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How To Trade During the News?It's critical for forex traders to pay attention to big economic data releases, government statements, and geopolitical events. Why? Because this information generally represents a country's economic strength and can predict a currency's future direction. Trading the news might be tough and not fit for everyone, but the resulting volatility can provide a plethora of trading chances. You know what they say: with the big volatility, comes the big responsibility (or something like that, right? #InvestroyJoke), so beware of wide spreads and slippages. We must first determine whether news items are even worth trading before building a "Trade the News" method. "Which news releases should I trade?" is a question you want to be able to answer. The big event risks that have a significant influence on the major currencies should be familiarized by forex traders. Remember, we're trading the news because it has the potential to raise volatility in the near term, thus we'd want to trade just the news that has the most market-moving potential for the currency market. The news that tends to influence market action and create volatility generally consists of the following: Modifications in central bank policy (sometimes known as "monetary policy"). Changes in government policy (sometimes known as "fiscal policy"). Economic data releases have had unexpected results. Random tweets from a particular international leader who enjoys emblazoning his name on skyscrapers (not anymore), or a billionaire working on spacexploration. Pretty much everything marked red in the economic calendar (especially related to US). There is no single news trading approach. As traders assess the conclusion versus market expectations, the price tends to surge in one way or have a subdued reaction to the news. With this knowledge, there are two basic ways to exchange news: a) Having a bias in one way b) Having an asymmetrical bias When you have a directional bias, you expect the market to move in one way when the news is disclosed. When looking for a trading opportunity in a certain direction, it's helpful to understand what aspects of news stories lead the market to move. The non-directional bias technique is a more popular news trading strategy. This strategy ignores any directional bias and merely relies on the fact that a major news event will cause a significant movement. It makes no difference either way the FX market swings. We simply want to be present when it happens! When you have a directional bias, you expect the price to go in a specific way, and you've already placed your orders. When news is released, it is always beneficial to grasp the underlying reasons why the market swings in a particular manner. You don't care which way pricing goes when you have a non-directional bias. All you want to do is get activated. Straddle trades are a type of non-directional bias setup. Conclusion: In addition to the factors mentioned above, you should be willing to learn along the way by figuring out: which news are stronger than others, what is the difference that needs to be between forecast vs actual for volatility to skyrocket and which news you should never even try trading. All these things come from trading and trading only (moreover, bad news, market changes every year). Personal note: The way we do it most of the time is… we trade them way before release, as this is how market picks up the direction.
Education
by Investroy
15
Criteria that need to be met before entering a tradeHey, wizards! Happy Wednesday and welcome on another Educational Post for the week. Today, we are gonna be talking about trade entry criteria and checklist. In other words, what we should look for before opening a position. First and foremost, we should analyse multiple timeframes and identify the direction of a specific market. As identified on the table, different types of traders examine different timeframes. The most common timeframes used by scalpers are M15, M5 and M1. H1 and H30 are popular among intraday type of investors, D1 and H4/H3 are commonly used by swing traders. After analysing different timeframes and getting the overall picture of a chart, we start identifying various key zones. This could be support and resistance areas, supply and demand zones, Fibonacci retracement levels, descending/ascending trendlines and so forth. After having identified crucial key levels, we start looking for more confirmations to backup our bias. Candlestick patterns (doji, hammer, engulfing), Top/Bottom/H&S figures, Indicators (EMA, RSI, MACD etc.) can be utilised as valid instruments to confirm our ideas. All in all, going through the steps identified above are important before opening a transaction. In addition, remaining patient, keeping it simple, and following risk-to-reward principles are as equally important.
BITSTAMP:BTCUSDEducation
by Investroy
38
The Art of Setting a Stop LossAs a trader, the most crucial responsibility you have is to manage and preserve your trading capital. You're out of the game if you lose all of your trading money; there's no way to make up the difference. If you make pips, you must be allowed to retain them instead of returning them to the market. But, let's be honest, it's not going to happen. The market will always do what it wants and go in the direction it wants. Every day brings a new set of challenges, and practically anything from geopolitics to unexpected economic data releases to speculations about central bank policy may swing currency markets one way or the other quicker than you can clap your fingers. This is exactly why you need to use appropriate stop losses in your trades. Generally speaking, there are 4 main SL types you can encounter on the market: volatility stop, chart stop, percentage stop and time stop. Let's begin with the most fundamental sort of stop loss: the percentage-based stop loss. The percentage-based stop employs a portion of the trader's money that is predefined. For instance, a trader's willingness to risk "3% of the account" on a deal. The percentage risk varies depending on the trader. More active traders risk up to 5-6% of their account, while less aggressive traders often risk around 1% every trade (that’s what we do as well). Important rule of thumb here is: Always set your stop loss based on the market or your system's criteria, not on how much money you want to lose. This means that observe and learn each pair you trade. 20 pips SL on EURUSD, might be not enough on a GBPJPY trade. Some pairs make 120 pips move a day, while others average at 60. Oh, and don’t you forget about the pip value difference. Based on what the charts are suggesting is a more rational technique to identify stops. One thing we can notice in price movement is that there are times when prices don't seem to be able to push or break through particular levels. When these levels of support or resistance are retested, they can sometimes prevent the market from moving upward again. Setting stops above and beyond these levels of support and resistance makes sense since if the market trades beyond these levels, it's logical to assume that a break of that region will attract more traders to play the break, pushing your position further against you. Important rule of thumb here is: Set your stop losses couple pips over under the major key points, so you don’t get affected by the market noise. More uncommon way of setting a stop loss is based on volatility (which is already considered in percentage stop loss). Volatility, to put it simply, is the amount a market might potentially fluctuate in a given length of time. Knowing how much a currency pair tends to change might help you establish the right stop loss levels and prevent getting pulled out of a trade prematurely due to market swings. Important rule of thumb here is: Study your ways to determine daily volatilities as they do change. Two common ways of doing so is through Average True Range (ATR) and Bollinger Bands. Stops established based on a preset time in a transaction are known as time stops. It might be a specified time (open limit time of hours, days, weeks, etc.), only trading during specific trading sessions, the market's open or active hours, or something else entirely. Set a deadline and get rid of the dead weight so money can accomplish what it's supposed to. Important rule of thumb here is: The time stops ultimately come down to what type of trader you are. So before, you start setting time limits you should understand whether you’re intraday, swing, long-term trader. Conclusion: We often draw a line between good traders and “The BEST”. What makes a difference in this case? Good trader uses a certain type of stop loss. “THE BEST” traders use a combination of all. An example would be looking at a EURUSD pair. We do our technicals, we have a predetermined percentage in our mind, we have a predetermined time in our mind, and we’ve considered the volatility of the mentioned pair. For instance, we set our Stop Losses close to key zones determined by price action, we wouldn’t risk more than 1% on a single trade, we’re swing traders, so we wouldn’t keep the trade over the weekend and lastly we’ve traded enough to know the average volatilities for each pair. Hope you found time to read this all as this will have a tremendous impact on your trading journey. All the best in 2022, family!
BITSTAMP:BTCUSDEducation
by Investroy
37
The Art of setting a Target ProfitHey, wizards! Happy 2022 and welcome on the first Educational Post by Investroy for the new year. Today we are gonna be talking about different ways of setting a Target Profit (TP), and scrutinizing the benefits and drawbacks of each. Though there are many ways to set targets, as it varies depending on ones trading plan and strategy, here are 3 of the most popular ways of placing a TP. 1)Confluence based Reading the chart and analyzing different timeframes of a certain security, we can use different confluences to spot potential zones of price reversals. On the graphical illustration demonstrated on the chart, we can observe that a rectangular range has been formed and the price is sitting at the lower boundary, in other words at the crucial zone of support. It is highly likely that traders will start going long on this setup and anticipate for the price to keep rising and reach the area of resistance. On the other hand, it is never 100% sure that the price will be able to bounce off the local zone of demand, and therefore risk management should be strictly followed. 2)Risk-to-Reward based (Fixed) The other name of this method is “set and forget”. One group of traders prefers to follow same risk-to-reward ratios for all positions opened (For ex. 1:2 or 1:3 fixed). Another group favors setting different RR ratios for different trades and let the positions run until they hit TP. All in all, the technique implies setting a certain RR Target Profit and letting trades run. On the figure displayed on the screen, it can be inferred that the sentiment of the market is clearly bullish and the price is expected to keep rising. One of the disadvantages would be the following: sometimes due to greed, traders set their targets too high and the price results in not reaching the intended TP. 3)Intuition/Logic based As strange as it may sound, there is actually a number of traders implementing this approach when setting a Target Profit. Moreover, it requires experience to sense where the market is about to move. As illustrated and interpreted on the graph, the market repeats historical actions from time to time. Experienced investors tend to notice some specific patterns and make decisions out of it.
BITSTAMP:BTCUSDEducation
by Investroy
35
Risk Management: the Beauty and the Main Principles of itHey, magicians, hope you are all doing great and enjoying the holiday season! After receiving multiple requests from you, we are back with another Educational Post and the topic is the following: Risk Management and its Principles. As we have already discussed in some of the previous educational posts, Risk Management, alongside with other componenets, is one of the most important elements that need to be followed in the world of Trading. If one wants to be successful and profitable in this journey, obeying the fundamentals of Risk Management is a MUST. We have created a visual illustration which will explain how Risk Management really functions, and how one can be successful by implementing it in a correct way. In order to better understand the table, let us make the following assumptions: -We are journaling our last 28 trades -We have risked 1% on each transaction (trade) -Our win rate is only 50% -We do not have any BREAKEVEN trades, meaning we have left all our positions run open till TP/SL As we can notice from the graphical illustration, most of the trades have different Risk-To-Reward ratios (for example: 1:3, 1:2, 1:1.8 etc.). With only 50% win rate, our Winning Trades will make us a nice +35.2% return, while the losing trades will set us back by -14%. If we do quick maths, we will see that the total return from our last 28 trades will constitute 21.2%! There is no "Holy Grail" in trading, but following the principles of Risk Management can lead one to the door of consistency and profitability. Of course, Risk Management is not the only element, as psychology, patience, mindset, and some other factors should be considered and mastered as well. We will be looking forward to covering other psychological aspects of trading in the next few educational posts! Until then, stay safe and happy, and if you have any requests or proposals, feel free to let us know in the comment section below! Investroy would like to wish you all a Merry Christmas and a happy upcoming New Year!
BITSTAMP:BTCUSDEducation
by Investroy
26
EUR/USD: the triangle is narrowing down. What's the next step?As it can be inferred from the chart, the price is still ranging within the borders of a sideways moving range and is now testing the upper boundary of it. In general, a descending triangle is a SELL indicator, therefore our bias still remains bearish. For the moment, we will be waiting for the price to reject the upper boundary of the triangle and drop all the way down till the area of support identified on the chart
Short
by Investroy
8
Studying The Worst Trades Will Change Your Trading Experience!I know it'll make you grimace but browse through your trading notebook for the worst deal you've ever had. Examine the trading arrangement you observed. Consider what went wrong, and then ask yourself, "Why did I ever accept that trade in the first place?" "What was I thinking?". "Was I even thinking?" is a more pressing question. That transaction was most likely taken automatically based on a familiar setting. Your judgment was based on your own thoughts rather than what the market was telling you in this situation. Your worst deal doesn't have to be the one in which you've lost the most money. When you hesitate to accept what could have been your trade of the year, or when you lock in profits too early instead of letting it ride, it can be a squandered opportunity. You may have backed out because you were afraid of losing, even if the markets indicated that this next investment would be profitable. Maybe you'll look back on your worst transaction and realize you did it because you grew so used to losing that you started mindlessly taking trade after trade to make up for your losses. In this situation, you insisted that you were correct and that you would finally outperform the market. Remember that revenge trading may become a bad habit that can lead to big losses if not addressed. The typical reaction to disastrous deals is to just shrug them off. It's simpler to bury the memory of a terrible transaction to the back of our minds, much like the memory of being rejected by crushes in high school (not that it happened to me all that often), and falsely comfort yourself that you'll prepare better next time, and then go on to the next deal. That isn't enough, though! You must go deeply into the issue and go over every detail of your terrible deals. You run the danger of repeating your mistakes if you don't. You must force yourself to open your trade notebook and ask yourself questions such, "Why did I do the deal?" no matter how difficult or unpleasant the effort is. "Did I close my trade based on legitimate signals?" You might be able to spot a negative trend in your behavior and take steps to remedy it if you force yourself to recognize the emotions you felt when you made poor trading selections. It might be tough to break poor habits and trading practices, but it will get you one step closer to managing your emotions and becoming a better trader. Even though the title says for all the newbies, this is applicable to all the market participants regardless of their experience. Remember, the sky is not the limit anymore!
BITSTAMP:BTCUSDEducation
by Investroy
12
XAU/USD: detailed breakdown magicAs it can be inferred from the graph, the $1764-$1770 area of support has been nicely respected by the price and we have witnessed some massive bullish movements. As the general principle states, after an impulsive move, a correctional move is a MUST. We are expecting for the price to correct till the previously broken zone of resistance now turned support, which perfectly lines up with the 0.382 Fibonacci retracement level. We will be really careful and patient, as the price can even drop below that zone before launching up. Our target will be set at the area of crucial resistance illustrated on the chart. Have a great trading week, community!
OANDA:XAUUSDLong
by Investroy
11
XRP/USD: as simple as it getsIf we are being quick and straight to the point, here are the reasons to look for a short position: -The sentiment of the market is clearly bearish -The price has nicely rejected the local zone of resistance -Judging by the few previous 8H candles, bullish pressure is not strong enough to drive the price to the upside When it comes to the target, setting it at the area of 0.65300 would be reasonable, as we have witnessed the price reject the zone before. Trade with caution, follow the risk management principles, and stay positive!
BITSTAMP:XRPUSDShort
by Investroy
18
AUD/CAD: price action+fibonacci magicAs it can be inferred from the chart, after being in a downtrend since the end of October, the price reversed in the beginning of December and is now in a massive bullish uptrend. A nice bottom is currently being formed around the area of 0.236 Fibonacci retracement level. Moreover, the 38.2% Fibonacci level perfectly lines up with a previously broken zone of resistance later turned support. It is a bit early to open BUY positions, as we have to patiently wait for more confirmations before a successful execution. Therefore, we will monitor the price action and see how it behaves around the key zones that align with Fibonacci levels. Happy trading, everyone!
Long
by Investroy
4
GBP/JPY: it does not get any more simple than thisAs predicted last week, the price indeed bounced off the crucial zone of support nicely and rose all the way up till the 152.500 area of previous support turned resistance, which also lines up with 61.8% Fibonacci retracement level. A massive wick rejection can be observed on the DAILY timeframe and a huge bearish engulfing candle on the lower timeframes such as H8 and H4. We are now expecting for the price to keep dropping till the important zone of support and even further down, forming new Lower Lows and continuing its bearish movements.
Short
by Investroy
6
Trading Myths vs Reality. Beginners, this one is for you!Hey, wizards! Happy Thursday and welcome on another Educational Post. The topic is the following: Myths and Reality of Trading. As you may already know, there are so many false statements that beginners run into before starting their trading journey. Those statements are illustrated on the layout and interpreted below: 1) Most people think that trading is easy and they can quit their job or whatever they do and start making a living off trading straight away. In fact, in order to be profitable, consistent, and be a full-time trader in general, he or she MUST have a backtested strategy and be experienced enough in this sector. Remember that it takes a while to be successful, but it is fully worth it! 2) “Trading is like a casino”- we hear this one quite often. Only two types of people use this expression a lot: those who have never been able to become successful in this industry, and those that have no plan or idea about what they are doing. One should never open a positions based on a coin flip or what others are saying. Ideas and analyses of other can be used as a confluence and inspiration for a trader to open a positions on a specific security. 3) Whether it is trading or any other industry, one can never be rich over the course of a night. It takes 10-14 for someone to become a licensed surgeon, at least 6 years to become a professional lawyer. What makes you think that you will become a professional trader in just a few weeks or months? 4) No matter what the situation is, always use a Stop Loss to avoid deep losses. Whether liquidity hunt exists or it does not, it is always important to stay safe and sound. 5) Risk management is always more important than the win rate. Imagine having a 1:3 Risk-to-Reward ratio on your next 10 trades and the win rate is only 50%. That means you will win 5 and you lose 5. Now, let’s say that we decide to risk 1% of our total capital per trade. If we do quick maths, we will see that with only 50% win rate and 1:3 RR, we will result in making a juicy 10% return from the total of our next 10 trades. Of course, this is not always the case, as there are some factors that should be considered, such as spreads, fees, pip value etc. However, this is a perfect example to help you get the overall idea. 6) There is a big number of traders who do not like the “Retail Way” and would rather trade the “Smart Money” concept, which is apparently the closest thing that we have to the Institutional Trading. The bottom line is this: choose a strategy that suits you the best, and go with it while optimizing along the way. Changing strategies every week/month will not make one consistent. It is crucial that you stick with one trading plan and be loyal to it. 7) Many beginning traders tend to increase their risk in attempts to make more profits. This approach is so risky and totally wrong. If one is willing to make more money trading, it is important that he or she increases the input, and not the risk.
Editors' picks
BITSTAMP:BTCUSDEducation
by Investroy
151
BITCOIN: the bearish rally is not over yetThe price of BTC/USD has been dropping for the past couple of weeks. At the moment, there are no sings of a bullish reversal, and therefore our bias remains bearish. A nice descending channel has been formed and the price is ranging within the borders of it. Being at the upper boundary of the channel and nicely rejecting it, we are pretty optimistic that the price will continue dropping and reach the $40500 area of crucial support. Happy trading, everyone!
BITSTAMP:BTCUSDShort
by Investroy
9