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Fundamental Analysis

Kelly Criterion and other common position-sizing methodsWhat is position sizing & why is it important? Position size refers to the amount of risk - money, contracts, equity, etc. - that a trader uses when entering a position on the financial market. We assume, for ease, that traders expect a 100% profit or loss as a result of the profit lost. Common ways to size positions are: Using a set amount of capital per trade . A trader enters with $100 for example, every time. This means that no matter what the position is, the maximum risk of it will be that set capital. It is the most straight-forward way to size positions, and it aims at producing linear growth in their portfolio. Using a set amount of contracts per trade . A trader enters with 1 contract of the given asset per trade. When trading Bitcoin, for example, this would mean 1 contract is equal to 1 Bitcoin. This approach can be tricky to backtest and analyse, since the contract’s dollar value changes over time. A trade that has been placed at a given time when the dollar price is high may show as a bigger win or loss, and a trade at a time when the dollar price of the contract is less, can be shown as a smaller win or loss. Percentage of total equity - this method is used by traders who decide to enter with a given percentage of their total equity on each position. It is commonly used in an attempt to achieve ‘exponential growth’ of the portfolio size. However, the following fictional scenario will show how luck plays a major role in the outcome of such a sizing method. Let’s assume that the trader has chosen to enter with 50% of their total capital per position. This would mean that with an equity of $1000, a trader would enter with $500 the first time. This could lead to two situations for the first trade: - The position is profitable, and the total equity now is $1500 - The position is losing, and the total equity now is $500. When we look at these two cases, we can then go deeper into the trading process, looking at the second and third positions they enter. If the first trade is losing, and we assume that the second two are winning: a) 500 * 0.5 = 250 entry, total capital when profitable is 750 b) 750 * 0.5 = 375 entry, total capital when profitable is $1125 On the other hand, If the first trade is winning, and we assume that the second two are winning too: a) 1500 * 0.5 = 750 entry, total capital when profitable is $2250 b) 2250 * 0.5 = 1125 entry, total capital when profitable is $3375 Let’s recap: The trader enters with 50% of the capital and, based on the outcome of the first trade, even if the following two trades are profitable, the difference between the final equity is: a) First trade lost: $1125 b) First trade won: $3375 This extreme difference of $2250 comes from the single first trade, and whether it’s profitable or not. This goes to show that luck is extremely important when trading with percentage of equity, since that first trade can go any way. Traders often do not take into account the luck factor that they need to have to reach exponential growth . This leads to very unrealistic expectations of performance of their trading strategy. What is the Kelly Criterion? The percentage of equity strategy, as we saw, is dependent on luck and is very tricky. The Kelly Criterion builds on top of that method, however it takes into account factors of the trader’s strategy and historical performance to create a new way of sizing positions. This mathematical formula is employed by investors seeking to enhance their capital growth objectives. It presupposes that investors are willing to reinvest their profits and expose them to potential risks in subsequent trades. The primary aim of this formula is to ascertain the optimal allocation of capital for each individual trade. The Kelly criterion encompasses two pivotal components: Winning Probability Factor (W) : This factor represents the likelihood of a trade yielding a positive return. In the context of TradingView strategies, this refers to the Percent Profitable. Win/Loss Ratio (R) : This ratio is calculated by the maximum winning potential divided by the maximum loss potential. It could be taken as the Take Profit / Stop-Loss ratio. It can also be taken as the Largest Winning Trade / Largest Losing Trade ratio from the backtesting tab. The outcome of this formula furnishes investors with guidance on the proportion of their total capital to allocate to each investment endeavour. Commonly referred to as the Kelly strategy, Kelly formula, or Kelly bet, the formula can be expressed as follows: Kelly % = W - (1 - W) / R Where: Kelly % = Percent of equity that the trader should put in a single trade W = Winning Probability Factor R = Win/Loss Ratio This Kelly % is the suggested percentage of equity a trader should put into their position, based on this sizing formula. With the change of Winning Probability and Win/Loss ratio, traders are able to re-apply the formula to adjust their position size. Let’s see an example of this formula. Let’s assume our Win/Loss Ration (R) is the Ratio Avg Win / Avg Loss from the TradingView backtesting statistics. Let’s say the Win/Loss ratio is 0.965. Also, let’s assume that the Winning Probability Factor is the Percent Profitable statistics from TradingView’s backtesting window. Let’s assume that it is 70%. With this data, our Kelly % would be: Kelly % = 0.7 - (1 - 0.7) / 0.965 = 0.38912 = 38.9% Therefore, based on this fictional example, the trader should allocate around 38.9% of their equity and not more, in order to have an optimal position size according to the Kelly Criterion. The Kelly formula, in essence, aims to answer the question of “What percent of my equity should I use in a trade, so that it will be optimal”. While any method it is not perfect, it is widely used in the industry as a way to more accurately size positions that use percent of equity for entries. Caution disclaimer Although adherents of the Kelly Criterion may choose to apply the formula in its conventional manner, it is essential to acknowledge the potential downsides associated with allocating an excessively substantial portion of one's portfolio into a solitary asset. In the pursuit of diversification, investors would be prudent to exercise caution when considering investments that surpass 20% of their overall equity, even if the Kelly Criterion advocates a more substantial allocation. Source about information on Kelly Criterion www.investopedia.com
Education
by sofex
4
Understanding Interest-rates & InflationHey Traders So, I have been asked by many of my clients to explain the relationship between interest-rates and inflation and how to translate that information into their analysis. For this reason I put this little mini lesson together to explain: - The core role of the central bank - Reason and objectives for interest-rates and inflation - How you can use this information to enhance your analysis - How to take advantage of this info when taking, managing or closing your trades. PS. if you would like me to do more of these types of videos be sure to leave a comment in the comment section.
TVC:DXYEducation
by DeanMuller
How does OUTsurance have Data from 2013?“How is it possible for Outsurance to have data on my charting platform, as far back as 2013 while it was just listed on the JSE.” A. The data that you see from 2013, came from the parent company Rand Merchant Investment Holdings (RMI). They then changed the name to OUTsurance Group Holdings Limited (OUT). And they have been in the process of transitioning and rebranding from RMI to OUT following the unbundling of its investments in Discovery1. And now, the Centurion-based insurer has officially swapped places with its parent company, Rand Merchant Investment Holdings (RMI), which is no longer listed on the exchange.
JSE:OUTEducation
by Timonrosso
1
🥶 FACT: Most traders quit year one. Hmm, but why? 🤔You all heard the statistic, "gambling is more profitable than trading - 13 out of 100 gamblers leave the casino with gains compared to 1 out of 100 traders". Yeah yeah. Nice story. Now tell us the real story. The market is not a casino. Don't compare. What about the thousands of traders making consistent gains? It's a FACT that most traders quit their trading "hobby" or "career" within their first year of trading. But what's ALSO a FACT is most traders: Don't take profits when they see them (keep holding for more). Go too heavy on a single trade. Go all in on a single trade. HODL for glory, even when they're super green on a trade. Are too bullish/ bearish and turn a blind eye to the other bias. Are over-speculating all the time (i.e. " NASDAQ:AMD 120 tomorrow. All in calls" Trade without a chart. Have no risk management. Don't follow their own rules. Have no trading strategy. One cannot state the first "fact" without stating the other; the real reason. Otherwise, that's a shallow statistic. That's like looking at a 15 min chart and not realizing that each candle is constructed of 1,000+ mini candles. Here's a 15 min NASDAQ:AMZN chart: Here's the same chart in 15 second candles: Zooming in to the chart gives you a clearer picture. Digging deep into the "quitting" traders' psychology, you'll get the answer. Also, I wouldn't say they quit. It's possible that the energy they were putting in wasn't paying off, and they didn't want to waste their time any further. Treat your trading like a job. Be strict. You see quick +20% profit? Take it. But you believe it's going higher? Still take it. Find another trade. Baby gains add up! Most traders who got burned on NYSE:AMC NYSE:GME , kept HODLing. This is coming from someone who bought NYSE:AMC at $2.13 pre-split in 2021 and sold around $25 and $70: ACHIEVING SUPER GAINS WILL RUIN YOUR MENTALITY! You will start treating the market like a casino. You will stop appreciating the smaller 20 to 40% gainers that you can do once per day or week. You will see yourself starting to go heavy because you "believe" that "this is the next banger". To avoid all this headache, build a strategy slowly over time, use the right tools to plan your trade, find a community to trade with, use proven strategies (i.e. support/ res, supply/ demand, patterns), go light in your first 1,000 trades, and so on. Happy to help if you have any questions below. Follow for more insight and for live trade swing & day-trade ideas! Good luck trading! Trade safe and don't go all in. Baby gains add up.
CME_MINI:ES1!Education
by kingdips
1
Blockchain Architecture Blockchain Architecture Around how to realize decentralized trust, a blockchain can be divided into five layers from a technical point of view, which are the data layer, network layer, consensus layer, contract layer, and application layer, as shown in Figure 1. The data layer defines the blockchain’s underlying data structure, storage structure, and ledger pattern as the theoretical basis and outlines a theoretical model of decentralized trust. The theoretical model of blockchain decentralized trust in the network layer is realized by utilizing the distributed P2P network. In the consensus layer, the consensus algorithm organizes and coordinates the behaviors of nodes in the decentralized system to drive the continuous operation of the blockchain. In the contract layer, smart contracts are introduced as the extension of the blockchain so that the blockchain can handle more complex transactions. At the application layer, providing blockchain APIs makes it easy for developers to build Dapps and offer decentralized solutions to problems from various industries. Mathematics 11 00101 g001 550Figure 1. Blockchain architecture. 3.1. Data Layer Due to the lack of authoritative central node coordination and management, the decentralized system has problems such as easy data tampering, untraceable node behavior, and difficulty in rapidly authenticating transactions, leading to the data not being trusted. As the theoretical basis of blockchain, the data layer needs to solve the appealing problem to ensure that the data are credible to achieve decentralized trust. From the perspective of the logical structure of data, the blockchain is a chain composed of a connected block, and each block stores the transaction information. The blocks are connected by hash pointers and are chained in chronological order of their generation. According to the characteristics of the hash function, any slight modification to the block data will create a huge change in the hash value of the block, leading to the block not being chained. Based on that, security ensures that the data on the block is not tampered with, and thus the credibility of the data on the chain. The data layer constructs the decentralized trust model of blockchain from three aspects: data structure, storage structure, and ledger pattern. 3.2. Network Layer The network layer is the key to implementing a decentralized system at the physical level. Decentralization means that the blockchain nodes are peer-to-peer at the physical level and that each node can communicate with each other without passing through the central node. Therefore, the network structure of the blockchain adopts the decentralized P2P structure. As shown in Figure 2, compared to a centralized network structure, a P2P network can ensure peer-to-peer communication between nodes, and nodes can join or exit the system quickly. Mathematics 11 00101 g002 550Figure 2. P2P network vs. centralized network. The P2P network is a distributed application architecture. The P2P networks were initially designed to facilitate the distribution of large files over unreliable networks. In a P2P network, multiple computers are connected in a peer-to-peer position, and the entire network does not require centralized coordination by a central processing node. In P2P networks, each peer can act as both requestor and responder of network services. Research on p2p network technology has recently focused on improving system performance and security. In system performance: Abudaqa et al. summarized, evaluated, compared, and classified the techniques used to improve the performance of P2P file-sharing systems based on network coding; Milojicic et al. provided a general analysis of the design and implementation issues of P2P systems in the context of practical cases. In security: Alharbi et al. explored the security weaknesses and threats in P2P networks and proposed that the fundamental problem of P2P networks is the trusting of peers and the problem of secure traffic routing. Risson et al. discussed the metrics affecting the robustness of P2P systems. 3.3. Consensus Layer The consensus layer implements the consensus algorithm, which organizes and coordinates the decentralized system, allowing the blockchain to operate securely and stably. A blockchain is a distributed system where nodes communicate and coordinate with each other only through messaging because no central node is involved. In a distributed system, nodes agreeing on an event is also called a consensus, and a consensus algorithm is used to ensure data consistency among nodes in the system. Due to unavoidable problems such as network latency, node failure downtime, and bandwidth limitation, distributed systems are subject to the FLP impossibility principle and CAP theory. The FLP impossibility principle means that in a system containing multiple deterministic processes, as long as one process may fail, no protocol can guarantee a finite time for all processes to agree. CAP theory points out that it is impossible for any distributed system to satisfy consistency, availability, and partitioning of fault tolerance at the same time , as shown in Figure 3. Therefore, according to CAP theory and the FLP impossibility principle, certain aspects must be traded off when designing consensus algorithms for blockchains. Mathematics 11 00101 g003 550Figure 3. CAP theory. Blockchain can be regarded as a distributed public ledger. The essence of consensus is to decide the bookkeeping right, i.e., to solve the problem of who can produce the blocks and package the transactions into the blocks. According to the different mechanisms to reach consensus, blockchain consensus algorithms can be divided into proof-based and voting-based. 3.4. Contract Layer The contract layer implements smart contracts, a set of digitally set commitments that are unmodifiable once deployed and executed immediately once triggered. Smart contracts, as an extension of the blockchain, enable the blockchain to have the ability to handle logically complex transactions. 3.5. Application Layer The application layer provides API interfaces for users to easily build Dapps using blockchain services and applies blockchains to various practical scenarios. With the development of blockchain technology, various Dapps have emerged to bring decentralized trust solutions to the problems of traditional industries. 4. Blockchain Basic Principle 4.1. Data Structure A blockchain has a chain structure in terms of blocks to achieve data immutability. The data structure of different blockchain platforms differs in specific details but is the same overall. Take Bitcoin as an example. The block in Bitcoin is divided into the block header and the block body. The block header contains the version number, random number, hash of the previous block, Merkle tree root hash, timestamp, current workload proof difficulty, etc. The block body contains all the transactions packed into the block, and the Merkle tree comprises these transactions. To support smart contracts, Ethernet adds a system state to the block header for storing account balances, contract storage, contract code, and account random numbers. A block contains a block header, timestamp, proof-of-workload random number, hash of the previous block, packed transactions, Merkle tree, etc. . The block’s verification signature and proof-of-work use cryptographic algorithms such as elliptic curve encryption and SHA-256. The data-layer structure differs slightly from blockchain platform to blockchain platform because of the different functions they focus on. Take the Bitcoin system as an example, and the data-layer structure is shown in Figure 4: Mathematics 11 00101 g004 550Figure 4. Blockchain data-layer structure. To reduce the bandwidth consumption caused by block synchronization, each block in the Bitcoin system can be divided into two parts: the block header and the block body, which stores all the transaction records in the current block. Bitcoin nodes are divided into full nodes and light nodes. Bitcoin light nodes only need to synchronize the block header for block synchronization. The transaction records in the Bitcoin system are similar to the transaction records in the physical system. Each transaction record includes information such as the input and output addresses of the transaction information and the number of transfers. Based on this transaction information, a corresponding form of Merkle-tree structure can be generated from the bottom up. The hash value of the root node of the Merkle tree is stored in the header of the block, and at the time of each block generation, the bookkeeper of the block adds a timestamp to the block, which is used to mark the generation time of the block. As the timestamp is enhanced, the block is extended to form a chain of blocks with a time dimension, allowing data information to be traced back in time. In addition, the block header contains the hash value of the previous block header, the version number, the random number of the proof of work, and the target hash value, among other information. Finally, the all information in the header of this block is hashed, and the resulting hash value exists in the header of the next block, which, in terms of logical structure, makes each block linked together in the form of a chain. 4.1.1. Hash Function Hashing converts data of any length into a number within a fixed range. The conversion method is called a hash function, which calculates the value obtained after the original value is called a hash value. Take MD5, a widely used hash function, as an example. The MD5 algorithm is also called the MD5 message digest algorithm, which can generate a 128-bit hash value to ensure the integrity and consistency of information transmission. The MD5 algorithm is universal, stable, and fast; and it is widely used in the encryption and protection of ordinary data. Hash functions are the basis of crucial blockchain technologies such as hash lists, digital signatures, and Merkle trees. The calculation of the hash function is unidirectional. It is easy to calculate the hash value of the given data, but it is difficult to deduce the original data given the hash value. The generated hash value may be the same for different data, and this phenomenon is called a hash collision. Due to the one-way nature of the hash function, people who want to generate hash collisions can only continuously try random numbers through brute force. Therefore, the process of finding suitable random numbers to create hash collisions is often used as “proof of work” by the blockchain. 4.1.2. Hash List In order to ensure that the block data cannot be tampered with, the hash value of the previous block is retained in other blocks except the Genesis block, and the blocks are connected with the hash value to form a hash list. A hash list is a one-way chain table in which hash pointers connect nodes. Any small change in the block data will cause a huge change in the hash value, so it is impossible to tamper with the data in the hash list. In addition to a chained structure, some scholars have proposed a blockchain with a non-chain structure for dealing with different scenarios. Qi et al. proposed a cascade structure of blockchain to solve the performance problem of blockchains, which can accelerate the generation of blocks, expand the capacity of blocks, reduce the risk of bifurcation, and increase the security. Ribero et al. proposed a cryptocurrency called DagCoin based on DAG structure, the first blockchain-based on DAG. DagCoin has no fixed blocks; each transaction has its own proof of work. The system can achieve a speed comparable to Bitcoin. Despite the emergence of blockchains with non-traditional chain structures, such as DAG and cascade structures, mainstream blockchains are still dominated by chain structures. 4.1.3. Timestamps To make transactions traceable, Bitcoin adds timestamps to blocks and calculates the block’s hash value by using the timestamp as the information in the block together. The timestamp is the total number of seconds from 00:00:00 GMT on 1 January 1970 to the present, and the timestamp proves that the transaction in the block must have existed at that time. The current development of timestamps mainly revolves around improving timestamp accuracy and reducing errors. Zhang et al. proposed an accurate blockchain-based timestamping scheme which solves the problem of the inaccuracy of file timestamps caused by blocks due to the existence of time errors in timestamps. Ma et al. proposed an optimized blockchain timestamping mechanism that reduces the range of timestamps in blocks to an average of 10 min by serving external trust timestamps to the blockchain consensus. 4.1.4. Merkle Tree Blockchain stores all the transaction records of history, and the data volume of historical transaction data will become larger and larger as time goes by. It is unrealistic to verify the existence of a certain transaction by traversing all the historical transactions. To enable fast transaction verification, all transactions in the block are stored as a Merkle tree. A Merkle tree is a tree that connects parent and child nodes with a hash pointer. Bitcoin uses the simplest binomial Merkle tree to quickly verify whether a transaction exists in a block. The structure of a binary Merkle tree is shown in Figure 5. Each leaf node in the tree corresponds to a SHA256 hash of one transaction data within the block. The value of the parent node is obtained by concatenating the values of the two child nodes and then performing a hash operation. Hashing between nodes is performed repeatedly until the root hash value is reached, when the transaction Merkle root is generated. The Merkle root is used to detect any tampering with the transaction data in the block, so as to ensure the integrity of the transaction data in the block. Mathematics 11 00101 g005 550Figure 5. Merkle tree. 4.1.5. Digital Signature Bitcoin is a chain of digital signatures designed to prevent transactions from being forged or denied. A digital signature is an unforgeable string of numbers that can be generated only by the sender of the message. It proves the validity of the sender of the message. Digital signatures are often used to verify the integrity of documents or messages and are an effective way to make transactions non-repudiation and unforgeable. In the process of Bitcoin transactions, the owner of a Bitcoin transfers the coin to the next owner by digitally signing it with the hash of the previous transaction and the next owner’s public key and adding it to the end of the coin. The recipient can verify these signatures to validate the ownership of the coin. Digital signatures are based on asymmetric encryption, first proposed by Rivest et al. . Asymmetric encryption has two keys, which are used in the encryption and decryption processes. The commonly used asymmetric encryption algorithms in blockchain are RSA, SHA256, ECC, etc. As a decentralized distributed system, blockchain needs to adopt a compatible encryption algorithm because the system configuration of each node is different. RSA algorithm is an international standard algorithm that is widely used and compatible and can be applied to different systems. RSA is the first algorithm that can be used for encryption and digital signature, and it is also considered one of the best public key schemes. Although RSA has the characteristics of strong compatibility and high security, RSA has the problems of long key and time-consuming cryptographic computation. Compared to RSA, ECC has the advantages of small key length, high-security performance, and small time consumption for the whole digital signature. Compared with RSA, ECC can use a shorter key to achieve comparable or higher security than RSA. 4.2. Storage Structure During blockchain transaction execution, transaction data need to be packaged into blocks, and data writing is in high demand. In the process of blockchain transaction validation, it is necessary to quickly locate the block where the transaction is in and perform transaction validation. Based on the above functional requirements, blockchain often uses a combination of file systems and databases to store block data. The file system can facilitate the system to append data in the form of logs, and the database stores the index information of the file where the block is located, which can quickly find the location of the relevant transaction block and assist the system in query. Block data and block “undo” data are stored in the file system, and block “undo” data are the data for rolling back the blockchain when the system generates a chain fork. The database stores the state and index data of the blockchain, which are usually stored in key–value pairs for quick querying. 4.3. Ledger Pattern A blockchain is a decentralized transaction ledger, and the ledger records the history of all transactions. There are two main types of mainstream ledger patterns: transaction-based and account-based. 4.3.1. Transaction-Based Ledger The transaction-based ledger is used for digital currency transactions and is the ledger model used by Bitcoin. In Bitcoin, an “Unspent Transaction Output” (UTXO) is used instead of a centralized institution to clear transactions. In this transaction-based model, the user’s assets are not explicitly recorded directly in the system but instead extrapolated from the information in UTXO. In order to know how many bitcoins a user has in total assets, we need to calculate how many coins that user has in total in all accounts in UTXO. The transaction-based ledger can record each transaction, trace the origin of each fund, and protect user privacy. 4.3.2. Account-Based Ledger The account-based ledger is suitable for blockchain platforms that support smart contracts, such as Ethereum and Hyperledger Fabric. The account-based ledger model is similar to a bank account, where the account balance information is recorded explicitly by the system, and the transaction balance and business status data can be easily checked. Take Ethereum as an example. Ethereum accounts are divided into external accounts and contract accounts. External accounts are controlled by public–private key pairs; the user locally generates a public-private key pair. The private key controls the account also called a normal account. The user creates a contract that returns an address, and the contract can be invoked as long as the address of the contract is known. The account-based ledger gives participants a more stable identity and better support of smart contracts. 5. Consensus Mechanisms In the decentralized scenario, without the participation of the central node, a fair operation mechanism, i.e., a consensus mechanism, must be established among the nodes of the blockchain to enable each node’s unified and coordinated operation. Blockchain establishes a “trustworthy” network among nodes through the consensus mechanism so that each node can reach an agreement and achieve data consistency in the ledger of each node in the blockchain, which drives the continuous operation of the blockchain. The consensus mechanism of blockchain mainly solves the problem of who will construct the block and who will package the transactions into the block . The consensus mechanism is the core of blockchain technology, which determines the security, scalability, and distributed nature of blockchain system. The problem of consensus originates from the “biliteracy problem”, and later the “Byzantine general problem” was proposed. The biliteracy problem refers to how to achieve reliable communication over unreliable channels. The Byzantine problem refers to the problem of how to make a distributed system agree in the presence of malicious behavior (e.g., message tampering or forgery), and the nodes that can both fail and behave badly are called “Byzantine nodes”. Consensus algorithms can be divided into classical distributed system consensus algorithms and blockchain consensus algorithms, depending on the time. Classical distributed consensus algorithms include Paxos, Raft, and Kafka. According to the different mechanisms used to reach consensus, blockchain consensus algorithms can be divided into proof-based and voting-based. The proof-based consensus algorithms require “some competition” among nodes to decide the bookkeeping rights, such as proof-of-work (PoW) and proof-of-stake (PoS). Proof-based consensus algorithms do not require the strict identity of participants, and nodes are free to join and exit, so proof-based consensus algorithms are commonly used in public chains. The voting-based consensus algorithm is initiated by a node to reach consensus by having the whole network nodes vote on whether to agree to the proposal, such as practical Byzantine fault tolerance (PBFT) . The voting-based consensus algorithms require a high identity of participating voting nodes and control the joining and exiting of nodes by the access mechanism, so voting-type consensus algorithms are commonly used in consortium chains. The consensus algorithm is the core of blockchain technology and a research hotspot of blockchains. The current research on consensus algorithms mainly focuses on two aspects: performance optimization and application. In performance optimization: Wu et al. proposed a hybrid consensus algorithm for blockchains that combines the advantages of PoS and PBFT algorithms. It reduces the number of consensus nodes to a fixed value through verifiable pseudo-random ordering and witnesses transactions between nodes. The improved hybrid consensus algorithm has excellent scalability, high throughput, and low latency, which is superior to the previous single algorithm. In applications: Biswas et al. proposed a proof-of-block-transaction (PoBT) consensus algorithm. The algorithm allows the verification of transactions and the reduction of computation time for blocks, improving the performance of the system in terms of security, computation, memory, and bandwidth. Fu et al. proposed a framework for evaluating consensus algorithms to provide guidance for the selection of consensus algorithms in sundry blockchain application scenarios. 5.1. Pow 5.1.1. Overview The proof of work (PoW) algorithm is one of the most widely used consensus algorithms in blockchain systems, and the Bitcoin system uses the PoW consensus algorithm. The PoW algorithm was first used for spam detection , and the core idea is to include in the email proof that a certain job has been completed (hence the name “proof of work”). Usually, the calculation of such proofs takes a few seconds, so this does not cause any difficulties for casual users. However, for spammers, this can take weeks to send millions of spam emails. Email recipients can easily verify if an email is a spam by proof of workload. In the blockchain using the PoW consensus algorithm, nodes need to constantly search for a specific random number, which is usually required to be calculated by a hash function (e.g., SHA-256) to obtain a hash value starting with several zero bits. It can be verified that the average work required to compute the random number is an exponent of the number of required zero bits. Due to the one-way computation and irreversible nature of the hash function, the random number found by the node is easily verified. In the Bitcoin system, the first node to find a specific random number is given bookkeeping rights and 50 coins as a reward. Hence, the process of finding random numbers is also called: “mining”. 5.1.2. Advantages and Disadvantages The Bitcoin system has been running smoothly since its launch in 2009 without any major failures, which is a testament to the effectiveness and security of PoW. In the PoW consensus, a node needs to control 51% of the computing power of the whole network to launch an attack. In the absence of a centralized node, the probability of a successful node attack is very low. Therefore, PoW consensus can effectively guarantee the security of the blockchain system. However, in PoW consensus, nodes constantly performing hashing operations will consume a large number of power resources, and blockchain chain systems using PoW consensus generally have serious energy consumption problems. In addition, the throughput of transactions in PoW consensus is very low. E.g., Bitcoin processes about seven transactions per second due to the limitation of block-out time and block size. This low transaction throughput makes it difficult to meet other application scenarios. 5.1.3. Improved Algorithms PoEWAL (proof of elapsed work and luck) : The PoEWAL consensus reduced the energy cost of the consensus by adding a time limit to the PoW. The mechanism emphasizes consensus by solving problems partially rather than completely within a fixed time frame. By adjusting the size of a given time period, the resource consumption of block mining can be effectively reduced, and devices with low computing power can also participate in mining. However, the essence of the consensus is still to obtain more consecutive zero hash values through continuous hashing operations. There is a problem similar to PoW where nodes with high arithmetic power have a higher probability of successful mining. The trust-based PoW mechanism : It can effectively solve the problem of high energy consumption in PoW consensus while ensuring the security of the blockchain network. By introducing the attribute of the node credit value, the higher the credit value, the lower the difficulty of node mining. Using a malicious behavior detection mechanism, the behavior of nodes is divided into positive and negative aspects, and positive behavior helps to increase the credit value of nodes. In contrast, negative behavior decreases the credit value of nodes. The positive aspect is expressed as the number of valid transactions calculated and verified by the node in the consensus process. In contrast, the negative aspect is determined by the node’s malicious behavior time and penalty coefficient, where the malicious behavior is divided into two types. One is the node’s lazy inaction in the consensus process. The other is the node’s double spending attack in the transaction. The system dynamically adjusts the penalty factor according to the actual malicious behavior of the node, but it will bring on an additional computational overhead for malicious behavior monitoring. 5.2. Pos/Dpos 5.2.1. Overview The Proof-of-Stake (PoS) algorithm is designed to solve the problem of wasting a lot of resources by using PoW mining. Unlike PoW, which determines the bookkeeping right through the arithmetic power of nodes, PoS differentiates the bookkeeping right through the “equity” of nodes owning coins. The core idea of PoS is that in a decentralized network, the node with the largest equity will have a greater incentive to maintain the network. In terms of implementation, PoS introduces the coin age to dynamically adjust the mining level of nodes with different equity. The older the node, the lower the difficulty of mining it. Based on the appealing advantages of PoS, the PoS algorithm was first adopted in the blockchain platform peercoin, and Ethereum’s consensus mechanism was transitioned from PoW to PoS on 15 September 2022. Although PoS solves the energy consumption problem of PoW, the performance is still not improved. In response to the performance problems of PoS, Dan proposed the delegated proof-of-stake (DPoS) algorithm . The topology of DPoS is shown in Figure 6. DPoS reduces the pressure on the network by reducing the number of participating consensus nodes and adding an election mechanism to PoS. As a variant of PoS, DPoS is similar to PoS in that the number of representative members is limited and elected by all, and the elected representatives participate in the consensus. Mathematics 11 00101 g006 550Figure 6. DPoS topology. 5.2.2. Advantages and Disadvantages PoS consensus can significantly provide the transaction throughput of the system and reduce the energy loss in the consensus process. However, PoS consensus has disadvantages such as poor fairness and ease of generating the Matthew effect. The use of coin age will make it easier for the node with more tokens to gain bookkeeping rights, shifting the power gradually to that node, decentralizing the degree of decentralization, and making fairness worse. 5.2.3. Improved Algorithms e-PoS : In response to the possibility that PoS can lead to centralization and unfairness in blockchain systems, Saadd et al. improved PoS and proposed modular e-PoS. Compared with PoS, e-PoS can resist the power concentration of the network. Ouroboros : Kiayias et al. proposed the first proof-of-stake-based consensus protocol with strict security guarantees. Ouroboros also employed a new incentive mechanism to incentivize “proof-of-stake” protocols, where honest behavior is an approximate Nash equilibrium. 5.3. Pbft 5.3.1. Overview Practical Byzantine fault tolerance (PBFT) can tolerate Byzantine faults. The PBFT algorithm was proposed by Miguel Castro and Barbara Liskov in 1999. It improves the efficiency of the Byzantine algorithm and reduces the complexity from exponential to polynomial, making Byzantine fault tolerance practical. The PBFT algorithm can achieve 2f + 1 fault tolerance; f is the number of Byzantine nodes that can be tolerated; and 2f + 1 can ensure that the correct nodes in it send more information than malicious nodes. Therefore, the minimum number of nodes required by PBFT is 3f + 1 (the maximum number of fault-tolerant nodes is (n − 1)/3). The PBFT algorithm is divided into five stages: request, preparation, preparation, confirmation, and reply. The process is shown in Figure 7. In the request stage, the client initiates a transaction request to the master node. In the pre-preparation phase, the master node verifies the message signature after receiving the request from the client. After the message signature verification is passed, it broadcasts the pre-preparing message to all the network’s nodes. In the preparation phase, the replica node verifies the message after receiving the pre-preparing information broadcast by the master node. If the verification is passed, the node broadcasts the prepare message to other nodes. In the confirmation phase, after receiving the correct prepare message from 2f other nodes, the node will enter the prepared state and send a commit message to other nodes. In the reply phase, after the node receives the commit message, it verifies the message, passes the verification, and waits for the commit message sent by 2f + 1 different nodes. After receiving the message, it will send a reply message to the client. Mathematics 11 00101 g007 550Figure 7. PBFT consensus process. 5.3.2. Advantages and Disadvantages The PBFT algorithm can realize Byzantine fault tolerance with polynomial complexity and reach a consensus in the presence of malicious nodes in the network so that the Byzantine fault tolerance algorithm can be applied in practical systems. However, the PBFT algorithm has problems such as high communication complexity, a fixed number of nodes, poor scalability and dynamics, and only being suitable for private chains or consortium chains. In terms of network resource consumption, the frequent broadcasting of messages by the system will also lead to high bandwidth consumption. When the number of participating nodes increases, network congestion will likely occur, resulting in system performance degradation. Regarding the number of participating nodes, the number of nodes in the PBFT algorithm remains unchanged, the nodes cannot enter and exit at will, and the number of nodes is fixed. 5.3.3. Improved Algorithms Hot-Stuff : This algorithm was proposed by Abra et al. It improves the efficiency of the distributed consistency algorithm by making improvements to PBFT. The Hot-Stuff algorithm uses a parallel pipeline processing proposal, which is equivalent to combining the preparation and commitment phases in PBFT into one phase. In addition, Hot-Stuff uses linear view change (LVC), which reduces the communication complexity in view change. RPBFT : In response to the problems of arbitrary master node selection, a high communication overhead, poor dynamics, and low efficiency in the PBFT algorithm, Li proposed the practical Byzantine fault-tolerant consensus algorithm (RPBFT) based on role management. The RPBFT algorithm divides nodes into three roles, manager, candidate, and normal nodes; and realizes the transition between roles through a reward mechanism and election mechanism. Each role has specific responsibilities, so the nodes do not need to restart the system during joining and exiting. Meanwhile, using a synchronous verification mechanism instead of the traditional view replacement protocol increases the node efficiency. 5.4. Discussion The consensus mechanism is the core part of a blockchain. The traditional distributed consensus mechanism (PBFT) is not well adapted to the unique open environment of the blockchain, and the network connection is replicated between nodes. Therefore, traditional distributed consensus blockchain systems often employ various networking assumptions. However, reality often differs from our assumptions. Consensus mechanisms explicitly designed for blockchains (such as PoW, although its original purpose is not this, are still regarded as representatives of blockchain consensus mechanisms) often do not need to make various assumptions about the network and nodes. Thus, openness and decentralization tend to be stronger. In different application scenarios, the two have their advantages and disadvantages, and blockchain designers must choose. 6. Smart Contracts Smart contracts are the core of blockchain 2.0 , represented by Ethereum smart contracts. They allow a blockchain to handle complex transactions not just limited to cryptocurrency ones. The concept of smart contracts was proposed before the emergence of blockchain, almost simultaneously with the emergence of the modern Internet. However, limited by the technological development at that time, smart contracts were not widely used until the emergence of blockchains. Smart contracts are digitally established contractual terms that are self-verifying, self-executing, and do not require a third party. Compared to traditional contracts, smart contracts are more efficient, less costly, more secure, and free from “repudiation”. Smart contracts are designed to perform safely and efficiently without a trusted third party, which aligns with the “decentralized trust” of blockchain. The smart contract in a blockchain is essentially a piece of code that runs continuously, cannot be modified once deployed, and is executed automatically when a predefined condition is triggered. A blockchain enables reliable information exchange, value transfer, and asset management through smart contracts. 6.1. Development Smart contracts were first proposed by American computer scientist Nick Szabo in 1995 . In 2009, the Bitcoin platform went online, supporting the use of Bitcoin scripts to manage transactions with the prototype of smart contracts. Bitcoin also represented the first generation of blockchain technology. In 2014, Ethereum introduced smart contracts and supported the creation of smart contracts in the Turing-complete programming language. In 2016, Kosba et al. proposed Hawk, a smart contract development framework that protects user privacy. In 2018, Kalra et al. proposed ZEUS, a smart contract security analysis framework. The framework provides an order of magnitude improvement in security analysis time compared to previous techniques. In 2020, Zheng et al. classified smart contract applications by comparing and analyzing typical smart contract platforms. In summary, smart contracts are evolving towards easier development, higher security, and widespread application. Additionally, with the rise in blockchain technology, smart contracts will also receive more attention from scholars while developing rapidly. 6.2. Contract Languages Smart contracts are deployed to blockchains, which requires the contracts to be strongly typed, as blockchains have valuable storage space. In addition, smart contracts should be easy to read and not misleading. Therefore, traditional programming languages such as C/C++ and Java do not write smart contracts very well. Programming languages for smart contracts have been born to meet the development needs of smart contracts. 6.2.1. Solidity Solidity is a new language developed specifically for Ethereum smart contracts. It has a syntax similar to JavaScript and runs on EVM. Solidity is a statically typed programming language that supports inheritance, libraries, and user-defined types. It can be used to create voting, crowdfunding, blind auctions, and multi-signatures. It can be used to create a variety of contracts, such as voting, crowdfunding, blind auction, and multi-signature wallet. On Ethernet, solidity contracts are compiled into bytecode, written to blocks through special transactions, and eventually executed by other transactions driven by the Ethernet VM. Solidity is one of the most widely used contract languages today, but at the same time, solidity has seen many security vulnerabilities and corresponding attacks. 6.2.2. Vyper To solve solidity’s security vulnerabilities, Vyper provides a smart contract language focusing on simplicity, suitability, and security , a contract-oriented Python programming language targeting EVM . Vyper has a very clean and easy-to-understand syntax, so it is almost impossible for developers to write misleading programs. 6.2.3. Daml The DAML language is a domain-specific language specifically designed to encode shared business logic for simple, secure, and efficient applications. DAML is used for developing and deploying distributed applications in blockchain environments and is one of the best programming languages for smart contracts. Developers can use DAML to write applications quickly and concisely as an open-source programming language. 6.3. Platform Comparison 6.3.1. Bitcoin In the Bitcoin network, users can write Bitcoin scripts to manage transactions. Bitcoin scripts are used to implement bitcoin transaction validation by checking a transaction’s lock script and unlock script. Bitcoin scripts are stack-based, non-stateful, non-Turing-complete scripting languages with no complex statements such as select and loop statements, and therefore, they have limited functionality. Bitcoin scripting reduces the complexity of the system while meeting the requirements of transaction needs. However, it also brings disadvantages, such as low flexibility and limited usage. To allow Bitcoin to adapt to different systems, Bitcoin scripts are designed to be stateless so that a script can be executed similarly on any system. Suppose a script is validated on one system. In that case, it ensures that every other system in the Bitcoin network can also validate the script, meaning that a valid transaction is valid for everyone. A Bitcoin script is a sequence of actions for a transaction that describes what happens to the next person who wants to spend the bitcoins being transferred and will gain access to them, divided into locking scripts and transaction scripts. Bitcoin scripts have the makings of a smart contract. 6.3.2. Ethereum For the first time in a blockchain system, Ethereum introduced smart contracts that support Turing completeness . Ethereum uses Solidity to write smart contracts. Solidity is a contract-oriented, high-level programming language created to implement smart contracts. In Ethereum, smart contracts deploy bytecode to the Ethereum network through transactions. Ethereum successful deployment generates a new smart contract account, executed by an Ethereum Virtual Machine (EVM). When deploying a smart contract, the contract code is first compiled into EVM bytecode by the SOLC smart contract compiler, and then a single transaction is used to create the smart contract. Ethereum smart contracts are Turing-complete, so in theory, users can write programs that do anything with them. It is easy to create contracts for voting, crowdfunding, closed auctions, multi-signature wallets, etc., using solidity, and they can meet most smart contract development needs. 6.3.3. Hyperledger Fabric Hyperledger Fabric is a platform for distributed ledger solutions based on a modular architecture that is highly confidential, resilient, flexible, and scalable. Its main purpose is to support the pluggability of different components to the complexity and complexity of the economic ecosystem. Hyperledger Fabric typically deploys smart contracts in the form of chain code. In Hyperledger Fabric, the chain code is the business bearer and is primarily responsible for the specific business logic, i.e., encapsulating transaction definitions and processing logic into interfaces. Each chain code runs in a protected container (Docker), isolated from the running of background nodes. Hyperledger Fabric supports writing smart contracts in multiple languages, such as golang, java, and node.js, which greatly reduces the development threshold for smart contracts. 6.3.4. Eos The Enterprise Operation System (EOS), a commercially distributed application blockchain operating system, is a new blockchain system developed by Block.one which aims to decentralize everything. As a new blockchain architecture , EOS provides a platform for smart contract development. It distributes storage designed to address scalability issues common in blockchain systems such as Ethereum and Bitcoin. EOS provides a decentralized application development environment with high transaction throughput through dPoS consensus and BFT consensus. Unlike Ether, which uses a virtual machine to execute smart contracts, EOS uses WebAssembly3, a portable, small, fast-loading, and web-compatible format, so users can write smart contracts in various languages as long as they can be compiled into WebAssembly3 (e.g., C++). 6.3.5. Avalanche Avalanche is a new generation of public chain projects, and the main network was launched in September 2020. Avalanche is not a blockchain but a collection of blockchains composed of multiple subnets. The subnet has a special subnet consisting of three blockchains, the Primary Network. The three chains are the exchange chain (X-chain), platform chain (P-chain), and contract chain (C-chain). Each of the three chains has its functions, and they can be converted across chains, making it more convenient for users to take advantage of assets. The X-chain is responsible for the establishment and transferal of assets, and most users use this chain when transferring assets or trading assets. The P-chain is responsible for storing the data, information, and verification work on the chain. The C-chain is responsible for the functions of smart contracts. This chain is compatible with EVM, so it can be applied to most smart contracts. Thanks to its unique structure compared with traditional blockchain platforms, Avalanche has higher performance—it can achieve more than 4500tps—and is more scalable and secure. 6.4. Example The following is an example of a money transfer contract to show the complete workflow of smart contract development, deployment, and execution. Suppose A wants to transfer money to B through a smart contract. The contract workflow is shown in Figure 8. First is development, where the business process of transferring money from A to B is written as smart-contract source code, and the source code is compiled into bytecode by a compiler. Next is deployment, where the compiled bytecode is deployed to the blockchain network via a single transaction. After consensus in the P2P network, the contract address is returned for contract invocation. Finally, when the deployed smart contract triggers an execution condition or is invoked to execute the contract transaction (e.g., deducting a specified amount from A’s account and adding a specified amount to B’s wallet), the result of the execution will be written to the block. Mathematics 11 00101 g008 550Figure 8. Smart contract workflow. In the process of transferring funds from A to B, the whole process is open and transparent without the intervention of a third party, and the results of the transaction execution are written to the blockchain and cannot be tampered with. 6.5. Discussion The execution of smart contracts does not require the participation of a third party and can respond to user requests at any time, ensuring the fairness and efficiency of transactions. Before the contract is deployed, all the terms and execution processes have been formulated and executed under the computer’s absolute control, so there is no possibility of errors in the entire process. Once the contract is deployed, all content cannot be modified. If one party breaks the contract, it will be punished accordingly. Using smart contracts can save transaction fees charged by banks and service fees of intermediaries. In addition to the advantages mentioned above, smart contracts still have the following problems: security issues, as it is difficult for anyone to guarantee the complete correctness of the code, and errors cannot be modified; interface problems, as each blockchain has different forms of storage for digital assets; the issue of how to call smart contracts across blockchains to realize asset transfers remains to be researched. 7. Applications From blockchain 1.0 to blockchain 3.0, blockchain technology has been flourishing. Blockchain technology has also been applied from the earliest cryptocurrency to a wider range of fields, such as cryptocurrency, healthcare, IoT, Security AI, and NFT. . The decentralized, open, and transparent characteristics of blockchain can also bring decentralized solution ideas to existing problems in some fields. 7.1. Cryptocurrency Cryptocurrencies have been around since the 1990s but were not used and developed for various reasons until the emergence of Bitcoin made them widely known. Electronic cash (Ecash) emerged in 1990, changing the way traditional money works and allowing it to be traded digitally and anonymously over the Internet. In 1997, Back proposed the hashcash algorithm mechanism , which calculates a token through the CPU cost function and can be used as a proof of workload. In 1998, Dai proposed the electronic cryptocurrency system B-money, a distributed system that uses cryptography to control the currency for transactions, and first adopted the idea of decentralization to design cryptocurrency. In 2008, influenced by the global financial crisis, the international community began exploring innovative finance. Satoshi Nakamoto proposed Bitcoin in this context, which also marked the birth of Blockchain 1.0 technology. Satoshi Nakamoto combined a distributed system using cryptography from Ecash and B-money and a proof-of-work mechanism from Back and Finney to solve the trust and Byzantine problems. Bitcoin is a P2P form of digital currency. Unlike traditional currencies, Bitcoin does not have a central currency issuer, and the P2P network nodes work together to keep the system running. Bitcoin is also the most successfully used cryptocurrency to date. Cryptocurrency is by far the most successful and well-known application of blockchain. Cryptocurrencies, represented by Bitcoin, were once synonymous with blockchain. It is foreseeable that even in the future when blockchains are widely used, cryptocurrencies will remain among of the most important blockchain applications. 7.2. Energy Current energy trading methods are still dominated by traditional centralized trading, which suffers from inefficient trading, opaque trading information, and long settlement times; and distrustful and opaque energy markets have potential security and privacy issues. In addition, intermittent energy sources and microgrids are an important part of the energy supply, and the increasing amount of renewables in the energy system requires new market approaches to pricing and decentralized generation . Compared to centralized generation and single -arket pricing strategies, using a decentralized blockchain to control generation and energy trading can better incentivize generation organizations, improve generation efficiency, and facilitate energy trading. Kang et al. proposed a localized P2P power trading system (PETCON) for local power trading among plug-in hybrid electric vehicles (PHEVs) based on consortium chain technology. In PETCON, electricity trading among PHEVs is resolved through an iterative double-auction mechanism that maximizes social welfare while protecting PHEVs’ privacy. Su et al. proposed a smart-contract-based energy blockchain system that enables secure charging services for electric vehicles by executing smart contracts. The experimental results show that the scheme has higher efficiency compared to other conventional schemes. Blockchain technology will be applied more to decentralized energy management and energy trading in the future, and decentralized energy management systems can supplement the current centralized energy management system. 7.3. Healthcare The current information systems of most medical institutions are centralized and stored independently, which makes it difficult to efficiently interconnect data among medical institutions and inconvenient for patients to seek medical treatment across institutions. Centralized information systems are also vulnerable to hacking and data leakage, compromising patients’ privacy. Blockchain’s tamper-proof and verification features can ensure that patients’ private information is not leaked . Azaria et al. have built a decentralized record management system (MedRec) to handle electronic medical data using blockchain technology. The system provides a comprehensive, immutable patient log and is easily accessible. Using PoW incentives enables patients to participate as “miners” in maintaining the system’s security while allowing patients and providers to choose the release of metadata to facilitate medical research. healthbank, a Swiss global digital health startup, offers users a secure blockchain-based data management platform , where users can store and manage their health information data, and the sovereignty of the data is in the hands of the user. In addition, healthbank can act as a data trading platform where users can save data for medical research, and where users can receive specific financial compensation for the data they provide. hirtan et al. implemented a medical data-sharing system using Hyperledger Fabric, which can share important information about medical analytics among hospitals, medical clinics, and research institutions based on patient-defined access policies. The system uses a combination of public and private chains to protect user privacy. The private chain stores the user’s accurate ID information, and the public chain stores patient health information labeled with temporary IDs. In summary, the use of blockchain to build a decentralized medical data management platform enables the sharing of medical data to facilitate medical research while ensuring the privacy and security of the data. 7.4. Internet of Things IoT devices are found in various scenarios, such as cities, buildings, and homes. IoT combines various information sensing devices with networks to form a huge network to achieve interconnection of people, machines, and things at any time and place, allowing traditional devices to become intelligent and autonomous . However, the IoT still has issues such as security and privacy that hinder its widespread use. A blockchain can establish decentralized trust in a distributed environment , which helps to overcome the security issues and privacy problems of IoT. Alphand et al. combined an object-based IoT security architecture and an ACE authorization framework. Their solution uses a blockchain to replace a single ACE authorization server. It enables smart contracts, handles authorization requests, and uses a self-healing key distribution scheme to achieve efficient management of the IoT. Li et al. proposed a multilayer, secure IoT network model based on blockchain technology, providing a wide-area network solution for the IoT. The model reduces the difficulty of blockchain deployment by dividing the IoT into a multi-layered decentralized network while ensuring the high security and trustworthiness of the blockchain. Pinno et al. proposed a blockchain-based IoT access authorization architecture that ensures the privacy and confidentiality of information collected by IoT devices. The architecture is compatible with many access control models used in the IoT today. In summary, more and more blockchain technologies are being applied to the Internet of Things (IoT) to solve the privacy and security problems in the IoT. However, a blockchain consumes many resources, and IoT devices generally have little computing power and storage space, so the traditional blockchain is not directly applicable to the IoT. 7.5. Security AI Thanks to the development of computing power brought about by cloud computing and the generation of many samples in the era of big data, artificial intelligence technology, represented by machine learning, has been developed and used increasingly. However, studies have shown that machine learning models are vulnerable to attacks that lead to privacy leaks, posing privacy and security risks. Blockchain’s data are highly redundant and decentralized, which is ideal for storing and protecting important privacy data from data loss or privacy leakage caused by attacks or mismanagement of centralized institutions. In recent years, various scholars have researched how blockchain can be applied to AI privacy protection. Zyskind et al. implemented a decentralized personal data management system based on blockchain technology to ensure that users own and control their data. Additionally, they implemented a protocol that turns the blockchain into an automated access control manager that does not require a third party. Chen et al. proposed LearningChain, a decentralized machine learning system for privacy protection and security, and designed a distributed stochastic gradient descent (SGD) algorithm to learn general prediction models. Decentralized SGD uses a differential privacy-based scheme to protect the data privacy of each party. Qi et al. proposed a federated learning framework based on the consortium chains which can achieve secure and reliable federated learning without the need for a central model server. The federated learning framework can effectively protect model data privacy and prevent data poisoning attacks due to the noise-added differential privacy mechanism. The blockchain can be regarded as a decentralized trusted database, replacing the centralized server to realize the data storage function required for machine learning and avoid privacy and security attacks on the central server. 7.6. Nft A Non-Fungible Token (NFT) is a token issued according to the Ethereum ERC721 and ERC1155 standards. It has indivisible, irreplaceable, and unique characteristics. Through NFTs, all tokenized properties can be freely traded with customized values based on age, rarity, liquidity, etc. NFT is mainly used for games, artworks, domain names, collectibles, virtual assets, real assets tokenization, and other fields, especially artwork and games that have received great attention in the market. NFT has greatly stimulated the prosperity of the decentralized application market. According to data from the cryptoslam website, as of August 2022, the cumulative transaction volume of NFT has reached $39,245,668,068. Wang et al. conducted systematic research on NFTs for the first time, pointing out that the development of the NFT ecosystem is at an early stage, and related technologies need to be further developed. 7.7. Web 3.0 Web 3.0 is generally considered the next generation of the Internet, a decentralized Internet running on blockchain technology. In this environment, users do not have to create multiple identities on different centralized platforms but can create a decentralized universal digital identity system that can pass through various platforms. The most prominent feature of Web 3.0 is that it can not only realize the exchange of data but also realize the circulation of value . Web 1.0 data are read-only, such as Yahoo and MSN data. Web 2.0 data are read–write interactive, such as Facebook and Twitter data. Web 3.0 data are read–write interactive and owned and controlled by the creator; representative applications include Bitcoin, Ethereum, IPFS, etc. Web 3.0 is a new network infrastructure that integrates the traditional Internet, blockchain, programmable economy, etc. It is currently experiencing a blockchain, and its final architecture is uncertain, but the booming trend is unavoidable.
CRYPTOCAP:TOTALEducation
by BitonGroup
4
CONTRACTING AND EXPANDING TRIANGLESTriangle patterns are powerful technical indicators that provide traders with valuable insights into potential market trends and price movements. Among the various types of triangle patterns, horizontal triangles, contracting triangles, and expanding triangles are widely recognized for their reliability and effectiveness. Horizontal triangles, also known as symmetrical triangles, occur when the price consolidates between two converging trendlines. These trendlines are drawn by connecting a series of lower highs and higher lows. Horizontal triangles signify a period of indecision in the market, as buyers and sellers battle for control. There are two types of horizontal triangles: Contracting Triangles and Expanding Triangles. Contracting Triangle: Contracting triangles, also known as descending or ascending triangles, are characterized by converging trendlines with one trendline slanting upward or downward. These patterns indicate a gradual decrease in price volatility and suggest an imminent breakout. Characteristics: 1. Converging Trendlines: One trendline is drawn horizontally, acting as support or resistance, while the other trendline slants in the opposite direction. 2. Decreasing Range: The price range between the trendlines gradually narrows as the pattern progresses. 3. Breakout Anticipation: Traders expect a breakout in the direction opposite to the slant of the converging trendlines. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline (in descending triangles) or below the lower trendline (in ascending triangles) to enter a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to mitigate potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Expanding Triangle: Expanding triangles, also known as broadening triangles, are characterized by diverging trendlines, indicating increased volatility and uncertainty in the market. These patterns often precede significant price reversals. Characteristics: 1. Diverging Trendlines: The upper and lower trendlines move in opposite directions, creating a widening pattern. 2. Increasing Range: The price range between the trendlines expands as the pattern develops, reflecting growing market volatility. 3. Breakout Anticipation: Traders anticipate a breakout in the direction opposite to the widening of the triangle pattern. Entry and Exit points 1. Entry Point: Wait for a confirmed breakout above the upper trendline or below the lower trendline to initiate a trade. 2. Stop-Loss Placement: Set a stop-loss order slightly outside the triangle pattern to limit potential losses if the breakout fails. 3. Target Price: Measure the height of the triangle pattern and project it in the direction of the breakout to determine a potential target price. Horizontal triangle patterns offer traders valuable insights into potential market trends and price movements. By understanding the characteristics and formation of these patterns, traders can effectively identify entry and exit points, set appropriate stop-loss orders, and determine target prices. However, it is essential to combine triangle patterns with other technical analysis tools and indicators for a comprehensive trading strategy. With practice and experience, traders can harness the power of triangle patterns to enhance their trading decisions.
Education
by UnknownUnicorn15614419
5
Mastering the Pin Bar Candlestick Pattern in Forex 🕵️‍♂️📈✨ In the world of forex and gold trading, chart patterns often hold the key to unlocking profit potential. Among these patterns, the pin bar stands out for its reliability and versatility. In this comprehensive guide, we'll delve into how to effectively apply the pin bar candlestick pattern to enhance your trading strategies. Through real-world examples, you'll gain the skills and knowledge to spot and leverage this powerful pattern in your trading endeavors. Understanding the Pin Bar Candlestick Pattern A pin bar, or "Pinocchio bar," is a single candlestick pattern that indicates potential price reversals or continuations. It consists of a small body with a long wick or "nose" that extends beyond the body. The direction of the nose (up or down) is a crucial signal: - Bullish Pin Bar: The nose points downward and appears at the bottom of a downtrend, suggesting a potential bullish reversal. Example 1: Bullish Pin Bar in Gold Trading - Bearish Pin Bar: The nose points upward and forms at the top of an uptrend, indicating a possible bearish reversal. Example 2: Bearish Pin Bar in Forex Applying the Pin Bar in Your Trading Strategy 1. Confirmation: Don't rely solely on the pin bar; use it in conjunction with other technical analysis tools like support and resistance levels, trendlines, and indicators to confirm your trade. 2. Risk Management: Set stop-loss orders below the low (for bearish pin bars) or above the high (for bullish pin bars) of the pin bar to limit potential losses. 3. Entry and Exit: Determine your entry and exit points based on the pin bar's implications. For instance, you might enter a trade on the open of the next candle after a pin bar and exit when a predetermined profit target is reached. The pin bar candlestick pattern is a valuable tool in forex and gold trading, offering insights into potential reversals or continuations. By understanding its structure and applying it in conjunction with other technical analysis tools, you can make more informed trading decisions. Remember, practice and careful analysis are key to successfully integrating the pin bar into your trading strategy. Now, armed with this knowledge, you're ready to uncover profit potential in the markets! 🕵️‍♂️📈✨ Dear followers, let me know, what topic interests you for new educational posts?
COINBASE:BTCUSDEducation
by SignalProvider
11
The BEST trade to TAKE!Do you know what the BEST trade is? The best trade is not a winner. The best trade is not a lucky streak. The best trade is not what you think… If you’ve followed your rules, strategy, criteria, risk management and taken the trade. That is the BEST you can do. Whether it wins or not, you have taken the BEST trade. Let’s dig in… Follow Your Rules Every successful trader has a set of rules that act as the bedrock of their strategy. These rules are based on highly researched analyses on back and forward testing. In the medium to long term, you’ll reap the rewards. Therefore, your BEST trade is following your rules. Wait for the criteria To find the BEST trade, you must establish specific criteria that a trade must meet before you pull the trigger. Maybe you’re waiting for syzygy between price action, candlesticks, volume, indicators, chart patterns or a combination of them. Once the criteria has been met, then you’re ready to take the BEST trade…. Keep to your risk management Protecting and preserving your capital is paramount in trading. The BEST trade is when you have assessed the risks and put your safeguards for your trades. What are you willing to risk per trade? What is your margin requirements in the trade? Is it affordable? Will you have enough capital to play it through Will you have enough capital to take on many other BEST trades? Can you emotionally handle the risk per trade? Once you’ve got the right answers, you’re ready to take the BEST trade. Own your mindset – The Ultimate Act of Courage You know the trade might be a winner or loser. And it’s not about the outcome. IThe BEST trade is about having the courage to execute when all your criteria are met. It’s about trusting your process and embracing the uncertainty that comes with every trade. J.T.T.B.T – Just Take The BEST trade Once you’ve done the planning, analyses, risk assessment, then you’re ready to Just Take The BEST Trade! You’ve done your job. If it wins great – it’s once step closer to portfolio growth. If it loses – it’s the cost of the trading business. Remember this… The BEST trade is not a destination but a journey filled with learning, discipline, and resilience. It’s not solely about profit or loss. It’s about the process of becoming a better trader and evolving as a trader yourself. Let’s sum up with the steps to you taking the BEST Trade. Follow Your Rules Wait for the criteria Keep to your risk management Own your mindset – The Ultimate Act of Courage J.T.T.B.T – Just Take The BEST trade
TVC:SA40Education
by Timonrosso
Why We NEED to Lose To Be SuccessfulThere is a paradox to succeed when trading. And that is, we need to lose to win. We need to make sure though that our potential losses are ALWAYS less than our gains. I want to go through some of the reasons why losses are not only inevitable but also essential in the journey of successful trading. Reason #1. Losses are Inevitable Financial markets are largely unpredictable due to a plethora of influencing factors such as: Demand & supply Geo, economical and political events Algorithm volume trading by institutions New influx of traders into the market. Unpredictable micro and macro events The unpredictable nature implies that losses are part and parcel of trading. Not even the most seasoned traders can boast of a 100% win rate. Most successful traders end up with a 48% to 70% win rate. So, if you’re looking for a high win rate – you need a reality check to stay grounded and humble. Only then, you may have a chance at winning in this difficult game. Reason #2. Losing Months Will Happen Even when you work and follow proven and profitable strategies, you will face a time of losing streaks. This can occur over weeks, even stretching into months. You might lose a small chunk of your portfolio, but then you’ll need to the time to recoup and bring your portfolio back to ATH (All time highs). Reason #3. Unfavourable market conditions Markets are intrinsically volatile. Not only that but, small markets tend to follow the bigger leaders. And when the price fluctuations are erratic by nature, it carries the stocks, indices and other markets with it. E.g. We could see the S&P 500 move in a sideways consolidation period for three months in a row. And now matter how good the prospects are within a smaller market, they tend to follow the main indices. So, we have to just wait for the better times and for the more conducive market conditions. This moves on to a bigger element: Reason #4: Economic Cycles Broad economic cycles include: Accumulation Mark-up phase Distribution Mark down phase Then there are periods of a boom, recession and a crash. These will also impact market trends and lead to losses. It’s important to learn to hedge positions (long and short) and know when to be neutral (no holdings). You’ll need to learn how to adapt and integrate losses into your trading. That way, you’ll be more prepared and less emotional for when they come. Let’s sum up the reasons: Reason #1. Losses are Inevitable Reason #2. Losing Months Will Happen Reason #3. Unfavourable market conditions Reason #4: Economic Cycles
TVC:SA40Education
by Timonrosso
📢 Quad witching. What is it? What to expect? How to trade it.First thing, it's actually triple-witching now. There used to be a 4th contract, but now there's only 3. 3 contracts expire on this day: Index futures (S&P, Dow) contracts Index options (i.e. SP:SPX ) contracts Stock options ( NASDAQ:AAPL NASDAQ:GOOG NASDAQ:NVDA etc) contracts Single stock futures contracts. They don't exist anymore. That's why it's TRIPLE witching now. This only happens in March, June, September, and December. The third Friday. For example, when you buy "AAPL 100c 9/15/23", the date is the expiration. Only if it's ITM and you're holding before close, you will have to decide to KEEP your contracts, ROLL them over, or SELL them. If you KEEP, you'll get 100 shares per contract. Now imagine $3.4T worth of contracts having to go through that on the same day. Volatility. There's $3.4T worth of contracts expiring tomorrow--- the highest ever in any September expiration, and the 6th largest ever. 10 of the last 11 September witching, SPY finished red around -0.50%. I calculated the range for SPY during the last 3 years of witching, it's around 6.5-7 points. The ATR for SPY for the last 60 days is 4.58 points. The week after September witching tends to be a rollercoaster ride. March 20, 2020 was a witching day (yes pandemic, but good to know) So what should you do? If you have no experience, do nothing. If you're **day-trading**, take your gains quickly and don't expect a lot. If you're adding to your swings, wait for good dips. Expect the highest volatility around 2-4 PM. Don't trade 0DTE. If you do, don't hold for glory. Lol. Watch for impulsive moves causing SL raids Watch the closely. It will be very telling since whales will be readjusting positions and possibly rolling/ reloading. Expect volatility. High volume on indices, major stocks, and further out option contracts (people rolling over their contracts) Expect liquidity grabs, fake outs, etc. If you don't trade it, enjoy the volatility. Watch TVC:VIX (volatility index) Don't go heavy on any positions. Buy slow, don't chase, and ask questions if unsure. Don't force trades. Don't FOMO buy. Don't chase. Don't get caught in the volatility. Use support/ resistance/ supply/ demand zones. They work best on these days as they show liquidity grabs, fakeouts, etc. Just looking out. Hope you benefitted. I'll be posting my trades in my community linked below. Welcome to come & follow.
AMEX:SPYEducation
by kingdips
Piles Of Doo-DooThe Biden Admin has single-handedly destroyed the Economy in record time. Core Inflation soars UP 400% in the first 12 month's. The only way that can happen is intentionally. Yet, there are no lockdowns, a "vaccine" has been released and there is no WW3. Plans backfired, now it looks like everyone is standing around trying to dig all the dog shit out of their shoes. Sorry, it's your shit and it belongs to you and nothing can save you now. This chart does not even include soaring Gas & Food prices which actually makes Inflation much worse than it's being portrayed here.
ECONOMICS:USCIREducation
by cldx
📝 ALWAYS review your trades and improve your trading strategy.ALL your trades should get a good in-depth review. Unless, of course, you're just gambling, then the market isn't for you, and you're likely not even using TradingView -- because why would you need a chart? 🙂 If you make a red trade, review it, do better next time. If you make a green trade, but you were like this the whole time: :sweating: ... chances are you were lucky. Review it, do better next time. If you make a green trade and it doesn't "continue", so to speak, either you knew exactly what you were doing (nice!), or you were lucky. Review it, do better next time. If you make a GREAT trade and it continues to RIP after (aka "left gains on the table"), NICE JOB.. Review it. Do it again. And again. Keep reviewing all your trades till you have a bullet proof strategy. There is no other way to advance as a trader. If you don't review your trades, you will not improve. Open your mind to learning from other traders. You may be better than them in some things, but they may be better than you in some things. Kobe, Lebron, Ronaldo, Messi, Brady, and every athlete you can name has went to practice every day throughout his/ her career. Pros don't stop practicing. Neither should you. In the referenced trade, I made a quick +10% in NASDAQ:QQQ calls. Although the intention was to scalp, I got lucky to not get burned. Here's how I normally review my trades: Remember to NOT force trades. There's no point. I warned against forcing any trades yesterday in my quad/ triple witching post. Volatility is no joke. More volatility coming next week. Remember that. Follow for more insight & share/ like this with others who can benefit. Welcome to join my community. Link below.
CME_MINI:NQ1!Education
by kingdips
WHAT EXACTLY IS A TRADING EDGE?In the world of the forex market, having a trading edge can make all the difference between success and failure. A trading edge refers to a set of unique advantages or strategies that give us an increased probability of making profitable trades. It is the secret weapon that separates the winners from the losers in the highly competitive trading arena. In this post, we will explore some key elements that contribute to a trader's edge and how they can be effectively utilized. One of the crucial components of a trading edge is the ability to identify and execute high-probability setups. These setups are specific market conditions or patterns that have historically shown a higher likelihood of resulting in profitable trades. Traders with well-defined setups can quickly assess the market and take advantage of favorable opportunities. However, having a setup alone is not enough; we must develop a comprehensive strategy to guide our decision-making process. A trading strategy encompasses our overall approach to the market, including entry and exit rules, risk management parameters, and trade management techniques. A well-thought-out strategy provides a systematic framework to follow, reducing emotional decision-making and increasing consistency. To maximize our trading edge, we must pay attention to both pre-market and post-market analysis. Pre-market analysis involves evaluating market conditions and news events before the opening bell. This allows us to anticipate potential price movements and adjust our strategy accordingly. Post-market analysis helps review trades, identify strengths and weaknesses, and make adjustments for future trades. Keeping a trading journal is another essential tool for enhancing our trading edge. A journal serves as a record of all trades, including entry and exit points, reasons for entering the trade, and lessons learned. By regularly reviewing the journal, we can identify patterns in the decision-making process and refine our strategy accordingly. The market itself plays a significant role in our trading edge. Understanding the overall market sentiment, trends, and key levels of support and resistance can provide valuable insights for making informed trading decisions. Traders who stay informed about market dynamics are better equipped to adapt their strategies to changing conditions. The time of day and time frame chosen for trading can also contribute to our trading edge as well. Different trading strategies may work better during specific times of the day (sessions) or on particular time frames. Some traders prefer short-term intraday trades, while others focus on longer-term swing trades. Identifying the most suitable time frames and trading hours can significantly increase our chances of success. News events are another factor that can impact a trader's edge. Economic releases, corporate earnings announcements (for stock traders), and geopolitical developments can cause significant market volatility. Traders who stay updated on news events and understand their potential impact on the market can adjust their strategies accordingly or even capitalize on these events. Effective money management and risk management are vital aspects of maintaining a trading edge. Money management involves determining the appropriate position sizing and risk per trade, ensuring that losses are controlled and profits are maximized. Risk management techniques, such as setting stop-loss orders and trailing stops, help protect against excessive losses and preserve capital. Our first job is not to make a profit but to preserve our capital. Establishing a routine and following specific rituals can also contribute to our trading edge. A routine helps to maintain discipline and consistency in trading. Routines, such as reviewing charts, analyzing news events, and mentally preparing before each trading session, can help us get into the right mindset for making sound decisions. What do you do in the morning after waking up? Go straight to the chart? Meditate for 15 minutes? What are you going to do if a family incident occurs or if the power goes out? Creating a watchlist and trade plan is the final piece of the puzzle for enhancing our edge in the markets. A watchlist consists of potential trade opportunities that meet our setup criteria. By having a pre-defined list of stocks or forex pairs to focus on, we can avoid being overwhelmed by numerous options. A trade plan outlines the specific steps to be taken for each trade, including entry and exit points, risk management parameters, and profit targets. In conclusion, a trading edge is a combination of various elements that contribute to our success in the financial markets. By developing a set of high-probability setups, implementing a well-defined strategy, staying informed about market dynamics and news events, and effectively managing money and risks, we can gain a significant advantage in the markets. Maintaining a routine, following rituals, and having a watchlist—all of these become part of the trade plan that gives us an edge in the markets. And if we apply discipline and consistency to it, we have a much higher chance of being successful in trading. Traders, if you liked this educational post, give it a boost and write in the comments.
Education
by Lingrid
13
How To Improve Your Win RateHey guys! Today, we're discussing 3 concrete strategies that you can use to improve your win rate with your trading strategy. This includes: 1.) How to improve your underlying decision making (trade with the trend, take advantage of levels, and understand the fundamentals driving supply and demand). 2.) How to adjust your exit strategy to improve your win rate, trading psychology, and (potentially) expected value. 3.) How to reframe the markets using probabilities and options. Leveraging the law of large numbers can allow you to hit what you're aiming for, including a high win rate with many different option structures. Questions? Hit us up in the comments. Looking for more high-probability trade ideas? Follow us below. ⬇️⬇️
NASDAQ:TSLAEducation
by PropNotes
18
EUR/USD Scalp IdeaPay close attention! This is the Last 7 Days (Trading Days ofc) ! I drew the London Session's Low , You see Every time we Hunted the London Low in NY Session and Reclaimed it, So We had a Scalp Chance to Long at London Low and Take Profit after 24 hours. the only day that we didn't reclaim London Low, it was Thursday and the price was effected by the news. Thursday's News: 🕯USD: Core PPI m/m 🕯USD: Core Retail Sales m/m 🕯USD: PPI m/m 🕯USD: Retail Sales m/m 🕯USD: Unemployment Claims Do you Think we Should keep using this Pattern for the next couple days? How we can improve our Stop and TP?
Education
by rohi99
The Relative Strength Index Explained [RSI]Hello traders and investors! If you appreciate our charts, give us a quick 💜. Your support matters! The Relative Strength Index (RSI) is a powerful tool used in technical analysis to gauge the momentum and potential overbought or oversold conditions of an asset. Here's a breakdown of how it works: Time Period and Calculation: By default, the RSI measures the price changes of an asset over a set period, which is usually 14 periods. These periods can represent days on daily charts, hours on hourly charts, or any other timeframe you choose. The formula then calculates two averages: the average gain the price has had over those periods and the average loss it has sustained. Momentum Indicator: RSI is categorized as a momentum indicator. It essentially measures how quickly the price or data is changing. When the RSI indicates increasing momentum and the price is rising, it signals active buying in the market. Conversely, if momentum is increasing to the downside, it suggests that selling pressure is intensifying. Momentum Explained: Momentum in trading is like measuring how fast a car is speeding up or slowing down. In the case of RSI, it's all about understanding if a cryptocurrency or stock is picking up speed in its price changes or slowing down. RSI as a Trend Strength Indicator: Think of RSI as a meter that shows you how strong the current trend is in the world of trading. It's like checking the engine power of a car to see how fast it can go. Shifting Frame Analogy: Imagine RSI as a shifting picture frame. This frame covers a certain number of periods, say 14 days, just like a moving window in time. When a day with a significant loss falls out of this frame, and days with substantial gains come into view, it's as if the frame is shifting to reveal a brighter picture. This shift in the frame is reflected in the RSI. If the new days are bringing in more gains than losses, the RSI goes from being low (indicating a weak trend) to high (indicating a strong trend). RSI and Momentum: RSI acts like a swinging pendulum, moving back and forth between 0 and 100. It tells you the current speed of price changes in the market. When RSI is going up, think of it like a rocket taking off – it indicates bullish momentum, meaning prices are likely rising. Conversely, when RSI is going down, it's like a balloon deflating – this suggests bearish momentum, indicating prices are likely falling. Overbought and Oversold Conditions: RSI helps you spot extreme conditions in the market. If RSI goes above 70, it's like a warning sign that the price might have gone up too fast, and the asset could be overbought. It's a bit like when a stock is in high demand, and everyone's rushing to buy it. On the flip side, if RSI drops below 30, it's a signal that the price may have fallen too quickly, and the asset could be oversold. It's a bit like when a stock is out of favor, and everyone's selling it. So, when you see RSI crossing these thresholds, it's like a traffic light for traders. Above 70 is like a red light (be cautious, price may reverse), and below 30 is like a green light (consider buying, price may bounce back). These are handy rules of thumb for making trading decisions! Price Reversals in Overbought/Oversold Territory: When a stock or cryptocurrency's price is in the overbought or oversold territory (RSI above 70 or below 30), it's like a warning sign that a reversal might happen. However, it's important to remember that these levels don't guarantee an immediate reversal. Just because RSI is high doesn't mean you should rush to sell, and vice versa. Prices can remain in these extreme zones for a while before reversing. RSI as a Tool, Not a Sole Decision Maker: RSI is a tool in your trading toolbox, not a crystal ball. It's one piece of the puzzle. It's not accurate to say, "RSI < 30 equals an automatic buy signal, and RSI > 70 equals an automatic sell signal." Trading involves more factors and judgment than that. Consider Multiple Timeframes: Looking at different timeframes is like zooming in and out on a map. It provides a more complete picture of what's happening. For example, if the daily RSI is showing overbought conditions, but the weekly RSI is still in a healthy range, it suggests a different perspective. The longer-term trend may still be intact. Oscillating Indicator: RSI oscillates between 0 and 100, providing traders with a visual representation of an asset's strength or weakness. The scale helps identify potential overbought or oversold market conditions. An RSI score of 30 or lower suggests that the asset is likely nearing its bottom and is considered oversold. Conversely, an RSI measurement above 70 indicates that the asset price is likely nearing its peak and is considered overbought for that period. Customization: While the default setting for RSI is 14 periods, traders can adjust this parameter to suit their trading strategies. Shortening the period, such as using a 7-day RSI, makes the indicator more sensitive to recent price movements. In contrast, using a longer period like 21 days reduces sensitivity. Additionally, some traders adapt the overbought and oversold levels, using 20 and 80 instead of the default 30 and 70, to fine-tune the indicator for specific trading setups and reduce false signals. Divergences: Divergences occur when the price of an asset and its RSI are moving in opposite directions. It's like having two friends walking together but going in different directions. Regular Divergences: Imagine this like a traffic signal turning red when everyone's used to it being green. Regular divergences signal a potential trend reversal. For example, if the price is going up (bullish), but RSI is going down (bearish), it could indicate that the bullish trend is losing steam, and a reversal might be on the horizon. Hidden Divergences: Hidden divergences are like a green light at a junction where everyone expects red. They signal a potential trend continuation. For instance, if the price is going down (bearish), but RSI is going up (bullish), it could mean that the bearish trend might continue but with less intensity. Learn more about divergence: Practical Use and Timeframes: Divergences are like big road signs on a highway. They're often easier to spot on higher timeframes, such as daily or weekly charts, where the broader trend becomes more apparent. When you see a divergence, it's like getting a heads-up that something interesting might happen in the market, but it's important to combine this signal with other analysis and indicators to make informed trading decisions.
CRYPTO:BTCUSDEducation
by Vestinda
ARM: Be careful chasing hot IPOs.NASDAQ:ARM see a lot of FOMO here.. Remember: Don't market buy. They will fill your order as high as possible. Don't FOMO buy. Don't force a trade. SoftBank is a dumper. They tried dumping ARM in 2020 for a +25% gain to $NVDA. Let that sink in. Also, don't short it. You might get roasted. SoftBank bought 25% stake at 64B valuation recently. That means that should serve as a decent floor. The other floor is 40B which NASDAQ:NVDA would scoop up I imagine. Follow for more tips & like this post. Your support is appreciated.
NASDAQ:ARMEducation
by kingdips
1
Enhance your Trading Expertise into the Future – 5 Tech breakthrIn today’s rapidly evolving financial landscape. You really need to stay ahead or get left behind. It’s our passion to help you deepen your knowledge of the market trends and technologies that are shaping the future. And you know what, there are some very important trends and sectors you’ll need to adapt to your trading. Let’s explore some of the new paradigms that are transforming the trading ecosystem. New ETFs Exchange Traded Funds (ETFs) have surged in popularity lately. This is because of their flexibility, accessibility, and potential for diversification. You’re going to hear a lot more from companies like BlackRock’s iShares and Vanguard leading the way. Recently, thematic ETFs have been gaining traction. These ETFs focus on niche areas like environmental, social, and governance (ESG), technology, and health. For example, the ARK Innovation ETF (ARKK), managed by ARK Invest. This targets companies that are expected to benefit from disruptive innovation across different sectors. New AI Tech Artificial intelligence (AI) is revolutionizing financial trading by providing traders with automated, high-speed decisions based on complex algorithms. You need to adapt AI into your life, before it goes past your head. AI-powered trading software’s is another thing I am looking at and trying to adapt into MATI. With it you’ll be able to analyze large volumes of data at lightning speed. This will allow you to make more informed decisions, run your trading journal, analyse data and even pinpoint which markets work best with your strategy. We are still in the infant stage of deep and machine learning with trading, so learn and grow with it. Electric Vehicles The electric vehicle (EV) industry is really taking over. I’m sure you’re seeing more Teslas on the road than ever before. I’m sure you’re seeing electric vehicle stations to charge cars. Even by the ports and harbours, you’ll see electric charging stations. With companies such as Tesla and NIO leading the charge. As the demand for clean energy solutions grows, It’s not just about the car manufacturers. But also the companies that provide these charging stations like (ChargePoint, Blink Charging) and battery technology (Panasonic, LG Chem). Space Tourism Space tourism is no longer a figment of science fiction. Companies like SpaceX, Blue Origin, and Virgin Galactic are making commercial space travel a reality. Just recently in June 2023, Virgin Galactic had their first space tourism trial experience. Before you know it, maybe we too will be looking at our beautiful blueberry of a planet from space. Metaverse The Metaverse is where you can combine a fully immersed world with VR ora shared digital experience with virtually augmented physical reality. Companies like Facebook (now Meta Platforms), Apple and Roblox are investing heavily in this space. This is just a scratch of what is coming out, and what I’ll be applying to trading. Here are another 20 breakthrough technologies to watch out for. Quantum Computing CRISPR and Gene Editing Autonomous Vehicles Advanced Robotics Machine Learning (ML) Nanotechnology Li-Fi (Light Fidelity) Synthetic Biology Hyperloop Technology Smart Cities Hydrogen Energy Lab-Grown Meat 3D Bioprinting Drone Delivery Personal A Remember, knowledge is not just power – in the world of trading, it’s profit.
TVC:SA40Education
by Timonrosso
Relationship between CPI and Oil price A rise in oil prices may cause the consumer price index (CIP) and Producer Price Index (PPI) higher. Today US CPI climbed to 3.7% from 3.2% as Oil price continues to raise high since June 2023. Rising oil prices increase the cost of transporting goods and services, as a result the inflation raises high. WTI CRUDE 88.73 BRENT CRUDE 92.09 MURBAN CRUDE 94.38 Producer Price index (PPI) Sep 14, 2023 (Aug) 0.4 %( expect) 0.3 %( Previous) We can expect coming PPI to rise higher than expected (0.4%) as there is a stronger correlation between oil prices and producer prices more than the correlation between the oil price and CPI as the (PPI) measures the average selling price from domestic producers and It can be directly linked to inputs.
ECONOMICS:USIRYYEducation
by NICKY-FX
CHECKLIST AS PART OF THE TRADING PLANHello, friends! We all know that it is important to have a trading plan and a profitable strategy, and, of course, to follow them. Now, the issue of discipline and following your own trading rules is where most of the problems start. However, there is one simple tool, literally a piece of paper, that can help you significantly improve your discipline in trading and, as a result, your key performance indicators and profits. With that simple tool being the checklist. In this article we will talk about why it is important, why it is important for a trader and how to properly compile and apply it. Why do traders plan their trades? Great traders and world-famous investors plan how, when and why they are investing. They realize that to achieve their ultimate goal, they need a map outlining the route of their trading plan that will help guide them to make the right decisions at the right time. A trading plan will provide you with structure and help you develop discipline in your trading actions. It will help you track your trading process, assign responsibility and measure your success. It will provide you with a framework to clearly visualize your current situation at any given time, and will help you identify your goals, outline your strategy, and determine your risks and returns. Whether you are an experienced trader or just a beginner, a well thought out trading plan is sort of the vehicle you need to get to your destination. Not only is it important to have your trading plan, but it is equally important to stick to it. Some of us easily stick to it, while others are in a constant struggle with their concept and the reality of carefully following the rules, they have defined in their strict trading plan. Do you really have a trading plan that you would follow by properly executing your market entries and exits? I'm a big advocate that we should all have a clear system to support our decision making that will help us remain objective and unbiased about when to buy and sell. However, should any good system that you should follow be so unambiguous? Should you trust it or doubt it? Your discipline and commitment to your trading plan can be measured, reviewed and improved. You can incorporate key performance indicators into your trading strategy and determine how closely you follow your rules and trading plan. The number of mistakes you make based on aspects such as noise, emotion or oversights can be counted and questioned - as a result, you can improve your trading plan. Identify your mistakes by comparing when your system gives you a buy or sell signal, when and why you actually executed it. If most of your trades are not executed according to your system or rules, you may be managing your positions intuitively rather than following the rules. This approach to trading lacks consistency and will negatively impact your returns in the long run. At the same time, there are cases where trading based on emotion will minimize losses and lock in profits, but only a narrow range of professional traders have intuitively mastered this ability on a consistent basis. In the end, for the remaining traders, emotion-based trading does not work because it cannot be replicated, and it only leads to insolvency and frustration. What may work today will not work tomorrow and always. In addition, this kind of trading increases stress and creates bad habits for repeated indecision. If your trading plan is solid most of the time, then it is worth sticking to it. Thus, it is important to make an effort to check the reliability and stability of your trading plan before you start trading or increase your risks. Traders often abandon their plans when they do not have enough personal experience to follow the plans and thus naturally lack confidence. What would make it easier to follow your plan? So how do you follow your plan? One of the things that gets in our way is, oddly enough, our brain. We think and guess too much. From this we can assume that if we reduce the activity of our wandering mind and leave only logic, efficiency will increase. A good way to accomplish this is to make and print out a checklist for entering and exiting trades. What is a checklist? A checklist contains a number of necessary items for any work. In our case for trading. The checklist is used to check if all the conditions are in line with your market entry strategy. You tick each of the conditions, if at least one of them is not fulfilled, do not enter the market. Everything is very simple. Suppose your strategy is based on two indicators combined with support/resistance levels, you trade intraday, one of these indicators is a trend indicator and the other is an oscillator. Then your checklist could look like this: 1) Now American / London session? - Yes/No 2) Is there an entry signal on the X indicator? - Yes/No 3) Is the Y indicator in agreement with the signal of the X indicator? - Yes/No 4) Does the signal have a level support? - Yes / No 4) Isn't there another level in the way of the proposed trade, which will prevent it from reaching the target? - Yes / No 5) Is there no important news coming out in the next half an hour? - Yes / No 6) Am I feeling well right now (i.e. I am not sick, depressed, tired)? - Yes / No You run through this list and mark the items with a pencil. If the answer to all questions is YES then enter the trade. If there is at least one NO do not enter. Everything is so simple and you do not need to think. By thinking I mean the wandering mind mode, which leads to unnecessary trades, early entries/exits, etc. The checklist removes these mental "what ifs", "I guess", "it seems", etc. All items on the checklist match - enter. If at least one item doesn't match - don't enter. How to Make a Checklist for Your Strategy How to make a checklist? Very simple. Take the rules of your strategy and reduce them to a list of items so that against each item you can put a check mark, if the conditions on the chart correspond to it, or answer one-word Yes / No. I also advise you to include a point about your current moral state, because it is not worth trading when you are tired, sick, depressed, etc. Conclusion A checklist is essentially a checklist of items from your trading strategy and trading plan. Its purpose is to reduce the influence of a "wandering mind" on your trading. Also, the checklist helps you not to forget about anything. Every time, before opening a trade, run through each point on your list: if even one item does not correspond to the current situation - do not enter the market. And may the profit be with you!
Education
by DeGRAM
3
5 Tips For Selling Options ProfitablyHey guys! In this post, we'll detail 5 key tips to keep in mind while selling options that can massively improve trading results over the long term. Let's jump in. Selling options has become a more popular strategy lately, due to the fact that traders can control, to some degree, their win rates and R:R setups. If you've followed us for any length of time, you know we're big fans of selling puts. This is because there are only a few things that most traders and investors care about when they get involved in the markets: - Returns - Volatility - Difficulty - Repeatability Selling puts is a great blend of all four. However, shorting put options to outperform the market is simple, but it's not easy. Here are 5 key tips to improve your option selling skills: -------------- 1.) Make sure the underlying stocks are high quality. ✅ Selling put options is no different than building a portfolio of stocks. There's a chance one could be assigned, and it's key that you're ok sitting in a position for a while as it chops around. Let the edge work. 2.) Avoid selling puts when the VIX is low. 💥 Low 'fear' in the market = cheap insurance. Low premiums = bad things happening when stuff goes wrong. 3.) Look for stocks that have sold off. 📉 Oversold stocks (that are high quality) are perfect candidates for selling puts. Unless they are in a brutal downtrend, the recent selloff means there's more fear, which means higher premiums. It also means a better entry price. 4.) Set a minimum return requirement. 💸 If the puts you're selling don't yield more than the S&P 500 does annually, then why bother? Make sure that the annualized yield of the puts you're selling total more than 7-8%, and ideally more than 12%. Compounding is the goal. 5.) Don't use leverage. ❌ Using leverage is a quick way to the poor house if something goes wrong. It's much better to build a portfolio of positions in cash where no position takes up more than ~3% of exposure. It can be "expensive" to start, but it's worth it. -------------- There you have it - 5 key tips for selling options. We hope you enjoyed! Want to get started with more high-probability trade ideas? Follow us below. ⬇️⬇️
NASDAQ:GOOGEducation
by PropNotes
6
The Keys to Success Every Forex Trader Should Master 🕵️‍♂️📊💡 In the fast-paced world of forex trading, understanding price action is akin to possessing a treasure map. Price action analysis is the art of deciphering market movements based on price movements alone, without relying on indicators or oscillators. In this comprehensive article, we'll reveal the essential price action secrets that every forex trader should know. We'll explore real-world examples and equip you with the knowledge needed to navigate this thrilling terrain. The Secrets of Price Action 1. Candlestick Patterns: Candlestick patterns are powerful tools in price action analysis. They reveal market sentiment and potential trend reversals. 2. Support and Resistance: Identifying key support and resistance levels on a price chart can provide insights into potential price reversals or breakouts. 3. Trendlines: Drawing trendlines allows traders to visualize price trends and anticipate potential entry and exit points. Real-World Examples Example 1: EUR/USD - Bullish Reversal: Example 2: GBP/JPY - Breakout: Unlocking the secrets of price action analysis is the key to success for every forex trader. By mastering candlestick patterns, understanding support and resistance levels, and utilizing trendlines, you can decipher market movements and make informed trading decisions. Armed with these price action secrets, you're better equipped to navigate the ever-changing landscape of forex trading and seize profitable opportunities. 🕵️‍♂️📊💡 Dear followers, let me know, what topic interests you for new educational posts?
COINBASE:BTCUSDEducation
by SignalProvider
9
IMPORTANT - 14 Risk and Money Management RulesOver the past 20+ years, I've only mentioned a few money management rules. But then I thought about it, and realised there are so many more I use when I trade. So with this TradingView platform, I’m going to share my 14 most essential risk management rules I’ve ever come across. RULE #1: The 2% Rule – Limit Your Risk You might have seen this risk rule from me before, but there are new TradingView members everyday. Here’s how it works… Never risk more than 2% of your total trading capital on a single trade. No matter how good the trade looks, this rule will help you safeguard your portfolio from the impact of a single trade's outcome. The reason is, you will enter a losing streak. You will most likely take from five to seven losing trading in a row. But with the 2% rule, you’ll only be down 10% to 14% of your portfolio compared to if you risked 5% to 10% per trade. RULE #2: The Probability Rule – Assess Trades When you buy or sell trades, there are three types that can line up according to your trading strategy. I like to categorise these trades as. High, medium, or low probability. For high, medium, and low probability trades, risk 2%, 1.5%, and 1% of your portfolio respectively. If my trading criteria matches all the right elements to buy or sell – this is considered a high probability trade. That’s where I will risk 2% of my portfolio per trade. If my trading criteria has one or two elements that are showing conflicting signals – this will be considered a medium probability trade. In this case, I’ll only risk 1.5% of my portfolio. Other cases, there’ll be a time where the system will line up but the market environment is in a choppy and volatile range. This is where the trade will be a low probability trade. And so, I’ll only risk 1% of my portfolio per trade. Identify the probabilities and you’ll be able to adjust your risk accordingly. RULE #3: 20% Drawdown Rule – Pause After Losses There could be a time, where your portfolio is in the slums. This is where you could be down 14% to 20% of your portfolio. What then? Well you need to protect your capital. I have a simple rule where, once my portfolio is down 20% of my portfolio – I will pause my trading. During a drawdown, I’ll then switch to paper trading until conditions improve. If the market resumes in favourable territory and I feel more confident that the system will work better – I’ll then resume trading with 1% risk. RULE #4: Never Risk Unaffordable Money This one is a given, and one I often preach. With trading you should NEVER risk any money you can’t afford. If you’re using your only savings from retirement or you have any money that you’ll be emotionally attached to - Avoid trading all together. This is not only dangerous for your financial situation but it will also lead to a rollercoaster of emotions trading during both winning and losing streaks. RULE #5: The Time Stop-Loss Rule – Time-Based Limits If a trade doesn't meet its profit target (or hits the stop loss) within a specific timeframe, close it. I have a 7 week (35 business days) rule. It doesn’t matter when, what level or if the trade is in the money or out the money. You want to close the trade, after a certain period of time has elapsed, for three reasons. 1. You’re a short-term trader and don’t want to turn it into a long term investment 2. There are costs you are paying daily which is leading you to incurring a higher loss or less profits. 3. You don’t want to feel married to any specific trade. Either you’ll bank a lower loss than you planned. Or you will bank a lower profit than planned. This prevents capital from being tied up in stagnant trades. RULE #6: The Trailing 1:1 Rule – Protect Profits This rule, will help you secure your profits when a trade is moving in your favour. Here’s how it works. Once a trade hits a 1:1 risk-reward ratio (and has moved in my favour). It gives the opportunity to move the stop loss up to just above break even. This way you’ll will bank a minimum gain, should the trade turn against you. Also, it will increase your win rate and emotionally you’ll feel it’s much easier to hold a trade with nothing to lose. RULE #7: Half Off Rule – Secure Gains Sometimes, you don’t want to move your stop loss. Instead you want to lock in profits, while the market is moving in your favour. So the rule is simple. When the trade reaches the risk to reward of 1:1, this might be the best time to close half your position. This will lock in some profits while leaving room for further gains. RULE #8: The 5% Margin Rule – Control Leverage This rule is more applicable to those who have a MUCH larger account of R25,000 and up. Remember, with trading you’re buying and selling on margin. If the gearing is 10 times this means if I hold 1% of my account, I am risking 10% of my portfolio if the trade heads to zero. So, the trick is to never risk more than 5% of your account on a single trade. This approach reduces exposure to risk and aids risk tracking in volatile markets. RULE #9: The Intraday Stop Rule – Daily Loss Limit Not all traders like to hold overnight. You get intraday traders who buy and sell trades within the day. If you are one of them, then this rule is for you. Make sure you set a daily loss limit or a maximum number of losses. For example, if you’re down 3 to 4 trades in the day – that might be your que to stop trading for the day. There are a few reasons for this including: • The market environment is not conducive to continue. • You need to protect your capital. • Your emotions might run out of control having taken too many losses in a day. • This could result in impulsive and revenge trading to try make up for your losers. RULE #10: Forex NEWS Rule – Avoid High-Impact News Events I mentioned this in the last Trading Tips Q&A, but I’ll say it again. If you’re a Forex trader and you want to avoid volatile times when certain news events come out. You can stay out or avoid trading during high-impact news events. These events include CPI, NFP, PPI, and FOMC releases. Such events can increase trading risks and lead to unpredictable market movements. (Especially in the Forex market!). RULE #11: The Risk-Reward Rule – Favor Positive Ratios Whenever I take a trade, I always want my gains to be bigger than my losses. To do this I set my risk-reward ratio of at least 1:2. This means, I am only willing to risk one in order to bank two times more. Do this enough times and you’ll almost guarantee your potential gains will outweigh your potential losses in the medium term. And having a risk to reward of at least 1:2 means you’ll factor in the costs, brokerage and other fees with your trade. RULE #12: The 20% Golden Rule – Diversify and Limit Exposure You always need to have capital within your portfolio. Not only to trade, but to protect the current trades that you’re holding at any one time. So this rule is golden. Here’s how it works. I never expose more than 20% of my total investment portfolio to trading. This means, I’ll always be holding at least 80% of my portfolio. Remember, with margin (leverage) trading, it magnifies gains and losses. Having only 20% of your total investment portfolio will help you to always have more money in your portfolio to account for more trades, losses, costs and for you to diversify and manage your risk better. RULE #13: The Hedgehog Rule – Balance Long and Short Positions I love this rule. In trading you can buy (go long) when the market moves up. Or you can sell (go short) when the market moves down. But sometimes, you might feel you’re over exposed to the long side even though the market is moving up. So instead you can hedge your positions by balancing longs and shorts. If the market turns down, then at least you’ll have some shorts in the mix to make up for the losses with your longs that are going against you. I always try to avoid overcommitting to a single direction. This way I am able to protect my portfolio from sudden market reversals. RULE #14: Multi-Account Rule – Separate Markets I find markets all move differently and yield results at different rates. So what I like to do is open different trading account for different markets (e.g., Forex and stocks). I like to track and trade Forex for one account and stocks for another. You’ll find if you trade too many different markets in one account, it will most likely skew the portfolio and your track record. This is because of the way they all move sporadically from each other. So, diversify your portfolios across different asset classes and markets to manage your risk. Final words. I trust this 14 Risk management Rules Lesson will help guide you to your trading goals. If there’s one thing you should do is print, or save this guide and keep them close for reference. These rules will undoubtedly prove valuable in your trading endeavors.
TVC:SA40Education
by Timonrosso