10-Year T-Note vs. 10-Year Yield Futures: Which One To Trade?Introduction:
The 10-Year T-Note Futures and 10-Year Yield Futures are two prominent instruments in the financial markets, offering traders unique opportunities to capitalize on interest rate movements. This video compares these two products, focusing on their key characteristics, liquidity, and the differences in point and tick values, ultimately helping you decide which one to trade.
Key Characteristics:
10-Year T-Note Futures represent a contract based on the value of U.S. Treasury notes with a 10-year maturity, while 10-Year Yield Futures are based on the yield of these notes. The T-Note Futures contract size is $100,000, while the 10-Year Yield Futures contract size is based on $1,000 per index point, reflecting a $10 DV01 (dollar value of a one basis point move).
Liquidity Comparison:
Both 10-Year T-Note Futures and 10-Year Yield Futures are highly liquid, with substantial daily trading volumes and open interest. This high liquidity ensures tight spreads and efficient trade execution, providing traders with confidence in entering and exiting positions in both markets.
Point and Tick Values:
Understanding the point and tick values is crucial for effective trading. For 10-Year T-Note Futures, each tick is 1/32nd of a point, worth $31.25 per contract. The 10-Year Yield Futures have a tick value of 0.001 percent, worth $1.00 per contract. These values influence trading costs and profit potential differently and are essential for precise strategy formulation.
Margin Information:
The initial margin requirement for 10-Year T-Note Futures typically ranges around $1,500 per contract, while the maintenance margin is slightly lower. For 10-Year Yield Futures, the initial margin is approximately $500 per contract, reflecting its lower notional value and DV01. Maintenance margins for yield futures are also marginally lower, providing traders with flexible capital management options.
Trade Execution:
We demonstrate planning and placing a bracket order for both products. Using TradingView charts, we set up entry and exit points, showcasing how the different tick values and liquidity levels impact trade execution and potential outcomes.
Risk Management:
Effective risk management is vital when trading futures. Utilizing stop-loss orders and hedging techniques can mitigate potential losses. Avoiding undefined risk exposure and ensuring precise entries and exits help maintain a balanced risk-reward ratio, which is essential for long-term trading success.
Conclusion:
Both 10-Year T-Note Futures and 10-Year Yield Futures offer unique advantages. The choice depends on your trading strategy, risk tolerance, and market outlook. Watch the full video for a detailed analysis and insights on leveraging these products in your trading endeavors.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
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Psychology: Trade Smart - Focus on Facts, Not wishes!See the Truth: Trading Without Bias
Discover the critical importance of objective analysis in trading.
Learn how to avoid emotional biases, stay neutral, and focus on what the market truly shows you. This guide will help you improve your trading strategies and achieve more consistent results.
Volatility bands vs Bollinger BandsThis chart illustrates how the difference between volatility bands in white and Bollinger bands in orange. As you can see volatility bands encompass the volatility better.
Mean vs Simple moving averageThis chart displays the difference between the mean in white and the simple moving average in orange to illustrate the difference in how they work. As you can see the mean is a better approximation of price movements.
HOW TO FIND A BETTER ENRTY FOR TRADING FOREXHere i show you how you can find a better entry trading forex and also trading xauusd. So right here you can able to know how to enter , set stoploss and take profits
Mastering Ichimoku Cloud: Predicting Price Movements Like a ProIn this comprehensive video tutorial, I’ll guide you through the process of predicting price movements using the Ichimoku Cloud. Learn how to determine price direction with precision and identify the crucial "doorway" the price must pass through to confirm a trend.
We'll cover:
Understanding the components of the Ichimoku Cloud
Identifying key signals for trend confirmation
Real-life examples to illustrate how price interacts with the cloud
Practical tips for applying Ichimoku Cloud analysis in your trading
Join me as I share my expert insights and provide step-by-step guidance to help you master the Ichimoku Cloud. Don’t forget to like, comment, and subscribe for more trading lessons and strategies. Let's elevate your trading skills together! 🚀💹
AMP Futures - Economic CalendarIn this idea we will demonstrate how to access the economic calendar.
EGO NO GO Traders’ Downfall: Six Actions to AvoidThere is NO place for ego and bravado with trading.
If it falls under your personality, you have been warned.
Do you know why?
Because ego and emotion are traders’ kryptonite.
In this piece, we’ll dive into the egotistical trader’s playbook and shine a light on six actions that could be crippling your trading game.
EGO NO GO #1: Overtrade: More is Not Always More
Overtrading is like trying to sprint a marathon; it’s unsustainable and a fast track to burnout.
You need to pace yourself or you’re going to get a spasm or a stitch.
As a trader, you’re not a machine-gun trader, firing rounds at every shadow.
You need to only look and wait for the highest probability trades.
Remember, it’s about the right trades, not just more trades.
Solution: Quality Over Quantity as I always tell my MATI Traders!
EGO NO GO #2: Revenge Trade: The Emotional Spiral
After a loss, I know it feels tempting to jump straight back into the markets in order to recover your funds.
But let’s face it…
Revenge trading is about as effective as using a leaky bucket to bail water out of a sinking ship.
Solution: Keep Cool and Carry On
Clear your head.
Take a walk, grab a beer – The market will always be there for you the next day.
And it will probably dish out even better trades.
Remember, the market doesn’t know you, and it certainly doesn’t owe you. Stick to your plan, not your pride.
EGO NO GO #3: Ignore Risk Management: The Silent Killer
If you ignore risk management, it’s like skydiving without checking your parachute.
What if you jumped and instead of a parachute you’re wearing a backback?
Don’t laugh, these things happen.
With trading you need your risk management measures:
Stop loss of less than 2%
Drawdown management when the portfolio goes down.
Risking money you can emotionally handle to lose.
Making sure of your trade size.
Checking your risk to rewards.
Ensuring you’ve protected your positions.
Solution: Plan Your Risk
Decide on your risk parameters before you enter a trade, and then—this is key—stick to them.
Your future self will thank you.
EGO NO GO #4: Dismiss Market Analysis: Gut Feelings vs. Hard Data
You also need to check the weather.
By weather I mean, look at the news events coming out for the day and week.
Is it NFP (Non Farm Payrolls)? – The day when you DON’T day trade.
Is it CPI (Consumer Price Index)? – The day you DON’T Trade
Is it FOMC where the federal committee talks and causes volatility?
Solution: Check the news events and be vigilant.
EGO NO GO #5: Blame Everything: The Pointless Game
When trades go south.
They look to blame.
They point fingers to their mentors, their strategy, themselves.
There is NO blame game with the markets.
If you followed your rules, strategies, risk to reward and everything else – You did the best of your ability for that trade.
Solution: Own your trade to Hone your trade It
Accept responsibility, learn from your mistakes, and grow stronger. It’s the only way.
EGO NO GO #6: Fail to Adapt: Evolve or Be Left Behind
The market is a beast that’s always changing.
I always say adapt or die.
Feel the general market’s environment.
Know whether it’s in a favourable or unfavourable period.
Tweak your system to improve your metrics.
Change the markets by adding or removing ones that aren’t working.
Take ego out of the analysis.
Solution: Stay Sharp, Stay Updated
FINAL WORDS:
I’m sure you already feel less egotistical when it comes to trading. And that means, this article has done it’s job.
Whenever you feel ego creeping in, remember this article save it and store it.
In fact go through all the articles that resonate, print them and store them in a file.
It will be your guide to trading well!
Let’s sum up the ego tendencies and how to avoid them…
Avoid Overtrading: Less can be more.
No Revenge Trading: Act with strategy, not emotion.
Stick to Risk Management: It’s your safety net.
Conduct Market Analysis: Never trade uninformed.
Stop the Blame: Learn and move forward.
Adapt to the Market: Evolve your strategy to stay relevant.
What Is the 80-20 Rule (Pareto Principle) in Trading?What Is the 80-20 Rule (Pareto Principle) in Trading?
In trading, rules that could maximise efficiency are highly sought after. One such principle is the 80-20 rule, also known as the Pareto principle. This concept asserts that 80% of outcomes often stem from 20% of causes. In software development, 20% of the bugs cause 80% of the problems. In customer service, 20% of the customers tend to account for 80% of the complaints, etc.
The Pareto principle has profound implications for trading strategies: by focusing on the most impactful factors, traders can potentially enhance their performance. This FXOpen article explains the 80-20 rule, exploring its origins, applications, and examples that illustrate its benefits.
Understanding the 80/20 Rule in Trading
The 80/20 method, or Pareto Principle, is a powerful concept that has found applications in various domains. It suggests that a small percentage of causes is responsible for a large percentage of effects. In trading, this means that approximately 80% of returns are expected to come from 20% of trades or trading strategies. Conversely, the remaining 80% of trades may only generate 20% of total returns.
Historical Background of the Pareto Principle
The Pareto Principle is named after Italian economist Vilfredo Pareto, who first observed this phenomenon in 1896. The principle's origins can be traced back to his observation and work in the early 20th century. Pareto found out that 80% of the land in Italy was owned by 20% of the population. This observation led to the broader conclusion that this 80-20 distribution applies to various aspects of life. Over time, the Pareto principle has been adapted and used in a wide range of fields, including economics, business management, and, notably, trading.
Examples of the Pareto Rule
Here are some illustrative examples of the use of the Pareto principle from different fields.
Business: In many companies, 20% of the products or services account for 80% of the company’s income. It is also often observed that 80% of the revenue comes from 20% of large corporate clients, while most customers don’t buy that much, for example, luxury cars from a manufacturer. Alternatively, consider a sales department where 20% of the salespeople generate 80% of the revenue for the company. The 80/20 rule in business works quite often.
Software development: Typically, 20% of bugs cause 80% of software problems. This insight helps development teams prioritise debugging efforts on the critical few bugs that have the most impact on the software’s performance and UX. Or it could be that 20% of the code accounts for 80% of the app’s functionality.
Wealth distribution: Vilfredo Pareto originally observed that 80% of Italy’s wealth was owned by 20% of the population, a principle that holds true in many economies today. This observation has implications for economic policies and wealth management strategies, where policymakers might focus on redistributive measures to address economic inequality.
Explanation of the 80-20 Trading Strategy
The unequal distribution of inputs and outputs is a fundamental concept underlying the 80-20 rule. A small subset of trades or trading instruments are likely to generate the bulk of one’s returns, while the majority of the trades might contribute relatively little or even result in losses. Additionally, a trader may find that a small subset of their skills or habits, such as risk management or emotional discipline, are responsible for the majority of their effectiveness, while other factors play a less significant role.
The rule can be a valuable tool for identifying and capitalising on the most trading opportunities while minimising efforts on less fruitful endeavours. To leverage this principle, traders focus their efforts on the most revenue-generating areas, as this can help optimise their strategies for potentially better outcomes. Focusing on these high-impact trades involves analysing past trades and looking for patterns to pinpoint the most promising opportunities and allocate resources accordingly.
Application of the 80/20 Rule in Trading
Let’s see how the 80/20 principle manifests in trading.
The first step is to identify high-impact trades. If a small percentage of trades contribute to the majority of returns, focusing on finding and replicating these high-impact trades can possibly increase the overall return on investment. Certain market conditions, such as high volatility, may lead to more effective trades, so one can follow the news or economic announcements related to them to stay informed.
The second step is to optimise the trading strategy. A trader might discover that a few technical indicators, such as moving averages or the Relative Strength Index, are responsible for the majority of their effective trades. Analysis may also reveal that the most effective trades occur during a specific time. For instance, some stock traders find that the first hour after the market opens or the last hour before it closes yields the most desirable results. If one prioritises some indicators in their analysis and focuses on peak trading times, it might require less effort to trade, and simplify the decision-making process, but still have optimal outcomes.
The third step is to allocate resources. Applying the 80/20 portfolio rule can help traders allocate their initial capital more effectively. Putting more in trades or assets that have historically been more effective may help maximise returns. For instance, if 20% of trades in particular trading instruments generate 80% of the returns, traders may allocate more capital to these high-performing assets.
The last step is to manage risk. Just as returns tend to be concentrated, so too can risks. Identifying the 20% of factors that contribute to 80% of the risk can help traders implement robust risk management strategies. This might include setting tighter stop-loss orders on trades that historically have higher volatility, avoiding certain market conditions, or adjusting position sizes to minimise risk exposure.
An Example of the 80/20 Rule in Trading
Consider a trader who reviews their trading history over the past few months and discovers that trades based on economic events accounted for 20% of their total trades but generated 80% of their gains. This pattern indicates that focusing on trading around economic announcements can be particularly effective for this trader.
This is just one of the Pareto principle examples in trading, and in your case, the situation and influencing factors may be different. To understand how the principle will work for you, you can open an FXOpen account, where you can trade over 600 financial instruments.
Practical Examples and Case Studies
Here are two more real-life trading scenarios.
A day stock trader might notice that trades made during the first hour of market opening, known as the opening bell, yield considerably higher returns than trades made at other times. Upon further analysis, the trader finds that this period accounts for 20% of their trading time but results in 80% of their daily earnings. With the help of concentrating their efforts during this time window and perhaps scaling back on trades made during other time periods, the trader may fine-tune their strategy.
The alternative case is when a trend-following trader noticed that 20% of their trades, specifically those that aligned with strong market trends, accounted for 80% of their returns. So, the 80/20 rule works for them, too. They adjusted their course of action to focus primarily on capitalising on these high-probability trend-following opportunities.
Challenges and Limitations of the 80/20 Principle
While the 80-20 rule can be a powerful tool for stock, cryptocurrency*, or forex traders, it is essential to recognise potential challenges in its application.
1. Accurately identifying the vital 20% can be difficult to do, especially in dynamic market conditions. Traders may need to continuously reevaluate and adjust their focus as market trends evolve.
2. The 80-20 rule is a generalisation, and the actual distribution of inputs and outputs may vary from the suggested ratio. It is a theory, not a strict practical rule.
3. Analysis of historical data may be distorted by survivorship bias, where only effective trades are considered, potentially leading to an overestimation of the 80-20 distribution.
4. Traders may face psychological challenges when strictly adhering to the 80-20 rule, such as the fear of missing out or the temptation to diversify their trading activities.
Traders should approach the 80-20 rule with a critical mindset, continuously monitoring and adjusting their strategies and maintaining a disciplined approach to risk management.
Summing Up
Identifying and focusing on the 20% of trading activities that contribute the most to returns and minimise risk factors can potentially minimise your efforts. This principle encourages traders to prioritise quality over quantity, leading to more streamlined and effective trading. However, it’s essential to recognise the limitations associated with the 80-20 rule and to approach it with a critical and adaptable mindset.
An application of the Pareto principle requires a combination of data-driven analysis, disciplined execution, and continuous refinement of strategies. If you want to practise trading it, consider the TickTrader platform, offering over 1200 trading tools.
FAQ
What Is the 80% Rule in Day Trading?
The 80% principle in day trading refers to the 80-20 Pareto rule, where a trader focuses on the few factors that contribute to most trading outcomes. The strategy aims to increase the frequency of effective trades by concentrating on the vital key factors that affect trading results.
What Is the 80/20 Trading Strategy?
The 80/20 trading strategy means that the minority of trades or market conditions can account for the majority of returns — approximately 80% of gains come from 20% of trades. This principle is about focusing on the most productive trading opportunities.
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
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.
Keys to the Kingdom: How to Become a Badass TraderReady to unlock the secrets of badass trading? In this video, I'm sharing the ultimate guide to becoming a successful and confident trader. Whether you're a beginner or a seasoned pro, these tips and strategies will elevate your trading game to new heights.
We'll cover:
Mastering technical analysis and reading market trends
Developing a solid trading plan and sticking to it
Managing risk like a pro to protect your capital
Recognizing key opportunities for maximum gains
Building the right mindset for trading success
Join me as I reveal the keys to the kingdom and transform you into a badass trader. Don't forget to like, comment, and subscribe for more powerful trading insights and strategies. Let's dominate the markets together! 🚀💹
THE EMOTIONAL TRAP: UNDERSTANDING THE DANGERS OF TILT IN TRADINGAs everyone knows emotions are one of the main components of success in trading. And not only in trading, but also in life. And the problem is that everyone knows about the negative sides of excessive emotionality, but they still keep making the same mistakes. The mistake is that in the moment of calmness a person underestimates the harm that emotions can cause. They miss the moment when signs of leaving the state of calmness appear and then they have to deal with the consequences of actions made in an unbalanced state.
In trading, tilt is an equivalent of an ordinary argument. A situation in which a person goes out of the balanced state and actually loses control over what is happening. In legal terminology, this is called a "Heat of Passion". But if in law the legislation calls the heat of passion a mitigating circumstance, then in trading the market does not care about emotions - all the consequences fall on the trader.
📍 THE HIDDEN DANGERS OF TILT
The more emotion is eliminated from trading, the more logical and effective it becomes. However, emotions are an inherent part of human character, and it is impossible to completely eradicate them. Statistics reveal that traders between the ages of 20 and 30, as well as those above 50, are most susceptible to emotional influences. This can be attributed not only to their level of experience but also to their ability to manage themselves and remain objective. Young adults, just starting their careers, often exhibit a sense of recklessness, while the older generation tends to become complacent and lose their grip on their emotions.
📍 THE DANGERS OF TILTING IN TRADING ARE:
• Loss of emotional control, leading to impulsive decisions that are not guided by logic or a well-thought-out trading system.
• Emotions, whether negative (such as fear and anxiety) or positive (like euphoria and excitement), can take over, causing mistakes and irrational decisions.
• Emotional reaction to every emergency situation becomes a habit, making it challenging to separate rational thinking from emotional responses. This habit can be difficult to break and can lead to consistent mistakes in trading decisions.
• Tilting can also result in the violation of risk management rules, such as closing profitable trades prematurely or holding onto losing positions for too long, which can have severe consequences for one's trading account.
One common occurrence that can lead to tilt is when a trade almost reaches its target level, only to suddenly reverse, resulting in a loss or lost profit. This can be frustrating and demotivating.
Another scenario is when a trader opens a trade based on an obvious trend, only to see it turn unprofitable. When a trader is 100% certain of their forecast, but it proves to be incorrect, it can lead to an emotional outburst. This emotional response can cloud their judgment and lead to impulsive decisions that worsen the situation.
Interestingly, professionals in other fields, such as poker and chess, have identified similar causes of tilt. In these games, tilt is often categorized into distinct groups. Understanding these causes can help us develop strategies to recognize and manage our own tilt, ultimately improving a performance and overall trading experience.
📍 THE CAUSES OF TILT IN TRADING CAN BE ATTRIBUTED TO SEVERAL FACTORS
1. Bad luck: Despite probability theory suggesting that the outcome of positive or negative events is 50/50, a streak of bad luck can still occur. This is due to the variability in trading systems and the role of luck. A trading system may perform well on one occasion but poorly on another.
2. Unfairness: Unjust market practices, such as sudden spread widening, market maker manipulation from brokers, can evoke feelings of tilt. Cryptocurrency markets, in particular, are susceptible to market maker games. While it's challenging to combat broker injustice, acknowledging and accepting market unpredictability can help manage tilt.
3. Fear of loss: Defeat is an inherent part of trading, but not everyone is willing to accept it. The way individuals perceive loss can significantly impact their emotional response. Some people learn from their mistakes, while others become overwhelmed by emotions.
4. Mistakes: Regrettable mistakes, especially those caused by inattention or failure to acknowledge a correct prediction, can lead to tilt. It's essential to recognize that mistakes are inevitable and develop strategies for addressing them without allowing emotions to dictate decision-making.
5. Uncertainty: Doubts about the accuracy of a signal or fear of loss can prevent traders from taking action, even when they're confident in their forecast. Developing intuition, trusting oneself, and practicing self-awareness through demo accounts or small accounts can help alleviate this type of tilt.
6. The desire to win back losses: The urge to recoup losses at all costs can lead to impulsive decisions and further losses.
7. Despair: This emotional state is characterized by a complete breakdown in judgment, leading to reckless decisions and potentially resulting in the loss of one's deposit and abandonment of trading altogether.
📍 THE CONSEQUENCES OF TILT IN TRADING CAN BE SEVERE AND FAR-REACHING
Some common consequences include:
1. Impulsive and reckless trading decisions, often characterized by haphazardly opening trades without a clear plan or strategy.
2. Emotional fear can lead to premature exits from the market, even when the exit signal is not supported by technical or fundamental factors. This can result in missed opportunities and lost profits.
3. Doubts about the correctness of one's actions can lead to chaotic decision-making, causing traders to hastily change trade volumes, pending orders, and other settings.
4. When a stop-loss is triggered, emotional traders may impulsively open a trade in the opposite direction, often due to a local pullback on a strong trend or market maker manipulation. This is a classic example of emotional decision-making.
5. In an attempt to salvage a large loss, traders may decide to "wait it out" in the hope that the price will eventually break even. However, this approach often ends in a stop-out, as the loss continues to grow.
6. Greed can also be a consequence of tilt, as traders become obsessed with maximizing their profits and take excessive risks. This can lead to devastating losses and damage to the trading account.
Tilt in trading is often more prevalent after a losing trade, rather than after a profitable one. This is because the emotional impact of a loss can be more significant and lingering, whereas a winning trade may prompt a sense of relief and complacency.
However, this second type of tilt, which occurs after a winning trade, can be particularly dangerous. When a trader experiences a series of profitable trades, they may start to relax and let their guard down, leading to a loss of control and discipline. This can quickly snowball into a desire to win back their profits, which can spiral out of control and ultimately lead to emotional exhaustion and burnout.
This phenomenon can be attributed to the psychological principle of "relapse," where individuals who have made significant progress in overcoming their biases or impulses may revert to old habits when faced with success. In the context of trading, this can manifest as reckless behavior, impulsive decisions, and an inability to distinguish between rational and emotional decisions.
📍 CONCLUSION
Ultimately, the responsibility for our actions and emotional state lies solely with ourselves. The key to maintaining emotional control is to stick to our system, regardless of the outcome. This means resisting the temptation to deviate from our strategy, even when we're experiencing a streak of success or facing a series of losses.
It's crucial to recognize that emotions can be unpredictable and potentially destructive forces. When we feel the urge to take action outside of our predetermined plan, whether due to elation or frustration, we must take a step back and reassess. If we're experiencing a series of successful trades, it's essential to take a break before we become complacent and let our emotions get the better of us. Similarly, if we're on a losing streak, taking a break can help us clear our minds and approach our trading with a clearer head.
The ability to control ourselves is often the deciding factor between success and failure in any endeavor. By acknowledging this and prioritizing emotional regulation, we can develop the discipline necessary to maintain a consistent and profitable trading strategy. Remember, self-control is not about suppressing our emotions, but about acknowledging them and making conscious decisions that align with our goals.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
The chart is a battleground, revealing who got crushed!In the early days of exchange trading, there was no technical possibility to visualize market quote movements, and traders analyzed ticker tapes. The real hype and massive interest in exchange speculation owe it to the technical possibility of displaying exchange information in the form of charts with ticks, bars, candles, and other more exotic ways of displaying price movements (Renko, Kagi). This led to a rapid growth of various schools of technical and graphical analysis. Just Google it, and you'll be overwhelmed by the sheer amount of info out there. It's like, every chart can be interpreted in a million ways, and three analysts will give you four different opinions on the same chart. It's crazy!
But after 15+ years of trading, I've come to realize that the essence of graphical analysis is all about finding the "suffering" market participants. Classic patterns make it easy to spot areas of market activity and where traders are piling in. I'll give you some examples, backed by data from open sources, that'll show you just how predictable retail traders can be.
Now, I know some experienced traders might say, "Patterns don't work, and this knowledge isn't enough." But I call BS - patterns do work, and the real question is who's extracting the most value from them? Of course, interpreting market patterns is just one piece of the puzzle.
Here's an analogy: think of experienced hunters preparing for a hunt. They don't just wander around looking for prey; they identify the habitats, study the location, and track the animal's migration paths. They have a plan, limited time, and the right gear to get the job done.
It's the same with pro traders with really big money. They plan and execute their strategy, using the behavior of less-informed participants in certain "hotspots" that attract retail traders like magnets. It's simple: a a newbie sees a market situation that looks just like one from a technical analysis book, and they're like, "Ah, I've got this!"
Alright, let's take a look at the current situation with the Euro. I've got a screenshot with the average long and short positions of retail traders marked on the chart. It's a 1-hour time frame, which is probably the most popular one, right? Think about it, why is this time frame so popular? The data is from an open source, as of Friday evening. Take a minute to study this chart. What catches your eye?
Let's zoom in and add some lines and arrows. Voilà! What do we see? The average long and short positions of participants (from the open source) almost perfectly match the breakouts of local highs and lows. This is what's called "trading the breakout" in the books.
We can make an intermediate conclusion: the "bulls" were encouraged to open positions and got stuck in a losing zone, while the "bears" are celebrating their victory, as the market is favoring them and they're in a small profit. In other words, the market sentiment is bearish.
Woohoo, case closed, let's go to short the Euro now!
And yes, and no! The Euro quotes have been below the average short position of traders since June 14th, for two whole weeks, inviting everyone to start shorting. Even a blind "bull" can see it's time to switch sides). Here are some more numbers from the open source: short positions on the Euro decreased by 11.55% last week , while bearish positions grew by 8.55% . These are broker-aggregated data, no insider info here. You can find them yourself if you put in some time and effort. These numbers, as you understand, confirm our hypothesis that this "shorting invitation" didn't go unnoticed.
Now, in the context of this article, think about it: "Will the 'Hunters' take advantage of this situation?" Or will the market take us all for a profitable ride? Oh boy...
Let's look at the current situation with the Yen. It's a 1-hour chart with opened buys and sell levels marked.
What can we conclude: a massive bearish candle clearly encouraged a lot of short positions to open, while the "bulls" opened at the upper range boundary during its test, and the market is favoring them, while the bears are suffering. But what's even more important, they're not just suffering, but also reversing the market. According to open data, the number of open short positions grew by 14.09% last week . Good luck to them in this tough business! However we should remember that short positions are closed at a stop-loss by "market buy" orders, which gives an impulse for further growth.
What do I want to convey with this article, what do I want to share with you, mates?
Evaluate market sentiment through the prism of "suffering" participants - that's, in my opinion, the best indicator!
Usefully utilize information from open sources about retail positioning, there's a lot of value in it.
Try to look at the chart with the eyes of a "hunter", search for traps set. Make such analysis a necessary part of your strategy to gain an edge, without which trading on markets is like playing "roulette".
It's a journey, folks. Some get it earlier, some later, but eventually, most traders come to realize they need to "dig deeper", learn more about market mechanics, and improve their strategies. It's a painful process, but it's worth it.
So, don't give up! Get back on your feet, and try again. As 50 Cent said: Get rich or die trying!
True SMC inducement and order flowThis Post will help you to understand Some New Things about OF and INDUCEMENT
KOG - "Fail to plan, plan to fail" Traders,
The market is designed to confuse retail traders, the reason for that is they know 95% of you enter these markets with no plan. You’re not aware of the levels, you’re not charting the pairs you trade, and you lack the basic skills to manage your money and your risk. You need to have a plan before you enter a trade, you need to have a strict set of rules, and everything should line up as much as possible before you take the entry. By the time new traders understand they need a plan, they’ve blown their accounts and blame the markets.
Every trader, before they start their day needs to have a strict set of rules they abide by before entering the markets for a trade. There are many variations and most will have their own rules, but to start you off here are a few we set out for our traders. They're not uncommon, simple steps to take to keep you safe in the markets.
Is the market ranging or trending?
We have to adapt our trading style in accordance with what the market is doing. If it’s a trending market, we know we have a clear direction on the pair and we know the levels of the trend as well as the levels that are provided. We then add the target to this and now have a clearer understanding of where price may support or resist before continuing the trend. When the market is ranging, we adapt our trading style knowing that we’re going to experience a lot of choppy price action as well as extreme up and down swings. We plot the range, we add the levels, and we now have a clearer understanding of support and resistance as well as the range high and low. When the range breaks and confirms the break, you know whether you should be entering or getting out of a trade. Holding on to hope will kill your account and you will then blame the market.
Are there key levels above or below?
Key levels on a chart are really important to understand. You need to add the levels on the long term charts and the levels on the short term charts. This gives you an idea of where price may go before it either supports or resist the price. It also tells you whether price is going to continue in the direction if the key level breaks and the turns into either support or resistance. You can now plan, if the price continues into that level how much will my account be in drawdown, will I be able to hold, do I need to hedge, should I take the loss and switch direction. Holding on to your bias and hope will very likely kill your account, you’ll then blame the market.
How much capital am I risking?
You need to treat this as a business, no matter what your account size. Every day there are large institutions who want to take your money away from you, you’re in this market to take from them and give them as little as possible. You should have a risk model in place, am I going to risk a certain percentage of my account? Am I going to stick to a stop loss of a certain amount of pips? Am I going to have a risk reward that makes sense? Your stop loss and risk management plan is your best friend in this market, it allows you to limit the losses and live to trade another day. It also allows you to trade with a fresh mind everyday because you’re not holding on to hope. Traders fail because they don’t have a risk model, they then get stuck in a drawdown which doesn’t allow them to trade because they’re waiting the entries that are in drawdown to come back into the price range. Cut your losses early, if you’re wrong you’re wrong, don’t let your ego right checks your butt can’t cash! Holding on to losing trades with no risk model will likely blow your account, you’ll then blame the market.
Are there any new events?
News events can move the markets in a very aggressive way but will move the price into the levels that you should already have added to your charts. News brings volume and a lot of traders will use this to their advantage to either scalp or to get good entries on the pairs they trade. It’s best practice to not trade before the news releases unless you’re already in the right way of the market. “The trade always comes after the event”, wait for the price to be taken to the level they want to either buy and sell, wait for a confirmed reversal on the smaller time frames, once everything lines up, then look to take an entry. Trading news events comes with years of practice, it also takes a lot of discipline and the ability to manage risk, not only that but you have to be willing to switch your bias in an instance if you get it wrong. Most traders lack this experience, trade news events like it’s a normal day on the markets and then blow their accounts in one hit, you’ll then blame the market.
Am I following my trading plan?
“Fail to plan, plan to fail”. As above, you need to plan every single trade you take, make sure the market conditions are in your favour, make sure the price is at the right levels, make sure your risk model is in place, make sure you’re aware of the risks involved if it doesn’t go your way. By doing all of this and making a plan, you know what the worst case scenario will be, by knowing that you’re emotions and psychology won’t be affected that much and you will build your confidence. You’ll then develop your strategy and you’ll have a better understanding of what kind of ROI you can consistently make in the markets. Have the discipline to follow your plan and stick to it like a you’re a robot. Get used to taking losses, this is part of the game you’re in. Your wins just need to be bigger and you’re on your way to becoming a consistent trader. Most traders don’t follow their plan, they then blow their accounts and you’ll blame the market.
Hope this helps at least some of you stay the right side of the markets and we wish you the very best in your trading career.
As always, trade safe.
KOG
Ultimate Trading Strategy: Reaction to Supply and Demand Levels!🔍 Identifying Potential Buy or Sell Zones: In this step, you need to identify the zones that are likely to react and wait for the price to potentially reach them. ⏳📊
🌟 With the reaction to the first area, a buy trade is activated. 🌟
📝 Confirmations:
📉 Reaction to the expected area – Watch for a price movement hitting our anticipated zone!
🛠️ Formation of a combined hammer pattern – Look out for this powerful reversal signal!
📈 Formation of a bullish engulfing pattern – A strong indicator of upward momentum!
🔍 Trading Tips:
💡 High-risk stop-loss location:
👉 Place it below the candlestick pattern. At least twice the spread to ensure you're covered! 📏🔒
💡 Lower-risk stop-loss location:
👉 Place it below the expected area. Again, at least twice the spread for extra safety! 📏🔒
💰 Take-profit strategy:
👉 Base it on risk management mathematics, such as risk-reward ratios of 2, 4, and 6.
👉 Alternatively, observe reactions to past market areas, especially near important market highs and lows. 📊📈
🎯 Entry point strategies:
👉 Enter at the close of the confirmation candle.
👉 Or, set a limit order around 50% of the confirmation candle for a bigger volume opportunity! 📉📈
🌟 Buying in Two Phases: A Smart and Exciting Strategy! 🌟
🔹 Phase One:
When you reach a profit of twice the risk, exit the trade. Why? Because the Asian high has been hunted and the candlestick formed has a long upper shadow. 🌄💹
💡 Analysis:
The price hasn’t reached other zones yet and has risen in reaction to the first expected zone. Therefore, we expect a pullback and continued upward movement. 💪📈 So, I’ll place a second buy trade. 🚀💵
🔍 Confirmations for the Second Buy Trade:
A double bottom has formed, marked with an X. ❌❌
A small hammer candlestick has swept the double bottom. 🔨
A long positive shadow candlestick has swept the bottom and reacted to a small order block on the left. 🌟
💡 Tips for the Second Buy Trade:
Enter at the close of the long-shadowed doji candlestick or place a stop limit order above the long-shadowed doji candlestick. 📉📈
The stop loss should be below this candlestick. 📏🔒
🔹 Phase Two:
Next, the price has reached an expected reaction zone from where we expected a price drop. 🌐💡
🔍 Confirmations for the Sell Trade:
Reaction to the expected zone. 🔍
An inverse hammer candlestick reacting to the zone. 🔨
💡 Tips for the Sell Trade:
The entry point should be in a candlestick with a negative signal indicating a price drop. This hammer candlestick can indicate a decline. 📉🔻
The target can be a reward of 2 or the last price bottom. 🎯💰
The stop loss should preferably be behind the expected zone. 📏🔒
🔥 Important Points!!:
Since the price hasn’t deeply penetrated the zones, there’s a chance it might go higher or even mitigate this zone twice, ultimately turning it into a pullback for a further price rise. 🚀📈
Continuing on, the price reached the upper zone area.
We expected a price drop from this zone, but it reached at 03:15,
which is outside our trading session. However, we could have traded on it.
🔍 Sell Confirmations:
The price has reached the expected zone.
An inverse hammer candlestick pattern.
💡 Interesting Fact:
If you had placed a limit order around the midpoint of the previous two zones,
you would have profited by now. So, for this zone, you can also place
a limit order around 50% of it.
Continuing further, other zones have formed below that could be useful
for new trades.
✨ Successful Sell Trade Achieved, Reaching a Reward of 4 Times the Risk.
📉 During the session continuation, the trend line was broken, triggering an upward price pullback.
🔹 Now, at the beginning of the session, we have a new zone, likely a selling order placement area. We're taking the risk on this zone. This time, we can place the trade around 50% of it. 🚀💼
🔥 Alright, what's your take now? 🔥
🌟 Is the price reacting to this level or not? 🌟
🚀📈 or 📉💥
Where are the upper zones located?
What do you think? 🤔💬
Debunking Al Brook's 90 Minute Theory (81% Win Rate Strategy)Al Brook's states that on the E-Mini S&P500 after the first 90 minutes, we have a 90% chance of seeing the high or low of the day. I dug through the data myself from 6-28-2024 to 5-17-2024. Below (and in the video) is what I found.
First, I changed my timeframe to 90 minutes to make this task super easy. Then recorded all the of the 90 minute ranges within an excel sheet. This was not required for the research but, I had other plans for my blog. Then I looked to see what days the high and low were breached. These days were counted as days that disproved Al's theory. There were 12 where the high and low were breached.
17/29 = ~59%
There you have it, 59% the time the 90 minute range is either the high or the low of the day. But, what could you do with this information?
Since I already calculated the ranges, I had a good starting place. I tried to take the full average 90 minute range (22pts) and 1:1 Reward to Risk Ratio (R/R) indicators and place the entry at the closing price of the 90 minute bar. I didn't see any pattern that made since and the losers were considerably bigger than the winners. After making this video, I realized I should have only used half of the range. I think there is still work to be done here.
Anyway, I went through each opening range and looked for the distance of breakouts they had before turning around. I still used the R/R indicator for this but, that was just to get a measurement of points. At this point (no pun), I knew I could take an average of points from the range breakout and apply them to make a strategy.
If the original data says 59% chance we have seen the high or low of the day. That means if the next bar breaks the high or low of the range that we still haven't seen the high or low yet. A strategy with a 59% win rate really only needs a 1:1 R/R (without fees and commissions) to be profitable. So, I measured out 26.50 (this was the average breakout) on the R/R indicator for both a profit target and a stop loss. The entry was the first break of either the high or low.
The results were about 50/50 but, the total points collected was around 81.50pts over 29 days. Using a pretty mindless set and forget strategy. The one caveat was that positions that didn't hit stops or targets had to be closed out at EOD.
Well, 50/50 and 81 points of profit isn't bad but, what if we had a string of big loser and the strategy ended up 40/60 or something? Then we would be screwed. So, I applied a turtle trading technique where I only entered after a loser. If I won, I had to wait for another loser to appear. I couldn't trade a string of winners.
This is where the money shot is! There were a total of 11 trades when applying the turtle method. 9 of the 11 trades were winnings for a whopping 81% and 136pts over 29 days. What a set and forget strategy, huh!?
Ok Joe, but what about Al Brook's and his theory? Well, we have a small sample size here. Its a great starting place. I don't know what Al's sample size was nor do I know the timeframe in which this theory was developed. Markets are forever changing and I think that may be the case for this theory.
Premium & Discount Price Delivery in Institutional TradingGreetings Traders!
In today's educational video, we will delve into the concepts of premium and discount price delivery. The objective is to provide you with a comprehensive understanding of institutional-level market mechanics. Before we proceed, it is crucial to define what we mean by "institutional level" and "smart money," as these terms are often misunderstood. We will also address the common misconceptions about who the liquidity providers are in the market.
By grasping these foundational concepts, you will gain a new perspective on the market, realizing that its movements are not random but calculated and precise, orchestrated by well-informed entities often referred to as smart money.
If you have any questions, please leave them in the comment section below.
Best Regards,
The_Architect
Opportunities that make moneyOne day you will regret that you didn't buy this precious diamond at these auction prices, and the future will be one of the advertising currencies of the X pages, which you knew was cheap, but you didn't buy it.
Mastering Institutional Order Flow & Price DeliveryGreetings traders!
Welcome back to today's video! In this educational session, we'll delve into the concept of institutional order flow. Our objective is to accurately identify market reversals and trend continuations. By mastering the draw on liquidity, we will gain a clearer understanding of whether the market is experiencing bullish or bearish institutional order flow. To accomplish this, we will analyze the behavior of smart money and trace their footprints.
Join us as we uncover these crucial insights together.
If you haven't seen the " Premium & Discount Price Delivery in Institutional Trading " video, here is the link:
Happy Trading,
The_Architect
What is Smart Money Trap ( SMT)What is Smart Money Trap ( SMT).
This Post will help you to understand SMT.
SMT appeared after IDM
Elliptic Gold MovementEllipse theory from Cowan 4D book. Investors should be aware of the slow-moving market until August 2033. By ready
Prop Trading - All you need to know !!A proprietary trading firm, often abbreviated as "prop firm," is a financial institution that trades stocks, currencies, options, or other financial instruments with its own capital rather than on behalf of clients.
Proprietary trading firms offer several advantages for traders who join their ranks:
1. Access to Capital: One of the most significant advantages of working with a prop firm is access to substantial capital. Prop firms typically provide traders with significant buying power, allowing them to take larger positions in the market than they could with their own funds. This access to capital enables traders to potentially earn higher profits and diversify their trading strategies.
2. Professional Support and Guidance: Many prop firms offer traders access to experienced mentors, coaches, and support staff who can provide guidance, feedback, and assistance. This professional support can be invaluable for traders looking to improve their skills, refine their trading strategies, and navigate volatile market conditions.
3. Risk Management Tools: Prop firms typically have sophisticated risk management systems and tools in place to help traders monitor and manage their exposure to market risks. These systems may include real-time risk analytics, position monitoring, and risk controls that help traders mitigate potential losses and preserve capital.
4. Profit Sharing: Some prop firms operate on a profit-sharing model, where traders receive a share of the profits generated from their trading activities. This arrangement aligns the interests of traders with those of the firm, incentivizing traders to perform well and contribute to the overall success of the firm.
Overall, prop firms provide traders with access to capital, technology, support, and learning resources that can help them succeed in the competitive world of trading. By leveraging these advantages, traders can enhance their trading performance, grow their portfolios, and achieve their financial goals.
How to use Fibonacci Retracement ?‼️ Forex traders use Fibonacci retracements to pinpoint where to place orders for market entry, taking profits and stop-loss orders. Fibonacci levels are commonly used in forex trading to identify and trade off support and resistance levels. After a significant price movement up or down, the new support and resistance levels are often at or near these trend lines . Usually the price retracts to 50% or until OTE (0.618, 0.705, 0.79) before another impulse movement occurs.
