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Activate the alarm function when touching the set indicator Hello, traders. If you "Follow", you can always get new information quickly. Please click "Boost" as well. Have a nice day today. ------------------------------------- One of the good things about using TradingView charts is that you can use the alarm function. This alarm function has a limit on the number depending on the plan you use, so please check it out. I will take the time to explain the alarm function using my chart. It is hard, boring, and tedious to just look at the chart until you meet the desired trading point or criteria. If you do that, you may end up making a wrong trade or missing the trading period while doing something else. If you create an alarm and change the Value section to the HA-MS_BW indicator, multiple indicators will be displayed. The indicators currently activated on the chart are HA-Low, HA-High, BW, and M-Signal indicators on the 1D chart, so you can select BW or HA-Low, LH, LL and check if the alarm turns on when they cross. When looking at the 15m chart, since it is moving sideways in the box section of the HA-Low indicator, if you set it to LH, LL indicator, the alarm will come when you touch the upper or lower point of the box. Then, you can use it conveniently when you want to trade within the box section. If you want to trade in a large trend, I think it would be good to set the alarm to turn on when you touch the 5EMA on the 1D chart. Or, you can set the alarm to turn on when the OBV indicator breaks through the high (HH) or low (LL) line upward. If you are a paid member of TradingView, I highly recommend using the alarm function. - Have a good time. Thank you. -------------------------------------------------- - ​​Big picture The real uptrend is expected to start after it rises above 29K. The area expected to be touched in the next bull market is 81K-95K. #BTCUSD 12M 1st: 44234.54 2nd: 61383.23 3rd: 89126.41 101875.70-106275.10 (overshooting) 4th: 134018.28 151166.97-157451.83 (overshooting) 5th: 178910.15 These are points where resistance is likely to occur in the future. We need to check if these points can be broken upward. We need to check the movement when this section is touched because I think a new trend can be created in the overshooting section. #BTCUSD 1M If the major uptrend continues until 2025, it is expected to start forming a pull back pattern after rising to around 57014.33. 1st: 43833.05 2nd: 32992.55 -----------------
Education
by readCrypto
How To Trade Off Liquidity Levels Following A Structure BreakoutGrasping how to trade around liquidity levels is crucial. The fundamentals of technical analysis revolve around identifying and leveraging these points. One common mistake that new traders make is not choosing the right price levels for trades. This can lead to inadequate risk-reward setups and inconsistency in trading results. What Are Liquidity Levels? For large institutions and traders needing to execute substantial orders, locating sufficient liquidity is vital. A market’s liquidity significantly influences price volatility. When major players enter the market, they aim to achieve the best possible prices. However, due to the size of their orders, they need ample counter-orders to fill their trades while minimizing slippage. If a trader attempts to enter a position in a low-liquidity area, the resulting volatility can negatively impact their average entry price. Conversely, entering at a high-liquidity level usually means less price fluctuation, leading to a more favorable average price. So, where can you find these liquidity levels? Look at where stop-loss orders are likely placed. This is where the concept of “stop-loss hunting” comes from—large players need liquidity to accumulate significant positions, which makes these areas of interest since they help reduce slippage. A liquidity level arises from an initial imbalance in supply and demand, forming what we know as swing highs or lows. As more traders take positions, these levels become historical reference points for placing stops. When these levels are revisited, a decision point occurs, leading to either a breakout or a reversal. A useful guideline is to watch for rejections that don’t reach a 50% retracement of the previous high or low, as this might indicate a lower-quality liquidity level. Strong rejections tend to indicate better chances of holding during retests. I personally look for rejections that result in a breakout into new highs or lows. Other factors, such as market conditions (risk-on/risk-off), broader market structure, and relevant economic data, also play a crucial role in assessing whether a level will hold. Trading EUR/USD Using Liquidity Levels To illustrate how to identify potential buying or selling opportunities based on liquidity levels, draw a horizontal line from the latest wick or swing high/low and extend it until it meets price again. In the EUR/USD hourly chart example below, I selected a month’s worth of data, marking blue lines for liquidity levels that led to market structure breakouts (higher highs or lower lows) and red lines for levels where retests failed to break the structure. I recommend a strategy of targeting a 2:1 risk-reward ratio, setting stop-loss orders at half the size of the previous swing, moving to break even at 1:1. By the end of this exercise, it should be clear that trading on liquidity levels with a breakout condition (blue lines) significantly increases your chances of success compared to trades that go against the prevailing market structure (red lines). If you focused solely on the blue levels, you might have experienced 6 winning trades and only 1 loss at a 2:1 risk-reward ratio. By combining this approach with additional factors like aligning with higher timeframe cycles, considering fundamental analysis, and practicing disciplined risk management, you may find this strategy aligns with your trading style. I encourage you to explore this methodology through your own backtesting and see how it can enhance your trading arsenal.
Education
by TaylorDeMario
TOP 20 TRADING PATTERNS [cheat sheet]Hey here is Technical Patterns cheat sheet for traders. 🖨 Every trader must print this cheatsheet and keep it on the desk 👍 🖼 Printable picture below (Right click > Save Image As…) In finance, technical analysis is an analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis use many of the same tools of technical analysis, which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis, which states that stock market prices are essentially unpredictable, and research on whether technical analysis offers any benefit has produced mixed results. As such it has been described by many academics as pseudoscience. Fundamental analysts examine earnings, dividends, assets, quality, ratio, new products, research and the like. Technicians employ many methods, tools and techniques as well, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns. Technicians using charts search for archetypal price chart patterns, such as the well-known head and shoulders or double top/bottom reversal patterns, study technical indicators, moving averages and look for forms such as lines of support, resistance, channels and more obscure formations such as flags, pennants, balance days and cup and handle patterns. Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/volume indices and market indicators. Examples include the moving average, relative strength index and MACD. Other avenues of study include correlations between changes in Options (implied volatility) and put/call ratios with price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc. There are many techniques in technical analysis. Adherents of different techniques (for example: Candlestick analysis, the oldest form of technical analysis developed by a Japanese grain trader; Harmonics; Dow theory; and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation. Contrasting with technical analysis is fundamental analysis, the study of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all the underlying fundamental factors. Uncovering the trends is what technical indicators are designed to do, although neither technical nor fundamental indicators are perfect. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions. Best regards Artem Shevelev
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BITFINEX:BTCUSDEducation
by ArShevelev
238
These Market Structures Are Crucial for EveryoneIn this article, we will simplify complex market structures by breaking them down into easy-to-understand patterns. Recognizing market structure can enhance your trading strategy, increase your pattern recognition skills in various market conditions. Let’s dive into some essential chart patterns that every trader should know. Double Bottom / Double Top A double bottom is a bullish reversal pattern that occurs when the price tests a support level twice without breaking lower, indicating strong buying interest. This pattern often suggests that the downtrend is losing momentum and a potential uptrend may follow. Conversely, a double top signals a bearish reversal, formed when the price tests a resistance level twice without breaking through. This pattern indicates selling pressure and suggests that the uptrend may be coming to an end. Bull Flag / Bear Flag A bull flag is a continuation pattern that appears after a strong upward movement. It typically involves a slight consolidation period before the trend resumes, providing a potential entry point for traders looking to capitalize on the ongoing bullish momentum. On the other hand, a bear flag forms during a downtrend, signaling a brief consolidation before the price continues its downward movement. Recognizing these flags can help traders identify potential breakout opportunities. Bull Pennant / Bear Pennant A bull pennant is a continuation pattern that forms after a sharp price increase, followed by a period of consolidation where the price moves within converging trendlines. This pattern often indicates that the upward trend is likely to continue after the breakout. Conversely, a bear pennant forms after a sharp decline, with the price consolidating within converging lines. This pattern suggests that the downtrend may resume after the breakout. Ascending Wedge / Descending Wedge An ascending wedge is a bearish reversal pattern that often forms during a weakening uptrend. It indicates that buying pressure is slowing down, and a reversal may be imminent. Traders should be cautious as this pattern suggests a potential downtrend ahead. In contrast, a descending wedge appears during a downtrend and indicates that selling pressure is weakening. This pattern may signal a bullish reversal, suggesting a possible upward breakout in the near future. Triple Top / Triple Bottom A triple top is a bearish reversal pattern that forms after the price tests a resistance level three times without breaking through, indicating strong selling pressure. This pattern can help traders anticipate a potential downtrend. Conversely, a triple bottom is a bullish reversal pattern where the price tests support three times before breaking higher. This pattern highlights strong buying interest and can signal a significant upward move. Cup and Handle / Inverted Cup and Handle The cup and handle pattern is a bullish continuation pattern resembling a rounded bottom, followed by a small consolidation phase (the handle) before a breakout. This pattern often indicates strong bullish sentiment and can provide a solid entry point. The inverted cup and handle is the bearish counterpart, signaling potential downward movement after a rounded top formation, suggesting that a reversal may occur. Head and Shoulders / Inverted Head and Shoulders The head and shoulders pattern is a classic bearish reversal signal characterized by a peak (head) flanked by two smaller peaks (shoulders). This formation indicates a potential downtrend ahead, helping traders to identify possible selling opportunities. The inverted head and shoulders pattern serves as a bullish reversal indicator, suggesting that an uptrend may follow after the price forms a trough (head) between two smaller troughs (shoulders). Expanding Wedge An expanding wedge is formed when price volatility increases, characterized by higher highs and lower lows. This pattern often indicates market uncertainty and can precede a breakout in either direction . Traders should monitor this pattern closely, as it can signal potential trading opportunities once a breakout occurs. Falling Channel / Rising Channel / Flat Channel A falling channel is defined by a consistent downtrend, with price movement contained within two parallel lines. This pattern often suggests continued bearish sentiment. Conversely, a rising channel indicates an uptrend, with price moving between two upward-sloping parallel lines, signaling bullish momentum. A flat channel represents sideways movement, indicating consolidation with no clear trend direction, often leading to a breakout once the price escapes the channel. P.S. It's essential to remember that market makers, whales, smart investors, and Wall Street are well aware of these structures. Sometimes, these patterns may not work as expected because these entities can manipulate the market to pull money from unsuspecting traders. Therefore, always exercise caution, and continuously practice and hone your trading skills. What are your thoughts on these patterns? Have you encountered any of them in your trading? I’d love to hear your experiences and insights in the comments below! If you found this breakdown helpful, please give it a like and follow for more technical insights. Stay tuned for more content, and feel free to suggest any specific patterns you’d like me to analyze next!
Education
by ArShevelev
5
Quadruple Witching: What Retail Traders Should Know█ Quadruple Witching is Happening Today: What Retail Traders Should Know! Today marks Quadruple Witching, a pivotal event in the financial markets that occurs four times a year—on the third Friday of March, June, September, and December. During Quadruple Witching, four types of derivative contracts expire simultaneously: Stock Index Futures Stock Index Options Single Stock Futures Single Stock Options When all four of these contracts expire simultaneously, it can lead to increased trading volume and heightened volatility in the markets. The term "witching" is derived from the "Triple Witching" event, which involves the simultaneous expiration of three types of contracts (stock index futures, stock index options, and single stock options). Quadruple Witching adds the expiration of single stock futures to this mix. This convergence leads to a surge in trading activity and heightened market volatility as traders and investors adjust or close their positions. █ When Does Quadruple Witching Occur? Quadruple Witching takes place on the third Friday of March, June, September, and December each year. These dates align with the end of each fiscal quarter, making them significant for various market participants. █ What Retail Traders Should Be Aware Of ⚪ Increased Volatility Price Swings: Expect more significant and rapid price movements in both individual stocks and broader market indices. Unpredictable Trends: Sudden shifts can occur, making it challenging to anticipate market direction. ⚪ Higher Trading Volume Liquidity Peaks : Trading volumes can spike by 30-40%, enhancing liquidity but also increasing competition for trade execution. Potential for Slippage: High volumes may lead to slower order executions and potential slippage, where trades are executed at different prices than intended. ⚪ Potential for Market Manipulation Large Institutional Trades: Institutions managing vast derivative positions can influence stock prices, creating opportunities and risks. Short-Term Opportunities: Retail traders might find short-term trading opportunities but should exercise caution. ⚪ Emotional Discipline Stress Management: The fast-paced and volatile environment can be emotionally taxing. Maintain a clear trading plan to avoid impulsive decisions. Risk Management: Use stop-loss orders and position sizing to protect against unexpected market moves. █ Historical Perspective and Market Behavior Historically, Quadruple Witching days have been associated with noticeable market movements. ⚪ Price Trends Some studies suggest that markets may trend in the direction of the prevailing market sentiment leading into the expiration day. ⚪ Volatility Patterns Volatility tends to spike during Quadruple Witching, especially in the final hour of trading, as traders finalize their positions. ⚪ Volume Spikes Trading volumes can increase by 30-40% compared to regular trading days, reflecting the high level of activity as contracts expire. █ Tips for Navigating Quadruple Witching ⚪ Avoid Trading Some traders prefer to stay out of the market to avoid unpredictable price movements and potential losses. ⚪ Stay Informed Market News: Keep abreast of financial news and updates that may influence market sentiment. Contract Expirations: Be aware of which contracts are expiring and their potential impact on specific stocks or indices. ⚪ Focus on Liquidity Trade Liquid Stocks: Opt for highly liquid stocks and ETFs to ensure smoother trade executions and tighter bid-ask spreads. Avoid Thinly Traded Assets: Steer clear of stocks with low trading volumes to minimize execution risks. ⚪ Use Limit Orders Control Entry and Exit Points: Limit orders allow you to set specific prices for buying or selling, helping manage execution prices amidst volatility. ⚪ Monitor Key Levels Support and Resistance: Keep an eye on critical technical levels that may act as barriers or catalysts for price movements. Volume Indicators: Use volume-based indicators to gauge the strength of price movements. ⚪ Maintain Discipline Stick to Your Plan: Adhere to your trading strategy and avoid making decisions based on fear or greed. Manage Risk: Implement strict risk management practices, such as setting stop-loss levels and not overexposing your portfolio. █ Key Takeaways ⚪ Frequency: Occurs four times a year on the third Friday of March, June, September, and December. ⚪ Impact: This leads to increased trading volume and volatility due to the expiration of four types of derivative contracts. ⚪ Strategies: Traders may choose to avoid trading, focus on liquid assets, implement strict risk management, or exploit short-term volatility. ⚪ Risks: These include unpredictable price movements, liquidity issues, execution challenges, and emotional stress. █ Conclusion Quadruple Witching can significantly impact market dynamics, presenting both opportunities and challenges for retail traders. By understanding the mechanics of this event and implementing strategic measures, traders can better navigate the heightened volatility and make informed decisions. Remember to stay disciplined, manage your risks effectively, and focus on liquid assets to optimize your trading performance during Quadruple Witching days. ----------------- Disclaimer This is an educational study for entertainment purposes only. The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information. All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs. My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
OANDA:SPX500USDEducation
by Zeiierman
4
"Hindenburg's Omen" to predict a stock market crash."Hindenburg's Omen" to predict a stock market crash. "Hindenburg's Omen" is a technical indicator in financial analysis designed to predict a potential significant decline or a stock market crash. Here are the main things to remember about this indicator: Definition and origin Introduced by Jim Miekka in the 1990s. Named after the Hindenburg airship disaster in 1937, symbolizing an unexpected disaster. How it works - Hindenburg's Omen is triggered when several conditions are met simultaneously on a stock market: - A high number of stocks reaching both new highs and lows over 52 weeks (usually more than 2.2% of stocks). - The number of new highs must not exceed twice the number of new lows. - The stock index must be in an upward trend (positive 50-day or 10-week moving average). -The McClellan Oscillator (sentiment indicator) should be negative. Interpretation -When these conditions are met, the Omen suggests underlying market instability and an increased risk of a significant decline. -The signal remains active for 30 trading days. Reliability -The indicator has correctly signaled some historical crashes, such as the one in 1987. -However, its reliability is questionable as it also produces many false signals. Usage -Generally used in conjunction with other forms of technical analysis to confirm sell signals. Traders can use it to adjust their positions or as an alert for increased market monitoring. It is important to note that, like any technical indicator, the Hindenburg Omen is not infallible and should be used with caution, in conjunction with other analytical tools. In the following photos, a harmonic "BLACK SWAN" pattern was detected on the DOW JONES, announcing a stock market crash or a strong correction!
CAPITALCOM:US30Education
by Le-Loup-de-Zurich
Quarter Theory: Intraday Trading Mastery - Part 2 ExamplesGreetings Traders! In today's video, we'll continue our deep dive into Quarter Theory Intraday Trading Mastery—a model rooted in the algorithmic nature of price delivery within the markets. We’ll explore the concept of draw on liquidity through premium and discount price delivery, equipping you to identify optimal trading sessions and execute high-probability trades, all while aligning with market bias. This video is part of our ongoing High Probability Trading Zones playlist on YouTube. If you haven't watched the previous videos, I highly recommend doing so. They provide essential insights into identifying and acting on market bias, which Quarter Theory enhances further. I highly recommend you watch ICT2022 Mentorship model on YouTube, it will really help you in your trading journey, the link to the mentorship is provided below. I’ll attach the links to those videos in the description below. Quarter Theory: Intraday Trading Mastery - Part 1 Intro: Premium Discount Price Delivery in Institutional Trading: ICT 2022 Mentorship: www.youtube.com High Probability Trading Zones: www.youtube.com Best Regards, The_Architect
OANDA:NAS100USDEducation
by The_Archi-tect
Unlock the Market's Hidden Rollercoaster: How to Ride the WavesXau/Usd Review with my trading personality As a Whimsical Rollercoaster Enthusiast, your trading style is likely driven by the excitement of quick market movements and the thrill of capturing early trades. You're probably someone who thrives on dynamic entries, enjoys the fast-paced action, and may have a more intuitive approach to the market. Let’s blend that with risk management to balance your adventurous spirit while still keeping a solid trading plan. Technical Review for a Whimsical Rollercoaster Trader: 1. Key Levels to Watch: 2,595 (Resistance) and 2,580 (Support) are your playgrounds right now. You’re drawn to the thrill of what might happen at these zones. If price pushes toward 2,595, you might feel an urge to jump in, expecting an immediate reaction. However, I encourage you to: Embrace your adventurous nature but temper it with tactical precision. Let the level hit and then wait for a quick confirmation (like a wick rejection or a mini pullback). This gives you both the excitement of early entry and higher probability without losing your edge. Scenario: Price pushes toward 2,595. Here, your Risk Entry could be triggered: Risk-Entry Plan: Enter short at the first rejection of 2,595. Set a tight stop-loss just above the liquidity zone (2,600), respecting your love for quick moves but protecting from being shaken out too soon. Target the 2,580 area first, knowing the ride might be wild but worth it. Why it suits you: It’s a quick decision, satisfying your need for speed, while the tight stop-loss aligns with managing risk. You get that thrill, but within guardrails. 2. Confirmation Entry – Building Momentum: Confirmation Entries might feel a bit “slow” to you, but they can help ensure you stay in the game longer. Consider them when you want to ride bigger moves, not just quick scalp trades. Scenario: If price breaks through 2,595, wait for a retest to confirm this zone is now support. Here’s where you bring in your whimsical nature: instead of waiting too long, spot a smaller timeframe pattern, like a bullish engulfing candle or a rejection wick, and go long. Confirmation-Entry Plan: Enter long at the retest of 2,595 after a clear rejection pattern. Think of it as waiting for the next loop on the rollercoaster — the bigger move is coming, and you want to be on board for it. Set a slightly wider stop-loss, maybe under 2,580, to allow the trade to develop without getting knocked out early. Aim for the next higher liquidity zones, like 2,600 or 2,615. Why it suits you: This method still lets you catch the excitement of a momentum breakout, but the confirmation gives you more confidence. You still get the rush but with less risk of getting thrown out before the big move. 3. Patterns Within Patterns – Your Playground: As a Whimsical Rollercoaster Enthusiast, you probably love when the market shows intricate patterns — they're like hidden rollercoaster tracks, revealing sudden twists and turns. Scenario: If price breaks above 2,595, zoom into lower time frames and look for miniature patterns within the broader trend. You might find a bull flag within a larger ascending channel. Entering on these small corrective patterns can satisfy your need for fast-paced decision-making while riding the overall trend​. Plan: Use these smaller patterns for quick entries. Set your stops just outside the pattern, and take profits quickly as the price breaks out. Think of it as riding the small waves, but always looking for the bigger momentum move to follow. Why it suits you: You’re jumping in on short-term opportunities while always keeping an eye on the next big move. This keeps you engaged and allows you to take action when you feel that burst of adrenaline without losing sight of the bigger picture. 4. Managing Whimsical Risk: Stop-loss flexibility: As someone who enjoys spontaneity, a tight stop might feel restrictive but necessary. Here’s the compromise: Set initial stops tight (like just above 2,595 if shorting), but allow yourself room to evolve the trade based on market action. If the trade moves in your favor, quickly move the stop to breakeven. Mental Resilience: Losses will happen, but you need that mental discipline to jump back in without chasing every tick. Treat each trade like a separate rollercoaster ride — whether it’s a good or bad one, there’s always another one coming. Use your intuition and excitement to recognize evolving setups. But keep a few rules in place to avoid the pitfalls of impulsivity (e.g., no more than 3 trades per day on a single idea to avoid over-trading). 5. Incorporating the Rule of Three: For the rollercoaster trader, the Rule of Three is your ultimate guide. This rule asks you to identify at least three confirming factors before entering a trade​: Scenario: Price reaches 2,595: You see a rejection (touch #1). The lower time frame shows consolidation or a mini bear flag (touch #2). Momentum begins to fade (touch #3). Action: This triple confirmation allows you to short confidently, knowing you have the right mix of signals to back your bold entry. Why it suits you: The Rule of Three still gives you the excitement of quickly entering trades but ensures they are high-probability setups. It prevents you from overtrading out of sheer excitement while still letting you capture those thrilling moves. Summary Action Plan for a Whimsical Rollercoaster Trader: Risk Entry: When you feel the market is ready to react at key levels (like 2,595), dive in! But do it smartly — use tight stop-losses and a quick decision-making process. Think of it as jumping onto the coaster right before it starts moving. Confirmation Entry: Use this when you're looking for a bigger, smoother ride. Wait for the breakout-retest combo, then get in for the larger trend move. Stay patient here; it’s worth the wait. Patterns within Patterns: Zoom into the mini rollercoasters inside the bigger structure. Catch the small waves but keep your eyes on the longer ride. Trinity Rule : Ensure three factors align before entering. This rule keeps you disciplined while still embracing your whimsical nature.
OANDA:XAUUSDEducation
by Adlercon333
Proof Technical Analysis Reigns SupremeIn doing my multi-timeframe analysis from earlier in the evening I was bias long. However I wasn't sure if price wanted to make a deeper pullback to the 1H LQZ I had marked up or even come down for the 3rd touch of my trendline in the ascending wedge (reversal pattern). Dropping down to the 5m timeframe I saw price slowing and formed a hover. I could have set an entry using a lower lot size to build a buffer, confidence, and to be able to participate in the markets - but I didn't. I passed out lol. I knew my bias was still correct and I was confident in taking "another" long position. I saw a larger flag with the close of that flag above a resistance zone or LQZ however you want to label it, and knew my bias was still valid. I took my entry as I saw price stalling forming some 5m dojis. After the first big push up I was able to reduced my risk letting the trade play out. My TP was initially aiming for the high of the day. However I was mindful of NY taking longer to play out and I knew I wasn't able to really monitor my trade. So I "didn't get greedy" and snagged my profits at about 80 ticks on the futures chart. This was a huge lesson in trusting the story price tells us through market structure and patterns. Although I didn't participate in my first trade, the trade I did take would have been a great stack-in. I'm glad I was able to participate today as my best and only trading days are Thursdays and Fridays.
OANDA:XAUUSDEducation
by MommaPreneur
2
Order Flow TradingOrder Flow Trading What is Order Flow and Why is it Important? Order flow trading is the process of analyzing the real-time flow of buy and sell orders in the market. Unlike technical analysis, which relies on historical price data, order flow looks at the immediate actions of market participants—particularly large institutions—that directly influence price movements. This approach helps traders understand market liquidity, identify major buyers and sellers, and anticipate potential price reversals or continuations. Order flow trading is crucial because it offers insights into the market's real-time supply and demand dynamics. By seeing the actual transactions occurring at specific price levels, traders can gauge the strength of market participants and make more informed decisions. Essentially, order flow reflects where the money is moving in the market, making it a powerful tool for identifying key price levels and market trends. Tools for Analyzing Order Flow Several tools and platforms allow traders to monitor and analyze order flow. These tools provide a real-time view of market activity and reveal hidden information that can’t be seen through price charts alone. Here are the most popular tools for order flow analysis: 1. Depth of Market (DOM) The Depth of Market or DOM is a tool that displays the current buy and sell orders placed in the market at different price levels. It shows the number of contracts or shares that are waiting to be executed at various prices, allowing traders to see where large orders are sitting in the order book. Usage: Traders use DOM to identify areas of high liquidity, where many buy or sell orders are clustered. These areas often act as support or resistance levels, as large institutional players may defend these zones to prevent the price from moving beyond them. 2. Time & Sales The Time & Sales window (also called the tape) is a real-time list of executed trades. It shows the time, price, and volume of each trade, as well as whether the trade was executed at the bid or the ask price. Usage: By watching the tape, traders can see whether more trades are being executed at the bid (indicating selling pressure) or at the ask (indicating buying pressure). This helps in identifying whether market participants are aggressive buyers or sellers. 3. Footprint Charts Footprint charts combine price data with order flow information to show the volume traded at each price level. These charts are color-coded, making it easy to see where buying or selling is dominant. Unlike a regular candlestick chart, footprint charts offer more granular information about the balance of buy and sell orders. Usage: Traders use footprint charts to see whether volume is increasing or decreasing at key price levels. This helps them gauge the strength of a price move or spot potential reversals when high volume fails to push the price in a certain direction. 4. Volume Profile The Volume Profile is a tool that displays the amount of volume traded at different price levels over a specific period. It gives a clear picture of where most of the trading activity has occurred and highlights high-volume areas that could act as support or resistance. Usage: Traders use the volume profile to spot significant price levels where large institutional orders are likely to have been placed. These zones often indicate key levels for potential reversals or continuation of trends. Using Order Flow to Spot Large Buyers/Sellers and Market Direction Order flow provides a real-time view of market participants' intentions, especially large institutional traders. By identifying large buy and sell orders, traders can infer the likely direction of the market. 1. Spotting Large Buyers and Sellers Large Buy Orders: If the DOM shows a large number of buy orders stacked at a specific price level, this suggests strong buying interest. Large institutions may be accumulating positions, and the price is likely to bounce from this level if those orders get filled. Large Sell Orders: Conversely, large sell orders stacked at a price level indicate strong selling pressure. If these orders remain unfilled or new sell orders keep appearing, it could mean a price drop is likely, especially if the market struggles to break through this level. Time & Sales Activity: By watching the tape, traders can spot large individual trades, which often signal the activity of institutional players. These trades can serve as clues for potential market direction. For example, a series of large trades executed at the ask price may signal aggressive buying and a potential upward move. 2. Identifying Market Direction Buy or Sell Imbalances: If there’s a significant imbalance in the DOM between buy and sell orders, this can indicate the likely market direction. For example, if there are substantially more buy orders than sell orders, it could suggest bullish sentiment and the possibility of an upward move. Absorption and Rejection: If large buy or sell orders are continually placed at a specific level but are not being filled (absorbed by the market), it could signal that the price is likely to reverse. This is known as order absorption, where one side of the market (buyers or sellers) can no longer push the price higher or lower. Price Support and Resistance: Large orders at key price levels often act as temporary support or resistance. If the market fails to break through these levels despite multiple attempts, it could signal that a reversal is likely. Conversely, if the orders get consumed quickly, it might suggest that the price is ready to break out in the direction of the larger order flow. 3. Tracking Institutional Activity One of the primary advantages of order flow trading is its ability to reveal the actions of institutional players. By analyzing where large orders are placed and executed, retail traders can follow the "smart money." Institutions often hide their intentions by splitting large orders into smaller ones, but order flow analysis can help identify these patterns. Example: Suppose you see a significant number of buy orders at a specific price level over an extended period. This could indicate that a large institution is accumulating a position, and once these orders are filled, the price may move sharply upwards. Conclusion Order flow trading provides unique insights into real-time market activity, allowing traders to anticipate price movements with greater precision. By understanding the dynamics of large buy and sell orders, monitoring liquidity levels, and using tools like the DOM, Time & Sales, and footprint charts, traders can spot opportunities that are invisible on traditional price charts. Incorporating order flow into your trading strategy can give you a competitive edge by helping you align with the moves of larger market participants.
TVC:GOLDEducation
by samstoobad
3 Pro Tips for Managing Losing Trades,Risk, Emotions & StrategyManaging losing trades is an essential part of trading, whether you're involved in stocks, forex, or any other financial market, we have all heard traders say I haven't ever taken a loss before my strategy has 100% win rate blah blah ok really, even the best traders in the world take losses, as humans we naturally don't like to lose but in trading its a part of doing business. Here are three in-depth tips to help manage losing trades effectively: ### 1. ** Develop and Stick to a Risk Management Plan ** A risk management plan is your primary defence against significant losses. The key components include position sizing, setting stop-losses, and managing risk-reward ratios. - ** Position Sizing **: Always ensure that you're not risking too much of your capital on a single trade. A common rule is to risk no more than 1-2% of your trading capital on any given trade. This way, even if you hit a streak of losses, your account can recover. - ** Set Stop-Loss Orders **: A stop-loss is a predetermined point where you exit a trade to prevent further losses. This should be set based on your analysis and not emotions. Many traders use technical levels like support and resistance or a percentage-based rule (e.g., 2-5% below the entry price). However, it’s essential to place the stop at a level that aligns with market conditions, rather than placing it arbitrarily. - ** Risk-Reward Ratio **: Aim for a risk-reward ratio that makes sense in the long term (e.g., 1:2 or 1:3), meaning that for every dollar you risk, you aim to gain two or three. This ensures that even with a lower win rate, your winning trades can outweigh your losses. ### 2. ** Detach from Emotional Biases ** Emotions like fear, greed, and frustration can cloud judgment, leading to poor decision-making during losing trades. Psychological discipline is crucial to protect against these common pitfalls. - ** Avoid Chasing Losses **: After a losing trade, many traders try to "win back" what they lost quickly, often leading to overtrading or taking high-risk trades. This is called "revenge trading" and can exacerbate losses. Take a step back, assess the situation, and only enter new trades that meet your criteria. - ** Accept Losses as Part of the Process **: Losing trades are inevitable. Successful traders view losses as an expense or cost of doing business. They understand that even the best trading strategies have losing streaks. Accepting this reality helps you avoid emotionally driven decisions. - ** Maintain a Trading Journal **: Keeping track of both winning and losing trades can help you identify emotional patterns. Record why you took the trade, the results, and how you felt during the trade. This reflection can provide insight into emotional triggers and help you make more rational decisions in the future. ### 3. ** Adjust Your Strategy Based on Market Conditions ** Markets are dynamic and constantly changing. What works in one market environment may not work in another. Regularly review and adapt your trading strategy to current market conditions, particularly after losing trades. - ** Assess Trade Context **: After each losing trade, conduct a post-trade analysis. Did the trade fail due to poor market conditions, execution errors, or a flaw in your strategy? Recognising these patterns can help you tweak your approach and avoid repeating the same mistakes. - ** Diversify Your Strategy **: Relying too heavily on one trading approach or asset class can increase the likelihood of losses during unfavourable conditions. Consider diversifying your strategies (trend following, mean reversion, etc.) and the assets you trade. This spreads risk and can stabilise performance during market volatility. - ** Cut Losses Early When Conditions Change **: If the market conditions that supported your trade change significantly, don’t hesitate to exit the trade, even before hitting your stop-loss. For example, news events or shifts in sentiment can render your trade idea invalid. Being flexible and willing to exit early when your initial reasoning no longer holds is essential. By applying a robust risk management plan, controlling emotional biases, and regularly adapting your strategy to current market conditions, you can navigate and limit the damage of losing trades.
NASDAQ:NVDAEducation
by Costy13
2
What are Volume Candles and how to use themVolume Candles are a great chart type you can use to integrate volume analysis into your trading. TradingView is a superb platform that offers this chart type in real-time, so you can immediately get a completely different feel of what the market is actually doing. As an experienced trader, understanding volume candles is crucial in getting a deeper insight into market dynamics. Unlike standard candlestick charts, which focus primarily on price movement, volume candles combine price action with the strength of trading activity (volume). This offers a unique perspective that can give you an edge in reading market sentiment and momentum. What Are Volume Candles? Volume candles are modified candlestick charts where the width of the candle is proportional to the trading volume during the corresponding time period. The typical candlestick elements—open, high, low, and close prices—are still present, but the volume aspect adds an additional layer of information, enhancing the clarity of price action. Key Features of Volume Candles: Height: Represents price movement (just like in regular candlesticks). Width: Indicates the volume of trades within that period. Unique Information You Can Extract from Volume Candles: 1. Volume-Driven Price Action Volume candles show how much trading interest exists at various price levels. When you observe a large volume candle, it tells you that a lot of market participants were active at that price. Conversely, a thin candle signals lower activity. This helps you: A. Identify levels where strong participation occurs (institutional players what I call the puppet master). B. Spot consolidation zones where volume is low, which often precedes significant price moves. 2. Momentum Confirmation High-volume candles that align with price trends suggest strong momentum. Wide Bullish Candles: If you see a wide up candle during an uptrend, it indicates that the buying pressure is backed by solid volume. This gives more credibility to the uptrend and hints at a continued move upward. Wide Bearish Candles: Similarly, a wide down candle during a downtrend signals strong selling pressure. Volume Candle Chart can also be used for day trading purposes where you need to act FAST. This TradingView chart type is extremely good so you don't need to compare the traditional volume bars on the bottom of the chart. IMPORTANT: You must understand the puppet master mentality, which gives you context. *** EXTRA: You can use this theme color.
Editors' picks
NASDAQ:COINEducation
by ZoharCho
4
Change of character analysisgood morning traders, this is my analysis of NZDUSD that i forgot to share lol, its a Low probability trade with 65% of win, our key level of a downtrend was broken which confirmed a change of character so I anticipated a new move towards the upside and entered with a tight stoploss and waited for 1H to show us a bullish candle confirmation . The trade is still going up to our prediction reason why I decided to share this is to show people the importance of trend following and how import candlestick confirmation really is. never trade if the trend is not clear and never enter if you don't see a candle confirmation
Education
by StarleXtheTrader
2
Z-Score & Smart Money Management to Reduce LossesHow to Use Z-Score for Smarter Trading Strategies In trading, success often depends on your ability to predict market movements and manage your capital efficiently. One of the tools that can give traders an edge is the Z-score, a statistical measure that helps identify patterns in win and loss streaks. This article breaks down what the Z-score is, how it works in trading, and how you can use it to optimize your strategies. What is Z-Score in Trading? In simple terms, Z-score measures the distance between an observed outcome (like a win or loss) and the average result in a set of data. In the context of trading, this data set typically represents your wins and losses over time. The Z-score is most commonly found in the range of -3 to +3, with higher scores indicating a greater probability of consecutive wins followed by losses, and lower scores representing more random, unpredictable outcomes. A high Z-score suggests that your trading strategy is likely to go through a series of wins, followed by a series of losses . This information can help you adjust your capital allocation and manage risk better. Conversely, a low Z-score points to a more chaotic trading environment where wins and losses alternate with little predictability. How Z-Score Can Improve Your Trading Decisions 1 • Understanding Random vs. Strategic Trading Traders who act without a strategy tend to experience unpredictable results — one win here, one loss there. This type of trading is driven by randomness and typically has a low Z-score, meaning there is no clear pattern of consecutive wins or losses. On the other hand, traders who use strategic approaches — like the ones developed by SOFEX —tend to see more predictable outcomes. These strategies often have a higher Z-score, signaling that you can expect a string of wins, followed by a string of losses. 2 • Capital Management Based on Z-Score The Z-score provides crucial insights into when to adjust your capital. The general rule of thumb is: • After a streak of wins, reduce your capital. The Z-score indicates that a loss is likely to follow after a series of wins. • After a loss or streak of losses, increase your capital, as a win is statistically more likely to follow. For example, if you start with $1,000 and win multiple times in a row, your first instinct might be to increase your capital to $2,000 or even $3,000. However, this is where most traders make a critical mistake . Based on the Z-score model, it's better to decrease your capital after consecutive wins, as losses are statistically imminent. Conversely, increase your capital after a loss to benefit from the upcoming win streak. 3 • Avoid Overconfidence After Wins Traders often fall into the trap of increasing their stake after a series of wins, assuming that the market will continue to favor them. However, the Z-score suggests that after 3-5 wins, you should lower your risk and decrease the amount you're trading. By doing so, you protect your profits from the losses that typically follow a winning streak. 4 • How to Apply This in Practice Let’s walk through a typical trading scenario: You start with $1,000. You win multiple trades, so you might be tempted to increase your capital. However, if you understand the Z-score, you’ll know that after several wins, a loss is likely coming soon . Instead of increasing capital, reduce your stake, say, to $500 or $800. When the inevitable loss comes, you’ve minimized your risk. After this loss, you can now increase your capital back to $1,500 or $2,000, as the Z-score suggests that a win streak is more probable after a loss. By following this approach, you avoid major losses after a win streak, and you’re well-positioned to capitalize on the next string of wins. Key Takeaways for Traders • Z-score predicts patterns in trading, with high Z-scores indicating win streaks followed by losses, and low Z-scores indicating a more random, unpredictable pattern. • After consecutive wins, lower your capital to protect your profits, as losses are statistically likely to follow. • After consecutive losses, increase your capital to take advantage of the upcoming win streak. Managing your capital based on Z-score predictions allows you to minimize losses and maximize profits, even during market fluctuations. Final Thoughts Trading is as much about managing risk as it is about making profits. The Z-score strategy can help traders anticipate win and loss streaks, allowing them to adjust their capital allocation more effectively. By following this model, you can protect yourself from large losses and make smarter decisions about when to scale up or down your trades. In summary, to optimize your trading: • Lower capital after multiple wins to avoid large losses. • Increase capital after losses to take advantage of win streaks. Implementing these strategies based on the Z-score will not only improve your trading outcomes but also help you build long-term, sustainable profitability. So the next time you're riding a win streak, remember: it's not the time to increase your stake—it's time to strategically lower it and lock in your profits. View our video on the subject here . Thank you for reading. Read our article on the Kelly Criterion in the Related Ideas section! Z-Score diagram taken from EarnForex .
Education
by sofex
Algorithmic Trading OverviewAlgorithmic Trading Overview Algorithmic trading is an essential component in today's financial markets, automating trading to improve efficiency and profitability. This article explores the intricacies of algorithmic trading, from how it works to its benefits and drawbacks, providing a comprehensive overview for traders. What Is Algorithmic Trading? Algorithmic trading uses computer programs to carry out trades in financial markets. It offers a modern approach that combines quantitative analysis, programming, and market expertise. Essentially, it automates the trading process, allowing for pre-defined rules and conditions to trigger buying or selling actions. While the concept may sound complex, its core function is to improve trading efficiency and potentially enhance profitability. Moreover, its utility extends across various asset classes, from equities and commodities to forex and derivatives. Both individual and institutional traders employ algorithmic trading to capitalise on market opportunities that may unfold too quickly for human traders to seize. How Algorithmic Trading Works In the realm of algorithmic trading, the process begins with setting up specific trading criteria. Traders or financial analysts develop algorithms that rely on mathematical models to interpret market data. These algorithms scrutinise multiple variables like price, volume, and even social media sentiments to make informed decisions. Real-time data feeds into the algorithmic systems, which continuously analyse this information to look for trading opportunities. These opportunities are executed instantly, giving algorithmic traders an edge in exploiting market inefficiencies. Once the criteria are met, the algorithm automatically executes trades, whether that involves purchasing an asset or selling it. Take algorithmic stock trading as an example. A trader might program an algorithm to buy shares of a company if its 50-day moving average goes above the 200-day moving average, a classic bullish indicator. The system would then monitor these averages and execute the trade when the condition is met, all without human intervention. However, algorithmic trading is not solely about stock markets; it is just as prevalent in the forex arena, commodity trading, and even bond markets. The speed and adaptability of these systems make them indispensable tools for modern trading. Trading Strategies and Models Various trading strategies and models can be employed in algorithmic trading. High-frequency trading (HFT) is one that seeks to make profits from small price gaps that are often only available for milliseconds. Mean reversion, on the other hand, assumes that the asset's price will revert to its average over time, buying low and selling high within a specific timeframe. For traders who prefer a more hands-on approach, custom strategies offer a tailored solution. Platforms like FXOpen's free TickTrader provide access to a comprehensive set of charts and indicators, allowing traders to design unique strategies. These could be as straightforward as using a combination of technical indicators like Moving Averages or Bollinger Bands. These custom-made strategies allow for flexibility and personalised engagement with market opportunities. Benefits of Algorithmic Trading Algorithmic trading offers a myriad of benefits that make it a staple in today's fast-paced financial markets. Employing the best algorithmic trading software can bring about several advantages: - Increased Speed and Efficiency: Algorithms operate in real-time and can analyse and execute trades far more rapidly than a human trader can, ensuring opportunities are not missed. - Reduced Emotional and Human Bias: The automation of trading decisions removes the emotional component, helping traders stick to a predetermined strategy. - Enhanced Precision and Consistency: Algorithms can process vast amounts of data and consistently apply trading criteria, offering a level of precision that is hard to achieve manually. Disadvantages of Algorithmic Trading While algorithmic trading offers undeniable advantages, it's not without its drawbacks. Notably, it can expose traders to certain risks: - System Failures: Technical glitches or connectivity issues can lead to missed trades or unintended positions, affecting overall performance. - Market Manipulation: Some algorithms, like those used in High-Frequency Trading, can artificially inflate market activity, causing distorted price movements. - Lack of Fundamentals: Algorithms cannot perceive market sentiment or unforeseen events like political instability, making them less adaptable than human traders in specific scenarios. The Bottom Line In summary, algorithmic trading has reshaped the landscape of modern trading, offering benefits like speed, efficiency, and precision. However, it's important to discover the pros and cons before using algorithmic trading. For those interested in taking advantage of this technology, opening an FXOpen account provides access to forex VPS hosting, perfect for algorithmic trading. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
2
XAUUSD: Navigating Key LQZ 4 HIGH-PROBABILITY shortMulti-Timeframe Analysis of XAUUSD 1. 4-Hour Chart Key Structure: All-Time High (ATH) at $2,600.318: This level acts as a strong resistance. Price has rejected this zone, showing an initial failure to break higher. Corrective Channel: The price has formed a small ascending corrective channel after the ATH rejection, which often indicates a potential continuation move downwards. Key Liquidity Zones (LQZs): 4H LQZ at $2,522.172: This zone could act as the next support if the downtrend continues. Daily LQZ at $2,511.042: Deeper support that aligns with the broader timeframe. Implication: Based on the corrective channel and the rejection of ATH, a continuation down towards the 4H and Daily LQZ is likely unless a strong bullish push occurs. 2. 15-Minute Chart Bearish Momentum: The price formed a sharp drop after the ATH rejection, leading to a corrective structure forming. Ascending Channel: A bearish ascending channel (corrective) is visible, which may suggest further downside. A clean break below the lower boundary of this channel would confirm bearish continuation. 1H LQZ at $2,542.056: This zone is likely to be the first target if the breakout occurs. Implication: If the price breaks below the corrective channel, a potential short entry targeting the 1H LQZ is a strong play. A further drop to the 4H LQZ could follow if momentum continues. 3. 5-Minute Chart Current Reaction: The price is bouncing from the lower part of the small corrective structure. There is a minor bounce from the 5M LQZ at $2,562.855. Next Step: Monitor for price rejection or failure at the 5M LQZ. If it fails to sustain this level, a short opportunity arises. Implication: A break below the 5-minute structure could lead to a fast move down toward the 1H LQZ. Watch for strong rejections at this level. --- Trade Setup Suggestion: 1. Entry: Aggressive: If the price breaks the corrective channel on the 15-minute chart, you can enter short near $2,562-$2,564. Conservative: Wait for a confirmed break and retest of the lower channel boundary. 2. Stop Loss: Set above the corrective channel high, around $2,580, to protect against sudden bullish reversals. 3. Targets: First target: 1H LQZ at $2,542.056. Second target: 4H LQZ at $2,522.172. Third target: Daily LQZ at $2,511.042 if further downside persists. Conclusion: The price structure and liquidity zones indicate a bearish continuation is possible, especially if the corrective channel breaks down. Keep an eye on how price interacts with the liquidity zones to refine entries and exits.
OANDA:XAUUSDEducation
by MommaPreneur
What To Expect After The Fed rate Cut: 9-18-2024 (Fed Day)This video is really designed to teach you some basics about Fibonacci Price Theory (FPT) Analysis. I wanted to show you how I see the charts using FPT and why, sometimes, I might be seeing things differently than you do on the charts. In my world, there are simple constructs that are evident on every chart. Supply & Demand zones, trending/flagging, and most importantly Fibonacci Price Theory constructs. Fibonacci Price Theory is the basis of all my analysis. It is the ground-level structure I look for in price on all charts. Then, I move to more advanced indicators and other analysis types to develop a Success/Failure outcome (trend/trade expectation). What I do is not hard to understand - it just takes practice. Fibonacci & Gann techniques are infinitely adaptable to any type of price action. I use another technique I call the Tesla Price Amplitude Arcs which often help me identify where/when price events may happen - but that is for another video (maybe). Ultimately, it comes down to understanding the structure and intent of price action (either success or failure) and how to position your trades for that success or failure of any price event. There are really two types of traders: trend traders and counter-trend traders. Trend traders try to catch the explosive price moves as trend events. Counter-trend traders try to catch major reversal levels in price and try to profit from counter-trend price moves (reversals/reversions). Using FPT, you can learn to execute both type of trading styles and improve your ability to see the market trends/setups more clearly. I hope this video helps you learn to become a better trader and helps you understand my Plan Your Trade videos more clearly. At least you'll be able to understand how I see charts and what drives much of my thinking related to chart. Get some. #trading #research #investing #tradingalgos #tradingsignals #cycles #fibonacci #elliotwave #modelingsystems #stocks #bitcoin #btcusd #cryptos #spy #es #nq #gold
AMEX:SPYEducation
by BradMatheny
7
Nasdaq-100 Index. The Psychological Aspects of Round NumbersIn the complex dance of commerce and finance, price tags play a key role in influencing consumer decisions. While it’s a fairly common psychological assumption that every penny and cent counts when it comes to getting the best deal, human psychology often deviates from this linear logic. In this educational post, we explore the irresistible appeal of round numbers, and how they often trump other considerations when making transaction decisions. The Irresistible Attraction to Round Numbers We do often believe that every penny counts in our transactions. However, research shows a striking deviation from this assumption. In scenarios where people choose a price, such as tipping at a restaurant or donating to beloved author or website, they disproportionately choose round numbers — like $ 5, $ 10 or $ 20 — far more than would be predicted by chance alone. One could argue that this is due to the rejection of change, a reluctance to waste time on small change, and the unwillingness to bother with complex mathematics. However, even in cases where the exact bill is not an issue (e.g., cashless card payments), the preference remains. For example, diners faced with a non-round bill (for example $ 34.67) are more likely to give non-round tips ($ 15.33), but only so that the total is a neat round number ($ 50). Why do we prefer round prices? And what is the psychology behind it? 1) Cognitive simplicity: The human mind is programmed to simplify and seek simplicity. Numbers like 10, 50, or 100 inherently feel “cleaner” and less chaotic than 17, 62, or 84. This desire for neatness gives us a sense of accomplishment. 2) Perception of quality: The marketing world has long capitalized on this preference for round numbers. Brands strategically associate round prices with premium quality. On the other hand, odd prices like “29.99” or “34.99,” while ubiquitous, subconsciously signal here's a discount or a bargain. 3) This preference is not limited to prices. People exhibit this tendency to round in other aspects of life as well. Our repeated exposure to round numbers is common in a variety of contexts, both in everyday life and during financial transactions, which contributes to an unconscious bias toward them. This cognitive ease with round numbers further perpetuates the preference. The stock market’s behavior and its fluctuations around these significant, round numbers is not a coincidence in general; there is a psychological explanation. Market Psychology of Round Numbers When the market reaches round numbers such as 500 or 1,000, 2,500 or 5,000, 10,000 or 20,000, it attracts the attention of both active traders and casual investors who may not even be actively following the market. As in everyday life, people often use round numbers as thresholds for making investment decisions. For example, some may decide to enter the market if a major index such as the Nasdaq-100 has exceeded 10,000, or they may decide to sell some of their stocks if the Nasdaq-100 has reached 20,000. These round numbers act as magnets for sellers as they mark important milestones given the relatively high rarity of a round number. If the market has the potential to move higher, it first needs to absorb the selling pressure around the round numbers and establish equilibrium before continuing its move higher. If we analyze the market behavior over the last decades, we will see clear patterns at round numbers. Let us take a closer look at a few examples. 1) Indian Stock Index, Sensex BSE:SENSEX Sensex, one of the major market indices in India, has its share of round number syndrome. For example, when Sensex reached 10,000 points in Q1 2006, it experienced significant market activity, with the index fluctuating by as much as 30 percent in Q2. The same phenomenon occurred at multiples of 10,000. Thus, at 20,000 points, which the Indian market reached at the end of 2007, the index collapsed by more than 60 percent over the next 4 quarters of 2008. Later the 20,000 mark has been reached again in the second half of 2010, and the index again suffered a decline of more than 20 percent during 2011. Later Indian stock market index reached the 30,000 mark in the first quarter of 2015, and its led to a price decline of more than 20 percent in the next 4 quarters, while 40,000 mark in the fourth quarter of 2019 - led to the market decline by 30 percent on the wave of COVID-19 sales. 2) Gold market OANDA:XAUUSD As in the previous example, round numbers often become key points of congestion for Gold market, when the market tries to break even higher, but the forces of buyers and sellers may be unequal. For example, spot Gold reached the $ 1,000 mark for the first time in the Q1 2008, which, following the logic discussed above, led to sales and 30 percent decrease. Gold spot buyers have tried a lot to reach $ 2,000 mark in 2011, but it brought the market down by 45 percent over the next 5 years. There were also a lot of unsuccessful attempts to jump above $ 2,000 in 2020-2022. Finally Gold spot surged above $ 2,000 only in Q4 2023, its led to further price increase, up to 2500 US dollars per ounce. 3) US stock index, Nasdaq-100 index NASDAQ:NDX The Nasdaq-100 index approached the 10,000 point mark for the first time in Q1 2020, which could have contributed to the sell-off. In fact, this is what happened, as the market then plunged by more than 30 percent in March 2020, and only thanks to monetary support measures and the reduction of US interest rates to almost zero, the index was able to break the 10,000 barrier by the end of Q2 2020. Reaching the 20,000 mark by the market index in Q2 2024, as we see, again leads to increased turbulence in US tech stocks and talk of imminent monetary easing by the Fed. Final Thoughts 1) It is important to note that round number syndrome and increased seismic activity near rounds number is a short-term phenomenon. Once the selling pressure is absorbed, the market resumes its movement based on other factors and develops independently of these already passed milestones. 2) Understanding the market behavior at round numbers can provide valuable information to investors. These round numbers act as psychological triggers for investors, driving their decision-making processes. 3) Understanding this phenomenon allows investors to make more informed choices and understand the short-term fluctuations that occur during these stages.
NASDAQ:NDXEducation
by Pandorra