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England's Economic Crossroads and Banking ResilienceEngland’s economy is facing a complex array of challenges, driven by domestic social unrest, geopolitical tensions, and evolving labor dynamics. Recent riots, sparked by both marginalized Muslim communities and extreme right-wing groups, highlight deep-seated socio-economic issues. These tensions have been exacerbated by international events, such as the October 7, 2023, incident in Israel, which reverberated through England's Muslim community. In addition to these social and geopolitical pressures, the economic indicators present a mixed picture. Inflation, unemployment, and a housing crisis have strained the economy, while regional conflicts, such as the Middle East and Russia-Ukraine wars, pose further risks to energy prices, trade, and security. Amidst this backdrop, the Bank of England’s recent declaration that top UK lenders can be dismantled without taxpayer bailouts is a significant milestone. This statement reflects the progress made since the 2008 financial crisis in enhancing the resilience of the UK banking system through stricter capital requirements and resolvability assessments. However, emerging risks such as climate change, cyberattacks, and global financial interconnectedness require continuous vigilance and robust regulation. Inspiration and Challenge: As traders and investors, understanding the interplay between social dynamics, geopolitical tensions, and financial stability is crucial. England’s current economic state challenges us to think beyond traditional metrics and consider the broader implications of regional conflicts and social unrest on financial markets. The resilience of the UK banking system offers a glimmer of stability, but it also calls for ongoing scrutiny of emerging risks. Engage with this analysis to deepen your strategic insights and navigate the complexities of the global economic landscape.
FTSE:UKXShort
by signalmastermind
Title: Geopolitical Tempest Navigating the EUR/ILS Currency PairThe EUR/ILS exchange rate is a crucial indicator of Israel's economic and geopolitical stability in relation to the Eurozone. Recently, it has been under substantial pressure due to escalating tensions between Israel and Iran. This dynamic interplay of geopolitical risks and economic factors creates a complex environment for the Israeli shekel (ILS) against the Euro (EUR). Key Points 1. Geopolitical Background: The conflict between Israel and Iran, fueled by nuclear ambitions, proxy wars, and direct military engagements, has deep historical, religious, and political roots. 2. Economic Implications: Investor confidence, economic sanctions, and increased military expenditures are critical factors influencing the ILS. Geopolitical instability can reduce investor confidence, cause capital flight, and strain Israel's fiscal budget. 3. Impact on EUR/ILS Exchange Rate: Geopolitical risks lead to a flight to safety, with investors seeking stable currencies like the Euro. Inflationary pressures from supply chain disruptions and military spending can erode the ILS, while the Bank of Israel's interventions may be limited by persistent tensions. Conclusion The Israel-Iran conflict casts a long shadow over the Israeli economy and the strength of the ILS. As geopolitical tensions persist, the EUR/ILS exchange rate is likely to experience significant volatility. Investors and policymakers must remain vigilant, monitoring developments closely to mitigate risks and capitalize on opportunities in this uncertain environment.
Long
by signalmastermind
The Fear Index and Geopolitical TensionsIn an era marked by geopolitical tensions and economic volatility, the fear index emerges as a crucial tool for traders seeking to navigate turbulent markets. This article delves into the historical significance of the fear index, exploring pivotal moments like the Cuban Missile Crisis, the 1973 Oil Crisis, and the 2008 Financial Crisis. By understanding how investor psychology and market sentiment intertwine with the fear index, traders can gain a competitive edge. In today's world, marked by unprecedented geopolitical tensions, understanding the fear index has never been more crucial. As global conflicts escalate, the fear index provides essential insights into market sentiment and helps risk managers navigate through these turbulent times. A Geopolitical Powder Keg We are witnessing a convergence of significant geopolitical events: Russo-Ukrainian Conflict: Ongoing hostilities have far-reaching implications for global stability. Middle Eastern Volatility: Potential for a full-scale war involving major powers like Israel, the U.S., and Iran. Sino-Taiwanese Tensions: Threats of a Chinese invasion of Taiwan with severe repercussions for the semiconductor industry and global economy. Pro-Palestinian Protests: These could escalate into widespread violence, further destabilizing the political and economic landscape. The Role of the Fear Index The fear index, often measured by market volatility, acts as a barometer of investor sentiment in the face of these geopolitical risks. By closely monitoring the fear index, risk managers can gain early warnings of market disruptions and develop strategies to mitigate potential crises. Historical Context Historical precedents show how the fear index responds to geopolitical tensions: Cuban Missile Crisis (1962): Stock markets plummeted due to heightened anxiety, underscoring the impact of geopolitical events on market sentiment. 1973 Oil Crisis: The Arab-Israeli War and subsequent oil embargo led to global economic downturns, reflecting the fear index's potential spike during such crises. 9/11 Attacks: The fear index surged as markets reacted to the unprecedented nature of the terrorist attacks. 2008 Financial Crisis: Global financial instability caused a dramatic increase in the fear index, providing early warnings of the impending market collapse. COVID-19 Pandemic: The pandemic's economic halt saw the fear index spike, signaling early disruptions. Methodologies for Calculation Understanding how the fear index is calculated enhances its utility: Volatility Indexes (e.g., VIX): Measure implied market volatility. Sentiment Analysis: Assess sentiment through news and social media. Investor Behavior Metrics: Analyze options trading and margin debt levels. Combining these approaches offers a comprehensive view of market fear in response to geopolitical tensions. The Psychological Impact Investor behavior during geopolitical crises is influenced by: Loss Aversion: Heightened sensitivity to potential losses. Herd Mentality: Following the crowd amplifies reactions. Availability Heuristic: Overestimating the probability of easily recalled events. Strategic Applications Risk managers must adopt a holistic approach, integrating the fear index with geopolitical and economic data to develop robust contingency plans. While the fear index can't predict crises' exact timing or magnitude, it provides valuable early warnings to prepare for potential disruptions. Conclusion The fear index is indispensable for navigating today's geopolitically charged environment. By monitoring market sentiment and identifying emerging trends, you can protect your investments from unforeseen events and build resilience. Embrace the insights offered by the fear index to stay ahead in these volatile times.
CBOE:VIXLong
by signalmastermind
Gold: A Strategic Asset in an Uncertain WorldGold's appeal as a safe-haven asset has been reinforced by recent geopolitical tensions. This analysis explores the factors driving gold prices, including geopolitical risks, economic conditions, and the role of gold ETFs. Gold has proven its resilience as a safe-haven asset during times of uncertainty. Geopolitical tensions, particularly in the Middle East, have fueled demand for gold. While economic factors also influence gold prices, the metal's role as a portfolio diversifier remains compelling. Consider gold ETFs for convenient exposure. Gold serves as a valuable safe-haven asset, particularly during times of geopolitical instability. Key Points: Geopolitical Risks: The article highlights the increasing geopolitical tensions globally and their impact on financial markets. The Middle East, in particular, is identified as a region of significant concern. Gold as a Hedge: Gold's unique characteristics, such as liquidity, store of value, and diversification benefits, make it an effective hedge against geopolitical risks. Economic Factors: While geopolitical factors are emphasized, the analysis acknowledges the influence of economic conditions, including interest rates and inflation, on gold prices. Investment Vehicles: Gold ETFs, like the SPDR Gold Shares ETF (GLD), are presented as convenient options for investors seeking gold exposure.
AMEX:GLDLong
by signalmastermind
Platinum A Complex Equilibrium - Unraveling Market DynamicsThe platinum market is currently navigating a complex equilibrium shaped by a confluence of factors. A persistent supply deficit, driven largely by robust industrial demand, particularly from the automotive sector, has exerted upward pressure on prices. However, the specter of electric vehicle adoption, a long-term threat to platinum demand in the automotive catalyst market, introduces a countervailing force. This dynamic interplay between supply-demand fundamentals and technological disruption creates a challenging environment for market participants. Moreover, the geopolitical landscape, particularly in South Africa, the dominant platinum producer, adds an additional layer of complexity. Labor unrest, infrastructure challenges, and broader political instability in the region can significantly impact supply and, consequently, prices. The broader global geopolitical environment also plays a role, as tensions between major world powers can create uncertainty and market volatility. Despite these headwinds, the potential for inventory depletion and ongoing industrial demand suggest that the market may continue to exhibit bullish tendencies. Yet, the magnitude and timing of these bullish impulses will be contingent upon the evolving dynamics of supply, demand, and geopolitical risks. As such, market participants must adopt a nuanced perspective, carefully considering both the short-term and long-term implications of these interconnected factors. Essentially, the platinum market is a complex system characterized by non-linear relationships and feedback loops. Understanding these intricacies is crucial for developing effective investment and trading strategies.
FX_IDC:XPTUSDLong
by signalmastermind
How to Apply a Position Size Calculator in Forex Trading In this educational article, I will teach you how to apply a position size calculator in Forex and calculate a lot size for your trades depending on a desired risk . Why do you need a position size calculator? Even though, most of the newbie traders trade with the fixed lot , the truth is that fixed lot trading is considered to be very risky . Depending on the trading instrument, time frame and a desired stop loss, the risks from one trade to another are constantly floating . With the constant fluctuations of losses per trade, it is very complicated to control your risks and drawdowns. A lot size calculation , however, allows you to risk the desired percentage of your capital per trade , limiting the maximum you can potentially lose. A lot size is calculated with a position size calculator . How to Measure Lot Size for Trades? Let's measure a lot size for the following trade on EURUSD. Step 1: Measure a pip value of your stop loss. It is the distance from your entry level to your stop loss level. In the example on the picture, the stop loss is 35 pips. Step 2: Open a position size calculator Step 3: Fill the form. Inputs: Account currency, account balance, desired risk %, stop loss in pips, currency pair. Let's say that we are trading with USD account. Its balance is $10000. The risk for this trade is 1%. Step 4: Calculate a lot size. The system will calculate a lot size for your trade. 0.28 standard lot in our example. Taking a trade on EURUSD with $10000 deposit and 35 pips stop loss , you will need 0.28 lot size to risk 1% of your trading account. Learn to apply a position size calculator. That is the must-use tool for a proper risk management.
Education
by VasilyTrader
8
Democrats Return to the Election Battle with Harris!Democrats Return to the Election Battle with Harris! Financial Markets Confused! Kamala Harris, with the support of 68% of Democrats, is closer to competing against Trump. The Vice President of the United States, Kamala Harris, has surpassed the necessary support threshold to secure the Democratic Party's presidential nomination. This positions her as the likely candidate from the Democratic Party to compete against the Republican nominee, Donald Trump. While it seemed the Democrats were nearing the end of their journey and with Biden's withdrawal it was expected that the road would be clear for the Republicans, Harris's candidacy has created new challenges for the crypto market. It is now difficult to predict whether Trump will win the upcoming US election, as Harris could secure the votes of African Americans and women. Additionally, it seems some people who did not want to choose between Trump and Biden now have a new candidate to vote for. With all these issues, it seems the crypto market has lost the excitement of Trump's potential presidency and is pricing current events with a sense of confusion! Technical Analysis of Bitcoin Bitcoin, after reaching $68,500 and creating a double top at this level, has returned to $66,500. The presence of negative divergence and the uncertainty of Trump's victory due to Harris's nomination by the Democrats are market risks, while the launch of Ethereum ETFs is a positive market event today. Losing $66,500 could lead to further decline to $63,800 and $62,500.
Short
by Cryptowormshot
Bitcoin Is Trading At The Support As Stocks PullsbackHey traders I this video I will take look at NVIDIA which I think it can be moving into a correction and can possibly be headed down for deeper prices. So if today major stocks indicies will have second red day in a row, then possibly next week there can be more risk-off. In such case I think its better to wait on any long ideas on cryptos (short-term), and wait on much better timing for potential long entires, which can be maybe after summer, or during elections when normal markets tend to be in bull run. Additionally, any rate cut later this year can be alos supportive for stocks and other assets. When I look at bitcoin, I think that 50k is very good potential support; if it gets there. Have a nice weekend. Grega
BITSTAMP:BTCUSD
by ew-forecast
Growing Small Accounts Without High Risk### Growing Small Accounts Without High Risk #### What to Avoid: Do not rush to make massive gains in either pips or % returns. Do not open yourself to large risk in hopes of equally large returns or profits. Do not assume taking small risk-defined trades will not grow your account. Do not sacrifice trading equity due to poor planning or lack of planning. #### What to Aim For: Determine how to realistically anticipate a favorable reward-to-risk model. Learn to respect the risk side of trade setups more than the reward. Identify trade setups that permit three reward multiples to one risk or higher. Frame good reward-to-risk setups that have little impact if unprofitable. ### The Reality of Reward to Risk Ratios | Winrate | Minimum Ratio | |---------|---------------| | 75% | 0.3 : 1 | | 60% | 0.7 : 1 | | 50% | 1 : 1 | | 40% | 1.5 : 1 | | 33% | 2 : 1 | | 25% | 3 : 1 | If your winrate is 50%, you only need 1:1 Risk to be profitable.
Education
by SerenityEquity
WHAT IS TRADING ACCOUNT DRAWDOWN | 3 Types Of Drawdown Explained In my videos, I frequently use the term "trading account drawdown ". Many of you asked me to explain the meaning of that term and share some examples. What is Trading Account Drawdown? The account drawdown is the highest observed loss from the highest value of the deposit to the lowest value of the deposit at a certain period of time. Imagine you started to trade with 10,000$ account. At the end of the year, your account size reached 15,000$ . However, at some point through the year the deposit value dropped to 6,000$ . It was the absolute minimum for the one-year period. At some point, your net loss was -4,000$ or 40% of your account balance. The account drawdown is 40% . ❗️Knowing the account drawdown is very important for the risk assessment of the trading strategy. Usually, 50% and bigger drawdown signifies an extremely high risk. 3 Types of Drawdown 1. Current drawdown - a temporary drawdown associated with the negative total value of opened trading position(s) at present. Once you start trading with 10,000$ deposit, you open several trading positions. Being opened, with the constant price movements, your potential gains fluctuates from positive to negative. For example, with 3 active trades : EURUSD ( -500$ at present); GBPUSD ( +200$ at present); GOLD ( -100$ at present) Your current account drawdown is -400$ or 4% of your deposit. 2. Fixed drawdown - the negative value of the closed trading position(s) at present for a certain period of time. While some of your trades remain active, some are already closed . Imagine the same deposit - 10,000$ . On Monday you opened 6 trades, 2 still remain active ; 4 are already closed . Your total loss from your closed trades is -500$. Your fixed Monday's drawdown is 5%. 3. Maximum Drawdown - the maximum observed loss from the highest value of the deposit before a new maximum is reached. Starting to trade with 10,000$ you are already trading for 5 years . Your account were growing rapidly and at some moment it reached 25,000$ . Then the recession started. You faced a dramatic loss of 12,500$ before you started to recover. That was the maximum observed loss for the period. Your maximum account drawdown was 50% . ❗️Different types of drawdown give a lot of insights about a trading strategy. Its proper assessment will help to spot a high risk strategy and to find a conservative one. Constantly monitor your account drawdown and always check the numbers. What is your highest account drawdown?
OANDA:XAUUSDEducation
by VasilyTrader
1
US30 (Technical and Geopolitical Weekly Analysis)Technical and Geopolitical Analysis: The previous weekly chart indicated a strong upward movement, but the market is now poised to react to geopolitical pressures, particularly the tensions between China and Taiwan, expected to intensify this week and continue into next month. Technical Analysis: Bullish Scenario: If the price stabilizes above 38,700, it is likely to move between 38,700 and 40,050. Any sustained stability above 40,005 will signal a continuation of the bullish trend, potentially reaching 40,970. A retest at 40,005 could occur before the bullish trend resumes. Bearish Scenario: The bearish trend will be confirmed if the price closes below 38,700 on at least the daily chart, targeting 37,990. The next significant support level is 36,460, which is strong support for this year. Key Levels: Pivot Line: 38,700 Resistance Prices: 39,500, 40,005, 40,970 Support Prices: 38,300, 37,990, 36,460 The expected trading range will be between the support at 37,990 and the resistance at 40,050.
OANDA:US30USDShort
by SroshMayi
Trading Psychology: How to trade economic data.As traders, one of the biggest challenges we face is deciding what factors to consider when opening a trade: should we base ourselves on charts, news, macroeconomic data? Many opt for a combination of all these elements, and although all traders go through the same stages, there are different routes to success. The problem with following the crowd is that you end up doing exactly what everyone else is doing. The solution: forge your own path, with all the challenges this entails. Most traders follow the news, analyze the data and then compare them with the charts to try to determine the best entry point. And as if that were not enough, they often seek the opinion of other online traders to confirm their decision. However, consulting the opinions of others can be counterproductive, as they can alter, for better or worse, any personal opinion about the analysis we are conducting. We always tend to think that others know more than us and that if they think differently, it must be for some reason and that we will not be the ones who are right. This is just another example of market psychology and the human tendency to always follow the crowd, regardless of whether it is right or not. I believe that in order to make a living from trading, research must start with yourself, it is essential. And this is necessary to confirm or refute the information with which the market bombards us every minute. You need very intense training and experience to make a living from trading. How many traders trade intraday based on economic calendar data? How many really make money? It’s not worth it. Aware of the multitude of traders who congregate around the platform at key times, market makers have all kinds of tricks. Their favorite; the sweep. Up, down and both sides at the same time. Is a mental stop better? In my case, no. I don’t know how mentally strong you are, but the word says it all: mental-stop. When you expose yourself to letting the mind think, you are entering dangerous psychological terrain and it is very difficult, if you are losing, to close with discipline in each and every operation. Notice that I say in each and every one, because with not respecting a single one and that the price does not return in that operation to the entry point, it will be your elimination as a trader. Therefore, anything that can cause a loss is worth discarding. Greed doesn’t let you, we know that with a data in favor of our position you can make a lot of money but if the data is contrary and also forms a gap, no one will save us. And let’s not talk about if you are leveraged. Being leveraged and having the position run against you is one of the hardest experiences a trader can have. Seeing how your capital is destroyed at forced marches, how losses increase, how you are not able to close because you expect a recovery to do so is dramatic. Realizing that first loss, which at first seemed big to you and now doesn’t seem so much. You would “kill” to lose only that. Then, once you are losing a lot you will no longer be able to close. There comes a time when you assume it and let the losses run as far as they go. You have accepted it. You risk the account in the hope of recovering. This means hours of waiting for the desired recovery. In addition, the market is very rogue. After the fall comes the rebound, usually up to half. You get the idea that it is going to recover completely and instead of closing you hold on to see if the moment comes when you no longer lose anything. The market will make you believe that this is going to happen. You may even average (add more positions) so that the recovery is faster and by the way, if the price goes beyond where you have opened the first operation, you even come out with profits. But, as I say, the market is very cruel and when you start to dream and have hope again, it turns around and falls with even more force if possible, crushing your account and destroying your morale. The result we all know. If the account does not have enough capital to withstand the bleeding, margin call will “come to see us”. And if it does, it will take you days, weeks, months or even years to recover your capital, if you do. Days, weeks, months and even years without liquidity to do what you like the most, trading. In view of this, stoploss, as well as avoiding any situation that makes you lose is more than justified.
CRYPTO:BTCUSD
by CryptoCoBit
Risk Management Guide for Beginner TradersHello traders. In this video, I delve into the fundamental principles of risk management tailored specifically for beginner traders entering the world of financial markets. I start by emphasizing the importance of understanding risk and its implications on trading outcomes. By setting clear goals and objectives, traders can align their risk management strategies with their investment aspirations. We explore practical risk management tools such as stop loss orders, which act as a safety net to limit potential losses on trades. Calculating position sizes based on risk tolerance and stop loss levels ensures traders are not overexposed to any single trade. Continuous monitoring and review of trading performance enable adjustments to risk parameters in response to changing market conditions. I also shared some tools that can be used to help make the process of calculating risk efficient and accurate. By mastering these risk management techniques, beginner traders can safeguard their capital and embark on their trading journey with confidence and resilience.
Education
by Pips4Breakfastx
USOUSD Spot Oil Jumps on Geopolitical Escalation LONGSpot Oil on 30-minute chart had a slow rise in the past 24 hours followed by a pause and then a jump on the Israeli retaliation strikes into Iran. Middle East oil shipping in the Red Sea and Persian Gulf are at risk and shipping insurance for ongoing shipments is likely to experience heavy rate increases if shipping does occur. Houthi rebels may resume proxy attacks on the behalf of Iran. New sanctions contemplated against Iran may include increased action on oil exports and the Israelis could target oil infrastructure. Overall, spot oil now has a bullish bias. I see good cause to increase oil based positions at this time. My target for spot oil based on VWAP lines currently on the chart is 87.5 about 4% upside without leveraging. The volume indicator shows increased buying volumes relative to selling. The PVT shows a quick burst of trend momentum while the TTM indictor triggered and has an upgoing histogram.
EIGHTCAP:USOUSDLong
by AwesomeAvani
FSM a silver junior miner poised to profit on silver's momentum FSM is on a 30-minute chart. The trade idea is that FMS suffers in drops in spot sliver but thrives when spot silver rises as its fixed expenses in mining allow for increases in margin in a curvilinear fashion when spot silver rises. This is more so than a senior miner such as FCX that moves slower when metal prices rise or fall. I see the quick geopolitical dip in spot silver as an opportunity to pick up junior miners ( including GDXJ the ETF) at a discounted price to be held for spot silver recovery and then averaged out for realization of profits.
NYSE:FSMLong
by AwesomeAvani
2
RISK MANAGEMENT the most important setting?Trading without a structured risk management strategy turns the market into a game of chance—a gamble with unfavorable odds in the long run. Even if you possess the skill to predict more than half of the market's movements accurately, without robust risk management, profitability remains elusive. Why? Because no trading system can guarantee a 100% success rate. Moreover, the human element cannot be disregarded. Over your trading career, maintaining robotic discipline, free from emotional or impulsive decisions, is challenging. Risk is inherently linked to trading—it represents the potential for financial loss. Continually opening positions without considering risk is a perilous path. If you're inclined to take substantial risks, perhaps the casino is a more fitting arena. In trading, excessive risk doesn't correlate with greater profits. This misconception often leads beginners to risk excessively for minimal gains, jeopardizing their entire account. While eliminating all risk is impossible, the goal is to mitigate it. Implementing sound risk management practices doesn't guarantee profits but significantly reduces potential losses. Mastering risk control is pivotal to achieving profitability in trading. A risk management system is a structured framework designed to safeguard trading capital by implementing specific rules. These rules aim to mitigate potential losses resulting from analytical errors or emotional trading decisions. While market predictions can be flawed, the margin for error in risk management should be minimal. Key Principles of Risk Management: 1. **Implement a Stop Loss:** - While this might seem elementary, it's often overlooked. - Many traders, especially when emotions run high, are tempted to remove or adjust their stop loss when the market moves unfavorably. - Common excuses include anticipating a market reversal or avoiding a "wasted" loss. - However, this deviation from the original plan often leads to larger losses. - Remember, adjusting or removing a stop loss is an acknowledgment that your initial trade idea might be flawed. If you remove it once, the likelihood of reinstating it when needed diminishes, clouded by emotional biases. - Stick to your predetermined stop loss and accept losses as part of the trading process, void of emotional influence. 2. **Set Stop Loss Based on Analysis:** - Never initiate a trade without a predetermined stop loss level. - Placing a stop loss arbitrarily increases the risk of activation. - Each trade should be based on a specific setup, and each setup should define its stop loss zone. If there's no clear setup, refrain from trading. 3. **Adopt Moderate Risk Per Trade:** - For novice traders, a recommended risk per trade is around 1% of the trading capital. - This means that if your stop loss is hit, the loss should be limited to 1% of your total account balance. - Note: A 1% risk doesn't translate to opening a trade for 1% of your account balance. Position sizing should be determined individually for each trade based on the stop loss level and total trading capital. By adhering to these risk management principles, traders can build a solid foundation for long-term success in the markets, safeguarding their capital while allowing for growth opportunities. In the scenario of a losing streak—let's say five consecutive losses—with a conservative risk of 1% per trade, the cumulative loss would amount to slightly less than 5% of your trading capital. (The calculation of 1% is based on the remaining balance after each loss.) However, if your risk per trade is set at 10%, enduring five consecutive losses would result in losing nearly half of your trading capital. Recovering from such losses, especially with a high-risk approach, presents a significant challenge. The table below illustrates this challenge: if you lose 5% of your capital (approximately five losing trades), you would need to generate a mere 5.3% profit to break even—equivalent to just one or two successful trades. However, if you overextend your risk and suffer, for instance, a 50% loss, you would need to double your remaining capital to restore your original deposit. 4. Utilize a Fixed Percentage of Risk, Not a Fixed Amount for Position Sizing Position sizing should be dynamic, tailored to both your predetermined risk percentage and the distance to your stop-loss level. This approach ensures that each trade is individually assessed and sized according to its unique risk profile. In the following section, we will delve into the methodology for calculating position size for each trade. 5. Maintain Consistent Risk Across All Positions While different trading styles like scalping, intraday, and swing trading may warrant varying risk levels, it's crucial to cap your risk at a reasonable threshold. A general guideline is to not exceed a 5% risk per trade. For those in the early stages of trading or during periods of uncertainty, a risk of 1% or less is advisable. The table below offers an illustrative example of the outcomes achievable by adhering to risk percentages tailored to individual trades. Regardless of your confidence level in the potential profitability of a trade, maintaining consistent risk per trade is paramount. 6. Avoid Duplicating Trades Based on the Same Setup Opening identical trades based on a single setup doubles your exposure to risk. This principle is especially pertinent when dealing with correlated assets. If you identify a favorable combination of factors across multiple trading pairs, opt to execute the trade on the pair where the setup is perceived to have a higher probability of success. 7. Aim for a Risk-to-Reward Ratio of at Least 1:3 The Risk-to-Reward (RR) ratio measures the potential profit of a trade relative to its inherent risk. A RR ratio of 1:3 signifies that for every 1% risked through a stop-loss activation, a trader stands to gain 3% of their deposit upon a successful trade. With a 1:3 RR ratio, a trader doesn't need to be correct on every trade. Achieving profitability in just one out of every three trades can result in a net positive outcome. While RR ratios of 1:1 or 1:2 can also be profitable, they typically require a higher win rate to maintain profitability. For instance, if you're willing to risk 1% to gain 1%, you'd need at least 6 out of 10 trades to be profitable to yield a positive return. It's worth noting that a high RR ratio doesn't guarantee profitability. It's possible to have trades with a 1:6 or greater RR ratio and still incur losses if the win rate is insufficient.
Education
by truepersonal
1
Options Trading is Not about the GreeksCME: E-Mini S&P 500 Options ( CME_MINI:ES1! ) On March 24th, I published a trade idea, “Buckle Your Seatbelt for a Market Correction”, where I suggested that the US stock market was due for a major correction. Buying a Put contract on CME E-Mini S&P 500 Futures would be a trade to express this market view. How is this trade panning out? • On March 24th, the June S&P futures contract (ESM4) was settled at 5,289.75. The out-of-the-money (OTM) put strike 5,100 was quoted at 63. • To purchase a Put, a trader would pay an upfront premium of $3,150 (= 63 x 50). • On April 18th, the S&P has been down for five straight days, and ESM4 was settled at 5,49, losing about 4.6% since we first placed the trade on. Meanwhile, the 5100 put is now trading at 150.75. • Our put position is valued at $7,537.50 (= 150.75 x 50). If we were to close the trade now, we would realize a hypothetical return of +139.3% (= 150.75/63 -1) in less than a month, excluding transaction cost. While the underlying stock index is lowered for less than 5%, and the put strike is barely in-the-money (5049 is 51 points below 5100), the value of the put contract has been more than doubled. This trade showcases the attractiveness of an options strategy. Firstly, there is time value on the put contract. We have two more months to trade until the options expire on June 21st, the 3rd Friday of the contract month. The probability that the S&P could go significantly lower than 5100 makes the put options very valuable. Secondly, there is a multiplier of 50 built into the options contract. Each index point that the S&P moves in-the-money, the Put position will gain $50 per contract. Thirdly, the volatility of the S&P 500 index has increased 50% in the past month, from 12-12.50 to 18-19.50. Higher volatility makes options contracts more valuable. Options Greeks are Lagging Indicators My trade idea did not price in volatility increase. In fact, it did not even mention any of the options Greeks – Delta, Gamma, Theta, Vega, and Rho. In my opinion, the Greeks are concurrent indicators or lagging indicators. Take the VIX index as an example. It captures historical volatility about the S&P 500. However, options are priced by the implied volatility. It is the market consensus, or collective sentiments from all the buyers and sellers, about what volatility would be in the future. In this case, historical volatility is not very useful in gauging future volatility. All sophisticated options pricing models eventually bog down to a subjective estimate of the implied volatility. The Greeks are precise about what the market has been, but they are not useful in assessing how market sentiment will be a month from now. We could illustrate this with CME Group’s FedWatch Tool, which shows real-time market sentiments in Fed rate cut probability. • On March 24th, it indicated the probability of a 25-bp cut in June at 75.5%. There was a 77% chance that Fed Funds move to 4.50%-4.75% by year end, indicating a total of three rate cuts in 2024. Four total rate cuts, which would be a full percentage point lower, was priced at 43% probability. • On April 18th, the probability of a 25-bp cut in June is now down to just 15.3%. The probability for total rate cuts in 2024 are: 2 cuts (32.4%), 1 cut (36%) and no cut (15%). We may recall that only four months ago the market consensus was 6-7 rate cuts. (Link: www.cmegroup.com) If you measured the market last month based on the Greeks, you would have expected the S&P to go higher. Instead, market sentiment turned upside down as March CPI and Nonfarm payroll data completely destroyed the hope of near-term Fed rate cuts. Trading with E-Mini S&P Options In my opinion, the market correction is not over yet. There is a good likelihood that the S&P to move down 10%-15% from its peak of 5,265, to the range of 4,475-4739. Here are the key drivers: • US stock market had a spectacular run in the past two years on the back on AI revolution. While the seven Big Tech companies gained over 50%, the remaining 493 stocks registered low single-digit returns. We are now at the breaking point where the Magnificent Seven could no longer carry the heavy burden of the mediocre performance of the rest. • The lowered expectation of Fed rate cuts results in higher-than-expected future interest rates. This puts downward pressure on company valuation. I had several writings explaining how the discounted cash flow (DCF) valuation works. • Escalated geopolitical tension triggers a flight to safe-haven securities. Gold would gain in value while the stock market would decline. CME Group E-Mini S&P 500 Options provide leverage and capital efficiency. Options are based on futures contracts. The contract notional is $50 x S&P 500 Index. On April 19th, the June S&P futures contract (ESM4) is now quoted at 5,031.75. The 4,850-strike put is quoted at 64.75. To purchase a Put, a trader would pay an upfront premium for $3,237.50 (= 64.75 x 50). Hypothetically, if the S&P lowered 10% from its peak to 4,739, the put position would be 111 points in-the-money (= 4850-4739). The trader could exercise the options to capture the price difference or sell the put at a higher price. If the S&P ends up with a smaller correction, the trader could lose money, up to the full amount of the upfront premium. Options traders could find CME’s Options Calculator an easy-to-use tool in structuring their options strategies. The best part, it is free. www.cmegroup.com Happy Trading. Disclaimers *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
CME_MINI:MES1!Short
by JimHuangChicago
5
Too many dangerous dollars on handsFundamentals & Sentiment WTI: In general, there are global drivers for oil demand, amongst them is supply curbs from OPEC. More recently geopolitical risks in Middle east create bias for oil upside. USD: The dollar has been overbought according to CFTC reports. The risk of BoJ intervention is still there, so it's better not buy dollars anyhow as long as USDJPY is near 155. Also, today's US MoM Retail Sales are expected to be worse than last month - a good environment to trade into the event. If the Retail Sales come out stronger than expected, it's better to close the position or tighten stops. Technical & Other - According to seasonals DXY should stay flat for the next 3 weeks - WTI sold off sharply on Friday, so the mean reversion of that move makes sense. Setup: TC(RTF) Setup timeframe: 4h Trigger: 1h Medium-term: UP Long-term: Uptrend Min target: range highs Risk: 0.77% Entry: Market
OANDA:WTICOUSDLong
by Cherry94
USDUSD Oil Prices react to Middle EastOn Thursday January 11th ( earlier today) WTI Crude prices gyrated widely likely in reaction to US /UK intervention on the terrorists who seized a tanker on the behalf of Iraq in the Red Sea / Suez Canal area putting shipping and supply concerns into the oil industry to offset any weak demand. The 15 minute chart shows a megaphone pattern as a demonstration of waves of relative volatility in price action. I have a position shorting oil and will now close that position as I see a long entry developing here. US companies that use rail and pipeline matching domestic production to consumption are less impacted by this oceanic shipping issue. I will focus on them especially. OXY is at the top of the list and then MRO.
EIGHTCAP:USOUSDLong
by AwesomeAvani
6
Trading Psychology and Your Losses Hey traders, In this post, we will discuss a common fallacy among struggling traders: overestimation of a one single trade . 💡The fact is that quite often, watching the performance of an active trading position, traders quite painfully react to the price being closer and closer to a stop loss or, alternatively, coiling close to a take profit but not being managed to reach that. Fear of loss make traders make emotional decisions : extending stop loss or preliminary position closing. The situation becomes even worse, when after the set of the above-mentioned manipulation, the price nevertheless reaches the stop loss . Just one single losing trade is usually perceived too personally and make the traders even doubt the efficiency of their trading system. They start changing rules in their strategy, then stop following the trading plan, leading to even more losses. ❗️However, what matters in trading is your long-term composite performance . A single position is just one brick in a wall. As Peter Lynch nicely mentioned: “In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” There are so many factors that are driving the markets that it is impossible to take into consideration them all. And because of that fact, we lose. The attached chart perfectly illustrates the insignificance of a one trading in a long-term composite performance. Please, realize that losing trades are inevitable, and overestimation of their impact on your trading performance is detrimental. Instead, calibrate your strategy so that it would produce long-term, consistent positive results. That is your goal as a trader.
OANDA:XAUUSDEducation
by VasilyTrader
1