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Backtesting Settings For the Logical Trading Indicator V.1Since creating the Logical Trading Indicator, my trading game has changed in a big and positive way. But I have been curious as to how I can make an automated strategy with it and how much it makes. The Logical Trading Indicator has many different signals and alerts that you can use to create your own trading strategies that work best for your trading plan. Over the weekend, I have been tinkering around with the base strategy of buy when I get a buy signal and sell when i get a sell signal. I have played around with both a long and short strategy mainly focusing on the BTCUSD pairing. I am really doing this to help me find the best settings possible for each time frame and letting the strategy do the backtesting for me. This really helps me to figure out how it does over the past year or so. So far, at least for BTC, a LONG only strategy has yielded the best results. Mainly because I couldn't get it to fire shorts the way I wanted it to. This is where machines still need some human guidance, as well as your trades, haha. Dialing It In What I am doing is going into different timeframes and finding the best settings for the ATR multiple and length in combination with basis length and the long period moving average. I have been recording the results primarily on the 5 minute as well as the 1 HR and 4 HR time frames because those are the main time frames I focus on. I have played around with different variations of functions, but TradingView can't seem to get things to fire on the strategy the same way I can get the main indicator to fire. But based on this, I set the strategy to a simple LONG only strategy where it buys when you get a BUY signal and then closes when you get a SELL signal, with the addition of a stop loss function that let's me set a stop loss percentage to provide some additional risk management to help with the drawdown percentage. In this backtest, the strategy was not taking the 'Take Profit' signals into account, or when I tried to include them in the logic, they weren't firing properly, so I kept it simple with just the BUY and SELL signals with a stop loss. If you used the built in take profit signals, you can do even better than these results. On the 5 minute time frame, the most profitable settings ended up being: ATR Multiple: 3 ATR Length: 1 Basis Length: 15 EMA Long Period Moving Average: 50 SMA These settings yielded over 100% profit for the backtesting period, which is about a year. For the 1 HR time frame, the winning settings were: ATR Multiple: 3 ATR Length: 6 Basis Length: 20 EMA Long Period Moving Average: 100 SMA These settings yielded over 200% profit for the backtesting period with almost 60% win rate! Again, you could maximize this even more by utilizing the take profit signals and using short trades when the trend is right and if you are trading on a futures exchange. I have been doing more spot trading on DEXs lately, so I have been trading long only lately. The Importance of Backtesting I cannot stress this enough, you have to back test your strategies to make sure they are going to be profitable. This can be done manually by going back in time on the charts and finding all of your signals and seeing if it was profitable, or you can create your own strategy like this using TradingView's Pinescript and let the program do the backtesting for you. However you do your backtesting, just make sure it gets done! You don't want to just think an indicator or a strategy works, you want to KNOW it works! If not, you could be throwing your money down the drain. This is Only A Test- But Great For Info Gathering I am only using this strategy for my own backtesting purposes, not publishing it. I simply used one part of the strategy that is built into the Logical Trading Indicator, and it honestly doesn't properly utilize multiple options for exits as far as the automated strategy goes. I know that if I use these settings, but also use my built in take profit signals, I can do much better than these results are showing. What is great about this is you can see the performance and find trades that you wouldn't have taken in the first place, or entries and exits that could have been done better by trading manually. For example, after looking at the list of trades, I saw several trades I would have either gotten out of for better profit using the take profit signals, or trades I wouldn't have taken in the first place due to consolidation or accounting for the larger trend. When trying to program some of the other functions from the main indicator, TradingView would freak out on me a bit and not want to provide any results, or results that just didn't make any sense. But that is all a part of the process. It helps you figure out that the machines don't always have it right, and that having just a bit of 'human' in your trades can make your performance even better than the strategy suggests! Living That Trader Life This is the life of a good trader, at least in my opinion. Based on my trading plan, I do not trade on the weekends, even though the crypto markets are open, it isn't always the best time to trade. I like to take this time to go over my trading journal to see where I can improve, perfect my strategies, and hone in on the things I need to work on to get better. What this development work does for me is show me that automated trading is great, but with the combination of a great indicator that can produce trading alerts, and my own trader's intuition, I can give the markets a serious beating and come out with some amazing gains, as long as I stick to the plan, as well as trade manually with the signals! This helps me keep the emotions out of the game and let's me use the data with the correct settings to make the best decisions possible in my trades for the biggest gains! So get out there and do some backtesting on your favorite strategies to see if you really are trading logically!
COINBASE:BTCUSDEducation
by thelogicaldude
HOW-TO use the Fundamental Strength Indicator? (full guide)Below is the complete instruction on how to use the Fundamental Strength Indicator . Part 1: The Fundamental Strength of the Company To understand what it is for, let's imagine that you manage a long-distance running team, and you need to recruit a team of excellent athletes. However, you don’t even know the names of these athletes or their contract amounts. You only have information about their health and athletic performance: hemoglobin and iron content in the blood, maximal oxygen consumption, steps-per-minute rate, speed, age, etc. Each player has their own large table with different parameters. And you have, let’s say, a thousand tables like that. If you spend 3 minutes studying one table, it will take you 50 hours to analyze all the tables, which is just over 2 days of continuous work. And how long would it take to compare each athlete with the rest? Approximately 2 years of continuous work. This is obviously no good, that is why you take a computer, enter all the data from the tables and start thinking about how you can reduce the time to compare one athlete with another. As a result of your brainstorming, you come to the following conclusions: — Each parameter has its range of values, which can give you an idea of whether an athlete is suitable or not suitable for a marathon. — The parameter may have its dynamics: it may increase from month to month, stay the same, or decrease. — Each parameter can be assigned a score. For example, the step-per-minute rate can be: — 175 and above (+1 point) — 165–174 (0 points) — 164 and below (-1 point) And you do that with each parameter. What are these points for? To convert indicators that use different units into one measurement system. Thanks to this method, you can now compare apples to oranges. Then, you sum up all the points per month and get one single number — let's call it athletic strength. You like your thought process, and you apply this algorithm to every athlete’s table. Now, instead of dozens of parameters per month, you have one number (athletic strength) for each athlete. It looks like your task has been dramatically simplified. Next, to study the dynamics of athletic strength from month to month, you “ask” your computer to create a plot for each of the athletes. This chart shows that Athlete #1's athletic strength has fluctuated chaotically in the first three quarters of 2022, possibly due to the lack of regular training. But then you observe a positive trend, where athletic strength has grown from month to month. It seems like the athlete has taken up training. Then, to compare one athlete with another, you “ask” your computer to add the average value of athletic strength over the past six months (average pre-competition training period) to the existing plot. Now, you can use the most average recent value as a weighted score of athletic strength and compare athletes with each other based on this value. Thanks to this solution, you accelerate the analysis process by a magnitude: one athlete – one number. It appears that you can then simply sort the table by the highest athletic strength weighted score and consider the best athletes. However, not wanting to sort the table every time the data is updated or when you get new athletes, you make a better decision. The logic behind the points system implies that there is a maximum and a minimum possible number of points that one athlete can get. This allows you to create ranges of scores for athletes with excellent, mediocre, and poor training. For example, let’s say the maximum is 15 and the minimum is -15. Athletes with a score of 8 to 15 will be considered as strong, 1 to 7 – mediocre, and 0 to -15 – weak. That’s it! Now, thanks to this gradation, you can simply check which range the weighted athletic strength falls within, and decide whether each athlete will be admitted to the team. I believe that now your primary selection will take no more than one working day (including a lunch break). Now let's mentally replace athletes with public companies. Instead of data on health and athletic performance, we will have data from the companies’ financial statements and financial ratios. Applying a similar algorithm, we will get the fundamental strength of the company instead of athletic strength. I think it's time to show the Fundamental Strength Indicator . Let's launch! What do we see? — First, it is a Histogram with bars of three colors: green, orange, and red. The width of the histogram depends on the depth of data from the company statements. The more historical data, the wider the histogram over time. The green color of the bars means that the company has been showing excellent financial results by the sum of the factors in that period. According to my terminology, the company has a “strong foundation” during this period. Green corresponds to values between 8 and 15 (where 15 is the maximum possible positive value on the sum of the factors). The orange color of the bars means that according to the sum of factors during this period the company demonstrated mediocre financial results, i.e., it has a “mediocre foundation” . Orange color corresponds to values from 1 to 7. The red color of the bars means that according to the sum of factors in this period of time, the company demonstrated weak financial results, i.e., it has a “weak foundation” . The red color corresponds to values from -15 to 0 (where -15 is the maximum possible negative value on the sum of factors). — Second, this is the Blue Line , which is the moving average of the Histogram bars over the last year (*). Averaging over the year is necessary to obtain a weighted estimate that is not subject to medium-term fluctuations. It is by the last value of the blue line that the actual Fundamental Strength of the company is determined. (*) The last year means the last 252 trading days, including the current trading day. — Third, these are operating, investing, and financing Cash Flows expressed in Diluted net income. These flows look like thick green, orange, and red lines, respectively. — Fourth, this is the Table on the left, which shows the latest actual value of the Fundamental Strength and Cash Flows. Indicator settings: In the indicator settings, I can disable the visibility of the Histogram, Blue Line, Cash Flows (each separately), and Table. It helps to study each of the parameters separately. It is also possible to change the color, transparency, and thickness of lines. The movie Moneyball was released in 2011, where Brad Pitt plays the role of Billy Bean, the sports manager of the Oakland Athletics baseball team. With a small budget, he managed to assemble a high-scoring team based on the analysis of player performance. As a result, this approach was applied by other teams in the league, and Billy Bean received massive recognition from the professional community. Part 2: Benchmark Business Model One day, when I had already grasped the concept of the Fundamental Strength of a company, I was returning home from vacation. I was in a taxi and the driver was listening to an audiobook. As the drive took longer than an hour, I had nothing to do but listen to the story. I liked the content. It was a fictional novel with a plot centered around the main character named Alex Rogo. He is a manager of one of the three enterprises of the UniCo corporation. Even though Alex spends all his time and energy on work, things are not going very well for the company: over the past six months, the company has only had losses. This leaves Alex's executives no choice but to give him an ultimatum: if he can’t radically improve the situation in three months, the enterprise will be shut down, and he will be left without a job. At the same time, Alex's wife is tired of her husband’s absence in her personal life, so she decides to leave him. Anyway, the story's beginning turned out to be very dramatic, and I wondered how Alex would cope with all this. Luckily, in this stressful time, he meets his former physics teacher Jonah, who now consults companies regarding efficient production. Alex tells his old acquaintance about what’s going on and how he managed to increase labor productivity at the enterprise after purchasing new robots. However, the losses continue to hang over his head like the sword of Damocles. After listening to Alex's story, Jonah wisely suggests that the problem with his enterprise lies in the management is concerned about anything but the main goal of their business, which is creating money or profit. Jonah explains to Alex that all management ideas related to expanding the sales market, using new technologies, or improving product quality can lead the company to a disaster if fundamental things are not considered. In his opinion, management should only focus on three indicators: — Throughput , which is the rate at which a company makes money through sales. — Inventory , which is all the money invested by the company in assets: premises, equipment, patents, raw materials, etc.: that is, in something that can then be sold. — Operational expenses , which are all the money a company spends turning investments into cash, or something that can’t be sold, such as the salary of employees, the cost of rent, payment for delivery services, etc. Thus, the management’s job is to make improvements that will ultimately lead to an increase in Throughput and a decrease in Inventory and Operational expenses. For example, Alex’s purchase of robots to increase the number of products produced has led to an increase in production. However, suppose you look at it through the prism proposed by Jonah. In that case, we actually have the following picture: Inventory has increased, Operational expenses have not decreased (no one has been fired), and the robots can’t contribute to sales growth in any way (the Throughput is not increasing). As a result, this was not an improvement, but a deterioration. The accumulation of such bad decisions eventually leads to the unprofitability of the company. Conversely, continuous improvements that will increase the Throughput and reduce Inventory and Operational expenses will inevitably lead to achieving the main goal – making money. After I got home, I tried to find this book on the Internet. It turned out that it was written by physicist and philosopher Eliyahu M. Goldratt back in 1984. The novel is called The Goal . That’s when I realized that if the company's management adheres to the approach described by Goldratt, then after a while, we will most likely see a fundamentally strong company. And the Fundamental Strength Indicator clearly shows how much the management has succeeded along this path. For example, according to Goldratt, an increase in Throughput should lead to an increase in Earnings per share (EPS) and Total revenue . The reduction in Inventory may be linked with a decrease in Inventory to revenue ratio . Optimization of Operational expenses will definitely reduce the Operating expense ratio . All these parameters are considered when calculating the Fundamental Strength of the company. So, let's move on to the methodology for calculating the Fundamental Strength Indicator. The main idea that inspired me to create this indicator is: "Even if you buy just 1 share of a company, treat it like buying the whole business" . Guided by this approach, you can imagine what kind of business an investor is interested in owning and simultaneously determine the input parameters for calculating the indicator. For me, a benchmark business is: — A business that operates efficiently without diminishing the return on shareholders' investment. To assess the efficiency and profitability of a business, I use the following financial ratios(*): Diluted EPS and Return on Equity (ROE). The first two parameters for calculating the indicator are there. — A business that scales sales and optimizes its costs. From this perspective, the following financial ratios are suitable: Gross margin, Operating expense ratio, and Total revenue. Plus three other metrics. — A business that turns goods/services into cash quickly and does not fall behind on payments to suppliers. The following financial ratios will fit here: Days payable, Days sales outstanding, and Inventory to revenue ratio. These are three more metrics. — A business that does not resort to significant accounts payable and shows financial strength. Here I use the following financial ratios: Current ratio, Interest coverage, and Debt to revenue ratio. These are the last three parameters. (*) If you are keen to learn more about these financial ratios, I suggest reading my two articles on TradingView: Financial ratios: digesting them together What can financial ratios tell us? Next, each of the parameters is assigned a certain number of points based on its last value or the position of that value relative to the annual maximum and minimum. For example, if the Current ratio: — greater than or equal to 2 (+1 point); — less than or equal to 1 (-1 point); — more than 1 but less than 2 (0 points). Or for example, if Diluted EPS: — near or above the annual high (+2 points); — near the annual minimum and below (-2 points); — between the annual maximum and minimum (0 points). And so on with each of the parameters. As a result, the maximum number of points a company can score is 15 points. The minimum number of points a company can score is -15 points. These levels are marked with horizontal dotted lines: the green line is for the maximum value, and the red line is for the minimum. I track the number of points for each day of a company's life on a three-color Histogram. The resulting average value for the last year is on the Blue Line. For me, it is the last value of the Blue Line that determines: this is the actual Fundamental Strength of the company. As an additional filter, for example, when comparing two companies where all other conditions are equal: I use the dynamics of Cash Flows expressed in Diluted net income. These are the thick green, orange, and red lines over the Histogram. Examples: Below, I will evaluate various companies using the Fundamental Strength Indicator. Tesla, Inc. The indicator shows that since 2020, Tesla Inc. has been steadily increasing its Fundamental Strength (from 3.27 in Q1 2020 to 12.79 in Q1 2023). This is noticeable both by the color change of the Histogram from orange to green and by the rising Blue Line. If you look in detail at what has been happening with the financials during this time, it's clear what meaningful work the company has done. Revenues have almost quadrupled. Earnings per share have increased 134 times. At the same time, Total debt to revenue fell almost 10 times. Keurig Dr Pepper Inc. The company, formed in 2018 by the merger of Keurig Green Mountain and Dr Pepper Snapple Group, has failed to deliver outstanding financial results, causing its Fundamental Strength to fall from 4.63 in Q1 2018 to -0.53 in Q1 2023. During this period, the decline in diluted earnings per share was accompanied by higher debt and deteriorating liquidity. Costco Wholesale Corporation Wholesaler Costco has been surprisingly stable in its financial performance and with steady growth in both earnings and revenue. This is the reason the Histogram bars are exceptionally green throughout the calculation of the indicator. The Fundamental Strength has not changed in three years and is high at 11 points. Part 3: Company Cash Flow Dynamics The other day I came across an interesting article about the work of the Swiss company Glencore International AG in the 1990s. This company specializes in trading raw materials, and at that time it was actively trading with the countries that had left the USSR. None of those countries had foreign currency, and trust in local currencies had not yet appeared, so it was necessary to exchange commodities for commodities like in the Middle Ages. For example, to sell copper in Kazakhstan, a Swiss company bought raw sugar in Brazil, then took it to Ukraine for refining, then the refined sugar was exchanged for Siberian oil in Russia, then the oil was exchanged for copper ore in Mongolia, which was then sent to a plant in Kazakhstan to create copper suitable for sale on the world market. As we can see, money was used here only at the moment of purchase of raw sugar and sale of copper, the rest of the chain of transactions was an exchange of goods for goods. It turns out the following scheme: Money - Raw sugar - Refined sugar - Oil - Copper ore - Copper - Money' Of course, all of this made sense when Money' (with a stroke) equaled big money. Otherwise, the cost of preparing and executing such a complex transaction simply wouldn't have paid off. This example once again convinced me how significant a role money plays in any company's operations. Can you imagine the chaos that a business can become without money and having to make up similar supply chains? Money simplifies and accelerates all processes in a company, so competent management of these flows is the basis of an effective business. If you compare a company to a living organism, Cash Flow(*) is its circulatory system. It is thanks to this system that the company is supplied with everything it needs to produce goods or services. (*) If you are keen to learn more about Cash Flows, I suggest reading my two articles on TradingView: Cash flow statement or Three great rivers Cash flow vibrations Considering that cash flows play a fundamental role in the activity of any company, it is reasonable to assume that their analysis will give us the necessary information to decide. For this reason, an additional parameter was added to the Fundamental Strength Indicator : the dynamics of Cash Flows expressed in Diluted net income(*). (*) Since the value of income can be negative, the Diluted net income module is taken, that is, without the "minus" sign. Why do I use income as a unit of measure of Cash Flows? Because it is a good way to make the scale of indicator values the same for companies from different countries, with different currencies. It also allows you to use a single value scale for both Cash Flows and Fundamental Strength. So, let's take a look at how the dynamics of Cash Flows look like in the Fundamental Strength Indicator. These are three lines of different colors, which are located over the Histogram. Each of the flows corresponds to a specific color: — Operating cash flow: green line; — Investing cash flow: orange line; — Financing cash flow: red line. In this way, I can track the dynamics of the company's Cash Flow over time. To interpret the dynamics of Cash Flows, I pay attention to the following patterns: — How the cash flows are positioned in relation to each other; — In which zone each of the cash flows is located: in the positive or negative; — What is the trend of each of the cash flows; — How volatile each of the cash flows is. As an example, let's look at several companies to interpret the dynamics of their Cash Flows. John B. Sanfilippo & Son, Inc. This is the most ideal situation for me: operating cash flow (green line) is above the other cash flows, investment cash flow (orange line) is near zero and practically unchanged, and financial cash flow (red line) is consistently below zero. This picture shows that the company lives off its operating cash flow, does not increase its debt, does not spend a substantial amount of money on expensive purchases, and retains (does not sell off) assets. Parker Hannifin Corporation With stable operating cash flow (green line), the company implements investment programs by raising additional funding. This is noticeable due to an increase in financial cash flow (red line) and a simultaneous decrease in investment cash flow (orange line) with a significant deepening into negative areas. Apparently, there is not enough operating cash flow to realize the planned investments. One has to wonder how sustainable a company can be if it invests in its development using borrowed funds. Schlumberger N. V. The chaotic intertwining of cash flows outside the Fundamental Strength range (-15 to 15) is indicative of the company's rich life, but to me, it is an indicator of high riskiness of its actions. And as we can see, Fundamental Strength has only begun to strengthen in the last year, when the external appearance of cash flow has normalized. Thus, when the Fundamental Strength of two companies is equally good, I use an additional filter in the form of Cash Flow dynamics. This helps me to clarify my interest in this or that company. What is the value of the Fundamental Strength Indicator: — allows for a quantitative assessment of a company's financial performance in points (from -15 to 15 points); — allows you to visually track how the company's financial performance has changed (positively/negatively) over time; — allows to visually trace the movement of main cash flows over time; — accelerates the process of selecting companies for your shortlist (if you are focused on financial results when selecting companies); — allows you to protect yourself from investing in companies with weak and mediocre fundamentals. Mandatory requirements for using the indicator: — works only on a daily timeframe; — only applies to shares of public companies; — company financial statements for the last 4 quarters and more are required; — it is necessary to have the data from the Balance sheet, Income statement, and Cash flow statement, required for the calculation. If at least one component required for calculating the Fundamental Strength is missing, the message "no data to calculate the Fundamental Strength correctly" is displayed. In the same case, but for the operating cash flow, the message "no data to calculate the Operating Cash Flow correctly" is shown, and similarly for other flows. Risk disclaimer: When working with the Fundamental Strength Indicator and the additional filter in the form of Cash Flows, you should understand that the publication of the Balance sheet, Income statement, and Cash flow statement takes place sometime after the end of the financial quarter. This means that new relevant data for the calculation will only appear after the publication of the new statements. In this regard, there may be a significant change in the values of the Indicator after the publication of new statements. The magnitude of this change will depend both on the content of the new statements and on the number of days between the end of the financial quarter and the publication date of the statements. Until the date of publication of the new statements, the latest relevant data will be used for calculations. I would like to draw your attention to the fact that the calculation of Fundamental Strength and Cash Flows requires the availability of data for all parameters of the valuation model . It uses data that is exclusively available on TradingView (there is no reconciliation with other sources). If at least one parameter is missing, I switch to another company's analysis to continue using the indicator. Thus, the Fundamental Strength Indicator and an additional filter in the form of Cash Flows make it possible to evaluate the financial results of the company based on the available data and the methodology I created. A simple visualization in the form of a three-color Histogram, a Blue line, and three thick Cash Flow lines significantly reduces the time for selecting fundamentally strong companies that fit the criteria of the selected model. However, this Indicator and/or its description and/or examples cannot be used as the sole reason for buying or selling stocks or for any other action or inaction related to stocks.
NASDAQ:NVDAEducation
by Be_Capy
Diversification: What It Is, Why It Matters & How to Do ItDiversification is a market strategy that enables you to spread your money across a variety of assets and investments in pursuit of uncorrelated returns, hedging, and risk control. Table of Contents What is portfolio diversification? Brief history of the modern portfolio theory Why is diversification important? An example of diversification at work How to diversify your portfolio Components of a diversified portfolio Build wealth through diversification Diversification vs concentration Summary 📍 What is portfolio diversification? Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns. While it may sound complex at first, portfolio diversification could be your greatest strength when you set out to trade and invest in the financial markets. As a matter of fact, once you immerse yourself into the markets, you will be overwhelmed by the wide horizons waiting for you. That’s when you’ll need to know about diversification. There are thousands of stocks available for trading, dozens of indices, and a sea of cryptocurrencies. Choosing your investments will invariably lead to relying on diversification in order to protect and grow your money. Diversifying well will enable you to go into different sectors, markets and asset classes. Together, all of these will build up your diversified portfolio. 📍 Brief history of the modern portfolio theory “ Diversification is both observed and sensible; a rule of behavior which does not imply the superiority of diversification must be rejected both as a hypothesis and as a maxim. ” These are the words of the father of the modern portfolio theory, Harry Markowitz. His paper on diversification called “Portfolio Selection” was published in The Journal of Finance in 1952. The theory, which helped Mr. Markowitz win a Nobel prize in 1990, posits that a rational investor should aim to maximize their returns relative to risk. The most significant feature from the modern portfolio theory was the discovery that you can reduce volatility without sacrificing returns. In other words, Mr. Markowitz argued that a well-diverse portfolio would still hold volatile assets. But relative to each other, their volatility would balance out because they all comprise one portfolio. Therefore, the volatility of a single asset, Mr. Markowitz discovered, is not as significant as the contribution it makes to the volatility of the entire portfolio. Let’s dive in and see how this works. 📍 Why is diversification important? Diversification is important for any trader and investor because it builds out a mix of assets working together to yield returns. In practice, all assets contained in your portfolio will play a role in shaping the total performance of your portfolio. However, these same assets out there in the market may or may not be correlated. The interrelationship of those assets within your portfolio is what will allow you to reduce your overall risk profile. With this in mind, the total return of your investments will depend on the performance of all assets in your portfolio. Let’s give an example. 📍 An example of diversification at work Say you want to own two different stocks, Apple (ticker: AAPL ) and Coca-Cola (ticker: KO ). In order to easily track your performance, you invest an equal amount of funds into each one—$500. While you expect to reap handsome profits from both investments, Coca-Cola happens to deliver a disappointing earnings report and shares go down 5%. Your investment is now worth $475, provided no leverage is used. Apple, on the other hand, posts a blowout report for the last quarter and its stock soars 10%. This move would propel your investment to a valuation of $550 thanks to $50 added as profits. So, how does your portfolio look now? In total, your investment of $1000 is now $1,025, or a gain of 2.5% to your capital. You have taken a loss in Coca-Cola but your profit in Apple has compensated for it. The more assets you add to your portfolio, the more complex the correlation would be between them. In practice, you could be diversifying to infinity. But beyond a certain point, diversification would be more likely to water down your portfolio instead of helping you get more returns. 📍 How to diversify your portfolio The way to diversify your portfolio is to add a variety of different assets from different markets and see how they perform relative to one another. A single asset in your portfolio would mean that you rely on it entirely and how it performs will define your total investment result. If you diversify, however, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns and decreased overall risks. You can optimize your asset choices by going into different asset classes. Let’s check some of the most popular ones. 📍 Components of a diversified portfolio Stocks A great way to add diversification to your portfolio is to include world stocks , also called equities. You can look virtually anywhere—US stocks such as technology giants , the world’s biggest car manufacturers , and even Reddit’s favorite meme darlings . Stock selection is among the most difficult and demanding tasks in trading and investing. But if you do it well, you will reap hefty profits. Every stock sector is fashionable in different times. Your job as an investor (or day trader) is to analyze market sentiment and increase your probabilities of being in the right stock at the right time. Currencies The forex market , short for foreign exchange, is the market for currency pairs floating against each other. Trading currencies and having them sit in your portfolio is another way to add diversification to your market exposure. Forex is the world’s biggest marketplace with more than $7.5 trillion in daily volume traded between participants. Unlike stock markets that have specific trading hours, the forex market operates 24 hours a day, five days a week. Continuous trading allows for more opportunities for price fluctuations as events occurring in different time zones can impact currency values at any given moment. Cryptocurrencies A relatively new (but booming) market, the cryptocurrency space is quickly gaining traction. As digital assets become increasingly more mainstream, newcomers enter the space and the Big Dogs on Wall Street join too , improving the odds of growth and adoption. Adding crypto assets to your portfolio is a great way to diversify and shoot for long-term returns. There’s incentive in there for day traders as well. Crypto coins are notorious for their aggressive swings even on a daily basis. It’s not unusual for a crypto asset to skyrocket 20% or even double in size in a matter of hours. But that inherent volatility holds sharpened risks, so make sure to always do your research before you decide to YOLO in any particular token. Commodities Commodities, the likes of gold ( XAU/USD ) and silver ( XAG/USD ) bring technicolor to any portfolio in need of diversification. Unlike traditional stocks, commodities provide a hedge against inflation as their values tend to rise with increasing prices. Commodities exhibit low correlation with other asset classes, too, thereby enhancing portfolio diversification and reducing overall risk. Incorporating commodities into a diversified portfolio can help mitigate risk, enhance returns, and preserve purchasing power in the face of inflationary pressures, geopolitical uncertainty and other macroeconomic risks. ETFs ETFs , short for exchange-traded funds, are investment vehicles which offer a convenient and cost-effective way to gain exposure to a number of assets all packaged in the same instrument. These funds pull a bunch of similar stocks, commodities and—more recently— crypto assets , into the same bundle and launch it out there in the public markets. Owning an ETF means owning everything inside it, or whatever it’s made of. ETFs typically have lower expense ratios compared to mutual funds, making them affordable investment options. Whether you seek broad market exposure, niche sectors, or thematic investing opportunities, ETFs are a convenient way to build a diversified portfolio tailored to your investment objectives and risk preferences. Bonds Bonds are fixed-income investments available through various issuers with the most common one being the US government. Bonds are a fairly complex financial product but at the same time are considered a no-brainer for investors pursuing the path of least risk. Bonds have different rates of creditworthiness and maturity terms, allowing investors to pick what fits their style best. Bonds with longer maturity—10 to 30 years—generally offer a better yield than short-term bonds. Government bonds offer stability and low risk because they’re backed by the government and the risk of bankruptcy is low. Cash Cash may seem like a strange allocation asset but it’s actually a relatively safe bet when it comes to managing your own money. Sitting in cash is among the best things you can do when stocks are falling and valuations are coming down to earth. And vice versa—when you have cash on-hand, you can be ready to scoop up attractive shares when they’ve bottomed out and are ready to fire up again (if only it was that easy, right?). Finally, cash on its own is a risk-free investment in a high interest-rate environment. If you shove it into a high-yield savings account, you can easily generate passive income (yield) and withdraw if you need cash quickly. 📍 Build wealth through diversification In the current context of market events, elevated interest rates and looming uncertainty, you need to be careful in your market approach. To this end, many experts advise that the best strategy you could go with in order to build wealth is to have a well-diversified portfolio. “ Diversifying well is the most important thing you need to do in order to invest well ,” says Ray Dalio , founder of the world’s biggest hedge fund Bridgewater Associates. “ This is true because 1) in the markets, that which is unknown is much greater than that which can be known (relative to what is already discounted in the markets), and 2) diversification can improve your expected return-to-risk ratio by more than anything else you can do. ” 📍 Diversification vs concentration The opposite of portfolio diversification is portfolio concentration. Think about diversification as “ don’t put your eggs in one basket. ” Concentration, on the flip side, is “ put all your eggs in one basket, and watch it carefully. ” In practice, concentration is focusing your investment into a single financial asset. Or having a few large bets that would assume higher risk but higher, or quicker, return. While diversification is a recommended investment strategy for all seasons, concentration comes with bigger risks and is not always the right approach. Still, at times when you have a high conviction on a trade and have thoroughly analyzed the market, you may decide to bet heavily, thus concentrating your investment. However, you need to be careful with concentrated bets as they can turn against your portfolio and wreck it if you’re overexposed and underprepared. Diversification, however, promises to cushion your overall risk by a carefully balanced approach to various financial assets. 📍 Summary A diversified portfolio is essentially your best bet for coordinated and sustainable returns over the long term. Choosing a mix of various types of investments, such as stocks, ETFs, currencies, and crypto assets, would spread your exposure and provide different avenues for growth potential. Not only that, but it would also protect you from outsized risks, sudden economic shocks, or unforeseen events. While you decrease your risk tolerance, you raise your probability of having winning positions. Regardless of your style and approach to markets, diversifying well will increase your chances of being right. You can be a trader and bet on currencies and gold for the short term. Or you can be an investor and allocate funds to stocks and crypto assets for years ahead. Potential sources of diversification are everywhere in the financial markets. Ultimately, diversifying gives you thousands of opportunities to balance your portfolio and position yourself for risk-adjusted returns. 🙋🏾‍♂️ FAQ ❔ What is portfolio diversification? ► Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns. ❔ Why is diversification important? ► Diversification is important for any trader and investor because it creates a mix of assets working together to yield high, uncorrelated returns. ❔ How to diversify your portfolio? ► The way to diversify your portfolio is to add a variety of different assets and see how they perform relative to one another. If you diversify, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns, and decreased overall risks. Do you diversify? What is your strategy? Do you rebalance? Let us know in the comments. Liked this article? Give it a boost 🚀 and don't forget to follow us if you want to be among the first to be informed.
Editors' picks
SP:SPXEducation
by TradingView
4
Stock Market Logic Series #7Options Spreads strategy, let us talk about it. If you want to buy high-probability spreads, there are specific places where you have the advantage. And, there are other specific places where it is just pure gambling. And, we don't gamble, EVER. We take calculated risks, where the probability of success is much higher than the probability of loss. -------------------------- In spread options, what matters the most is where the price will be at the expiration date. WHY? Because your profit can only be realized near the expiration date unless the price moves dramatically into your favor and far away from the spread strikes. So, if what matters is where the price is at the expiration date, you want that in this future date, the price of the stock to be away from it, with HIGH PROBABILITY. As you can see from the drawing on the chart, the blue channel signifies the probability area of where the price should be in the future. So if in the future, you are in the probable zone, as seen in the RED spreads, at the expiration date, the price could be below or above your strikes, and thus be successful or not successful, so your odds are more 50-50. since the price can just stall there, and oscillate in this area, since it is the probable area where the price should be. But if you look carefully at historical data, you can see that in the GREEN (MONEY ZONES), the price gets immediately rejected... WITH THE HELP OF T-I-M-E And when you buy spreads, you want TIME to be on your side... So now you can easily see... how to make TIME which is a HUGE factor in spreads, on your side! The trend is your friend... IF... you let it TIME to help you... When you use options, and trading options in general you need to know which strategy fits which scenario, and where your HIGH probability trade waiting for you. Just in case you don't know what options spreads are... In simple words... You choose 2 prices of the stock (aka strikes): ------$100 ------$90 and you speculate that if the price in a month will be above $100, you profit 1 point. and if the price in a month will be below $90, you lose 1 point. So it is a 1:1 risk-to-reward strategy. So your advantage comes from knowing where are the pivot points. But not all pivot points have the same advantage... As I just showed you in this post...
NASDAQ:AAPLEducation
by ZoharCho
How to use call option buy or sell indicatorHello Traders, Exciting news! We've just released a detailed video guide on how to harness the full potential of Chobotaru Brothers Option Indicators. In this short tutorial, we cover everything you need to know to use the indicator, specifically focusing on out-of-the-money call options. Here's what you'll discover in the video: 1. Adding the Indicator to Your Chart: Learn the simple steps to seamlessly integrate Chobotaru Brothers Option Indicator into your trading view for a clear and concise analysis. 2. Finding Option Parameters: Navigate through your broker's option chain on platforms such as Interactive Brokers to locate all the essential parameters needed for effective trading decisions. 3. SEE the Lines of Profit: Gain a deep understanding of the meaning behind each line of profit displayed by the indicator, empowering you to make informed choices based on market movements. 4. Utilizing Lower Timeframes (Example of 5m and 30m): Explore the versatility of Chobotaru Brothers Option Indicator by discovering how it can be effectively applied to lower timeframes like 5 minutes and 30 minutes. 5. LIVE Example: Out-of-the-Money Call Option: Follow along with our real-time example using an out-of-the-money call option, providing practical insights into how EASY is the indicator's functionality and application in a live trading scenario. We've designed this tutorial to be beginner-friendly, ensuring that traders of all levels can seamlessly integrate Chobotaru Brothers Option Indicators into their trading arsenal. Watch the video, enhance your trading skills, and unlock the potential for greater success in the options market. If you find the video helpful, don't forget to like, follow, and share it with your fellow traders. Happy trading, and may your profits soar! Best regards, Chobotaru Brothers
NASDAQ:NVDAEducation
by ZoharCho
How to Find a High Probability Trade in an Uptrend Hey Traders, We'll show you how you can find an easy trade with a high risk-to-reward ratio using some basic concepts. - Step One: Spot an uptrend where you have higher highs and higher lows. - Step two: Spot the last break of structure. - Step three: Use the Fibonacci tool and connect it from the recent lows to the recent highs. - Step Four: Watch prices coming back to the broken structure that lines up with any Fibonacci level. ( Focus on the 50% - 61.8% - 78.6% Levels ) - Step Five: Wait for a clear bullish candle and then enter with stoploss structure - Step Six: Take partial profits at the recent highs and the Fibonacci extensions ( - 0.27 & -0.618 )
Education
by Tradenessfx
3
The most subjective facet of my decision-making systemIn the previous publication I started talking about my decision-making system. I use it when investing in stocks. This system allows me to answer three questions: - which stocks to choose? - at what price to make a trade? - and in what quantity? In this post, I will continue to answer the question Which stocks to pick? and tell you about another facet of my crystal. As you can see, my decision-making system is quite formalized. What do I mean? It has clear criteria for which a company must be checked before investing in its stocks. If we go deeper into this idea, we can say that the state of affairs in any public company can be assessed using numbers from its statements and stock exchange prices for its stocks. All this can be visualized, put into a form that is readable for the investor, and accelerate the decision-making process many times over. However, there is an area with information that hovers around the companies, directly or indirectly influences it, but is poorly formalized: this is News . News can be called a message related to a company and distributed through its website, media, and social networks. This message triggers an almost knee-jerk reaction among stock investors (and traders). They will try to interpret the information received, make a forecast, and in some cases even make a trade. It is for this reason that the moment the news is published is often accompanied by a sharp movement in the stock price and an increase in trading volume. The order book now has a lot more players than before. These are traders excited by the news, confident of what will happen next. Here I can’t help but recall the allegory about Crazy Mister Market from Benjamin Graham. It presents the market as a partner who is constantly knocking on your door and offering you crazy ideas (stock prices). Where does this mister get his madness from? My answer is simple — from the news. Despite this, I cannot help but pay attention to the news, I cannot help but interpret it, to build predictions in my head. This happens reflexively, as a reaction to boiling water hitting my skin. However, will I make a trade under the influence of this information? We'll talk about this at the end of the post. Let's find out what news is available and where to find it. In this publication, I will only consider matters relevant to the stock market. That is information that can directly or indirectly affect the state of affairs in the companies. As I work, I divide the news flow into two categories: macro-event and corp-event . A macro-event is something that can indirectly impact the state of affairs in a company since it impacts the external environment in which it lives. For example: 1. In the third quarter, US GDP grew by 4.9% year-on-year, which was better than expected (*). GDP Dynamics are a general economic indicator of economic growth in a particular country. This event only indirectly affects the business of the US companies. In other words, a company can be unprofitable even if the GDP in the country of its business is growing. (*) In the news, you will often see the following wording: - better than expected - worse than expected - as expected These are significant clarifications since it is believed that the exchange price already considers expectations for future events. Therefore, the coincidence with expectations will most likely be perceived calmly by market participants. Conversely, price fluctuations can be significant if the news can be qualified as a “surprise”. 2. The EPA is setting rules for a proposed “methane fee” on waste generated by oil and gas companies. This news also refers to macro events, as it impacts an entire industry: the oil and gas business. Moreover, please note that methane fee is only suggested. That is, it is not at all a fact that it will ultimately be implemented. Unlike macro events, a corp-event directly affects the state of affairs in the companies. Let's look at some of them. For example: 3. Hilton's (HLT) 3rd quarter Profit was in line with revenue forecasts. The news contains information about Hilton's financial results for the 3rd quarter. Of course, this directly impacts investors’ assessment of the company's prospects, and therefore the volume of investment in it. 4. Devastating wildfires have forced California's largest utility, Pacific Gas and Electric Company, to plan the sale of gas assets. Based on the news headline, we can conclude that the company is considering selling a significant part of its business (since the word “gas” even appears in the company name) to compensate for the damage from the devastating fires. Of course, this directly points to the difficult situation in the companies. Well, we figured out which news is considered a macro-event and which is a corporate event. Now let's find them where we need to. First, let's look at the event calendars that are available on TradingView. They are convenient because they inform us in advance what event to expect on the date in question. Let's start with the ⁣Economic calendar . You can find it in the main TradingView Products menu (Products -> Economic calendar ). This calendar shows upcoming publications of key macroeconomic indicators such as GDP, ⁣ interest rate, unemployment, and inflation. It will also reflect national events — for example, presidential elections. Thus, you will only see macro events in it. Click on globe and select the country you are interested in, a group of countries, or the whole world: this way you will filter events by geography. If you are interested in tracking only important events, there is a special button for this High importance . There is also a three-column importance indicator next to each event. If all are shaded, the event is of maximum importance. You can expand any event, read information about it, view statistics, and even add it to your personal calendar. In terms of importance, the higher the importance of the event, the stronger the market reaction may be after the information is released. Furthermore, the strength of the reaction will depend on how much reality diverges from expectations for this event (with the forecast). Please note that the current value published is published to the left of the forecast, and the value for the previous period is published to the right. This allows you to evaluate the released metric over time. So, my standard set of filters for the economic calendar is: - Geography: all over the world; - High importance; - This week; - All categories. The economic calendar has been set up. There is another calendar on TradingView: this is Earnings calendar . It is located in the interface for working with Supercharts and, of course, is intended for analyzing corporate events. Once you go to the chart, click on the calendar icon in the menu on the right, and the events panel will open in front of you. The Earnings calendar will contain the names of the companies, their next reporting date, and analysts' estimates of earnings per share: EPS. In its meaning, this estimate is an average expectation or forecast. Therefore, any strong discrepancy between current data and the forecast value can greatly change the value of the company's stocks. By the way, you can check this simply by clicking on the company's name in the calendar: the window with the stock price chart will update instantly. The released earnings per share value can be viewed both on the chart itself and in the company's information (the top menu button on the right). The current value will be marked with either a red circle (below the forecast) or a green circle (above the forecast). The gray circle indicates the forecast itself. Calendars are convenient because they present us with the main essence of the news in a compressed, digitized form. The description of such news is not as important as the value of the key indicator. However, if you want to read classic text news about a related company, simply click on the lightning bolt icon on your chart. You can also find news grouped by asset class, region, news agency, etc. in the main menu of the TradingView site's root page. Of the groups presented, I most often use News Flow to get a general context of what is happening. Returning to my decision-making system, there is news (let's call it critical ) that can trigger the closure of a position or non-opening of a position in the shares of a particular company, even though the main indicators do not suggest this. To determine such news, I ask myself three questions: 1. Do I trust this news source? We are surrounded by many sources of news: social networks, news sites, television, etc. It’s easy to check everyone’s reputation on the Internet. Therefore, to take the news into account, you must trust its source. If you see significant news about a company, but it is not in reputable media resources and/or on the company's website, this is a reason to think whether the source is trying to increase its popularity through a loud headline and unverified content. 2. Does this news describe an accomplished fact? Even in reputable publications, you can find publications with versions of events, forecasts, and opinions. This is good food for thought. However, when deciding, I constantly try to separate the standpoint from the fact confirmed by a reliable source. Only facts can be considered when deciding. 3. Is an accomplished fact capable of leading the company to bankruptcy? This is a difficult question that requires an assessment of the company's economic damage, and its comparison with the level of total debt to creditors and current assets. Even if a company is facing bankruptcy, it can be saved by providing assistance from the government or other businesses. Answering this question, I can listen to the opinions of analysts and my intuition. Therefore, this is the most subjective facet of my decision-making system. I just have to tell myself: “Yes, this fact can lead the company to bankruptcy” or vice versa: “No, this news is bad, but it does not pose a critical threat to the business.” So, if I answer “yes” to all three questions, then I can close a position in the shares of a particular company or not open it, guided simply by my “yes, this should be done.” The fact is that critical news comes out now, and reporting on a specific date in the future: there is a time gap between these events. Therefore, I find myself in a situation where I just need to decide and evaluate it later, in the future, based on published reports. It is similar to flying an airplane that fails during transit. The pilot may not fully understand what happened, but the choice must be made right now. If I answer “no” to any of the three questions, then I continue to use other facets of my “crystal” in standard mode, and leave the news “just for my information.” In future publications, I will continue to elaborate on my decision-making system and share my approach to choosing the price and quantity of a stock trade.
SP:SPXEducation
by Be_Capy
The 9 Rules of Successful Investors The world of investing can be a daunting place, especially for beginners . With so many factors to consider and the potential for significant losses, it can be difficult to know where to start. However, there are a few basic rules that all successful investors follow. By following these rules, you can increase your chances of success and avoid costly mistakes. 1. Be prepared to lose money. This is the first and most important rule of investing. No matter how much research you do or how experienced you are, there is always the possibility of losing money. This is why it is important to only invest money that you can afford to lose. 2. Calculate your risk before opening a trade, not during. Before you open any trade, you should always calculate your risk. This means determining how much money you are willing to lose on the trade. You should also set a stop-loss order to automatically close the trade if it reaches a certain price level. 3. Be in a cold state of mind (without the influence of emotions). Emotions can be a major enemy of successful investing. When you are trading, it is important to stay calm and rational. Do not let your emotions get the best of you, as this can lead to making bad decisions. 4. Open positions only in the direction of the trend. One of the best ways to increase your chances of success in trading is to trade in the direction of the trend. This means identifying the overall trend of the market and then trading in line with that trend. 5. Keep a trading journal with a detailed description of each trade. A trading journal is a great way to track your progress and identify areas where you can improve. In your trading journal, you should record details of each trade, such as the date, time, entry price, exit price, and profit or loss. 6. Regularly analyze your trades. Once you have a few trades under your belt, it is important to take some time to analyze them. This will help you identify what you are doing right and what you need to improve on. 7. Constantly improve yourself. The world of trading is constantly evolving, so it is important to keep up with the latest trends and strategies. There are many resources available to help you learn more about trading, such as books, websites, and courses. 8. Give yourself time to rest from trading. Trading can be a stressful activity, so it is important to give yourself time to rest and recharge. Taking breaks from trading will help you stay focused and avoid making emotional decisions. 9. Profit is only what you have taken and have in your pocket (conditionally), not what the open P&L in the position shows, because it is floating and not fixed profit. This is a reminder that profit is not real until you have taken it out of the market. Do not get too attached to your profits, as they can quickly disappear if the market moves against you. Additional Tips for Successful Investing In addition to the 9 rules listed above, there are a few other things you can do to increase your chances of success as an investor: Do your research. Before you invest in any asset, it is important to do your research and understand the risks involved. This includes understanding the asset's fundamentals, as well as the overall market conditions. Diversify your portfolio. Don't put all your eggs in one basket. By diversifying your portfolio, you can reduce your risk and increase your chances of success. Invest for the long term. The stock market is volatile in the short term, but it has historically trended upwards over the long term. By investing for the long term, you can ride out the short-term fluctuations and maximize your returns. Don't panic sell. When the market takes a downturn, it is important to stay calm and avoid panic selling. Selling when the market is down will only lock in your losses. Instead, focus on the long term and ride out the storm. By following these tips, you can increase your chances of success as an investor. However, it is important to remember that there is no guarantee of success. Even the best investors in the world lose money sometimes. The key is to learn from your mistakes and keep moving forward.
Education
by Yaroslav_Krasko
Simple management is easier on your mindhi, just wanted to share a couple of thought on management, mainly for new members. in my eyes, there are two categories of management: simple (fixed RR) and more complex (variations of trailing). Both have positive and negative sides. In my eyes, as a very very subjective opinion, simple fixed RR system will be better for most people. Or ok, I'll not speak for most, but for me definitely. Why so: incredible simplicity, cause you just need to test to see how much your trades usually run + create b.e. rule, and you're good to go 3-5RR are usually best for fixed RR systems do not underrestimate the energy that goes into making decisions while managing and waiting, watching for the trade to develop into higher RR's. With fixed you don't have this - you just go b.e. and then you can close the terminal, and go away if needed. However yes, advanced experienced consistent traders would trail almost with no extra emotions, cause it's usually more mechanical. With that said, for many relatevely new traders, trailing could be extra emotional. with fixed, you'll have less chances to become emotional, because of many reasons, for me personally fixed RR system gives a sense of accomplishment on every trade, while with managing I'm constantly thinking how can I manage longer better etc. So I'm rarely satisfied when I'm getting stopped out on trail, cause I'm still "stopped out", while on fixed I have a sense of good work done. I know it's weird, but it's personal experience I could continue, but I guess the general guideline is there. My main message is that TP can be a very simple fixed 3 or 4RR and that would be more than enough and easier for most people's mind have a good weekend.
BITSTAMP:BTCUSDEducation
by Yelli_trades
1
Smart Money Orderflow M15 ApproachIn this context, we define an intelligent order flow, which is a convergence of flows, in this case, downwards, leading the price to create congestions, i.e., internal breaks, and then consolidation phases, i.e., external breaks, which bring the price into the demand zone, where we should consider opening a long position subsequently. The pattern is clear: demand zone on H4 after a defined structural change with the main consolidation phase, and then we expect a retest in the demand zone, where it is highly likely that the price may reverse its direction, especially when analyzing the market from an M15 perspective. I remain available for further clarifications, greetings, and happy studying to all.
Education
by Forex48_TradingAcademy
1
Mitigation + BOS M15 Setup In this scenario, we examine a very common approach: trend continuation. The particular aspect of viewing it in this light compared to simply looking at trendlines is how we can identify demand zones and structural changes called BOS. Prices always tend to retrace in these zones before continuing. Personally, I identify demand or supply zones at H4, and once the price retraces, I look for rebounds at M15. In that timeframe, I aim to identify a structural change to the upside if I'm looking for a long position. Sometimes during an uptrend, it's very common to identify inefficiencies or FVG, which in turn support the price during retracement. Best wishes and happy trading to all.
Education
by Forex48_TradingAcademy
1
Pullback After Breakout Entry M15 ApproachIn this model, we define an approach that I personally use a lot, namely the creation of a demand or supply zone on the H4. In this case, we are observing a demand zone. Once the zone has been plotted on the chart, we wait for a retracement on the M15, and as soon as the market shows a structural change, in this case to the upside during the three London, pre-NY, and NY sessions, always considering to have the midnight open behind us, we can enter the market. The target will be the nearest swing high level, always considering to have at least a risk/reward ratio of 1.5. Best regards and have a good day everyone.
Education
by Forex48_TradingAcademy
2
Equal High & Low SweepToday I wanted to talk about two scenarios concerning market structure: the equal high for a bullish structure and the low sweep for a bearish structure. The crucial point of each setup, as always, is to identify a structural change called BOS. From there, I start looking for a demand or supply zone in the market where we should pay attention to observe the price return. This price return should occur as indicated in the setup, with the market starting to consolidate and form a double bottom or top of momentum. It is also important to consider the presence of a liquidity zone, as this will be our primary target zone, followed by the minimum or maximum of the structure. I wish everyone happy trading and remain available for further discussions on the matter.
Education
by Forex48_TradingAcademy
1
The Best Entry on the MarketIn this model, we will examine a tactical approach to achieve high-performance entry. It all starts with an uptrend characterized by continuous structural changes. In fact, there are continuous directional changes until the retest of the supply zone on M30. Subsequently, the market reacts to this zone by pushing downwards and generating a CHoCH. Here, switching to a 1-minute timeframe, it will be possible to wait for a retest of the supply zone before entering. The trade will target the session or daily low. Greetings and happy trading to all.
Education
by Forex48_TradingAcademy
1
New Approach on Forex: Inducement LowIn my analysis model, I focus on a bearish structure, where I identify the so-called "false demand zones" (SM Trap). It all starts with a supply zone, where the price begins to decline, creating a liquidity zone with a double bottom. Subsequently, the price retests the supply zone, declines again, and breaks the false demand zone, generating another one. Then, the market starts forming decreasing lows and highs, clear signals of the ongoing bearish trend. This is where I pay attention, as it constitutes a clear signal of the developing trend. To enter the market, I prefer identifying an FVG M15, targeting weekly, daily lows, or the H4 timeframe, in line with my trading plan. I find it crucial to observe the evolution of lows and highs, as their decrease further confirms the bearish trend. I wish everyone happy trading and success in their operations.
Education
by Forex48_TradingAcademy
1
The Best Strategy of 2024: Reversal Entry ModelGood morning, today I would like to draw your attention to a model that I am integrating into my analyses for this year. In this model, we define simple structural changes either downwards or upwards, in this context downwards using two BOS. Subsequently, we define the main demand zone where the price retests. After the retest, the price breaks upwards the structure creating a CHOCH, or an internal breakout. Afterwards, the price will move into a lateral phase accumulating a lot of liquidity, and as it is known, as soon as the price absorbs liquidity above or below a range, it then moves in the opposite direction of the filled liquidity. In this case, liquidity is absorbed below in the order block zone and the price moves upwards. I recommend supplementing charts with this model and identifying these setups starting from an H4 timeframe which can be simpler compared to smaller timeframes. Best regards and happy trading to everyone.
Education
by Forex48_TradingAcademy
1
The Ultimate Strategy | ChoCh + InducementThis strategy is based on identifying a market structure, which can be bullish or bearish. In this specific case, a bullish structure characterized by rising highs and lows is considered. The expectation is for the market to change direction, creating a shock. Subsequently, the formation of a liquidity block is observed during a market consolidation phase, followed by entering a demand zone where the imbalance dictates, and the response is a downward movement, as anticipated. The target of this movement is defined graphically. Greetings and happy trading to everyone.
Education
by Forex48_TradingAcademy
3
High probability setupThis is what I'm going to be looking in the market for the next long term journey, this is a special setup based on patience, strategy and price action, high probabilities and high R:R, works better in high timeframes, we have just wait for the firt confirmation which is: 1. Shift of structure, after watching that we have to look for: 2. A good RESISTANCE/SUPPORT zone where the price is rejecting in Daily of 4H and search for a: 3. Chart pattern which can be a HEAD AND SHOULDERS OR DOUBLE BOTTOM, DOUBLE TOP..., if we have these confirmations, we can look for the last which is: 4. Candlestick pattern: in the shift of the structure which can be an engulfing, an evening/morning star or marubozu, also can be a doji with the wick for our direction Each one of these confirmations are 22% probabilities for our strategy, after getting all them we can enter the trade, put the stop loss a bit above or below the last structure point and take a 1:3 risk reward and the most important part is: SET THE TRADE AND FORGET, Allow the price to go where it has to go, don't change the T.P, don't change the S.L, accept the risk of the trade and take a loss if is the case or take a win if the market allows that, and continue with the plan, IT'S IMPOSSIBLE TO HAVE A 100% CHANCES, so even if you have all this confirmation, you can lose and you have to ACCEPT IT, for that: Stick to the RISK MANAGEMENT thinking in percentage, I recommend to use a 1%-2% per trade, and that's all BE PATIENT AND SMART, THINK IN LONG TERM Remember: "The market is a mechanism for transferring money from the impatient to the patient"
EIGHTCAP:XAUUSDEducation
by TraderEaglefx
15M Pro OrderFlow | A Unique and Profitable StrategyIn this approach, we will outline one of the best entry points on M15. The model involves quickly assessing a potential demand area by identifying a liquidity zone formed during the Fibonacci retracement at the .62-0.78 level. From this zone, the market initiates a physiological uptrend before retracing downward, creating a sharp movement with an internal break, followed by a bounce in the demand area. It is at this moment that a precise entry will be executed, aiming to reach the structure's peak. It is important to note that this model is also applicable to H1, H4, and Daily time frames. Greetings to everyone and happy trading.
Education
by Forex48_TradingAcademy
3
SMC Sell Setup: High Probability EntryGood morning everyone, today we will explore a short entry model using the concepts of smart money. This model involves entering the market in a short position after a series of specific patterns. Firstly, we start with a bearish structure where the price breaks a significant low, creating a BOS. Subsequently, we will identify the SMC zone, which is a trap zone to avoid. In this zone, the price makes a false descent before rising, creating the most important peak that we will use to evaluate a short entry. After identifying this peak, the market begins to decline, forming a CHOCH, representing an internal break. This will signal our sell point, and we could define our sell zone indicated by the POI on the chart. Once the price enters this zone, we may consider opening a short position on the security. Greetings to everyone.
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by Forex48_TradingAcademy
1
Perfect ChoCh : Entry + SetupWith this trading model, I aim to share with the community a particularly significant approach that has revolutionized my way of operating in the markets, especially on shorter timeframes such as 1, 5, and 15 minutes. This model involves defining a clear structure before entering the market, specifically a demand zone already present in the market. A price that reaches this zone through a double structural break (BOS) before rallying and creating an internal break (ChoCh) before returning to the demand zone. Subsequently, the price will surpass the previous high, thereby defining a new demand zone. One will then await the price to reach this zone, and once there, enter the market with the aim of reaching the supply zone depicted on the chart.
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by Forex48_TradingAcademy
1
5 Steps Smart Money Concept Model5 STEPS SMART MONEY CONCEPT MODEL Break of Structure (BOS): Definition: A Break of Structure occurs when the market provides the initial indication that the price is likely to reverse. For example, a new lower low and lower high signal a disrupted market structure, indicating a forthcoming reversal to the downside. Trading Approach: Traders typically align their trades with the Higher Time Frame (HTF) BOS, especially when the price closes above/below a swing high/low. Change in Character (CHOCH): Definition: A CHOCH represents an initial shift that can signal a short- or long-term price reversal. It is considered a reversal pattern, utilized by SMC traders on higher time frames for market direction and on lower time frames for trade opportunities. Implementation: SMC traders use CHOCHs on various time frames to gauge market direction and identify intraday reversals or reactions to Points of Interest (POIs). Fair Value Gap (FVG): Definition: Fair Value Gaps highlight market inefficiencies or imbalances, where buying and selling are not equal. These gaps become magnets for price, resolving the inefficiency as resting orders are filled. Utilization: Traders use FVG information to target these gaps, identifying potential entry points for long or short positions. Fair Value Gaps are considered valuable Points of Interest (POIs) in price action trading.
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by Forex48_TradingAcademy
1
2024 US Recession | Key Factors2000 DOT-COM CRISIS The dot-com crisis, also known as the "dot-com bubble" or "dot-com crash," was a period of economic turbulence that affected the technology and telecommunications sectors in the late 1990s and early 2000s. Here are some key points: Euphoria Phase: In the 1990s, there was a boom in the technology and dot-com industry fueled by irrational investor euphoria. Many companies secured significant funding, even if they had weak or nonexistent business models. Excessive Valuations: Valuations of technology companies skyrocketed, often based on exaggerated growth projections and unrealistic expectations. This led to rampant speculation in financial markets. Bubble and Collapse: In 2000, the dot-com bubble began to burst. Many investors realized that numerous technology companies were unable to generate profits in the short term. This triggered a massive sell-off of stocks and a collapse in tech stock prices. Economic Impacts: The crisis had widespread economic impacts, with the loss of value in many technology stocks and the bankruptcy of numerous companies. Investors suffered heavy losses, and this had repercussions on the entire stock market. Economic Lessons: The dot-com crisis led to a reassessment of investment practices and taught lessons about the importance of carefully analyzing companies' fundamentals and avoiding investments based solely on speculative expectations. Following this crisis, the technology sector experienced a correction but also contributed to shaping the industry in a more sustainable way. Many companies that survived the crisis implemented more realistic and sustainable strategies, contributing to the subsequent growth and development of the technology sector. 2007-2008 FINANCIAL CRISIS The 2007-2008 financial crisis was a widespread event that had a significant impact on the global economy. Here are some key points: Origins in the Subprime Mortgage Crisis: The crisis originated in the U.S. real estate sector, particularly in subprime mortgages (high-risk). An increase in mortgage defaults led to severe losses for financial institutions holding securities tied to these loans. Spread of Financial Problems: Losses in the mortgage sector spread globally, involving international financial institutions. Lack of transparency in complex financial products contributed to the crisis's diffusion. Bank Failures and Government Bailouts: Several major financial institutions either failed or were on the brink of failure. Government interventions, including bailouts and nationalizations, were necessary to prevent the collapse of the financial system. Stock Market Crashes: Global stock markets experienced significant crashes. Investors lost confidence in financial institutions, leading to a flight from risk and an economic contraction. Impact on the Real Economy: The financial crisis directly impacted the real economy. The ensuing global recession resulted in the loss of millions of jobs, decreased industrial production, and a contraction in consumer spending. Financial Sector Reforms: The crisis prompted a reevaluation of financial regulations. In response, many nations implemented reforms to enhance financial oversight and mitigate systemic risks. Lessons Learned: The financial crisis underscored the need for more effective risk management, increased transparency in financial markets, and better monitoring of financial institutions. The 2007-2008 financial crisis had a lasting impact on the approach to economic and financial policies, leading to greater awareness of systemic risks and the adoption of measures to prevent future crises. 2019 PRE COVID In 2019, I closely observed a significant event in the financial markets: the inversion of the yield curve, with 3-month yields surpassing those at 2, 5, and 10 years. This phenomenon, known as an inverted yield curve, is generally considered an advanced signal of a potential economic recession and has often been linked to various financial crises in the past. The inversion of the yield curve occurred when short-term government bond yields, such as those at 3 months, exceeded those at long-term, like 2, 5, and 10 years. This situation raised concerns among investors and analysts, as historically, similar inversions have been followed by periods of economic contraction. Subsequently, in 2020, the COVID-19 pandemic occurred, originating in late 2019 in the city of Wuhan, Hubei province, China. The virus was identified as a new strain of coronavirus, known as SARS-CoV-2. The global spread of the virus was rapid throughout 2020, causing a worldwide pandemic. Countries worldwide implemented lockdown and social distancing measures to contain the virus's spread. The economic impact of the pandemic was significant globally, with sectors such as tourism, aviation, and hospitality particularly affected, leading to business closures and job losses. Efforts to develop a vaccine for COVID-19 were intense, and in 2020, several vaccines were approved, contributing to efforts to contain the virus's spread. In 2021, the Delta variant of the virus emerged as a highly transmissible variant, leading to new increases in cases in many regions worldwide. Subsequent variants continued to impact pandemic management. Government and health authorities' responses varied from country to country, with measures ranging from lockdowns and mass vaccinations to specific crisis management strategies. The pandemic highlighted the need for international cooperation, robust healthcare systems, and global preparedness to address future pandemics. In summary, the observation of the yield curve inversion in 2019 served as a predictive element, suggesting imminent economic challenges, and the subsequent pandemic confirmed the complexity and interconnectedness of factors influencing global economic health. 2024 Outlook The outlook for 2024 presents significant economic challenges, outlined by a series of critical indicators. At the core of these dynamics are the interest rates, which have reached exceptionally high levels, fueling an atmosphere of uncertainty and impacting access to credit and spending by businesses and consumers. One of the primary concerns is the inversion of the yield curve, manifested between July and September 2022. This phenomenon, often associated with periods of economic recession, has heightened alarm about the stability of the economic environment. The upward break of the 3-month curve compared to the 2, 5, 10, and 30-year curves has raised questions about the future trajectory of the economy. Simultaneously, housing prices in the United States have reached historic highs, raising concerns about a potential real estate bubble. This situation prompts questions about the sustainability of the real estate market and the risks associated with a potential collapse in housing prices. Geopolitical instability further contributes to the complexity of the economic landscape. With ongoing conflicts in Russia, the Red Sea, Palestine, and escalating tensions in Taiwan, investors are compelled to assess the potential impact of these events on global economic stability. The S&P/Experian Consumer Credit Default Composite Index, showing an upward trend since December 2021, suggests an increase in financial difficulties among consumers. Similarly, the charge-off rate on credit card loans for all commercial banks, increasing since the first quarter of 2022, reflects growing financial pressure on consumers and the banking sector. In this context, it is essential to adopt a prudent approach based on a detailed analysis of economic and financial data. The ability to adapt to changing market conditions becomes crucial for individuals, businesses, and financial institutions. Continuous monitoring of the evolution of economic and geopolitical indicators will be decisive in understanding and addressing the challenges that 2024 may bring.
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by Forex48_TradingAcademy
1