75: Comprehensive Guide to Volume Profiles and Volume in TradingWhat is a Volume Profile?
A Volume Profile is an advanced charting tool that plots the amount of trading activity (volume) across different price levels over a specific period. Unlike traditional volume indicators that only show volume over time, Volume Profiles provide insights into where the majority of trading took place, highlighting key areas of support and resistance, as well as zones of high and low interest among traders.
Key Components of Volume Profiles:
1. Point of Control (POC) : This is the price level where the highest volume of trades occurred. The POC is a crucial level because it represents the price at which traders found the most value, making it a strong indicator of support or resistance.
2. Value Area (VA) : The Value Area represents the range of prices where approximately 70% of the volume was traded. This area is divided into the Value Area High (VAH) and Value Area Low (VAL). The VA is significant because it identifies the zone where most market participants were active, providing a clear picture of market consensus on value.
3. High Volume Nodes (HVN) and Low Volume Nodes (LVN) : HVNs are price levels where there was a large amount of trading activity, indicating significant interest and often serving as strong support or resistance levels. LVNs, on the other hand, represent areas with minimal trading activity, where prices tend to move quickly due to the lack of interest.
The Importance of Volume in Trading
Volume is a fundamental aspect of market analysis, offering insights into the strength and sustainability of price movements. It reflects the level of participation in a market, indicating the intensity of buying or selling at different price levels.
- Confirmation of Price Movements : High volume confirms the legitimacy of a price move. For example, a price breakout from a resistance level on high volume is more likely to be sustained than one on low volume.
- Reversals and Continuations : Spikes in volume can signal potential reversals, especially when occurring at significant price levels such as the POC or near the VA boundaries. Conversely, a sustained high volume along a trend can indicate its continuation.
- Validation of Support and Resistance : Volume at key levels like the POC, VAH, and VAL helps validate these areas as strong support or resistance. When price interacts with these levels on high volume, it suggests that many market participants are active, reinforcing the importance of these price levels.
How to Interpret and Use Volume Profiles:
1. Identifying Key Price Levels :
- The POC acts as a magnet for price, often drawing the price back to it when it moves away. This level is crucial for identifying potential areas of reversal or consolidation.
- The Value Area is where the majority of the trading activity occurs. Prices above the VAH might indicate an overbought condition, while prices below the VAL could suggest an oversold market.
2. Volume and Market Sentiment :
- High Volume Nodes indicate areas of significant interest, where prices tend to stabilize due to heavy trading. These areas often become zones of accumulation or distribution, depending on market conditions.
- Low Volume Nodes indicate price levels with minimal trading interest, where prices may move quickly and encounter less resistance, often leading to rapid price changes or breakouts.
3. Order Flow and Large Volume Blocks :
- Large blocks of volume, particularly at HVNs, suggest the presence of institutional traders or significant market participants placing large orders. These zones are critical because they reflect where big players are accumulating or distributing their positions. As a result, these areas tend to create strong support or resistance levels that can define future market behavior.
4. Dynamic vs. Static Profiles :
- Volume Profile Visible Range (VPVR): This type of profile updates as you scroll through your chart, dynamically showing the volume distribution for the visible price range. It’s useful for analyzing the current market context and finding immediate trading opportunities.
- Fixed Range Volume Profile (FRVP): This profile is static, showing volume data for a specified price range or time period. It’s valuable for comparing current price action to historical data, helping identify long-term support and resistance levels.
Practical Tips for Using Volume Profiles :
1. Customization and Settings :
- Adjust the number of rows or ticks per row in your Volume Profile settings to get a more detailed or broader view of volume distribution. More rows will give you finer detail, while fewer rows will smooth out the data, highlighting major trends.
2. Combining with Other Indicators :
- Use Volume Profiles in conjunction with other technical indicators like moving averages, RSI, or MACD to confirm trading signals and enhance the reliability of your analysis.
3. Adapting to Different Timeframes :
- Tailor your Volume Profile analysis to your trading style. For day traders, shorter timeframes (e.g., 5, 15, 30 minutes) might be more relevant, while swing traders or investors might focus on daily, weekly, or even monthly profiles to identify long-term trends and key levels.
4. Observing Market Reactions at Key Levels :
- Pay close attention to how the market reacts when it approaches HVNs, LVNs, the POC, or the boundaries of the Value Area. These reactions can provide clues about future price movements and potential trading opportunities.
Volume Profiles offer a deep and nuanced view of market behavior by highlighting where significant trading activity has occurred at different price levels. By understanding the interaction between volume and price, traders can make more informed decisions, identify key levels for entry and exit, and gain insights into market sentiment. Integrating Volume Profile analysis into your trading strategy can provide a significant edge, enhancing your ability to navigate the complexities of financial markets.
Tradingeducation
Demo Account Will Not Make You a PRO TRADER
Hey traders,
In this article, we will discuss demo account trading .
We will discuss its importance for newbie traders and its flaws.
➕ Pros:
Demo account is the best tool to get familiar with the financial markets . It gives you instant access to hundreds of different financial instruments.
With a demo account, you can learn how the trading terminal works . You can execute the trading orders freely and get familiar with its types. You can get acquainted with leverage, spreads and volatility.
Trading on paper money, you do not incur any risks , while you can see the real impact of your actions on your account balance.
Demo account is the best instrument for developing and testing a trading strategy , not risking any penny.
The absence of risk makes demo trading absolutely stress-free.
➖ Cons:
The incurred losses have no real impact , not causing real emotions and pressure, which you always experience trading on a real account.
Your performance (positive or negative) does not influence your future decisions.
Real market conditions are tougher. Demo accounts execute the orders a bit differently than the real ones. That is clearly felt during the moments of high volatility, with the order slippage occurring less often and trade execution being longer.
Trading with paper money allows you to trade with the sums being unaffordable in a real life, misrepresenting your real potential gains and providing a false confidence in success.
Even though we spotted multiple negative elements of demo trading, I want you to realize that it still remains the essential part of your trading journey and one of the main training tools. You should spend as much time on demo trading as you need to build confidence in your actions, only then you can gradually switch to real account trading.
Profitable Triangle Trading Strategy Explained
Descending triangle formation is a classic reversal pattern . It signifies the weakness of buyers in a bullish trend and bearish accumulation .
In this article, I will teach you how to trade descending triangle pattern. I will explain how to identify the pattern properly and share my trading strategy.
⭐️ The pattern has a very peculiar price action structure :
1. Trading in a bullish trend, the price sets a higher high and retraces setting a higher low .
2. Then the market starts growing again but does not manage to set a new high, setting a lower high instead.
3. Then the price drops again perfectly respecting the level of the last higher low, setting an equal low .
4. After that, one more bullish movement and one more consequent lower high , bearish move, and equal low .
Based on the last three highs , a trend line can be drawn.
Based on the equal lows , a horizontal neckline is spotted.
❗What is peculiar about such price action is the fact that a set of lower highs signifies a weakening bullish momentum : fewer and fewer buyers are willing to buy from horizontal support based on equal lows.
🔔 Such price action is called a bearish accumulation .
Once the pattern is formed it is still not a trend reversal signal though. Remember that the price may set many lower highs and equal lows within the pattern.
The trigger that is applied to confirm a trend reversal is a bearish breakout of the neckline of the pattern.
📉Then a short position can be opened.
For conservative trading, a retest entry is suggested.
Safest stop is lying at least above the level of the last lower high.
However, in case the levels of the lower highs are almost equal it is highly recommendable to set a stop loss above them all.
🎯For targets look for the closest strong structure support.
Below, you can see the example of a descending triangle trade that I took on NZDCAD pair.
After I spotted the formation of the pattern, I was patiently waiting for a breakout of its neckline.
After a breakout, I set a sell limit order on a retest.
Stop loss above the last lower high.
TP - the closest key support.
90 pips of pure profit made.
Learn to identify and trade descending triangle. It is one of the most accurate price action patterns every trader should know.
#GOLD - only single supporting area, hold or not?#GOLD.. well guys market just trade above our today area that was discussed in today video analysis.
So now keep close only supporting area 2423 around.
Untill hold it don't short gold.
But keep in mind that below 2423 we will short gold by cut n reverse on confirmation.
Good luck
Trade wisely
Do Not Overwhelm Your Price Chart!
In this article, we will discuss a very important term in trading psychology - paralysis by analysis in trading.
Paralysis by analysis occurs when the trader is overwhelmed by a complexity of the data that he is working with. Most of the time, it happens when one is relying on wide spectra of non correlated metrics. That can be various trading indicators, different news outlets and analytical articles and multiple technical tools.
Relying on such a mixed basket, one will inevitably be stuck with the contradictory data.
For example, the technical indicators may show very bearish clues while the fundamental data is very bullish. Or it can be even worse, when the traders have dozens of indicators on his chart and half of them dictates to open a long position, while another half dictates to sell.
Above, you can see an example of a EURUSD price chart that is overwhelmed by
various technical indicators: Ichimoku, MA, Volume, ATR
support and resistance levels
fundamental data
As a result, the one becomes paralyzed , not being able to make a decision. Moreover, each attempt to comprehend the data leads to deeper and deeper overthinking, driving into a vicious circle.
The paralysis breeds the inaction that necessarily means the missed trading opportunities and profits.
How to deal with that?
The best option is to limit the number of data sources used for a decision-making. The rule here is simple - the fewer indicators you use, the easier it is to make a decision.
EURUSD chart that we discussed earlier can look much better. Removing a bunch of tools will make the analysis easier and more accurate.
There is a common fallacy among traders, that complexity breeds the profit. With so many years of trading, I realized, however, that the opposite is true...
Keep the things simple, and you will be impressed how accurate your predictions will become.
❤️Please, support my work with like, thank you!❤️
Binance Coin - The $70.000 price target is real!Hello Traders and Investors, today I will take a look at Binance Coin .
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Explanation of my video analysis:
Back in 2020 Binance Coin created a decent bullish break and retest of a horizontal structure which was followed by a rally of 10.000% towards the upside. After this rally, which ended in April of 2021, Binance Coin has been trading sideways ever since. Currently it seems like Binance Coin is preparing another bullish breakout, which could lead us all the way up to $70.000 in the future!
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Keep your long term vision,
Philip (BasicTrading)
From Beginner to Pro - The Evolution of a Trader
Hey traders,
In this educational article, we will discuss 3 stages of the evolution of a trader .
Stage 1 - Unprofitable trader 😞
The unprofitable trader has very typical characteristics:
-total absence of trading skills
Most of the time, people open a live account simply after completing some beginners course like on babypips website.
Being sure that the obtained knowledge are completely enough to start trading, they quickly face the tough reality.
-no trading plan
Having just basic knowledge, of course, they do not have a trading plan. Why the hell to have it if everything is so simple?!
All their actions on the market is just gambling. They open the positions randomly most of the time, simply relying on intuition.
-poor risk management
In 99% percent of the time, the unprofitable trader does not even think about risk management. The position sizing, stop placement and target selection are completely neglected.
Trading performance of the unprofitable traders is characterized by small wins and substantial losses and negatively trending equity.
Stage 2 - Boom and bust trader 😶
Usually, traders reach boom and bust stage after 1-2 years of unprofitable trading. At some moment, winning trades start to compensate losing trades, brining non-trending equity.
Such traders have very common traits:
-not polished trading plan
Being unprofitable for so long, traders start to realize the significance of a trading plan.
Sticking to the set of rules, they notice positive changes in their trading performance.
However, trading plan requires to be polished and modified. It takes many years for a trader to identify all its drawbacks before it starts bringing net profits.
-lack of confidence
When one starts following a trading system, confidence plays a substantial role.
The fact is that even the best trading strategy in the world occasionally produces negative results. In order to not give up and keep following such a system, one needs to build trust in that.
The confidence that after a series of losing trades, the strategy will manage to recover.
Such a trust can be built after many years of trading that strategy.
Stage 3 - Profitable trader ☺️
That is the final destination.
After many years of a struggling trading, one finally sees positively-trending equity. Winning trades start to outperform losing ones, leading to consistent account growth.
Profitable trader is characterized by iron discipline, confidence and consistency.
He knows what he is trading, when and why. His trading plan is polished, he fully controls his emotions.
He never stops learning and constantly develops his strategy.
Knowing the 3 stages of the evolution of a trader, one can easily identify at what stage he currently is. That will help to identify the things to be focused on to move to the next stage.
At what stages are you at the moment?
Exploring Ilian Yotov's Quarter Point Theory: Refine Your Entry
The quarters theory challenges the notion that financial markets are chaotic and that market prices are random by demonstrating constant orderly movement of price from one Quarter point to the next. In this publication, I will delve into the fundamentals of Yotov's Quarter Point Theory, its significance, and how it can be applied effectively in forex trading.
What is Quarter Point Theory by Ilian Yotov?
Ilian Yotov's Quarter Point Theory is a technical analysis strategy used in forex trading to identify potential entry and exit points. The theory is based on the observation that currency prices tend to gravitate towards specific levels known as "quarter points," which are key psychological and technical levels in the market.
Key Concepts of Quarter Point Theory
• Quarter Points: These are price levels that divide a currency pair's price range into four equal parts. For example, if a currency pair is trading between 1.2000 and 1.3000, the quarter points would be 1.2250, 1.2500, and 1.2750.
• Psychological Levels: Quarter points often act as psychological barriers where traders tend to place buy or sell orders, causing price reactions at these levels.
• Support and Resistance: Quarter points can act as support and resistance levels, where prices may consolidate, reverse, or experience significant movement.
Identifying Quarter Points
To apply Quarter Point Theory, traders need to identify the high and low of a currency pair's price range. These values are then divided into quarters to determine the quarter points.
The quarters theory focuses on the 1000 pip range between major whole numbers in currency exchange. Each 1000 pip range can be divided into 4 equal parts called Large Quarters
Each Large quarter has exactly 250 pips (1000/4 =250).
A Large Quarter Point (LQP) is a price that marks the beginning and the end of each Large Quarter (250 pips range).
Large Quarter Points that coincide with Major whole numbers are called Major Large Quarter Points (MLQP). MLQP signals the end of a 1000 PIP range and the beginning of a new 1000 pip range.
A Major Small Quarter point is simple the number that coincides with a whole number, for example, 1.30, 1.31, 1.32, 1.33, 1.34…. Each of these numbers mark the beginning of a 100 pip range.
Here is an illustration of this:
Using Quarter Points in Forex
When you study price around this theory, you may notice that price has a tendency to print the high of the day or low of the day around quarter point levels. Here is a example of this over a 5 day period on EURUSD:
With this new-found knowledge, you could integrate this into your strategy. Once you have a directional bias for the day and you have an AOI for entry, you simply need to identify the quarter point within that range and anticipate a reaction at that level.
For a deeper dive into this theory, I highly recommend reading the original work by Ilian Yotov's. If you would like a free pdf copy, drop me a message or leave a comment, I'd be happy to share this with you.
Happy Trading
THE KOG REPORTTHE KOG REPORT:
In last week’s KOG Report we said we would be looking for price to attempt the push up, go into resistance where we wanted to short the market into the order region, and then look for the long trade back up from there on the RIP into the levels above. This went extremely well giving us a pin point move from level to level. During the week we updated the idea, which was already going to plan with a new bullish bias level and trade the new Excalibur activations upside into just below where we are now.
Plan worked well again giving an almost pip to pip, level to level reaction from our levels and following our bias and analysis posted pre-hand.
Well done to those that followed not only gold but the numerous other pairs we trade in Camelot which also gave us fantastic results for the week.
So, what can we expect in the week ahead?
This week we would say caution on long trades unless we get a pullback into key level support where we feel it’s worth a test, unless the higher levels aren’t taken on or during the early sessions of the week. We have an order region sitting above 2425-35 which is a large region, and if we see price attempt and give us a clean reversal there, we feel an opportunity to short the market is available for traders back down into the 2400 and below that 2385 price region which is where they may want to start to accumulate again. The issue we have here is that 2445-65 level which is a clean region of liquidity if they want to take it and stretch the sellers even more, so here we will caution again, as that level is the extension of the move, be prepared!
So, in practice what do we do?
Because we’re back in uncharted territory again, we’ll have to treat this as level to level play, we’ll look lower in the highlight region to go long, unless broken, and if they continue to take us up, we’ll trade it level to level looking for the ultimate short trade following our trusted guide.
KOG’s Bias for the week:
Bullish above 2395 with targets above 2430-35 and above that 2447
Bearish on break of 2395 with targets below 2375
It’s going to be a difficult week with potential of gaps on opening due to a Powell speech later, be fore market open! There is a lot of geopolitical news driving the markets and fear is present, although it’s looking like we’re going higher we would say caution over the week as a sudden turn will be extreme!
Please do support us by hitting the like button, leaving a comment, and giving us a follow. We’ve been doing this for a long time now providing traders with in-depth free analysis on Gold, so your likes and comments are very much appreciated.
As always, trade safe.
KOG
Want to spot a turning point in trend before it happens?Want to spot a turning point in trend before it happens? Use Elliott wave parallel channel
This chart shows the GBP/JPY currency pair using monthly candlesticks. The advance from Sep 2011 to June 2015 can be labeled as an impulse wave (A). From that high, the pair declined in three waves labeled as wave (B) of a Zigzag A-B-C correction with an expanding diagonal characteristic in the C wave position.
As a rule, in a Zigzag rally, wave B notably terminates above the origin of wave A. When wave (C) advance of a zigzag rally is in operation, we can forecast where wave (C) might end.
We can use Elliott wave channel projection by connecting the origin of wave (A) with the end of wave (B) and then drawing a parallel line from the end of wave (A). As a guideline, the resulting channel gives us a potential target for the wave (C) endpoint.
Moreover, we can also use ratio analysis to improve the odds. As a guideline, in Zigzag formations, wave (C) commonly ends after traveling the same length as wave (A). Observe this level corresponds with the Elliott wave channel projection.
This cluster of evidence hints at wave (C) advance from Mar 2020 is in late stages and that prices are approaching a major top.
Technical Analysis DOES NOT WORK in GOLD Trading
Does technical analysis really work in Gold trading?
In this article, we will discuss whether the traditional, classic methods of technical analysis: support and resistance, breakouts, patterns can be reliable in this specific market.
We will explore the dynamics of Gold prices so far this year and discuss the most efficient way to trade Gold.
So if you are a gold trader or simple interested in the market analysis, you should not miss this eye-opening discussion!
First, let's discuss how Gold market behaves from the beginning of the year from technical analysis perspective.
Gold started this year in a strong bullish trend, the market opened after setting a new higher high on a daily the second of January.
After a formation of a higher high, the market became overbought and a correctional movement initiated. The price formed a bullish flag pattern and reached the level of the last higher low - a very important support.
After the test of structure, the price bounced and violated a resistance line of a flag with a strong bullish candle.
From the technical perspective, it was a very strong trend-following signal and a bullish continuation was anticipated.
However, it turned out that it was a false signal, and instead of going higher, the market dropped, setting a new lower low.
Why this false signal is so important is that the breakouts, key levels and price action analysis are the most reliable on a daily time frame.
Such a strong combination: bullish trend, bullish pattern, key support; has a very high accuracy on a daily.
That was the first time this year, when technical analysis on a daily was completely screwed .
It felt like the market was turning bearish.
The price violated a level of the higher low, setting a new lower low.
For Smart Money traders, it is a very important event that is called a Change of Character. It strongly confirms a bearish reversal on the market.
One more bearish confirmation that I spotted was a completed head and shoulders pattern formation with a confirmed violation of its neckline. That signal also confirms a bearish reversal.
And again, these 2 bearish confirmations were the false signals.
The price went back above the neckline and a bullish movement initiated.
This time, a classic price action pattern did not work , and smart money concepts gave a false signal.
Then I spotted a very bullish signal - the price violated a major falling trend line and closed above that.
It clearly indicated that the market was returning to a global bullish trend.
And again, that signal was completely false.
And the price dropped.
Trend line breakout in the direction of the trend - a classic trend-following confirmation did not work.
Then we saw 2 strong bearish signals: a bearish breakout of a rising trend line and a key horizontal support with a high momentum bearish candle. It felt like now it confirms that the market is bearish and it should drop lower to the closest key support.
And again, technicals failed miserably and after a retest of a broken horizontal structure and a trend line, the price just went higher completely neglecting them
From the beginning of the year, technical analysis: key levels, patterns, smart money, breakouts do not work on a daily.
All the signals that were spotted so far failed.
If you just started trading, you may easily come to the conclusion that technical analysis does not make any sense on Gold.
And you will be completely right, in that period it does not work at all.
I am trading Gold and Forex for more than 9 years, and year after year I noticed that there always are the periods when some techniques, some strategies do not work. Sometimes these periods are very short, but some time they can be quite long.
The only proven way to overcome such periods is consistency and proper risk management .
Risking a tiny portion of your trading account per trade, you will be able to survive the stubborn market.
The market always returns to normal conditions and starts respecting the technicals again. However, no one knows when.
There is a famous quote by John Keynes:
"Markets can remain irrational longer than you stay solvent""
And only proper risk management will keep you solvent longer than the market stays irrational.
❤️Please, support my work with like, thank you!❤️
THE KOG REPORT - UpdateEnd of day update from us here at KOG:
We were expecting it to be a quiet day, but in true unconventional market fashion we actually had a blinding day on the markets, especially gold. Early session we saw the break above which confirmed the long trade, Excalibur activated, the red box strategy agreed, and we got not 1 but 2 fantastic long trades on gold. To top it off, tap and bounce on the nose from the reaction point highlighted on the chart giving a move down, but only into support.
So, what now?
We would like to see this support level below hold around 2320-15 region, and if so, would like to see this attempt that 2335-40 region before we decide whether the set up is right for the short trade.
Resistance now stand at 2330-35 which will need to break to go higher. Otherwise, we'll look for the setup tomorrow and wait for Excalibur to confirm.
As always, trade safe.
KOG
Top-5 tips for Top-Down Multiple Time Frame Analysis Trading
I am trading multiple time frame analysis for many years. After reviewing trading ideas from various traders on Tradingview, I noticed that many traders are applying that incorrectly
In this article, I will share with you 5 essential tips , that will help you improve your multiple time frame analysis and top-down trading.
The Order of Analysis Matters
Multiple time frame analysis is also called top-down analysis for a reason. When you trade with that, you should strictly start your analysis with higher time frames and then dive lower, investigating shorter-term time frames.
Unfortunately, most of the traders do the opposite. They start from a lower time frame and finish on a higher one.
Above are 3 time frames of EURGBP pair: daily, 4h, 1h.
To execute multiple time frames analysis properly, start with a daily, then check a 4h and only then the hourly time frame.
Limit the Number of Time Frames
Executing multiple time frame analysis, many traders analyse a lot of time frames.
They may start from a weekly and finish on 5 minute time frame, going through 5-8 time frames.
Remember that is it completely wrong. For execution of a multiple time frame analysis, it is more than enough to analyse 3 or even 2 time frames. Adding more time frames will overwhelm your analysis and make it too complex.
Analyse Particular Time Frames
Your multiple time frame analysis should be consistent and rule-based. It means that you should strictly define the time frames that you analyse.
For example, for day trading, my main trading time frames are daily, 4h, 1h. I consistently analyse ONLY these trading time frames and I look for day trades only analysing this combination of time frames.
Higher is the time frame, stronger the signal in provides
Trading with multiple time frame analysis, very often you will encounter controversial signals: you may see a very bullish pattern on a daily and a very bearish confirmation on 30 minutes time frame.
Always remember that the higher time frames confirmations are always stronger, and their accuracy is probability is always higher.
Above there are 2 patterns:
a head and shoulders pattern on a daily time frame with a confirmed neckline breakout, and an inverted head and shoulders pattern on a 4h time frame with a confirmed neckline breakout.
2 patterns give 2 controversial signals:
the pattern on a daily is very bullish and the pattern on a 4h is very bearish.
The signal on a daily time frame will be always stronger ,
so it is reasonable to be on a bearish side here.
You can see that the price dropped after a retest of a neckline of a head and shoulders on a daily, completely neglecting a bullish pattern on a 4H.
Each Time Frame Should Have Its Purpose
You should analyse any particular time frame for a reason.
You should know exactly what you are looking for there and what is the purpose of your analysis.
For example, for day trading, I analyse 3 time frames.
On a daily, I analyse the market trend and key levels.
On a 4H time frame, I analyse candlesticks.
On an hourly time frame, I look for a price action pattern as a confirmation.
On GBPAUD on a daily, I see a test of a key horizontal resistance.
On a 4H time frame, the price formed a doji candle.
On an hourly, I spotted a double top, giving me a bearish confirmation.
These trading tips will increase the accuracy of your multiple time frame analysis. Study them carefully and adopt them in your trading.
❤️Please, support my work with like, thank you!❤️
Dynamics of Bull Market CyclesBull markets are the epitome of investor optimism and economic growth, characterized by rising asset prices and increasing investor confidence. However, within every bull market, there lies a cyclical pattern composed of distinct phases: Discovery, Momentum, and Blow-off. Understanding these phases is crucial for investors to navigate the market efficiently and capitalize on opportunities while mitigating risks.
🟣 Discovery Phase:
👉 Accumulation: During the accumulation phase, institutional investors and smart money recognize undervalued assets and begin quietly accumulating positions. This often occurs when the broader market sentiment is still pessimistic or uncertain, presenting attractive buying opportunities.
👉 Trend Emergence: As accumulation continues, subtle shifts in market dynamics become apparent. Prices begin to exhibit higher highs and higher lows, indicating the emergence of an uptrend. Technical indicators such as moving averages may start to show bullish crossovers, further confirming the trend.
🟣 Momentum Phase:
👉 Shake-out: The shake-out phase is characterized by short-term price declines or corrections that test investor resolve. Weak-handed investors, who bought near the end of the accumulation phase or are driven by fear, panic sell their positions. This phase often creates volatility and uncertainty but also offers opportunities for long-term investors to accumulate quality assets at discounted prices.
👉 Momentum Building: Following the shake-out, momentum begins to build as the broader market recognizes the strength of the uptrend. More investors start participating in the rally, driving prices higher. Positive news catalysts and strong earnings reports further fuel the momentum, attracting even more investors.
👉 First Sentiment: As the bull market gains momentum, investor sentiment shifts from cautious optimism to moderate confidence. Market participants start to believe in the sustainability of the uptrend, leading to increased buying activity. However, skepticism may still linger, especially among contrarian investors who remain wary of potential overvaluation.
🟣 Blow-off Phase:
👉 Renewed Optimism: In the blow-off phase, optimism reignites as investors regain confidence in the market's upward trajectory. Corrections or pullbacks are viewed as buying opportunities rather than signals of impending reversal. Institutional investors and retail traders alike re-enter the market, driving prices to new highs.
👉 FOMO (Fear of Missing Out): Fear of Missing Out becomes prevalent as investors fear being left behind in the rally. Social media, financial news outlets, and word-of-mouth recommendations amplify the sense of urgency to buy, further fueling price appreciation. This FOMO-driven buying frenzy can lead to exaggerated price moves and irrational exuberance.
👉 Euphoria: Euphoria marks the peak of the bull market cycle. Investors become irrationally exuberant, believing that the current uptrend will continue indefinitely. Risk management takes a backseat as greed overrides caution. Valuation metrics may reach extreme levels, signaling frothiness in the market.
Understanding the cyclical nature of bull market cycles is essential for investors to navigate the market successfully. By recognizing the distinct phases of Discovery, Momentum, and Blow-off, investors can make informed decisions, capitalize on opportunities, and protect their portfolios from potential downturns. While bull markets are synonymous with optimism and prosperity, prudent risk management and a keen awareness of market dynamics are critical for long-term investment success.
Support and Resistance levelsSupport and resistance levels, the bedrock of technical analysis, are fundamental elements. They serve as critical points that delineate potential price movements and are pivotal in decision-making processes for traders and investors alike
The basis:
There are several fundamental concepts in trading that remain the same over a long period of time. Among them, the concepts of support and resistance levels stand out. When used correctly, support and resistance levels improve trading efficiency in financial markets.
Today we will delve deeper into these concepts.
Price behavior:
The fundamental principle of price behavior lies in the concept of supply and demand, governing the existence and operation of any market.
When demand outweighs supply, it prompts an upward push in prices, while in reverse circumstances, a decrease is observed. By identifying levels of supply and demand, traders significantly enhance their success rate.
A support level indicates a price range where strong buying positions are concentrated, typically defined by two minimum price points.
A resistance level, conversely, denotes a price range around which strong selling positions are clustered, often marked by two maximum price points.
It's important to note that support and resistance levels should not be viewed as precise lines. Prices may not necessarily adhere to these levels point by point; often, they may not even touch the level directly, sometimes piercing through it. This variability is normal, so these levels should be perceived more as zones of support and resistance. The width of these zones can vary, with the magnitude of dispersion dependent on the timeframe in which trading occurs. The higher the timeframe, the potentially broader the range of support and resistance levels.
Once again for strengthening:
Support and resistance levels represent specific price ranges on a chart (often represented by rectangles in my analysis) where the direction of price movement has historically changed. These ranges attract traders' attention because they provide clear points for setting stop losses and entering trades. In addition, these levels usually attract large buyers or sellers whose limit orders contribute to market dynamics.
Essentially, the level denotes the price area in the market where traders perceive the price to be either overpriced or underpriced, depending on the prevailing market conditions. Therefore, it is extremely important to closely monitor key levels where the role of support and resistance has changed or where significant price reversals have occurred.
Blending levels signify pivotal points on a price chart where price action can prompt a reversal in the opposite direction. In the presence of a robust trend, price movements may penetrate through these supply and demand levels, leading to potential shifts in direction. Such occurrences typically coincide with heightened transaction volumes. The interplay of price adjustments, heightened market activity, and trading volumes collectively influence market direction.
When resistance is breached and the price retraces to its previous level, there's a likelihood that bulls will once again push it upwards. Conversely, if the price retraces to the breached level after breaking through support, bears are likely to actively drive it downwards. Support and resistance levels can be identified as areas in the market where traders are more inclined to buy or sell, depending on current market conditions. This creates a zone of collision between buyers and sellers, often prompting the market to change its direction.
Retest:
A retest of a level refers to a brief return of the price to the breached support or resistance line for testing purposes. Following the retest, the price typically continues its movement in the direction of the breakout.
On higher time frames, support and resistance levels become more powerful:
It is important to observe the price action around levels:
If the price swiftly reverses from a level into the opposite trend, it indicates significant importance of that level.
If the price tests a specific area multiple times with minor retracements, it's likely that the level will eventually be breached.
Swing zones refer to areas where the price retraces to the previous pullback in either a downtrend or uptrend. In less robust trends, the price tends to return to the boundary of the previous correction before continuing its movement.
Of course, support and resistance are dynamic concepts that require constant attention and analysis as their meaning changes depending on prevailing market conditions. Moreover, it is critical to consider multiple confirmations such as volume analysis and breakouts to confirm the strength of these levels.
Thank you for your attention!
Don't Trade These Trend Lines | Forex Trading Basics
A lot of traders apply trend lines for trading and making predictions on different financial markets.
Trend line can also be an important element of price action patterns.
However, only few knows that some trend lines are better to be avoided.
In this article, I will share with you the types of trend lines that you should avoid and not rely on for making trading decisions.
Invalidated Trend Line
Even the strongest trend lines may lose their significance with time.
Before you take a trade from a trend line, make sure that it still remains valid.
If the trend line is not respected by the buyers and then by the sellers,
or by the sellers and then by the buyers, we say that such a trend line lost its significance, and it is better to not trade it.
Have a look at that rising trend line on USDCAD.
We see strong bullish reactions to that, and we may expect a bullish movement from that, once it is tested.
However, it was violated and after a breakout it should turn into a vertical resistance.
Retesting that, the price easily went through the broken trend line.
The trend line lost its significance, and it is better to not trade that in future.
2 Touches Based Trend Line
When you are looking for a strong trend line to trade, remember that the trend line should be confirmed by at least 3 touches and 3 consequent bullish / bearish reactions to that.
Above is the example of a valid and reliable trend line.
However, quite often, newbie trade 2 touches based trend lines.
Most of the time, such trend lines are neglected by the market.
Moreover, relying on 2-touches-based trend lines, your chart will look like a complete mess.
Simply because there are too many trend line meeting that criteria.
Receding trend line
There are the trend lines that go against your trade with time while remaining valid.
Have a look at a major falling trend line on NZDCHF on a daily time frame.
You may open a swing long position from that on a daily or a day trade on intraday time frames like an hourly.
You can see that the market may easily go against your predictions for a long time, while perfectly respecting a trend line.
The price was sliding on that trend line for 6 consequent days before it finally started to grow.
Such trend lines are better to be avoided .
Make sure that a trend line and your trade have the same direction.
Trend lines can provide very safe points for trading entries. However, the trend lines are not equal and while some of them can be very profitable, some of them can lead to substantial losses.
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Embracing Failure: The Key to Unlocking Trading SuccessIn the pursuit of trading mastery, the path is often littered with setbacks and failures. However, it's essential to recognize that these hurdles are not just obstacles but invaluable learning opportunities. Learning how to fail – and more importantly, learning from failure – is a critical step towards enhancing your trading success. This article explores the significance of embracing failure as a vital component of your trading education.
➡️ The Role of Failure in Trading
Trading, by nature, involves uncertainty and risk. Even the most seasoned traders face losses; it's an inherent part of the game. However, the difference between successful traders and those who struggle lies in their response to failure. Successful traders view failures as feedback, using them as a springboard to refine strategies, hone skills, and fortify mental resilience.
➡️ Failing Forward
The concept of "failing forward" means using setbacks as a catalyst for growth. Instead of letting failure deter your progress, it involves analyzing what went wrong, understanding the factors at play, and adjusting your approach accordingly. This mindset shift is crucial in trading, where the same mistake can be costly if repeated.
➡️ Lessons from Losses
Every loss carries a lesson. It could be a flaw in your strategy, a gap in your market knowledge, or even an insight into your psychological biases. By meticulously reviewing your failed trades, you can uncover these lessons and apply them to avoid similar pitfalls in the future. Remember, in trading, experience is measured not just by your wins but also by how you navigate and learn from losses.
➡️ Some famous quotes
Thomas A. Edison : " I have not failed. I've just found 10,000 ways that won't work. "
Winston Churchill : " Success is stumbling from failure to failure with no loss of enthusiasm. "
Michael Jordan : " I've failed over and over and over again in my life and that is why I succeed. "
Henry Ford : " Failure is simply the opportunity to begin again, this time more intelligently. "
J.K. Rowling : " It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all—in which case, you fail by default. "
Oprah Winfrey : " Failure is another stepping stone to greatness. "
Theodore Roosevelt : " The only man who never makes mistakes is the man who never does anything. "
Albert Einstein : " A person who never made a mistake never tried anything new. "
Coco Chanel : " Success is most often achieved by those who don't know that failure is inevitable. "
Johnny Cash : " You build on failure. You use it as a stepping stone. "
James Joyce : " Mistakes are the portals of discovery. "
Samuel Beckett : " Ever tried. Ever failed. No matter. Try again. Fail again. Fail better. "
Robert F. Kennedy : " Only those who dare to fail greatly can ever achieve greatly. "
John C. Maxwell : " Fail early, fail often, but always fail forward. "
Arianna Huffington : " Failure is not the opposite of success; it's part of success. "
Abraham Lincoln : " My great concern is not whether you have failed, but whether you are content with your failure. "
Dale Carnegie : " Develop success from failures. Discouragement and failure are two of the surest stepping stones to success. "
Mary Kay Ash : " When you fail, you have to be able to say, 'I believe in myself enough to try again. '"
Steve Jobs : " Remembering that I'll be dead soon is the most important tool I've ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure — these things just fall away in the face of death, leaving only what is truly important. "
Richard Branson : " Do not be embarrassed by your failures, learn from them and start again. "
As you can see, you're not the only one who fails, the famous people quoted all had their fair share of fails. The fact that they did not give up is testimony to their eventual success.
➡️ Building Resilience
Repeated exposure to failure, coupled with a constructive response, builds resilience. This mental toughness is invaluable in trading, helping you maintain composure and clarity in the face of market volatility. Resilient traders are better equipped to stick to their strategies, manage risks effectively, and seize opportunities without being swayed by emotional extremes.
➡️ Practical Steps to Learn from Failure
☝🏽 Keep a Trading Journal : Document every trade, including the rationale, outcome, and any emotions felt. Review this journal regularly to identify patterns in your failures.
☝🏽 Seek Feedback : Engage with a trading community or mentor. External perspectives can offer insights you might overlook.
☝🏽 Educate Continuously : Use failures as a cue to fill knowledge gaps. Whether it's technical analysis, market fundamentals, or trading psychology, there's always more to learn.
☝🏽 Develop a Growth Mindset : Cultivate the belief that your abilities and intelligence can grow with effort. This mindset encourages resilience and a positive attitude towards learning from failure.
➡️ Conclusion
In trading, failure is not the opposite of success; it's part of the journey to success . By embracing your failures, analyzing them, and extracting lessons, you can continually improve your trading performance . Remember, every great trader has faced setbacks; what sets them apart is their ability to learn, adapt, and evolve from those experiences. So, next time you encounter a setback, see it as an opportunity to grow and inch closer to your trading goals.
❓How do you deal with failure? Do you let it get the best of you or do you dust yourself off and continue with renewed drive and energy?
Share your experience in the comments below 👇🏽👇🏽👇🏽
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Smart Money Concepts Detailed Learning Plan. 5 Essential Topics
If you want to learn Smart Money concepts, but you don't know what to start with, this article with help.
I will share with you 5-steps Smart Money Concepts learning plan . 5 important topics to study in SMC.
Topic 1:
Market Structure - the analysis of a behavior of a price on a chart.
In the contest of Smart Money Concepts you should learn:
-SMC structure mapping
-Market trend identification
-Trend change
-Trend reversal
-SMC important events: BoS, CHoCH
Learn Trend Analysis
Leach ChoCH
Topic 2:
Liquidity Zones - learn to identify the areas on a price chart where liquidity concentrates.
Learn How to Identify Liquidity Zones
Topic 3:
Imbalance - one of the most accurate signals of the presence of big players / smart money on the market.
Learn How to Identify Imbalance with Candlestick
Topic 4:
Order Block - the specific areas on a price chart where institutional traders / smart money are placing significant number of trading orders.
Top 5:
Top-Down Analysis - structured and consistent analysis of multiple time frames.
After you study Topic 1, 2, 3, 4, you should learn to apply these knowledge and techniques on multiple time frames, to make informed decisions, following long-term, mid-term, short-term analysis.
Learn Top - Down Analysis
The 5 topics that we discussed are essential for your success as a smart money trader.
Study these topics with care, and I guarantee you that you will achieve exceptional results.
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Powerful Fibonacci Trading Strategy For Beginners
I am going to reveal a powerful fibonacci trading strategy that I learned many years ago. It combines structure analysis, fibonacci retracement and extension levels and candlestick analysis.
Step 1
Find a trending market - the market that is trading in a bullish or in a bearish trend on a daily time frame.
AUDUSD is trading in a bullish trend on a daily.
Step 2
Execute structure analysis - identify key horizontal and vertical structures on a daily time frame.
Take a look at key structures that I spotted on AUDUSD.
Step 3
Draw fibonacci retracement levels.
Here are the important ratios you should look for: 382, 50, 618, 786.
In a bearish trend,
draw fibonacci retracement levels from the high of the trend to current low based on wicks.
In a bullish trend,
You should apply fibonacci retracement from the low of the trend to a current high based on wicks.
Take a look how I draw the retracement levels,
I took the low of the trend and the high of the trend.
Step 4
Find confluence.
Look for fibonacci numbers that match - lie within key structures that you identified.
Support 1 matches with 382 retracement.
Support 2 matches with 786 retracement.
Remove other ratios from the chart.
Step 5
Wait for a test of one of the fibonacci levels that match with key structure
The price perfectly tested 382 retracement level.
Step 6
Wait for a confirmation on a 4h time frame.
Our confirmation will be a formation of an engulfing candle - a strong candle that completely engulfs the entire range of a previous candle with its body.
In a bearish trend, we will look for a formation of a bearish engulfing candle. Bearish engulfing candle indicates a strong selling pressure and the strength of the sellers.
In a bullish trend, we will look for a bullish engulfing candle. It indicates a strong buying reaction and imbalance.
Have a look at a bullish engulfing candle that was formed on AUDUSD on a 4H time frame after a test of 382 retracement.
Step 7
Open a trading position, set stop loss and choose the target.
After you spotted an engulfing candle, open a trading position.
Open short after a formation of a bearish engulfing candle and open long after a formation of a bullish engulfing candle.
If you sell, your safest stop loss will be 1.272 extension of the last bullish impulse on a 4H.
If you buy, your stop loss will be 1.272 extension of the last bearish impulse on a 4H.
In our example, our stop loss will be 1.272 extension of a bearish impulse leg on a 4H time frame. The extension is based on high and low of the impulse.
If you short, your take profit will be the closest key structure support on a daily.
If you buy, your take profit will be the closes key structure resistance on a daily.
Here is our take profit level.
Being applied properly, the strategy should generate 60%+ winning rate.
Always remember to check your reward to risk ratio before you open the trade. It should be at least 1.1/1.
Also, before you place a trade, always make sure that you trade WITH the trend and take only trend-following trades.
The strategy works perfectly on Forex, Gold, Silver, Oil, Indexes.
Good luck in your trading.
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DON'T TRADE THESE SUPPORTS AND RESISTANCES
When it comes to technical analysis,
the understanding of which support and resistance levels to not trade can be as important as knowing which ones to trade.
In this article, I will show you the structure levels that professional traders avoid to maximize their profits and minimize losses.
Invalidated support and resistance
Invalidated support/resistance is the structure that has a clear historical significance, but that lost its strength and was neglected by the market during the last 2 tests.
Have a look at that key horizontal support.
We can see that in the recent past, the price bounced from that multiple times, confirming its significance.
Then, the price suddenly broke and closed below that support.
According to the rules, that structure should turn into a resistance after a violation.
However, after its test, the price bounced and violated that to the upside.
The structure became invalid, and you should not trade that in future.
Resistance in a Bullish Trend
If the market is trading in a bullish trend, according to the rules its last higher high composes a key horizontal resistance.
USDJPY is trading in a strong bullish trend.
The price dropped once it set a new higher high higher close.
It composes a key horizontal resistance.
Always remember, that in a bullish trend, the price tends to set new higher highs and higher lows over time.
Quite often, the test of the level of the last high leads to a further bullish continuation and a formation of a new higher high.
For that reason, it is better not to trade such resistances.
Support in a Bearish Trend
In a bearish trend, the last lower low is always considered to be a key horizontal support.
Above is a price action on USDCHF.
The pair is bearish and recently set a new lower low.
It is a key horizontal support now.
However, in a bearish trend, the price tends to set a new low after a retracement. Most of the time, it does not respect the support based on the last lower low.
I recommend you not to trade such supports.
I always repeat to my students that key levels work, but they are not equal in their significance. While some of them are very strong, some are better to be avoided.
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KOG - Identify your zones!Identifying the correct zones and regions for your trading:
Many of our followers will know that not only do we have Excalibur targets, we give the exact levels and price points that we want the price to achieve. What we also do, is show you the boxes (zones) on the chart for the wider community, to help steer you in the right direction. Price action plays a huge part in this and it’s something all traders should learn, however, zones are effective, not only in trading the right way, but knowing when you’re in the wrong way!
Price is a series of test on levels. It creates trends or ranges but will always do the same thing. Once we understand this, we know it's not the market that is the problem, it’s us, the trader. If we learn it's behaviour all we then need to do is make sure our money and risk management is up to scratch. It's never 100%, but if we test a level, it breaks, structure suggests it's going against us, don't hold on to hope, or add more in the direction you intended. Cut the damn thing like it's a poison to your account.
You need to treat this as a business, no matter what your account size. Every day there are large institutions who want to take your money away from you, you’re in this market to take from them and give them as little as possible. You should have a risk model in place, am I going to risk a certain percentage of my account? Am I going to stick to a stop loss of a certain number of pips? Am I going to have a risk reward that makes sense? Your stop loss and risk management plan are your best friend in this market, it allows you to limit the losses and live to trade another day.
The market will give you clues as to what it’s going to do, breaks, tests, and retests. We can plan the move before it happens this way, we know if it breaks a level, that level turns into support or resistance then it’s going to go and test the next level.
Remember:
The market will always give you a chance to get out of a trade if it’s going against you, as traders our ego's take over and we hold on to hope. If you're in a whipsaw and choppy market and in the wrong direction, your safest option, even if it ends up going your way in the end is to get out of it and limit your losses. You can always find another entry point for a better risk reward.
Ego is one of the biggest killers of accounts and works both ways. Hold on to a failing plan it will humble you. Show the market you’re too confident, it will humble you! Know when to trade, know when not to trade, know when you’re in the wrong way and accept defeat!
The example on the chart is showing you a simple 4H timeframe, with the zones in place. We know price will play zones and levels, it has to test these almost to see if it likes that price point or not. It will either break or reject the level.
If it breaks, you will usually see a forceful break, then the retest of the level which turns previous support/resistance into new support/resistance, or it will reject, in which case you will usually find the reversal. When trading with a bias or a target in mind, the market will use these zones (levels) to work within and as traders, we should know that if a level is hit, that’s our target reached, or, if it’s broken, that’s sign that we should either start thinking about managing the trade or getting out of it. In order to plot the levels, you will need to zoom out of the chart. Similar to the ‘Simple trading strategy’ we have shared in the past, you will use the peaks and troughs dragged across to present day, to identify your zones. Why? You may ask! Because the market is historical, the levels are the levels, and “levels don’t lie”.
Concern:
What many traders do, and it’s not their fault, it’s just a lack of education and trading experience, is hold on to trades with huge drawdown. They will place a trade in one direction, price goes against them, instead of implementing a stop loss, they will convince themselves the market will come back to this price, so instead “I’ll turn that into a swing trade”. This is the wrong way to think about the market, especially if you’re an intra-day trader, which most of us are. Shown on the chart, you can see, the level breaks, the level is retested, the retest in confirmed and the price moves away from the level. Once, the retest if confirmed, that’s the market telling you the trader, listen, you’re potentially in the wrong way, and we’re going to test another level higher/lower, so prepare yourself.
This is a really simple way, together with a risk model in place, to limit losses and maintain a healthy account.
Please try it and let us know!
As always, trade safe.
KOG
How I caught 100 pips on EUR after my analysis got INVALIDATED!In my last analysis, we were expecting EURUSD to retrace to the golden zone where I was looking for buying opportunity.
Unfortunately, the price broke the highs and continued moving to the upside. Our main goal was to buy EURUSD targeting areas above 1.090.
So what we did was that we waited price to come back to an area where we had at least two confluences.
1. Uptrend
2. 61.8 fibonacci level
Using the Fibonacci tool from the last low to the last high, we were able to catch EURUSD at a good level ( 1.087 ) targeting the 1.098 level ( +100 pips )
Price will always come back and give you the best opportunity so no need to FOMO and panic!
This is an explanation of how we can find a high probability trade like the one above
What to Do If You Are Losing in Trading?
Have you ever been in the following situation?
You pick a trading strategy, you make nice profits and then, for some unknown reasons, you start losing. You take one trade after another and the strategy stops working.
That is a very common thing that happens will every trader. I am trading for more than 9 years, and you know what, this year I got a trading week when I got 4 losing trades in a row.
In this article, I will explain to you what to do in such a situation and how to deal with losses.
So here are the trades that I took.
I shorted EURJPY, EURNZD, GBPJPY and USDCAD.
I bought AUDJPY.
All the trades a rule based, they were strictly taken in accordance with my trading strategy.
AUDJPY, EURJPY, EURNZD, GBPJPY trades closed in a loss and USDCAD closed on breakeven.
It is a l osing streak of 4 trades.
Does it mean that a trading strategy doesn't work anymore?
What 90% of traders do when they face the situations like that, they start trading with a new strategy. They win, they face a losing streak and the cycle repeats.
The truth is that there is no trading strategy that does not lose occasionally.
Losing streaks are the part of the game.
For the last 5 years, my strategy shows 64% average win rate.
It means that among 10 trades, the first 4 can be the losing ones and the 6 remaining can be the winners.
It is the game of statistics.
Now, imagine the potential distribution of winners and losers in 100 trades.
If you know that your strategy is historically profitable , if you back tested that, and it proved its efficiency what you should do, you should keep trading that.
The more losses you face, the higher is the probability that the winning streak is coming.
Each losing trade will increase the chance that the next one will be finally profitable.
With so many years of trading and faced various drawdowns and losing streaks, what I learned is that if you keep trading your strategy, if you keep trusting that, the market will always give you a chance to recover.
But if you stop, if you drop the strategy once you face a losing streak and pick a new one, you will simply miss the winning streak.
Repeating that cycle at the end of the day you will lose everything.
That is the hard truth about rule-based trading.
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