPA is a stringent focus on minimizing risk. Minervini emphasizes that successful trading is less about the frequency of wins and more about the magnitude of those wins against losses. The SEPA approach advocates for a disciplined risk management strategy, where setting stop-loss limits and knowing when to exit a trade are as important as entering one. 2. Stock Selection: SEPA advocates for a meticulous selection process, emphasizing stocks with the highest potential for growth. This involves analyzing companies with strong fundamentals—such as earnings growth, market leadership, and industry strength—and overlaying this with technical analysis to identify stocks poised for breakout. 3. Market Timing: Understanding the market's mood is vital in SEPA. It's not just about what to buy or sell, but when to do it. SEPA stresses the importance of aligning trades with the overall market direction and sentiment. This synchronization with market cycles is crucial for maximizing trade efficiency. 4. Entry Points: SEPA distinguishes itself with its focus on 'specific entry points.' The methodology prescribes entering a stock at a point where the probability of upward momentum is highest and before the majority of the move has occurred. This precision in timing entry points is what often differentiates successful trades from the rest. The Essence of Risk-Reward Ratio A pivotal aspect of SEPA is the emphasis on a strong risk-reward ratio. Minervini champions the principle that the potential upside of a trade should significantly outweigh its downside. This concept is not just about setting a high bar for potential profits; it's about ensuring that each trade is entered with a clear understanding of the potential loss and a plan to mitigate it. The risk-reward ratio is a crucial metric in SEPA, guiding traders to make decisions that align with their risk tolerance and trading goals. Section 2: Understanding the SEPA Criteria The SEPA Framework for Stock Selection In the world of SEPA (Specific Entry Point Analysis), the process of selecting stocks is far from arbitrary. It is a methodical approach, relying on a combination of technical and fundamental analysis to identify stocks with the highest potential for growth. Mark Minervini, the architect of SEPA, has defined a clear set of criteria for stock selection, each playing a pivotal role in the decision-making process. Price Trend and Pattern Recognition One of the keystones of SEPA is the focus on price trends and pattern recognition. This involves analyzing historical price movements and chart patterns to predict future stock performance. Minervini emphasizes the importance of identifying stocks in a strong uptrend, characterized by higher highs and higher lows. He also looks for specific chart patterns that historically precede significant price increases, such as cup-and-handle or tight consolidation patterns. These patterns are indicative of a stock accumulating strength before a potential breakout. Volume Dynamics Volume plays a critical role in validating the price movements of a stock. In SEPA, significant price moves accompanied by high volume are considered more credible and sustainable. High trading volume suggests a strong conviction in the stock's movement, whether it’s an upward surge or a downward trend. Minervini pays close attention to volume spikes, particularly when they coincide with breakout moments from established patterns, as these often signal the start of a major price move. Relative Strength Compared to the Market Relative strength is a key concept in SEPA, referring to a stock's performance in relation to the overall market or its specific sector. Stocks that outperform the market, especially during periods of general market weakness, are often prime candidates in SEPA analysis. This outperformance indicates inherent strength and investor confidence, suggesting that the stock may continue to thrive even in less favorable market conditions. Fundamental Criteria While SEPA heavily incorporates technical analysis, it also places significant importance on a company's fundamentals. Criteria such as earnings growth, sales growth, return on equity, profit margins, and debt levels are carefully examined. Minervini looks for companies with strong, consistent earnings growth, robust sales figures, and solid financial health. These factors are crucial as they provide a sound basis for a stock's potential for long-term growth, beyond just technical indicators. The Synergy of Technical and Fundamental Analysis The essence of SEPA lies in the harmonious integration of technical and fundamental analysis. While technical analysis helps in timing the market and identifying entry points, fundamental analysis offers a deeper insight into a company’s intrinsic value and growth potential. This dual approach enables traders to make well-rounded decisions, balancing immediate market signals with long-term company performance. Minervini's SEPA method teaches that neither technical nor fundamental analysis should be used in isolation. By combining both, traders can filter out noise, focusing on stocks that not only show promising technical patterns but are also fundamentally strong. This comprehensive approach is what sets SEPA apart and has contributed to its effectiveness and popularity among traders. Section 3: The SEPA Trading Process Identifying Trading Opportunities with SEPA Criteria The first step in the SEPA trading process is the identification of potential trading opportunities. This involves a meticulous analysis of stocks through the lens of the SEPA criteria: price trends and patterns, volume dynamics, relative strength, and fundamental health. Traders using the SEPA methodology scan the market for stocks exhibiting the tell-tale signs of an impending price surge, such as a strong uptrend, breakout patterns, and high relative strength compared to the market. These indicators, combined with robust fundamental metrics like impressive earnings growth and solid financials, flag stocks as prime candidates for trading. Timing the Market: Understanding Cycles and Sentiment SEPA is not just about finding the right stocks; it's equally about timing the market. This aspect involves understanding and interpreting market cycles and overall market sentiment. Minervini emphasizes the importance of aligning trades with the broader market direction. A bullish stock in a bearish market, or vice versa, might not perform as expected. Traders using SEPA stay attuned to market trends, economic indicators, and investor sentiment, using them as a backdrop against which individual stock performances are gauged. This sensitivity to the market's rhythm helps in making informed decisions about when to enter and exit trades. Entry Strategies: Determining the Right Entry Poin t A critical component of the SEPA methodology is determining the precise entry point for a trade. This decision is based on a confluence of technical indicators, including the completion of a bullish chart pattern and a corresponding increase in trading volume. The ideal entry point is often just after a stock breaks out of a consolidation pattern, signaling the start of a potential uptrend. However, timing is key; entering too early or too late can significantly affect the trade's outcome. SEPA traders use a combination of real-time analysis and historical patterns to identify these specific entry points, seeking to maximize gains and minimize exposure to volatility. Setting Stop-Loss Orders and Managing Risk Risk management is a cornerstone of the SEPA approach. Minervini advocates for setting strict stop-loss orders to protect against unforeseen market movements. A stop-loss order is an automatic sell order set at a certain price level, usually below the purchase price, to limit potential losses. Determining the stop-loss level involves assessing the stock's volatility and the trader's risk tolerance. This proactive approach to risk management ensures that losses are contained and capital preservation is prioritized. Section 4: Real-world Examples and Case Studies Analyzing Successful SEPA Trades One of the best ways to understand the efficacy of the SEPA methodology is through the lens of real-world examples and case studies. Let's consider a few historical trades that were successful under the SEPA framework: 1. Case Study 1: The Tech Breakout - A prominent example involves a technology stock that showcased a classic cup-and-handle pattern on its chart. The stock was also showing strong relative strength compared to the overall market and was backed by solid earnings growth. The entry point was identified just as the stock was breaking out of the pattern, coupled with a significant increase in volume. This trade was successful because it adhered to all the SEPA criteria: a strong technical pattern, high relative strength, sound fundamentals, and a clear entry point marked by increased volume. 2. Case Study 2: The Retail Surge - Another instance involved a retail company that had been consolidating for several months but maintained a strong earnings record. When the stock eventually broke out of its consolidation range on high volume, it signaled a strong buy under the SEPA methodology. The trade capitalized on the combination of a bullish technical signal and robust fundamental performance. Why Certain Trades Work and Others Don’t In analyzing these successful trades, it's evident that their success hinged on a strict adherence to the SEPA criteria. Conversely, trades that fail often do so because one or more of these criteria were overlooked or misinterpreted. For example, entering a trade solely based on a technical pattern without considering the stock's fundamental strength or the overall market sentiment can lead to unfavorable outcomes. Similarly, ignoring the importance of volume as a confirmation for a breakout can result in false signals. Lessons Learned from SEPA Case Studies Several key lessons emerge from these case studies: 1. The Importance of a Holistic Approach: Successful trades often result from a balanced consideration of both technical and fundamental factors. Relying too heavily on one aspect can lead to missed signals or misjudgments. 2. Timing and Precision Matter: Entry and exit points are crucial in the SEPA methodology. Even the right stock, if traded at the wrong time, can lead to suboptimal results. 3. Risk Management is Key: The trades that fare best under SEPA are those where risk management rules are strictly followed. This includes setting appropriate stop-loss levels and being willing to exit a trade when the initial analysis is no longer valid. 4. Market Context is Essential: Understanding the broader market environment is critical. A strong stock in a weak market, or vice versa, may not perform as expected. Section 5: Common Challenges and Mistakes in SEPA Identifying Pitfalls and Misconceptions While the Specific Entry Point Analysis (SEPA) methodology offers a structured approach to swing trading, it is not without its challenges and common mistakes. Understanding these pitfalls is crucial for both novice and experienced traders aiming to effectively implement the SEPA strategy. 1. Overemphasis on Technical Analysis: One common mistake is focusing too heavily on technical indicators while neglecting fundamental analysis. While SEPA does involve meticulous chart and pattern analysis, disregarding a company’s fundamental health can lead to risky investments in stocks with weak financials or poor growth prospects. 2. Misinterpreting Volume Signals: Another challenge is correctly interpreting volume dynamics. Some traders might misread volume spikes or overlook the importance of volume in confirming breakout patterns, leading to false entries or exits. 3. Ignoring Market Context: Traders sometimes fail to consider the broader market sentiment or trend, which is critical in SEPA. A bullish stock in a bearish market might not perform as anticipated, and vice versa. 4. Poor Risk Management: Perhaps the most critical mistake is inadequate risk management. This includes setting inappropriate stop-loss orders or not adhering to them, resulting in larger than necessary losses. Strategies to Avoid These Mistakes To avoid these common mistakes, traders should adopt several strategies: 1. Balanced Analysis: Ensure a balanced approach that considers both technical and fundamental aspects of a stock. This means not just looking at chart patterns but also at a company's earnings, growth potential, and financial stability. 2. Thorough Volume Analysis: Pay close attention to volume patterns and learn to interpret them correctly. High volume should accompany significant price moves, especially during breakouts. 3. Market Awareness: Stay informed about overall market trends and sentiment. Aligning individual trades with the general market direction is crucial for the success of the SEPA methodology. 4. Disciplined Risk Management: Establish clear risk management rules, including strict stop-loss orders, and adhere to them rigorously. It's better to exit a losing trade early than to hope for a turnaround that may never come. Tips for Beginners Adopting SEPA For beginners keen on adopting the SEPA approach, here are some tips: 1. Start with Education: Familiarize yourself thoroughly with the SEPA methodology. Understand its principles, strategies, and the rationale behind them. 2. Practice with Paper Trading: Before investing real money, practice with paper trading to get a feel for how SEPA works in real market conditions without financial risk. 3. Learn from Mistakes: Analyze every trade, successful or not, to understand what worked and what didn’t. Learning from mistakes is as important as celebrating successes. 4. Stay Disciplined: Discipline is key in trading. Stick to your analysis and don’t let emotions drive your trading decisions. 5. Seek Community and Resources: Engage with a community of SEPA traders and seek out educational resources to continuously improve your understanding and application of the methodology. Section 6: Advanced SEPA Strategies Elevating SEPA for Experienced Traders For traders who have mastered the basics of Mark Minervini's Specific Entry Point Analysis (SEPA), there are advanced strategies and nuances that can be employed to further enhance trading performance. Experienced traders can delve deeper into the complexities of SEPA, fine-tuning their approach to align with their unique trading styles and goals. Adapting SEPA to Varying Market Conditions 1. Bull Markets: In a strong bull market, SEPA traders can look for stocks showing relative strength and breaking out from sound consolidation patterns. Here, the focus can be on aggressive growth stocks with higher potential for rapid gains. 2. Bear Markets: During bearish phases, SEPA strategies can be adjusted to focus on defensive stocks or sectors that tend to outperform the market. In such conditions, more stringent criteria for entry points and tighter stop-loss orders are advisable to manage the heightened risk. 3. Sideways Markets: In range-bound markets, traders might concentrate on stocks with strong fundamentals that are showing relative strength against the market, trading within well-defined channels. Here, buying at the lower channel and selling at the upper channel, or shorting at the upper channel and covering at the lower channel, can be effective. Integrating SEPA with Other Trading Tools and Methodologies 1. Combining with Quantitative Analysis: Experienced traders can combine SEPA with quantitative analysis tools, such as algorithmic trading systems, to identify potential trade setups more efficiently. 2. Using Options for Leverage and Hedging: Implementing options strategies alongside SEPA can provide leverage and hedging capabilities. For instance, buying calls on stocks that are breaking out or selling puts on stocks near support levels can enhance returns while managing risk. 3. Sector Rotation Strategies: Understanding and applying sector rotation strategies in conjunction with SEPA can be beneficial. This involves shifting investments among stock market sectors as the economy moves through different phases of the business cycle. 4. Incorporating Sentiment Analysis: Advanced traders can integrate market sentiment tools, such as social media analysis and news sentiment indicators, to gauge investor sentiment and potential market directions that might impact their SEPA strategies. 5. Risk Diversification Techniques: Implementing risk diversification techniques, such as spreading capital across various sectors and not over-concentrating in a single stock, can help manage overall portfolio risk. 6. Continuous Learning and Adaptation: Finally, it's crucial for seasoned traders to stay abreast of new market trends, economic developments, and trading technologies. This continuous learning and adaptation can lead to more refined and effective SEPA strategies. Section 7: SEPA in the Digital Age Embracing Technology in SEPA Analysis In the rapidly evolving landscape of financial markets, technology plays an instrumental role in enhancing and refining trading strategies like Specific Entry Point Analysis (SEPA). The digital age has ushered in a host of tools and innovations that can significantly augment the SEPA methodology, making it more efficient, accurate, and adaptable. 1. Trading Software and Platforms: Advanced trading platforms now offer a myriad of tools that align well with SEPA strategies. These include sophisticated charting tools for pattern recognition, real-time market data feeds, and automated alert systems for potential entry and exit points. Such platforms enable SEPA traders to monitor multiple stocks simultaneously and execute trades more swiftly. 2. Artificial Intelligence and Machine Learning: AI and machine learning are revolutionizing the way traders analyze the market. These technologies can process vast amounts of data – from price movements to economic indicators – at speeds and depths beyond human capability. For SEPA traders, this means more precise pattern recognition, enhanced predictive analytics, and better risk assessment models. 3. Algorithmic Trading: Algorithms can be designed to automatically identify stocks that meet the SEPA criteria, execute trades at optimal entry points, and manage risk with pre-set rules. This automation not only speeds up the trading process but also helps in maintaining discipline, a key aspect of the SEPA strategy. Future Prospects of SEPA in Evolving Financial Markets As financial markets continue to evolve, the principles of SEPA remain relevant but may require adaptation to align with new market dynamics. 1. Adapting to Market Volatility and Complexity: Financial markets are becoming increasingly volatile and complex. SEPA traders will need to continually refine their strategies to adapt to these changes, possibly by incorporating more real-time data analysis and adapting to shorter or more erratic market cycles. 2. Integration with Emerging Technologies: The integration of SEPA with emerging technologies like blockchain and decentralized finance (DeFi) platforms could open new opportunities. These technologies might offer more transparent and efficient market data, enhancing the accuracy of SEPA analysis. 3. Educational and Collaborative Tools: The proliferation of online trading communities and educational resources will make SEPA methodologies more accessible to a broader audience. Collaborative tools and platforms can facilitate knowledge sharing and collective analysis, benefiting traders at all levels. 4. Sustainability and Ethical Investing: As the trend towards sustainable and ethical investing grows, SEPA strategies might also evolve to include environmental, social, and governance (ESG) criteria in stock selection and analysis. 5. Globalization of Markets: The globalization of financial markets offers SEPA traders a broader canvas. Adapting SEPA to different regional markets and economic conditions will be crucial for traders looking to capitalize on global opportunities. Conclusion Synthesizing the SEPA Journey As we conclude this exploration of Mark Minervini's Specific Entry Point Analysis (SEPA), it's important to reflect on the key insights and lessons gleaned from this comprehensive methodology. SEPA, with its roots in meticulous analysis and disciplined execution, stands as a testament to the power of a well-structured approach in the realm of swing trading. Key Takeaways from the SEPA Methodology • The Four Pillars: We began by understanding the foundational elements of SEPA: risk management, stock selection, market timing, and precise entry points. These pillars form the bedrock of the SEPA approach, guiding traders through the complexities of market dynamics. • Criteria for Stock Selection: Delving deeper, we examined the specific criteria SEPA employs for choosing stocks, including price trends, volume analysis, relative strength, and fundamental analysis. The synergy between technical and fundamental analysis emerged as a critical aspect of effective stock selection. • The Trading Process: The SEPA trading process, encompassing opportunity identification, market timing, entry strategies, and risk management, was dissected to provide a roadmap for practical application. • Learning from Real-world Cases: Through case studies and real-world examples, we observed SEPA in action, learning from both successes and failures to glean valuable insights into effective trading strategies. • Navigating Challenges: Recognizing common pitfalls and challenges in SEPA helped us understand the importance of a balanced, disciplined approach, particularly for those new to the methodology. • Advancing with SEPA: For the experienced trader, we explored advanced strategies and adaptations of SEPA in varying market conditions, emphasizing the role of continuous learning and adaptation. The Enduring Relevance of SEPA SEPA's relevance in modern swing trading remains robust. Its principles of disciplined risk management, combined with a keen analysis of market trends and stock fundamentals, provide a timeless framework suitable for navigating the ever-changing financial markets. As markets evolve, the core tenets of SEPA continue to offer valuable guidance for traders seeking to maximize their trading potential. A Call to Continuous Learning and Application The journey with SEPA doesn't end here. Whether you're a novice trader just starting out or an experienced market participant, the SEPA methodology offers a path for growth and refinement in your trading practices. The world of trading is dynamic and requires a commitment to continuous learning, adaptation, and disciplined application of proven strategies. As you integrate SEPA into your trading toolbox, remember that the journey is as much about personal growth as it is about financial success. Embrace the lessons, celebrate the successes, and learn from the challenges. SEPA is more than just a strategy; it's a pathway to becoming a more astute, resilient, and successful trader.

Education

by JS_TechTrading

The Influence of Central Banks on Forex Trading The global foreign exchange (Forex) market constitutes a vast and intricate financial ecosystem in which currencies from across the globe are traded. This marketplace witnesses the exchange of trillions of dollars on a daily basis, rendering it among the most liquid and dynamic markets on earth. Amidst this bustling activity, central banks play a pivotal role, especially through their institutional obligation to determine and conduct the country’s monetary policy. In this article, we will delve into the crucial influence that these major players exert on currency pairs and explore the role of central banks in the forex market. Central Banks and Their Roles Central banks are the main financial institutions in a country and serve as custodians of the domestic currency. They steer economic activity mainly through the money supply, which is influenced by setting a reference rate for domestic banks to borrow and lend money. Thus, by targeting specified central bank interest rates, a central bank sets exchange rates through the market forces of demand and supply. Anticipated hikes or cuts in interest rates are conveyed throughout all financial markets well in advance of official announcements, influencing the decision-making of traders and investors. Impact of Central Bank Foreign Exchange Measures on Forex Trading Central banks have numerous instruments to manage the foreign exchange rates of their domestic currencies, including different rate regimes, central bank foreign exchange interventions, and interest rates. Exchange Rate Regimes and Their Effects Two major regimes determine the framework within which central banks operate and influence the broader financial landscape. Fixed exchange rate regimes involve pegging the local currency to a specific measure of value, often a major international currency like the US dollar. The stability of this kind of central bank exchange rate can be attractive; however, it limits the ability to independently manage the interest rate in the central bank policy. Here, interventions are typically geared towards maintaining the established peg. Conversely, floating exchange rate regimes provide the flexibility to determine the interest rates, as well as use all other vital tools for achieving monetary policy objectives. Central Bank Foreign Exchange Interventions Currency interventions are a common strategic tool in central bank foreign exchange policies, and they can cause notable fluctuations in forex. A direct intervention occurs through the direct buying or selling of the local currency. This action is often used to stabilise or manipulate the exchange rate in the desired direction. Buying increases demand, and the forex rate of the currency appreciates. Selling does the opposite. An indirect intervention involves adjusting target interest rates to influence investors' perceptions and behaviour. This involves actual raising or lowering; however, it can also include giving out subtle signals and implications through public statements made by officials. Central Bank Interest Rates and Their Influence Decisions regarding targeted central bank interest rates are at the heart of monetary policy. Depending on the general economic stance, the monetary authority has the option to raise rates (or keep them high) or lower them (or keep them low). Hawkish Monetary Policy Hawkish monetary policy refers to a stance that favours higher interest rates. This approach is also known as contractionary monetary policy, and it is adopted when the central bank seeks to combat high inflation or cool down an overheated economy. Hawkish policies are conducted by raising central bank interest rates, leading to an increase in capital inflows due to the expectation of better returns. The demand for the local currency rises, leading to its appreciation relative to foreign currencies, which is also reflected in the central bank forex rates. Dovish Monetary Policy Conversely, a dovish monetary policy involves favouring lower interest rates to stimulate economic growth by encouraging investments into the real economy. Lower rates can make borrowing cheaper and encourage spending and investment in the real economy. That may potentially weaken the demand for the domestic currency as it becomes less attractive to investors seeking higher returns, causing depreciation in the exchange rate. Central Bank Interest Rate Instruments The primary objectives of central banks are to maintain low and stable inflation, promote economic growth, and improve the purchasing power of the domestic currency, which in turn should provide for a healthy labour market and encourage strong consumption. Several instruments are available for that purpose. Open market operations (OMO) are the main tools for achieving the targeted interest rates. The impact on forex rates follows these decisions and actions. OMO refers to the buying or selling of securities (typically government bonds) in the open market. Buying injects money into the system, indirectly lowering banks’ interest rates, while selling acts in the opposite action. Another instrument that explains the role of a central bank in the forex market is the discount rate at which commercial financial institutions can borrow money from the central financial authority. Adjusting it adds/removes liquidity from money markets. The reserve requirements are another available instrument. Modifying the percentage of total liquid assets to be held by financial institutions as reserves can either enhance or diminish domestic currency liquidity and affect interest rates. In their pursuit of specific objectives, central banks wield a direct influence over forex trading. Fluctuations in central bank interest rates significantly impact currency values, can cause severe volatility, and create lucrative arbitrage opportunities for forex traders. Interest Rate Differentials: Opportunities for Traders Interest rate differentials are observed when there are gaps between the central banks’ interest rates. A higher interest rate in one country can lead to an influx of foreign capital, strengthening its currency. Respectively, when one country raises its rates while another keeps them lower, it creates a differential that attracts capital towards the higher-yielding currency, causing its appreciation and also a higher forex rate. If you are interested in exploring trading opportunities, you can head over to FXOpen and try out the TickTrader trading platform. Central Bank and Foreign Exchange Related Events Traders use economic calendars to plan their strategies and stay ahead of potential opportunities or risks. Important announcements include employment reports, GDP releases, inflation figures, and consumption numbers. Yet, among the most closely followed events by traders are central bank interest rate decisions, as they have a profound impact on currency exchange rates and financial markets. The timing and frequency of these announcements are known well in advance. For instance, in the US, the Federal Reserve holds eight scheduled meetings throughout the year, the European Central Bank conducts meetings every six weeks, while the Bank of Japan and the Bank of England typically hold meetings on a monthly basis. Several weeks after they announce the target rates themselves, many central banks release the so-called “Minutes” – a detailed record of their latest monetary policy meeting. The “Minutes” can be of crucial importance as they offer a deeper insight into the discussions and deliberations among the officials and may provide insights into their future intentions and assessment of the economic outlook. Trading Behaviour Around Major Interest Rate Releases Trading before and after major interest rate announcements is challenging. Before a major announcement, traders consider the forecasts based on previously released economic data. If the expected rate estimate is in favour of a rate hike, appreciation of the respective currency is likely, and traders will buy it; otherwise, if data speaks for a rate cut, currency depreciation can be expected, and traders will sell. Traders typically avoid holding open positions during an announcement. This way, the risk is mitigated, as, during an announcement, rapid, unpredictable movements of currency pairs can occur, especially if the actual announced rate differs from market expectations. After the announcement, new positions can be opened. Conclusion Central banks are formidable players in the forex market, wielding significant influence through their monetary policy decisions and interventions. Traders and investors must closely monitor the authority’s actions and signals, as these can create substantial profit opportunities and risks in the dynamic world of forex trading. Curious about exploring the vivid world of forex trading? You can consider opening an FXOpen account that will grant you advanced trading opportunities. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Education

How To Use RISK vs. REWARD Ratios Hi Traders, Investors and Speculators 📈📉 Ev here. Been trading crypto since 2017 and later got into stocks. I have 3 board exams on financial markets and studied economics from a top tier university for a year. Daytime job - Math Teacher. 👩🏫 For today's post, we're diving into the concept " risk reward ratio " by taking 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 " long setup " or " short setup " on TradingView chart ideas. 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. This is achieved by using the tool you can find in your toolbar on the left, 7th from the top. The first two options are Long Position and Short Position. 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: 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. There are many more things to consider when thinking about risk management, but we'll dive into those in another post. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck

Education

by CryptoCheck-

Updated

DEFI: UniSwap - ALL YOU NEED TO KNOW 🦄Hi Traders, Investors and Speculators of the Charts 📈📉 If you’ve been following me on TradingView for a while, you’ll now that I’m a believer – a believer in the promise of blockchain. One of the principals of this promise is to move away from centrally controlled banking systems. This would eventually include the act of saving and earning interest for the money that you leave in the capable hands of your banker (who also gets to decide whether or not you qualify for loans). Currently, you need to give up all of your personal information to open a bank account and furthermore you are seriously undercut in the returns / interest rate that you will be receiving (to name only two of many problems with the system). For example, where I reside, the most common interest on a savings account is 5% annually, whereas the interest on your credit card is 19.5% annually. And this is, in short, the common argument for Decentralized Finance. Before we continue, familiarize yourself with these key terms: TVL – Total Dollar Value Locked in the platform DEX - A decentralized exchange. DEXs don't allow for exchanges between fiat and crypto — instead, they exclusively trade cryptocurrency tokens for other cryptocurrency tokens. Blockchain – A unique way of coding that is open for anyone to use, many believe that web3 will be built on top this kind of coding DeFi – Decentralized Finance such as cryptocurrencies and stablecoins dApp – Software like apps that work on the basis of blockchain code and thus apps that accommodate cryptocurrency such as UniSwap and NFT Market places LP tokens - New liquidity pool tokens. LP tokens represent a crypto liquidity provider's share of a pool, and the crypto liquidity provider remains entirely in control of the token. For example, if you contribute $10 USD worth of assets to a Balancer pool that has a total worth of $100, you would receive 10% of that pool's LP tokens. APY - Annual Percentage Yield, think of it as yearly interest in percentage Smart Contracts — E lectronic, digital contracts coded to integrate with dApps. Automated financial agreements between two or more parties once the pre-determined terms of the contract is reached Uniswap is a decentralized cryptocurrency exchange that uses a set of smart contracts (liquidity pools) to execute trades on its exchange. It's an open source project and falls into the category of a DeFi product (Decentralized finance) because it uses smart contracts to facilitate trades. Built on Ethereum, Uniswap is the first and largest DEX in DeFi and one of the many places where you can participate in yield farming. To earn interest in their cryptocurrency holdings, investors contribute their funds to a Uniswap smart contract; these investors are known as liquidity providers. The smart contracts that hold their cryptocurrencies are known as liquidity pools. Liquidity providers are required for Uniswap to function since they provide liquidity for trading on the platform. With the rise of Blockchain, Crypto and then Decentralized apps, yield farming was born to address some of the banking system's limits. Or at least, that would be in the perfect world. Yield farming is the process of using DeFi to maximize returns . Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services. This works for both parties, because yield farmers provide liquidity to various token pairs and you earn rewards in cryptocurrencies. However, yield farming can be a risky practice due to price volatility , rug pulls, smart contract hacks etc. Yield farming allows investors to earn interest which is called ‘yield’ by putting coins or tokens in a dApp, which is an application (coded software) that integrates with blockchain code. Examples of dApps include crypto wallets, exchanges and many more. Yield farmers generally use decentralized exchanges (DEXs) to lend, borrow or stake coins to earn interest and speculate on price swings. Yield farming across DeFi is facilitated by smart contracts. Let’s take a closer look at the different types of yield farming on UniSwap: Liquidity provider: You deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens. Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan. Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins. Staking: There are two forms of staking in the world of DeFi. The main form is on proof-of-stake blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield. Yield farmers who want to increase their yield output can also use more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains. Back to DeFi - In centralized finance, your money is held by banks and corporations whose main goal is to make money. The financial system is full of third parties who facilitate money movement between parties, with each one charging fees for using their services. The idea behind DeFi was to create a system that cuts out these third parties, their fees and the time spent on all the interaction between them. Defi is a technology built on top of blockchain - it can be an app or a website for example, which means that is was written in code language by software programmers. It lets users buy and sell virtual assets (like crypto and NFT's) and use financial services as a form of investment or financing without middlemen/banks. This means you can borrow , lend and invest - but without a centralized banking institution. In summary, DeFi is a subcategory within the broader crypto space. DeFi offers many of the services of the mainstream financial world but controlled by the masses instead of a central entity. And instead of your information being filed on paper and stored by a banker, your information is captured digitally and stored in a block with your permission. Many of the initial DeFi applications were built on Ethereum (which is a blockchain technology, but the code is different to Bitcoin's, in other words it operates/works differently). The majority of money in DeFi remains concentrated there. Lending may have started it all, but DeFi applications now have many use cases, giving participants access to saving, investing, trading, market-making and more. Another example of such a market is PancakeSwap (CAKEUSDT). PancakeSwap is also a decentralized exchange native to BNB Chain (Binance chain). In other words, it shares some similarities with UniSwap in that users can swap their coins for other coins. The only difference is that PancakeSwap focuses on BEP20 tokens – a specific token standard developed by Binance. The BEP20 standard is essentially a checklist of functions new tokens must be able to perform in order to be compatible with the broader Binance ecosystem of dapps, wallets and other services. 💭 Final Thoughts 💭 Is yield farming profitable? Short answer - Yes. However, it depends on how much money and effort you’re willing to put into yield farming. Although certain high-risk strategies promise substantial returns, they generally require a thorough grasp of DeFi platforms, protocols and complicated investment chains to be most effective. Is yield farming risky? Short Answer - Absolutely . There are a number of risks that investors should understand before starting. Scams, hacks and losses due to volatility are not uncommon in the DeFi yield farming space. The first step for anyone wishing to use DeFi is to research the most trusted and tested platforms. _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We thank you for your support ! CryptoCheck

Education

by CryptoCheck-

Updated

Stop Multi-Tasking and Start Mono-Tasking! – 8 Trading Reasons You’re risking your own money when trading. You realise that? And in this fast-paced world, it takes a split second to break a fortune. It takes a split second to miss an opportunity. It takes a split second to lose focus. And it’s all down to one trait that is actually detrimental to your trading. Multi-tasking. Here’s why. Reason #1: Missed Opportunities When you try to juggle too many charts, markets and tasks at the same time – it’s risky. And if you distract yourself at the same time with social media, your cute cat, the news and hype… It makes it a whole lot worse. You might miss the best and highest probability trades – that you need to grow your account. If you want to really dig into finding the best opportunities you need laser focus and tunnel vision. So stop multi-tasking and instead stick to mono tasking. Reason #2: Delays in Priorities If you multi-task, it can lead to a delay in focusing on high-priority tasks. Any delay, can result in: Catching the trade too late Skipping the trade completely Forgetting what you need to execute Taking an unnecessary loss You need to stop diverting your attention away from urgent market developments. Instead, make it a priority to focus on finishing that one task. And make sure you do it with your undivided attention. Reason #3: Elevated Stress Levels As traders, we’re not only working on our method and money management – but also our mindset. Financial trading and risking money is already stressful alone. So, multi-tasking can only exacerbate this stress. And when you get stress you don’t need me to remind you what happens: You see red Your judgement becomes cloudy You make impulsive decisions You make wrong decisions Your emotions override your logicality and rationality. You can get stress all because you’re doing too many things at once. Keep to one thing and compartmentalise the others. This will do wonders for your stress levels. Reason #4: Drop in Productivity You’d think if you do more, it’ll enhance productivity. Because you’ll get stuff done right? Um no. With complex instruments analyses and risk management principles, trading needs deep analysis, strategic planning, and quick execution. With multi-tasking, you’ll most likely shift between tasks rapidly. This will not only disrupt the flow of concentration you need for one task at a time. It could also reduce the efficiency and suboptimal outcomes for every task you take on. Reason #5: More Mistakes To err is human. And if you multi-task and take on too many things, this will increase the likelihood of errors in trading. You might enter the wrong amount. Get in at the wrong prices. Get your volume wrong. But more likely, you’ll misinterpret good market signals. Each mistake has the potential to reduce your profits and damage your reputation. Reason #6: Reduced Learning Opportunities Successful trading is an ongoing learning process. When you multi-task, it hinders you from fully engaging with market trends, historical data, and educational resources. When you’re learning one thing – stick to one thing. Or it’s going to go in the one ear – out the other. Be passionate and fully immerse yourself in the one thing you’re learning at a time. You’ll find you’ll get a better and deeper understanding which is critical for your learning journey. Reason #7: Loss of Concentration Multitasking fragments attention. This makes it super difficult to maintain the level of concentration you need when trading. When you jump from one thing to another. This rapid task-switching, diminishes the brain’s capacity to keep focus. And this could lower your analytical attention. Reason #8: Overwhelm and Burnout We’ve spoken about how multi-tasking increases stress and cortisol levels. But if you fail to work on it, you’re going to eventually go kaput. This is a forever game. The last thing you want to do is burnout in the journey. The last thing you want to do is develop a mental fatigue. The last thing you want to do is fail because you quit. Final words. Stop multi-tasking and start mono-tasking. Your singular focus will show you amazing, productive, optimal and efficient results. Not just with trading, but every task you set your heart and mind to. Let’s sum up the 8 reasons why Multi-Tasking is an absolute NO when trading. Reason #1: Missed Opportunities Reason #2: Delays in Priorities Reason #3: Elevated Stress Levels Reason #4: Drop in Productivity Reason #5: More Mistakes Reason #6: Reduced Learning Opportunities Reason #7: Loss of Concentration Reason #8: Overwhelm and Burnout

Education

AI-Driven Market Analysis: Revolutionizing Financial Insights Introduction Market analysis has long been the cornerstone of financial decision-making, offering insights into market trends, asset valuation, and investment opportunities. Traditionally, this analysis has relied on a combination of statistical methods, fundamental analysis, and expert judgment to interpret market dynamics and forecast future movements. However, the finance industry is currently undergoing a seismic shift with the introduction and integration of Artificial Intelligence (AI). AI, with its unparalleled ability to process and analyze vast quantities of data at unprecedented speeds, is revolutionizing market analysis. Unlike traditional methods, which often struggle with the sheer volume and complexity of modern financial data, AI algorithms can quickly sift through global market data, news, and financial reports, identifying patterns and correlations that might escape human analysts. This capability is not just about handling data efficiently; it's about uncovering deeper market insights and offering more nuanced, informed perspectives on market movements. The growing role of AI in financial market analysis is multifaceted. It encompasses predictive analytics, which forecasts market trends and asset price movements; risk assessment, which evaluates potential risks and market volatility; and sentiment analysis, which gauges market sentiment by analyzing news, social media, and financial reports. These AI-driven approaches are transforming how investors, traders, and financial institutions make decisions, offering a more data-driven, precise, and comprehensive view of the markets. As we delve deeper into the world of AI-driven market analysis, it's crucial to understand both its potential and its limitations. While AI provides powerful tools for market analysis, it also introduces new challenges and considerations, particularly around data quality, algorithmic bias, and ethical implications. In this article, we'll explore how AI is changing the landscape of market analysis, examining its applications, benefits, and future prospects in the ever-evolving world of finance. The Evolution of Market Analysis A Brief History of Market Analysis in Finance Market analysis in finance has a storied history, evolving through various stages as it adapted to changing markets and technological advancements. Initially, market analysis was predominantly fundamental, focusing on the intrinsic value of assets based on economic indicators, financial statements, and industry trends. Technical analysis, which emerged later, shifted the focus to statistical trends in market prices and volumes, seeking to predict future movements based on historical patterns. Over the decades, these approaches were refined, incorporating increasingly sophisticated statistical models. However, they remained limited by the human capacity to process information. Analysts were constrained by the volume of data they could analyze and the speed at which they could process it. This often led to a reactive approach to market changes, rather than a predictive one. Transition from Traditional Methods to AI Integration The advent of computer technology brought the first major shift in market analysis. Computers enabled quicker processing of data and complex mathematical modeling, allowing for more sophisticated analyses that could keep pace with the growing volume and velocity of financial market data. The introduction of quantitative analysis in the latter part of the 20th century marked a significant step in this evolution, as it used complex mathematical and statistical techniques to identify market opportunities. The real transformation, however, began with the integration of AI and machine learning into market analysis. AI's ability to learn from data, identify patterns, and make predictions, has taken market analysis to an entirely new level. AI algorithms can analyze vast datasets — including historical price data, financial news, social media sentiment, and economic indicators — much faster and more accurately than any human analyst could. This integration of AI into market analysis has led to the development of predictive models that can forecast market trends and anomalies with a higher degree of accuracy. AI-driven tools are now capable of real-time analysis, providing instantaneous insights that help traders and investors make more informed decisions. Furthermore, AI's ability to continually learn and adapt to new data sets it apart from static traditional models, allowing for a more dynamic and responsive approach to market analysis. The transition from traditional methods to AI integration represents a paradigm shift in market analysis. This evolution is not just about adopting new tools but signifies a fundamental change in how financial markets are understood and navigated. As we continue to advance in the realm of AI, the potential for even more sophisticated and insightful market analysis grows, promising to reshape the landscape of finance in ways we are only beginning to comprehend. Fundamentals of AI in Market Analysis The integration of Artificial Intelligence (AI) and machine learning into market analysis marks a significant advancement in the way financial data is interpreted and utilized. Understanding the fundamentals of these technologies is essential to appreciate their impact on market analysis. Explanation of AI and Machine Learning AI refers to the simulation of human intelligence in machines that are programmed to think and learn like humans. In the context of market analysis, AI enables the automation of complex tasks, including data processing, pattern recognition, and predictive analytics. Machine learning, a subset of AI, involves the development of algorithms that can learn and improve from experience without being explicitly programmed. In market analysis, machine learning algorithms analyze historical data to identify patterns and predict future market behavior. The more data these algorithms are exposed to, the more accurate their predictions become. Types of AI Models Used in Market Analysis 1. Neural Networks: Inspired by the human brain's structure, neural networks consist of layers of interconnected nodes that process data in a manner similar to human neurons. In market analysis, neural networks are used for their ability to detect complex patterns and relationships within large datasets. They are particularly effective in predicting price movements and identifying trading opportunities based on historical market data. 2. Regression Models: These models are fundamental in statistical analysis and are used to understand relationships between variables. In finance, regression models help in forecasting asset prices and understanding the impact of various factors (like interest rates, GDP growth, etc.) on market trends. 3. Time Series Analysis Models: Time series models are crucial in financial market analysis, as they are specifically designed to analyze and forecast data points collected over time. These models help in understanding and predicting trends, cyclicality, and seasonal variations in market data. 4. Natural Language Processing (NLP): NLP is used to analyze textual data, such as financial news, earnings reports, and social media posts, to gauge market sentiment. By processing and interpreting the nuances of human language, NLP models can provide insights into how public sentiment is likely to impact market movements. 5. Decision Trees and Random Forests: These models are used for classification and regression tasks. In market analysis, they can help in categorizing stocks into different classes based on their characteristics or in predicting the likelihood of certain market events. 6. Reinforcement Learning: This type of machine learning involves algorithms learning optimal actions through trial and error. In trading, reinforcement learning can be used to develop strategies that adapt to changing market conditions to maximize returns. Each of these AI models brings a unique set of capabilities to market analysis. Their ability to handle large volumes of data, recognize complex patterns, and make informed predictions is transforming the field of financial analysis, allowing for more nuanced and sophisticated market insights. As AI technology continues to evolve, its applications in market analysis are poised to become even more integral to financial decision-making. Key Applications of AI in Market Analysis The incorporation of Artificial Intelligence (AI) in market analysis has opened up new frontiers in understanding and predicting market behavior. AI's ability to process vast datasets and uncover intricate patterns provides invaluable insights for investors, traders, and financial analysts. Here are some key applications of AI in market analysis: 1. Predictive Analytics for Market Trends One of the most significant contributions of AI in market analysis is predictive analytics. AI algorithms, particularly those based on machine learning, are adept at analyzing historical data to forecast future market trends. These algorithms can identify subtle patterns and correlations that might be invisible to the human eye, enabling predictions about price movements, market volatility, and potential trading opportunities. As these models are exposed to more data over time, their accuracy in forecasting trends continues to improve. 2. Real-time Data Processing and Interpretation The financial markets generate vast amounts of data every second. AI excels in processing this data in real-time, providing instantaneous insights that are critical in a fast-paced trading environment. This capability allows for the monitoring of live market conditions, immediate identification of market shifts, and quick response to unforeseen events. Real-time analysis ensures that trading strategies can be adjusted promptly to capitalize on market opportunities or mitigate risks. 3. Automated Technical Analysis Technical analysis involves the study of historical market data, primarily price and volume, to forecast future market behavior. AI-driven automated technical analysis takes this to a new level by using algorithms to scan and interpret market data at scale. These algorithms can automatically identify technical indicators, chart patterns, and other key metrics used in technical analysis. This automation not only speeds up the analysis process but also eliminates human bias and error, leading to more objective and reliable insights. 4. Sentiment Analysis from News and Social Media Market sentiment, the overall attitude of investors towards a particular market or security, can significantly influence market movements. AI, particularly through Natural Language Processing (NLP), plays a crucial role in analyzing sentiment. It processes vast amounts of unstructured data from news articles, financial reports, social media posts, and other textual sources to gauge public sentiment towards the market or specific investments. By analyzing this data, AI can provide insights into how collective sentiment is likely to impact market trends and investment decisions. These applications highlight the transformative role of AI in market analysis. By leveraging AI for predictive analytics, real-time data processing, automated technical analysis, and sentiment analysis, market participants can gain a more comprehensive, accurate, and nuanced understanding of market dynamics. This advanced level of analysis is not only enhancing traditional market analysis methods but is also shaping new strategies and approaches in the financial sector. Case Studies: Success Stories of AI-Driven Market Analysis The integration of Artificial Intelligence (AI) in market analysis has not only been a topic of academic interest but has also seen practical applications with significant impacts on market decisions. Several real-world case studies illustrate how AI-driven analysis has transformed trading strategies and financial insights. Here are a couple of notable examples: Case Study 1: AI in Predicting Stock Market Trends One of the most prominent examples is the use of AI by a leading investment firm to predict stock market trends. The firm developed a machine learning model that analyzed decades of market data, including stock prices, trading volumes, and economic indicators. This model was designed to identify patterns that precede significant market movements. In one instance, the AI system predicted a substantial market correction based on unusual trading patterns it detected, which were subtle enough to be overlooked by traditional analysis methods. The firm acted on this insight, adjusting its portfolio to mitigate risk. When the market did correct as predicted, the firm was able to avoid significant losses, outperforming the market and its competitors. Case Study 2: Enhancing Hedge Fund Strategies with AI Another case involves a hedge fund that integrated AI into its trading strategies. The fund employed deep learning algorithms to analyze not just market data but also alternative data sources such as satellite images, social media sentiment, and supply chain information. This comprehensive analysis allowed the fund to identify unique investment opportunities and trends before they became apparent to the market at large. For example, by analyzing satellite images of retail parking lots, the AI could predict quarterly sales trends for certain companies before their earnings reports were released. Combining these insights with traditional financial analysis, the fund made informed decisions that led to substantial returns, demonstrating the power of AI in enhancing traditional investment strategies. Impact of AI on Specific Market Decisions These case studies illustrate the profound impact AI can have on market decisions. AI-driven market analysis allows for more accurate predictions, better risk management, and the identification of unique investment opportunities. It enables market participants to make more informed, data-driven decisions, often leading to better financial outcomes. Moreover, the use of AI in these examples highlights a shift towards a more proactive approach in market analysis. Rather than reacting to market events, AI allows analysts and investors to anticipate changes and act preemptively. This shift is not just about leveraging new technologies but represents a broader change in the philosophy of market analysis and investment strategy. In summary, these real-world applications of AI in market analysis showcase its potential to transform financial strategies and decision-making processes. As AI technology continues to evolve and become more sophisticated, its role in market analysis is set to become even more integral and impactful. Future of AI in Market Analysis The landscape of market analysis is rapidly evolving, with Artificial Intelligence (AI) at the forefront of this transformation. The future of AI in market analysis is not just about incremental improvements but also about paradigm shifts in how financial data is processed, interpreted, and utilized for decision-making. Here are some emerging trends and potential shifts that could redefine the role of AI in market analysis: Emerging Trends and Technologies 1. Advanced Predictive Analytics: The future will likely see more sophisticated predictive models using AI. These models will not only forecast market trends but also provide probabilistic scenarios, offering a range of possible outcomes with associated probabilities. 2. Explainable AI (XAI): As AI models become more complex, there will be a greater need for transparency and interpretability. XAI aims to make AI decision-making processes understandable to humans, which is crucial for trust and compliance in financial markets. 3. Integration of Alternative Data: AI's ability to process and analyze non-traditional data sources, such as satellite imagery, IoT sensor data, and social media content, will become more prevalent. This will provide deeper, more diverse insights into market dynamics. 4. Real-time Risk Management: AI will enable more dynamic risk assessment models that update in real-time, considering the latest market data and trends. This will allow for more agile and responsive risk management strategies. 5. Automated Compliance and Regulation Monitoring: AI systems will increasingly monitor and ensure compliance with changing regulatory requirements, reducing the risk of human error and the burden of manual oversight. 6. Quantum Computing in Market Analysis: The potential integration of quantum computing could exponentially increase the speed and capacity of market data analysis, allowing for even more complex and comprehensive market models. Potential Shifts in Market Analysis Strategies 1. From Reactive to Proactive Analysis: AI enables a shift from reacting to market events to proactively predicting and preparing for them. This will lead to more forward-thinking investment strategies. 2. Personalization of Investment Strategies: AI can tailor investment advice and strategies to individual investors' profiles, risk appetites, and goals, leading to more personalized financial planning and portfolio management. 3. Democratization of Market Analysis: Advanced AI tools could become more accessible to a broader range of investors and firms, leveling the playing field between large institutions and smaller players. 4. Increased Emphasis on Data Strategy: As AI becomes more central to market analysis, there will be an increased focus on data strategy - how to source, manage, and leverage data effectively. 5. Redefining Skill Sets in Finance: The rising importance of AI will change the skill sets valued in finance professionals. There will be a greater emphasis on data science skills alongside traditional financial analysis expertise. In conclusion, the future of AI in market analysis is not just promising but revolutionary. It is poised to redefine traditional practices, introduce new capabilities, and create opportunities for innovation in the financial sector. As these technologies advance, they will continue to shape the strategies and decisions of market participants, marking a new era in financial market analysis.

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by JS_TechTrading

TRADING BASICS: TRENDLINES Trend lines are the simplest and most basic concept of technical analysis. It is also, paradoxically, one of the most effective tools. Since almost all price patterns require the use of trend lines, the latter are the basic element of both pattern definition and its use. Now we will discuss what trend lines are, how to work with them and how to determine whether they are working. A trendline is a straight line that connects descending lows in a rising market or highs in a falling market. Lines that connect lows are called rising trend lines, and those that connect highs are called falling trend lines. To make a falling trend line, we connect the first high to the subsequent highs. When the price breaks the trend line, it is a hint that the trend may change. Similarly, for a rising line. How to draw a trend line? ✔️ For a trend line to be real, it must connect the previous highs or lows. Otherwise, there is no sense in such a line at all. This is called the major trend line. It is where the first low of a bearish trend connects to the first intermediate low. In the example below, the trend line is not particularly steep (it is at a low angle, and angles are important in a trend). Unfortunately, price then accelerates sharply after the next low. In a situation like this, it's best to simply redraw the trendline as price moves further away. This is called a new line in the picture and it reflects the changed trend much better. This line will be a secondary trend line. Well, the downtrend lines are drawn in the same way, but in reverse. Since the trend can go sideways, it is quite possible to guess that trend lines can be drawn horizontally. This is often the case when we find price patterns like the "neck" in the Head and Shoulders pattern, or the upper and lower borders of triangles. In such patterns, if the trend line is crossed, it is an indication that the trend is changing. The same is true for rising and falling trends. It is also important to realize that drawing a trend line is a matter of using common sense, not a set of very strict rules. A trendline breakout could indicate a reversal or consolidation The completion of a price pattern can indicate: 1. reversal of the previous trend, aka reversal pattern; 2. continuation of the previous trend, aka consolidation or continuation pattern. Similarly, a trend line breakout indicates either a reversal of the trend or a continuation of the trend. An example demonstrates this concept for a downtrend. In this case, the trend line connecting one high after another is broken in a downtrend. The fourth high will be the highest point of the bearish trend, so an upward breakout of the trend line in this case indicates the beginning of a bullish trend. In the picture above we see again a rising trend and a trend line breakout, but this signal has a completely different outcome. The reason is that the break of the trend line caused the trend to continue, but at a much slower pace. The third scenario is when the price goes into consolidation (aka sideways) instead of reversing, which is shown in picture. Accordingly, when a trendline is broken, it is a strong indication of a trend reversal. A changed trend can eventually reverse or go sideways after rising or falling. Unfortunately, in most cases we can't tell accurately what will follow a trendline breakdown. However, there can be some pretty good clues, such as the angle of the trendline. Since trends that run at an acute angle are less stable, their breakout more often leads to sideways rather than reversals. Useful hints can be hidden in the general state of the technical structure of the market. In addition, a trend line breakout often occurs at the successful completion of a reversal price pattern or shortly before. Extended trend lines ✔️ Many beginners, when they see that a trend line is broken, automatically conclude that the trend is about to change and immediately forget about the line. After all, an extended trend line can be as important as the fact of its breakdown. For example, if a rising trend line is broken, the price very often returns to the same line, but later. This is called a throwback. Significance of trend lines ✔️ So, we have it all figured out - a trend line breakout leads to either a trend reversal or a trend slowdown. Of course, it is not always possible to say what exactly happens there, but we need to understand how effective a trend line breakout is in general, which we are going to do now. In general, the significance of this event depends on three factors: The length of the line; The number of touches; The angle of inclination or rise. 1. Trend line length ✔️ A trend line is used to measure a trend. The longer the line, the longer the trend and the more such a line will become important to us. If descending lows come one after another for 3-4 weeks, such a trendline is less relevant. If the trend line lasts 1-3 years, its breakout is extremely important to us. The breakout of an old trend line is very important, it is a powerful signal. The breakout of a fresh (relatively) trend line is a less important signal. 2. Number of touches or approaches to the trend line ✔️ The more touches or interactions with the trend line, the more important it is, there is a direct correlation. Why is this so? Because the trend line represents a dynamic zone of support or resistance. Each successful touch of the line strengthens it, reinforces its importance as a support or resistance zone. Thus, the trend line's role as a guide for the trend as such is also strengthened. Approaching the trend line is no less important than touching it, because this is how the zone is actualized. If the trend line has become strong due to the touches, its continuation will be no less strong, but from the other side. After all, in an extended trend line, support often becomes resistance and vice versa. 3. Angle of slope ✔️ A very steep trend is usually unstable and easily broken, even by a short sideways movement. All trends break sooner or later, this is a fact. However, steep trends break much faster. The breakout of a steep trend is less significant than the breakout of a smooth and gradual trend. It sounds paradoxical, but the point is this - the break of a steep trend usually causes a short correction, sideways price movement, after which the trend resumes, but much less strong and smoother. Accordingly, the breakout of a steep trend line is a confirming pattern, not a reversal pattern at all. To summarize Trend lines are an easy tool to understand, but they must be used correctly and thoughtfully. A trend line breakout indicates a temporary interruption of the trend or a reversal of the main trend. The significance of a trend line consists of its length, the number of touches/approaches to it and the slope angle. A good trend line always reflects the underlying trend and forms significant support and resistance areas. Extended trend lines change former support/resistance in places, which should be paid special attention to. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment

Education

Option Trading Option Trading work based on a contract that gives the buyer the right to buy or sell a certain asset, at a predetermined price (strike price) within a certain time period. A very simple task, but is there a clear technical analysis method that can provide consecutive wins? This post is not trading advice, just a statistical hypothesis test. I will try in 100 candles, and stop if the win rate is below 70% If you are an options trader, or are interested in learning the system I use, please follow this post.

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Deciphering the Forex Frenzy: A Closer Look at 60 Seconds ⏱💹✨ In the bustling realm of Forex, a single minute carries an abundance of activity, steering markets through rapid fluctuations and intricate maneuvers. Understanding the flurry of events that unfold within this brief window is pivotal for traders aiming to capitalize on these micro-movements. This article provides an insightful exploration into the dynamics of a mere 60 seconds in Forex, unraveling its significance and the potential impact on trading decisions. 60-Second Rush in Forex Within this fleeting timeframe, several significant occurrences shape the landscape of currency pairs: Price Surges and Retraces: High-Frequency Trading Activity: Navigating the 60-Second Window Traders employ diverse strategies like scalping or utilizing minute-based technical indicators to swiftly identify opportunities for entering or exiting positions within this condensed timeframe. In just 60 seconds, the Forex landscape undergoes a whirlwind of activities, presenting a microcosm of opportunities and challenges for traders seeking to navigate the swift and impactful movements within this brief yet dynamic timeframe. ⏱💹✨ What do you want to learn in the next post?

Education

by UnitedSignals

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Select market data provided by ICE Data services. Select reference data provided by FactSet. Copyright © 2025 FactSet Research Systems Inc.© 2025 TradingView, Inc.

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