❗️CONFIRMATION BIAS IS YOUR ENEMY❗️
🏛As traders, we are constantly bombarded with information on the global economic landscape, market trends, and potential investments. With so much information at our fingertips, it is easy to fall victim to a cognitive bias known as confirmation bias.
🏛Confirmation bias, also known as selective perception, is the tendency for individuals to seek out and interpret information in a way that confirms their existing beliefs or hypotheses. In the world of trading, confirmation bias can be particularly dangerous, as it can lead traders to make decisions based on incomplete or biased information.
🏛For example, imagine you hold a strong belief that apple stocks are going to rise in the coming months. You begin to search for information to support this belief - perhaps you read articles, listen to news broadcasts, and consult financial websites that all confirm your hypothesis. Meanwhile, you are dismissing any information that contradicts your belief, such as negative earnings reports, changes in the market, or negative press.
🏛The problem with this type of thinking is that it can lead traders to ignore crucial signs that could indicate a shift in the market. Confirmation bias can cloud our judgment and hinder our ability to make objective, data-driven decisions.
🏛To avoid confirmation bias, traders need to actively seek out and consider evidence that contradicts their established beliefs. By doing so, traders can obtain a more comprehensive view of the market and make informed decisions based on all available information.
🏛Furthermore, it is essential to rely on multiple sources of information, including information from trusted analysts, financial experts, and data-driven research. Traders must be able to evaluate information objectively and dispose of preconceived notions that may color their decision-making process.
🏛In conclusion, confirmation bias is a cognitive bias that can significantly impair traders' abilities to make sound decisions in the market. Traders must be cognizant of this bias and actively work to identify and address it by seeking out multiple sources of information, analyzing data objectively, and challenging their preconceived beliefs. Only by doing so can traders ensure that their decisions are based on informed and rational conclusions, rather than biased opinions or incomplete information.
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Tradingeducation
The Process of Creating StrategyHello traders,
In this post i am going to show that how we can create and develop the trading strategy that works.
Now the first step we need to do is just search and find the any trading method that suitable for us for example that would be like elliott wave, ict concept, VSA, just using indicators and maybe you can also create your own method and backtest it. when you learned the method now its time to create your trading rules every strategy has own different rules like what is your risk to reward ratio? what is your trade management plan? either you manage your trade or just take the trade and come back after its hit TP or SL, how much is your daily limit means how much trades you will be taking in a day or in a week if you want to become a swing trader depends on you, what is your risk per trade? can you will be cutting the risk to half or just use fixed risk after lose trade? what is your daily limit of losing? can you hold trade overnight or over weekend? what is your trading timeframe? what is your trading sessions? etc...
These all kind of rules you will be require to create for yourself they might be different rules depends on your strategy method now we learned the method and created the rule move forward to the next step is open the live demo trading account and trade with your strategy and apply the rules don't break the rules that you created trade at least 30 days and journal your data your taking trades after 30 days check the journal you will see your data for example in your rules you set 1/2 risk reward ratio so you need to have around 40% winning ratio check the journal check the results did you have a 40% winning ratio if the answer is yes then good to go i am sure that you know what to do next but if you failed and your winning ratio is below 40% now analyze your journal data the trades you taken you will see some of bad trades that you don't wanted to trade again just avoid those trades next time and try again the process for the next 30 days. repeat the process one day you will be profitable and consistent but if you not then try again again learn from your mistakes and don't do that mistakes again.
When yo have been profitable this is the time you wanna enter in the market open the real live trading account and start trading with your strategy and follow the rules that you created for yourself run the process and always remember trading is not quick rish scheme you need to have a lot of patience, trading is a long run game like marathon race and its required patience. some of my advice is don't try to break the rules, don't depend on one trade, some times market will give you some results that you don't want from it but be patient and be consistent with your strategy with your rules, you will be facing drawdowns but that is the learning process you will learn a lot from the drawdown so with the time you will be better consistent and be profitable just don't leave the process too soon and believe in yourself and try again again and again, trading is a very beautiful and also the easiest thing to live life but firstly in the starting it required from us to pass the test. trading is a very easiest thing but also a very hardest thing. i hope you find this post useful, i wish you good luck and good trading.
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The Two Types of Risk Management PlanHello traders,
1) Fixed Risk
Calculates position size for next trade as a percentage of account depend on how much risk you willing to take every time every trade you taking you need to use fixed risk for every trade like for example 1% risk per trade so in this type of risk management plan we should require 100 losing trades in a row to blowing out our account a lot of people just using this simple method and this is very easy and understandable.
2) Cutting the Risk :
In this method cutting the risk we just normally trade 1% risk per trade but if we lose that trade so we just cut the risk to half for example if i trade with 1% risk and i lose so now the next second trade which i am taking i will be using 0.5% risk in that trade if i lose then i will be just keep using the same risk 0.5% some traders are are keep reducing the risk size like they come all the way to to 0.25% maybe they work for it but in our scenario if we keep losing we will be not reducing more than 0.5% risk per trade and when win comes then after our winning trade we will be back to the normal risk which is 1% risk per trade and keep trading with 1% risk per trade so short summary is if we lose cut the risk to half if we when if we win back to the normal risk if we win again stay with same normal risk but if lose then reduce the risk to half.
The reason behind that is in the fixed risk you have 100 traders to blowing out your account means 100 chances but in cutting the risk now we just calculate if we lose 100 trades in a row like fixed risk we would not blow out our account,, let's say we take our first trade and we lose now we are in -1% then another trade we will be taking with 0.5% per trade risk so here is 0.5% × 100 trades = 50 means if we continue to lose in a row after 100 trades we will be facing -50 draw down, so cutting the risk to half after lose trade is the safest method who wants to play safe and more chances to survive in the market.
I wish you good luck and good trading.
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Patience in Trading Hello traders,
Patience in trading is ability to wait to take the right action, if you have not enough patience you will have bad trades bad decisions and cause you to take action too soon.
3 things you should avoid if you want to become a better trader and improve your patience in trading.
1) Don't Rush :
Market is there not going anywhere so don't need to rush in bad trades stick to your best trade setups and always looking for an opportunity don't rush into normal trades.
So don't need to rush just relax and take things step by step, enjoy the journey of your trading.
''If you need to hurry, you are already too late''
2) Over Confident :
Over confident is a very worse thing especially in trading when someone overestimates their own skill and knowledge which can lead to them making mistakes.
There are some types of over confident like wishful thinking, over ranking, and illusion of control etc...
These all of types over confident can lead to big losses in trading.
Some of things that you can do to overcome your over confidence in trading is :
> Don't believe too much in your skills
> Always use stop loss
> Don't thinking just only for today
> Create your trading rules and don't break stick to it
> Always stay in the middle line don't go to the extreme which cause you over confident and don't go to the slight which cause you depression.
''We can never reach a stage where we can say, i know everything and i have nothing more left to learn''
3) Believe :
Believe in yourself if you don't have enough believe in your trading system or any kind of decisions you take in trading you can lead to big losses like comes in fear and try to close running trades and don't have enough believe in your taken trades.
Try to believe in yourself, try to believe in your decisions, try to believe in your trading system and be patient with your taken steps and wait for the outcome either it will bad or good doesn't matter just continue the process and learn from your previous mistakes and be better next time.
''Trust yourself, you know more than you think you do''
These are 3 things that you should need to do for patience in trading.
If you have any advice to be patient in trading please let me know in the comments.
I wish you good luck and good trading.
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Learn Top 4 Price Action Pattern to Trade Reversals
Hey traders,
In this article, I will share with you the list of 4 best reversal price action patterns.
📍Ascending & Descending Triangles
The main element of the ascending triangle as the REVERSAL pattern is the BEARISH impulse leg, preceding the formation of the pattern.
The pattern consist of 2 main elements:
a horizontal neckline based on the equal highs,
a rising trend line based on the higher lows.
❗️The trigger is a bullish breakout of a neckline of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying at least below the level of the last higher low.
🎯Take profit is the next historical resistance.
——————
📍The main element of the descending triangle formation as the reversal pattern is the BULLISH leg, preceding the formation of the pattern.
The pattern consist of 2 main elements:
a horizontal neckline based on the equal lows,
a falling trend line based on the lower highs.
❗️The trigger is a bearish breakout of a neckline of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying at least above the level of the last lower high.
🎯Take profit is the next historical support.
📍Rising & Falling Wedges
What makes a rising wedge pattern a reversal pattern?
Before the formation of the pattern, the price should form a strong bullish impulse and trade in a bullish trend.
The pattern consists of 2 contracting, rising trend lines based on the higher highs and higher lows.
❗️The trigger is a bearish breakout of a support of the pattern and candle close below.
📉The position is opened on a retest.
🔴Stop loss is lying above the high of the pattern.
🎯Take profit is the closest horizontal support.
——————
What makes a falling wedge pattern a reversal pattern?
Before the formation of the pattern, the price should form a strong bearish impulse and trade in a bearish trend.
The pattern consist of 2 contracting falling trend lines based on the lower lows and lower highs.
❗️The trigger is a bullish breakout of a resistance of the pattern and candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying below the low of the pattern.
🎯Take profit is the closest horizontal resistance.
📍Double Top & Bottom
Double bottom pattern usually forms at the end of a bearish trend.
After a strong bearish impulse, the price retraces, sets a lower high and retests the current low.
Instead of going lower, the price retraces one more time, retests the level of the last lower high and breaks it.
Such a formation confirms a bullish reversal.
❗️The trigger is a bullish breakout of a neckline of the pattern and a candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying below the lows of the pattern.
🎯Take profit is the closest horizontal resistance.
——————
Double top pattern usually forms at the end of a bullish trend.
After a strong bullish impulse, the price retraces, sets a higher low and retests the current high.
Instead of going higher, however, the price retraces one more time, retests the level of the last higher low and breaks it.
Such a formation confirms a bearish reversal.
❗️The trigger is a bearish breakout of a neckline of the pattern and a candle close below.
📈The position is opened on a retest.
🔴Stop loss is lying above the highs of the pattern.
🎯Take profit is the closest horizontal support.
📍Head & Shoulders Pattern & Inverted One
Inverted H&S pattern usually forms at the end of a bearish trend.
The price forms a zig-zag movement with 3 main elements:
the left shoulder with a lower low, the head with a new lower low, and the right shoulder with a higher low.
While the price sets multiple lows, it keeps setting the equal highs, composing a so-called horizontal neckline.
A bullish reversal becomes confirmed once the price breaks and closes above the neckline.
❗️The trigger is a bullish breakout of a neckline of the pattern and a candle close above.
📈The position is opened on a retest.
🔴Stop loss is lying below the lows of the pattern.
🎯Take profit is the closest horizontal resistance.
——————
Head & Shoulders pattern usually forms at the end of a bullish trend.
The price forms a zig-zag movement with 3 main elements:
the left shoulder with a higher high, the head with a new higher high, and the right shoulder with a lower high.
While the price sets multiple highs, it keeps setting the equal lows, composing a so-called horizontal neckline.
A bearish reversal becomes confirmed once the price breaks and closes below the neckline.
❗️The trigger is a bearish breakout of a neckline of the pattern and a candle close below.
📈The position is opened on a retest.
🔴Stop loss is lying above the highs of the pattern.
🎯Take profit is the closest horizontal support.
In order to increase the accuracy of trading these patterns, I would recommend trading them only if they are formed on key levels:
Bearish patterns on key resistances and bullish patterns on key supports.
Also, higher is the time frame where you spotted the patterns, higher is the chance that it will give a valid reversal signal.
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Fibonacci Levels and How They Can Be Used in TradingGreetings, @TradingView community! This is @Vestinda, bringing you a helpful article on the topic of Fibonacci Retracements and how to effectively utilize them in your trading strategies.
Fibonacci retracement levels are helpful for traders and investors in financial markets. They're horizontal lines on price charts that can show where price may reverse direction.
These levels are based on the Fibonacci sequence, which is a series of numbers that occur in math and finance.
Use case:
The first thing to understand about the Fibonacci tool is that it is most effective when the market is trending.
In an upward trending market, traders commonly use the Fibonacci retracement tool to identify potential buying opportunities on retracements to key support levels. Conversely, in a downward trending market, traders may look for opportunities to short sell when the price retraces to a Fibonacci resistance level.
Fibonacci retracement levels are regarded as a predictive technical indicator because they attempt to forecast where the price will be in the future.
Based on the theory, when trend direction is established, the price tends to partially return or retrace to a previous price level before continuing to move in the direction of the trend.
How to Find Fibonacci Retracement Levels:
Fibonacci retracement levels can be found by identifying the key Swing High and Swing Low points of an asset's price movement. Once these points are established, you can use the Fibonacci retracement tool, which calculates the potential levels of support and resistance based on the ratios between the key points.
To apply the Fibonacci retracement tool, click and drag from the Swing Low to the Swing High in a downtrend, or from the Swing High to the Swing Low in an uptrend. This generates a set of horizontal lines at predetermined Fibonacci ratios, including 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
Are you keeping up with me? ;)
Now, let's explore some examples of how Fibonacci retracement levels can be applied in cryptocurrency trading
The Uptrend:
In this instance, the Fibonacci retracement levels were plotted by selecting the Swing Low and Swing High points, which were observed on January 8th, 2021 at a price of $41,904.
The Fibonacci retracement levels were $33,521 (23.6%), $29,197 (38.2%), $26,114 (50.0%*), $23,356 (61.8%), and $19,925 (76.4%), as shown in the chart.
Traders anticipating that if BTC/USD retraces from its recent high and it will likely find support at a Fibonacci retracement level. This is due to the tendency of traders to place buy orders at these levels as the price drops, creating a potential influx of buying pressure that can drive up prices.
While the 50.0% ratio is not officially recognized as a Fibonacci ratio, it has nonetheless become widely used and has persisted over time.
Now, let’s look at what happened after the Swing High occurred.
Price bounced through the 23.6% level and continued to fall over the next few weeks.
Two times tested 38.2% but was unable to fall below it.
Subsequently, around January 28th, 2021, the market continued its upward trend and surpassed the previous swing high.
Entering a long position at the 38.2% Fibonacci level would have likely resulted in a profitable trade over the long run.
The Downtrend
Next, we will explore the application of the Fibonacci retracement tool in a downtrend scenario. Here is a 4-hour chart depicting the price action of ETH/USD.
As you can see, we found our Swing High at $289 on 14 February 2020 and our Swing Low at $209 later on 27 February 2020
The retracement levels are $225 (23.6%), $236 (38.2%), $245 (50.0%), $255 (61.8%) and $269 (76.4%).
In a downtrend, a retracement from a low could face resistance at a Fibonacci level due to selling pressure from traders who want to sell at better prices. Technical traders often use Fibonacci levels to identify areas of potential price resistance and adjust their trading strategies accordingly.
Let’s take a look at what happened next.
The market did make an attempt to rise, but it briefly halted below the 38.2% level before reaching the 50.0% barrier.
The placement of orders at the 38.2% or 50.0% levels would have resulted in a profitable trade outcome.
In these two instances, we can observe that price positioned itself at a Fibonacci retracement level to find some temporary support or resistance.
These levels develop into self-fulfilling support and resistance levels as a result of all the people who utilize the Fibonacci tool.
All those pending orders could affect the market price if enough market participants anticipate a retracement to take place close to a Fibonacci retracement level and are prepared to enter a position when the price hits that level.
In conclusion:
It's important to note that pricing doesn't always follow an upward trajectory from Fibonacci retracement levels. Instead, these levels should be approached as potential areas for further research and analysis.
If trading were as simple as placing orders at Fibonacci retracement levels, markets wouldn't be so volatile.
However, as we all know, trading is a complex and dynamic process that requires a combination of knowledge, skill, and experience to succeed.
We are truly grateful for your attention and time in reading this post. If you found it insightful and beneficial, we would be thrilled if you could show your support by clicking the <> button and subscribing to our page.
We are excited to share that our upcoming post will showcase what occurs when Fibonacci retracement levels do not perform as expected. Stay tuned for an informative and professional read.
Understanding Anchoring Bias in Trading
Anchoring is a heuristic in behavioral finance that describes the subconscious use of irrelevant information, such as the purchase price of a security, as a fixed reference point (or anchor) for making subsequent decisions about that security. Thus, people are more likely to estimate the value of the same item higher if the suggested sticker price is $100 than if it is $50.
Anchoring is a cognitive bias in which the use of an arbitrary benchmark such as a purchase price or sticker price carries a disproportionately high weight in one's decision-making process. The concept is part of the field of behavioral finance, which studies how emotions and other extraneous factors influence economic choices.
An anchoring bias can cause a financial market participant, such as a financial analyst or investor, to make an incorrect financial decision, such as buying an overvalued investment or selling an undervalued investment. Anchoring bias can be present anywhere in the financial decision-making process, from key forecast inputs, such as sales volumes and commodity prices, to final output like cash flow and security prices.
Historical values, such as acquisition prices or high-water marks, are common anchors. This holds for values necessary to accomplish a certain objective, such as achieving a target return or generating a particular amount of net proceeds. These values are unrelated to market pricing and cause market participants to reject rational decisions.
Beware of your mental fallacies. They are your main enemy in trading.
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Navigating the Uncertainties of Fibonacci Retracements in CryptoHello, @TradingView community! I'm @Vestinda, and I'm thrilled to share an informative article with you today about Fibonacci Retracements.
While they can be useful tools for traders and investors in financial markets, it's important to note that they are not infallible and may not always produce the desired outcomes.
As discussed in our previous post, Fibonacci support and resistance levels are not infallible and may occasionally break. It is essential to remain vigilant and use these levels in conjunction with other technical indicators and market analysis to make informed trading decisions.
While Fibonacci retracements can be a useful tool in technical analysis, it is crucial to exercise caution and not solely rely on them as the sole basis for trading decisions.
Unfortunately, Fibonacci retracements are not infallible and may not always work as expected.
Let us examine a scenario where the Fibonacci retracement tool proves to be ineffective in technical analysis.
To make a prudent trading decision amidst the ongoing downtrend of the pair, you make a strategic choice to leverage the Fibonacci retracement tool. With meticulous attention to detail, you designate the swing low at 3,882 and the swing high at 10,482 for precise determination of a Fibonacci retracement entry point.
The BTC/USD Daily chart is shown below.
Upon careful analysis, it is evident that the pair has rebounded from the 50.0% Fibonacci retracement level for multiple candles. As an astute trader, you recognize this crucial pattern and conclude that it is a viable opportunity to enter a short position.
You thoughtfully consider, "This particular Fibonacci retracement level is showing remarkable resilience. It is undoubtedly a lucrative moment to short it."
You may have been tempted to take a short position in anticipation of profiting from the downtrend of the pair, while simultaneously daydreaming of cruising down Rodeo Drive in a Maserati.
However, if you had placed an order at that level without proper risk management, your hopes of profit would have quickly dissipated as your account balance plummeted.
Observing the price action of BTC, let's examine what occurred next.
Indeed, the price action of BTC demonstrates that the market is constantly evolving, and traders must be prepared to adapt to these changes.
As shown in this specific case, the price not only climbed close to the Swing High level, but the Swing Low marked the bottom of the previous downtrend. This serves as a prime example of the significance of flexibility in the dynamic realm of cryptocurrency trading.
What can we learn from this?
In the world of cryptocurrency trading, Fibonacci retracement levels can be a useful tool to increase your chances of success. However, it's important to understand that they are not foolproof and may not always work as intended. It's possible that the price may reach levels of 50.0% or 61.8% before reversing, or that the market may surge past all Fibonacci levels.
Additionally, the choice of Swing Low and Swing High to use can also be a source of confusion for traders, as everyone has their own biases, chart preferences, and timeframes.
In uncertain market conditions, there is no one correct course of action, and utilizing the Fibonacci retracement tool can sometimes feel like a guessing game. To improve your chances of success, it's crucial to develop your skills and use Fibonacci retracements in conjunction with other tools in your trading toolkit.
Thank you for taking the time to read our post.
We sincerely appreciate your attention and hope that you found it informative and helpful. If you did, we kindly request that you show your support by clicking the "Boost" button and subscribing to our page. Your support helps us create more valuable content for our community.
😎MYTHS ABOUT TRADING BUSTED😎
⚛️The world of trading is full of myths and misconceptions. We often hear stories of overnight successes and devastating losses. It can be difficult to separate truth from fiction when it comes to trading. In this article, we will debunk some of the most common trading myths and provide the facts to help you make better investment decisions.
❌Myth: Trading is Gambling
✅Fact: Trading involves analyzing market trends, researching companies and industries, and making informed decisions based on data. Successful traders do not simply rely on luck; they systematically evaluate risk and reward before making trades.
❌Myth: You Need to be a Financial Expert to Trade
✅Fact: While a basic understanding of the market is important, you do not need a degree in finance to be a successful trader. There are numerous resources available to help beginners learn the basics of trading, including online courses, tutorials, and mentorship programs.
❌Myth: Day Trading is the Best Way to Make Money Quickly
✅Fact: Day trading involves buying and selling assets within a single trading day in order to profit on short-term price movements. While it can be lucrative, it is also risky and requires significant time and effort. Many successful traders prefer to take a long-term approach, focusing on investments that will appreciate over time.
❌Myth: You Need a Lot of Money to Start Trading
✅Fact: While having a larger investment portfolio can certainly provide more opportunities for profit, you do not need a huge amount of money to start trading. Many online brokers offer low minimum account balances, making it easier for beginners to start investing.
❌Myth: Trading is Only for the Wealthy
✅Fact: Trading is accessible to anyone with an internet connection and a willingness to learn. While high net worth individuals may have more resources to invest, anyone can start trading with a little bit of research and a willingness to take calculated risks.
❌Myth: Technical Analysis is the Only Way to Predict Market Trends
✅Fact: Technical analysis involves analyzing charts and data to predict future market trends. While it can be a valuable tool, it is not the only way to make informed trading decisions. Fundamental analysis, which involves evaluating a company's financial health and growth potential, is equally important.
❌Myth: Trading is a Solo Endeavor
✅Fact: Trading can be a solitary activity, but it is important to take advantage of opportunities to learn from and collaborate with other traders. Online forums like Tradingview, mentorship programs, and networking events can all provide valuable insights and support.
✳️In conclusion, there are many myths surrounding trading that can prevent individuals from taking advantage of its potential benefits. By separating fact from fiction, traders can make informed decisions and increase their chances of success. Whether you are a seasoned investor or a beginner, knowledge and education are essential to achieving your financial goals.
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THE TYPICAL WEEK OF A TRADER 🗓
In this educational article, I will teach you how to properly plan your trading week.
Sunday.
While the markets are closed, it is the best moment to prepare the charts for next week.
First of all, charts should be cleaned after the previous trading week: multiple setups and patterns become invalid or simply lose their significance and their stay on the charts will only distract.
Secondly, key levels: support and resistance, supply and demand zones and trend lines should be updated. Similarly to patterns, some key levels become invalid after a previous week, for that reason, structures should be reviewed.
Monday.
Analyze the market opening, go through your watch list and check the reaction of the markets.
Flag / mark the trading instruments that you should pay a close attention to. Set alerts and look for trading setups.
Tuesday. Wednesday. Thursday.
If you opened a trading position, keep managing that.
Pay attention to your active trades, go through your watch list and monitor new trading setups.
Friday.
Assess the entire trading week. Check the end result, journal your winning and losing trades. Work on mistakes.
Decide whether to keep holding the active position over the weekend or look for a way to exit the market before it closes.
Saturday.
Stay away from the charts. Meditate, relax and chill while the markets are closed.
Trading for more than 9-years, I found that such a plan is the optimal for successful full-time / part-time trading. Try to follow this schedule and let me know if it is convenient for you
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Multiple Time Frames Can Multiply Returns
In order to consistently make money in the markets, traders need to learn how to identify an underlying trend and trade around it accordingly.
Multiple time frame analysis follows a top-down approach when trading and allows traders to gauge the longer-term trend while spotting ideal entries on a smaller time frame chart. After deciding on the appropriate time frames to analyze, traders can then conduct technical analysis using multiple time frames to confirm or reject their trading bias.
Multiple time frame analysis, or multi-time frame analysis, is the process of viewing the same currency pair under different time frames. Usually the larger time frame is used to establish a longer-term trend, while a shorter time frame is used to spot ideal entries into the market.
HOW TO IDENTIFY THE BEST FOREX TIME FRAME?
Many traders, new and experienced, want to know how to identify the best time frame to trade forex. In general, traders should select a time frame in accordance with:
the amount of time available to trade per day
the most commonly used time frame utilized to identify trade set ups.
For example, day traders typically have the whole day to monitor charts and therefore, can trade with really small time frames. These range anywhere from a one-minute, to the 15-minute, to the one-hour time frame. Day traders that identify their trade set ups on the one-hour time frame can then zoom into the 15-minute time frame to spot ideal market entries.
Multiple time frame analysis usually produces high win rate, guaranteeing very limited risk.
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Get ahead of the Game of Crypto with Dow TheoryWelcome to @TradingView , this is @Vestinda! We're excited to share with you our insights on the Dow Jones Theory and how it can benefit cryptocurrency traders.
Dow Theory, also known as Dow Jones Theory, is a trading strategy developed by Charles Dow in the late 1800s.
Charles Dow did not write any books during his lifetime, but he did co-found The Wall Street Journal and the Dow Jones & Company. He also wrote many editorials for The Wall Street Journal. Here is a quote from one of his editorials that is particularly insightful:
"The successful investor is usually an individual who is inherently interested in business problems."
Dow theory continues to dominate and is regarded as one of the most sophisticated contemporary studies on technical analysis even after 100 years.
What exactly is Dow Theory?
Charles H. Dow compared the stock market to the tides of the ocean in the Wall Street Journal on January 31, 1901.
"A person watching the tide come in and wanting to know the exact location of the high tide places a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it and finally recedes enough to show that the tide has turned." This method is effective for observing and predicting the flood tide of the stock market."
Dow believed that the current state of the stock market could be used to analyse the current state of the economy.
The stock market can provide valuable measures for understanding the reasons for high and low trends in the economy or individual stocks.
How Does the Dow Theory Work?
The Dow Theory is based on several fundamental tenets, which are outlined below:
1. The Averages Reflect Everything:
The market price takes into account every known or unknown factor that may impact both supply and demand. According to this observation, the market reflects all available information, even information that is not in the public domain. However, natural disasters such as droughts, cyclones, floods, or earthquakes cannot be considered.
Major Geopolitical Events are Already Priced In:
All significant geopolitical events, trade wars, domestic policies, elections, GDP growth, changes in interest rates, earning projections, or expectations are already priced in the market.
Unexpected Events Affect Short-Term Trends:
While unexpected events may occur, they usually only affect short-term trends, and the primary trend remains unaffected.
Overall, the Dow Theory emphasises the importance of analysing the primary trend of the market and understanding that all available information is already reflected in the market price.
2. The Market Has Three Trends:
The primary trend:
It can be as long as one year to several years and is the ‘main movement’ of the market. These movements are typically referred to as bull and bear markets. This primary uptrend is called as bullish on the other hand primary downtrend can be considered as bearish trends.
The reality of the situation is that nobody knows where and when the primary uptrend or downtrend will end.
As you can see in the image above when a stock is moving in primary uptrend it makes new high followed by few lows not lower than the previous lows.
Similarly the same patterns follows when it is in primary downtrend.
The objective of Dow Theory is to utilize what we do know, not to make chaotic guess about what we don’t know. Through a set of guidelines from Dow Theory one can measure to identify the primary trend and stay with it.
The intermediate trend or secondary trend:
This trend can last between 3 weeks to several months. Secondary movements are reactionary in nature, think of them as corrections during bull market, or rallies & recoveries in the bear market.
In a bull market, a secondary trend is considered a correction. In a bear market, secondary trend are called reaction rallies.
So suppose if a stock during its primary uptrend made a high, it will retrace back to some points to make a low (known as intermediate trend or correction).
Likewise during an primary downtrend, a stock can make a high after falling for several months or years(known as bear market rallies).
The minor trend or daily fluctuations:
This trend is least reliable which can be lasting from several days to few hours. Dow theory suggests not to put much attention to these trends. As a Long-term investor it is just the part of corrections in secondary uptrend or downtrend rally.
This are just daily fluctuations happening in market on day to day basis. It constitutes of noise in market and perhaps be subject to manipulation.
Out of the three trends mentioned only primary and secondary trends are trustworthy. However, the study of daily price action can add valuable insight, if you look in context of the larger picture.
So when you are looking for daily price action of several days, or weeks try to evaluate bigger structure getting formed. By putting enough attention one can certainly benefit in short term rallies.
A few pieces of a structure are meaningless, yet at the same time, they are essential to complete the entire picture.
3.Major Trends Have Three Phases:
Dow significantly paid attention to the primary trends (major) in which he spotted three phases. These are Accumulation phase, Public participation phase and Distribution phase.
These phases are cyclic in nature and repeats over the time.
A) Accumulation phase:
This phase occurs when the market is in bearish trend, sentiments are negative with no hope for any upcoming uptrend. For example as we saw in Indian share market a steep low in mid cap stocks, making new lows every other day.
Most of the investors see them stay in this trend for unknown time period. However, this is the time when big investors, huge fund houses, institutional investors start accumulating them gradually.
This is known as smart money keeping their view for long term investment. Although you would see sellers in market still selling, they find the buyers easily.
B) Public participation phase:
At this phase the market have already absorbed the negativity with ‘smart money’ getting invested. This is the second stage of a primary bull market and is usually sees the largest advance in prices.
During this phase majority of public(retailers) also thinks to join in as the price is rapidly advancing. However most of them are left behind due to speed in rallies as well as the averages start heading higher.
If you are also a trader or investor you might have this experience and a regret of not able to participate with rally. It is a period followed by improved business conditions and increased valuations in stocks.
C) Distribution phase:
The third stage is the excess phase which eventually be turned to distribution phase. During the third and final stage, the public (retailers) gets fully involved in the market, as they get mesmerized by the bull market rally.
Some of them who felt left will still try to look for valuations and want to be part of the rally.
But this is the time when ‘smart money’ starts liquidating shares on every high. Whereas public will try to buy at this level absorbing all liquidating (sell-off) volumes made by big investors.
On contrary in the distribution phase, whenever the prices attempt to go higher, the smart money off loads their holdings.
This is the beginning of bear market, where sentiments will start turning negative, you will see more and more companies filing bankruptcy, change in economic growth etc.
During bear market the level of frustration rises among retail investors as they start loosing all hopes.
4.The Averages Must Confirm Each Other:
Dow used to say that unless both Industrial and Rail(transportation) Averages exceed a previous peak, there is no confirmation or continuation of a bull market.
Both the averages did not have to move simultaneously, but the quicker one followed another – the stronger the confirmation.
To put it differently, observe the image above, as you can see both the averages are in bull market, trending upward from Point A to C.
5. Volume Must Confirm the Trend:
Volume is a tool to know how many shares have been bought and sold in a given period of time. It helps in analysing the trends and patterns.
Now according to Dow theory, a stock must be in uptrend with high volume and low in corrections.
Volumes may not be an attractive piece of information but you should try to combine the volume data with resistance and support levels to get a clear picture.
6. Trend Is expected to Be Continued Until Definite Signals of Its Reversal:
Quite similar to Newton’s first law of motion which states that an object will remain at rest or in uniform motion in a straight line unless acted upon by an external force.
In simple words an object will remain in their state of motion unless a external force acts to change the motion.
Likewise, the market will continue to move in a primary direction until a force, such as a change in business conditions, is strong enough to change the direction of this primary move. You can also see the signals for reversals when a trend is about to change.
7.Signals and Identification of Trends:
One of the major challenges faced while implementing Dow theory is the accurate identification of trend reversals. Remember, if you are following the dow theory one should be not only looking for overall market direction, but also the definite reversal signals.
One of the main skill used to identify trend reversals in Dow theory is peak and trough or high and low analysis. A peak is defined as the highest price of a market movement, while a trough is seen as the lowest price of a market movement.
Dow theory suggests that the market doesn’t move in a straight line but from highs (peaks) to lows (troughs), with the overall moves of the market trending in a direction.
An upward trend in Dow theory is a series of successively higher peaks and higher troughs. A downward trend is a series of successively lower peaks and lower troughs.
8. Manipulation In the Market:
According to Charles dow the manipulation of the primary trend is not possible. where as Intraday, or day to day trading and perhaps even the secondary movements could be vulnerable to manipulation.
These short movements, from a few hours to a few weeks, could be subject to manipulation by large institutions, speculators, breaking news or rumors.
There is possibility that speculators, specialists or anyone else involved in the markets could manipulate the prices in short run.
Individual shares could be manipulated for example the security rise up and then falls back and continues the primary trend. With this in mind one need to be aware of the situations while trading and investing.
However, it would be next to impossible to manipulate the market as a whole. The market is simply too big for any kind of manipulation to occur.
Why Dow Theory Is Not Infallible?
Dow Theory is not a sure-fire means of beating the market hence it is not something which is infallible or fault-less. Some of the criticism received about Dow Theory is that it is really not a theory.
Charles Dow's principles and theories, while developed for the stock market, can still be applied to crypto investing.
Here are a few ways his knowledge can be used:
Follow the trend: Dow's first principle is that the market moves in trends. In crypto investing, you can identify trends by looking at price charts and technical analysis. If the price of a particular cryptocurrency is in an uptrend, it may be a good time to consider buying. If it's in a downtrend, you may want to consider selling or waiting for a better entry point.
Consider market breadth: Dow's second principle is that the market's movements should be confirmed by market breadth. This means looking beyond just the price of one cryptocurrency and examining the overall health of the market. For example, if a particular cryptocurrency is in an uptrend but the majority of other cryptocurrencies are in a downtrend, it may not be a sustainable trend.
Use volume as a confirmation: Dow's third principle is that volume should confirm the trend. In crypto investing, volume can provide insight into the strength of a trend. For example, if the price of a cryptocurrency is increasing with high volume, it may indicate a strong uptrend. On the other hand, if the price is increasing with low volume, it may not be a sustainable trend.
Be aware of market cycles: Dow's fourth principle is that the market moves in cycles. This means that there will be periods of growth and periods of decline. In crypto investing, it's important to be aware of these cycles and adjust your strategy accordingly. For example, during a bull market, you may want to focus on buying and holding, while during a bear market, you may want to consider shorting or staying on the sidelines.
Overall, while the crypto market is different from the stock market, many of Dow's principles can still be applied to crypto investing to help you make more informed decisions.
In conclusion, Dow Theory, developed by Charles Dow in the late 1800s, remains one of the most respected theories in financial market history.
The theory's primary tenets are based on the idea that the stock market reflects all available information, and there are three trends in the market: primary, intermediate, and minor.
The primary trend is the most important and can last several years, while the intermediate trend and minor trend are reactionary in nature.
Dow Theory provides an excellent framework for traders and investors to evaluate the current state of the economy, and it has remained relevant even after 100 years. Whether you are an intraday trader, a short-term trader, or a long-term investor, the knowledge of Dow Theory will undoubtedly help you develop various strategies for your investments.
So, in conclusion, Dow Theory is a respectful theory that has stood the test of time and continues to be an essential tool for anyone who trades or invests in the financial and crypto market.
Unleash Your Inner Trader — Read Story About Bulls and Bears That Will Change Your Mindset!
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Learn What is Confirmation Bias | Trading Psychology 🧠
In this educational article, we will discuss one of the most common cognitive errors of newbie traders - a confirmation bias.
In order to better understand that term, I want to start with the example:
Let's say that after doing some research, you are highly convinced that Bitcoin is bullish and that it is a decent investment.
You decide to buy that from 50.000 level, expecting the exponential growth.
Instead of growing, however, the market starts falling rapidly.
Rather than closing your position in loss, you decide to do a new research and execute the analysis, you start looking for the proof of your pre-existing beliefs. You completely neglect the voices of Bitcoin sceptics and ignore bearish clues on the price chart.
You consider only the facts that support a bullish outlook, not letting you accept the other point of view.
You become a victim of a confirmation bias.
Unfortunately, such a psychological trap frequently prevents a closing of a trading position in time, leading to substantial losses.
Confirmation bias is a common psychological error that makes a subject overvalue the information that upholds his existing beliefs and undervalue the opposing one.
Here are the most common symptoms of that trap:
1️⃣One is neglecting the objective facts.
2️⃣One is interpreting information in a way to support the existing beliefs.
3️⃣One is considering only the facts that conform with his point of view.
4️⃣One is completely ignoring the information that challenges his beliefs.
The only way to beat a confirmation bias in trading, is to learn to analyze the market from sellers' and from buyers' perspective. Your task is to compare the view of the 2 sides, and pick the one that is stronger, holding in mind the fact that everything can change.
You should always remember of the changing nature of financial markets and be ready to always reassess your views.
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The Story Behind Bulls and BearsHello @TradingView family , this is @Vestinda, and let's have some fun and enjoy the markets together.
Vestinda is driven to offer our knowledge in developing winning strategies and make traders tasks easier.
This is The Story About Bulls and Bears. Bulls can lift things up, Bears can eat you for lunch.
Who Are The "Bulls" And The "Bears" In The Market
The terms "bulls" and "bears" are included in the trader's slang as the main categories of players in the market. Understanding the technique of the game will help you to understand the intricacies of how the market works.
"Bulls" are buying investors. Like their totem, they lift the enemy up on the horns. "Bulls" buy, wait for the rising rate and sell at a higher price. They dream of a prosperous economy: the lower the unemployment rate, the higher the GDP, the faster markets grow. Warren Buffett - the most famous representative of the bulls .
The Bears play on the opposite side. They earn on the depreciation, in a fading economy. Their ideal world is high unemployment, low GDP and large-scale crises.
It all starts long before the collapse of the market: the “bears” buy on credit and immediately resell, artificially creating a drop in prices. After the price becomes cheaper, they are purchased again, but at a lower price, and the debt is repaid. The difference between the first and second purchases is the profit of the bears.
💲 How Bulls Make Money On The Market 💲
"Bulls" buy, when they are sure that the market will go up. Examples of situations where this is possible:
🟣 the shareholder enterprise has published a financial report, and the figures exceeded forecasts;
🟣 the new reform allows to pay less taxes, thereby increasing profits;
🟣 the company has introduced a new product, which, according to analysts, will be in great demand;
🟣 the level of well-being, salary and solvency of the population are growing, which has a beneficial effect on the company's profit.
Bullish trades take time – you have to wait to make money. "Bears" are distinguished by shorter trades and the prospect of quick earnings.
A red flag for the bulls is an increase in prices by 20% from the lows and the presence of strong prerequisites for further growth. The most favorable moment comes when there are more buyers than sellers on the market.
📍 There Are 4 Key Phases Of A Bull Market:📍
1️⃣ "bearish" trends are gradually fading;
2️⃣ the backdrop of negative news has ended, but there is no confidence in future growth yet, the market is moving sideways, the growth of prices alternates with a fall;
3️⃣ the economy is going up, volatility is decreasing, investors are optimistic;
4️⃣ the peak of growth, traders make easy profits.
The market trends are cyclical, a bull market becomes overbought over time and inevitably turns into a bear market. The move up can be uneven, with periods of pullbacks and corrections, that provide an opportunity to profit on counter-trend trades.
As a rule, prices didn't rise as quickly and unpredictably as they fall. Therefore, transactions in the "bullish" market are characterized by a longer period, the so-called "long positions". Both own and borrowed money, shares and other assets, which are returned after closing, act as collateral.
Long positions are considered more stable, predictable and calm. Therefore the majority of market participants are "bulls" (or consider themselves so). In an uptrend, it's easy to choose an investment because almost everything goes up. However, the "bulls" need to be careful and remember, that there is no eternal growth, the market can be oversaturated at any moment, turning in the opposite direction. It is important for conservative traders to exit the game on time.
💲 How Bears Make Money On The Market 💲
The bears enter the arena during a downturn in the economy and prices. Their tactic is to sell at the beginning of a downtrend and then buy at the end of a downtrend. If they guess the high and low points of the bear market, they will receive the maximum margin.
Examples of situations, that will play into the hands of this category of traders:
🟣 there were large-scale economic crises, force majeure situations, natural disasters, epidemics, wars;
🟣 the shareholder enterprise found itself in the center of a scandal or changed its general director;
🟣 sales of the new product failed.
A "bear" market comes into its own, when prices fall by 20% from the maximum.
There are 4 main stages of the trend:
1️⃣ the bull market is oversaturated and goes into overbought phase;
2️⃣ against the backdrop of negative sentiment, prices fall sharply, and trading activity decreases, panic arises on the market;
3️⃣ prices fell quite strongly, but continue to gradually decline, at this time “bears” enter the market en masse;
4️⃣ seduced by cheaper prices, conservative investors become more active, due to which the market gradually turns in the opposite direction.
Thus, the "bear" market is gradually replaced by a "bullish" one.
Can a Bull become a Bear?
In fact, these divisions are rather arbitrary, they were created by exchange slang. Officially, in the market, you do not need to indicate yourself in which category you belong, so no need to be a bull or a bear all your life.
Traders' strategies are good because they can be adapted or completely changed to specific conditions on the exchange. It's not always possible to sell shares at the maximum or buy at the minimum price, so you have to adjust to the average attitude. Therefore, a “bull” can become a “bear”, just like a “bear” can become a “bull”.
Conclusion: What are Bulls and Bears in Trading?
Bulls and Bears are two sides of the stock market. Bulls are traders who believe that the stock prices will go up, while bears are traders who think that the stock prices will go down. In trading, these two forces are constantly at work, and understanding their roles can help you make better decisions when it comes to investing. Bulls and Bears play an important role in trading as they provide insight on the direction of a particular security or market trend. By understanding their roles in trading, investors can more accurately predict future price movements and make more profitable trades.
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Learning Plan: 13 Essential Topics to Study in Trading
Hey traders,
I receive dozens of questions each and every day concerning the topics to study to become an expert in technical analysis .
Here I have collected the main subjects that, in my view, are essential for successful trading.
*the order of the topics is spontaneous and there is no logical sequence
1️⃣ - Candlestick patterns
To me, candlesticks are very important for understanding market behavior. A single wick quite often can tell you a story.
Mastering different candle stick patterns, you will be impressed by how much data and information you may derive from analyzing them.
2️⃣ - Price action patterns
At first glance price chart is complete chaos.
The market looks irrational and it feels like there is no way to read it.
Price action patterns are the language of the market.
With them, the price fluctuations start to make sense.
3️⃣ - Support & resistance
All my predictions, all my trades & signals are always based on support & resistance levels.
These are the levels that make the market change its direction, they influence the market so much, therefore you should learn to identify them and constantly hold them on focus.
4️⃣ - Supply & demand zones
The only difference between support & resistance and supply & demand zones is the fact that the first ones are represented as levels while the second ones are represented as the zones.
The identification of these zones is very important for proper market analysis.
5️⃣ - Key levels
Key levels are the strongest supports and resistances.
Of course, spotting various supports and resistances on the chart,
we can not say that they all are equal in their significance.
There is a strong (however subjective) hierarchy of them.
The most significant are called key levels and from them, the most significant moves are always expected.
6️⃣ - Trend analysis
When I teach my students how to analyze the price chart,
I always start with a trend analysis topic.
Knowing where exactly the market is going,
having specific and objective rules for the trend identification
are necessary for successful trading.
7️⃣ - Top-Down analysis
Multi-time frame analysis is my passion.
I am constantly combining the signals & observations from different time frames to make my trading decision and predict future market moves.
It proved to be a very efficient method of trading various markets.
8️⃣ - Financial instruments
Though to many it may sound obvious, in practice I know that a lot of people are struggling with a simple question "What to trade?".
You must learn to properly build your watchlist and you should have strong reasoning behind the selection of each unite that is inside.
9️⃣ - Trend following trading
As we know, the trend is our friend. And even though the phrase itself is very simple and straightforward, it takes so much effort and time to learn to follow the trend properly.
1️⃣0️⃣ - Counter trend trading
Occasionally the market reverses. Properly identifying early reversal signs and then catching a sharp counter-trend move, huge profits can be made.
Even though such a style of trading is considered to be extremely risky, being applied properly will generate a lot of cash.
1️⃣1️⃣ - Risk management
Losses are inevitable.
They are part of the game and we can do nothing about that.
The only thing that we can do, however, is to control the losses.
Calculating the risk for every single transaction is essential to avoid a margin call.
1️⃣2️⃣ - Leverage trading
Leverage selection, margin are the things that are tightly connected with risk management topic.
These are the terms that you must know how to operate with.
1️⃣3️⃣ - Trading psychology
Playing with real money, occasionally losing significant portions of your trading account can be a tough game.
It takes time to build a strong psyche to deal with the irrationality of the market.
Which topic to start with?
Pick any, learn it, study it.
They all are equally important so at the end of the day you need to cover them all in order to become successful.
Let me know, traders, what do you want to learn in the next educational post?
Eurcad (sell projection base on top down analysis)My analysis is based on tradeline breakout and retest. Price made rejections three times @1.46365. The third rejection pull down massively and break the tradeline @1.44087. Price retest the trendline with a bearish flag, Retracing @78 fib retracement level. Currently form a double top @1.45495.
How to allocate your funds for profit?
There are no wasted paths in life. All your efforts now either earn experience, knowledge, or wealth. As the Chinese saying goes, "Don't put all your eggs in one basket." This is because if you accidentally drop the basket, all the eggs will break. This principle applies to investment markets as well. It is recommended to avoid concentrating all funds into one type of investment, as it could lead to uncontrollable risk.
So, how can we allocate our funds sensibly?
Here are three investment types to consider:
Cryptocurrencies
After the emergence of countless "get-rich-quick" stories in the cryptocurrency market, many people have flocked to invest. However, the reality is that the market is merciless and risky. Only those who are strategic and opportunistic can make a profit. It is recommended to invest 10% of your funds into the market for a coin with a lower price point, and hold it for the long-term. If the value increases, your assets will expand infinitely. If it fails, you won't lose everything.
Forex Market
To participate in the forex market, choose currency pairs with lower liquidity, such as EURUSD, USDJPY, and GBPUSD. When these products show good buying opportunities, it is recommended to invest 50% of your funds into the market. The fluctuation of currency pairs is relatively small, making it a stable option for long-term trading. However, it requires a certain amount of capital accumulation to see profits.
Futures Market
In this market, let's focus on XAUUSD. This product has storage value internationally, making it suitable for trading. However, due to its sensitivity to news and geopolitical events, it can experience severe fluctuations. It is recommended to invest 20% of your funds into the market for short-term operations. Trading once or twice a day to gain short-term profits is the suggested approach.
The remaining 20% of your funds can be used for your daily expenses. Trading is not gambling. It is important to learn how to plan within your capabilities, manage your finances wisely, and make trading easier.
I have extensive knowledge in cryptocurrencies, forex, stocks, gold, and crude oil futures products. I will continue to update my daily operation strategies. Thank you for your attention and likes. If you have any questions, please feel free to leave a message. I will provide the most reliable advice to help you.
The Simpliest Math Behind Every Succesful TraderWhat exactly is risk management?
The ability to control your losses so that you do not lose all of your equity is referred to as risk management. This is a system that may be applied to everything that involves probabilities: trading, poker, blackjack, sports betting, and so on.
Many inexperienced traders underestimate the significance of risk management or don't understand the basics when it comes to risk management.
Would you risk $5,000 on every trade if you had a $10,000 trading account? Probably not. Because it only takes two consecutive losses in order to lose everything.
🧠 Now, let's imagine a thought experiment, in wich 🤩Alex and 🤨Peter are both traders with $10,000 in their accounts. Alex is a high-risk trader who puts $2500 risk on every trade. Peter is a cautious trader who puts $100 risk on every trade. Both apply a trading strategy that has a 50% success rate with an average risk-to-reward ratio of 1:2.
For good example, let's imagine the next 8 trades had the following results:
4 losing trades in a row
4 winning trades in a row
Here is the result for Alex: -$2,500, -$2,500, -$2,500, -$2,500 = -$10,000 Loss of the total account 😭😭😭😭
Here is the result for Peter: -$100, -$100, -$100, -$100, +$200, +$200, +$200, +$200 = +$800 Profits. 🏆 🏆 🏆 🏆
Can you tell the difference? See how risk management show the difference between being a profitable or losing trader. Peter managed to recover losing trades, and get into good profits after 8 trades. Alex didn't survive 4 trades...
🚨 You might have the finest trading strategy in the world, but if you don't manage how much you lose, you'll lose it all. It's only a matter of probability and time.
However, following this basic example will assist you to make your trading more profitable. Simply give it a shot.
Kind regards
Artem Crypto
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Take a look at my other Educational ideas below:
Learn How Support Becomes Resistance
Support and resistance levels are important points in time where the forces of supply and demand meet. These support and resistance levels are seen by technical analysts as crucial when determining market psychology and supply and demand.
Support is the level at which demand is strong enough to stop the asset from falling any further.
Resistance is the level at which supply is strong enough to stop the asset from moving higher.
The psychology behind support and resistance.
First let’s assume there are buyers who’ve been buying a stock close to a support area. Let’s say that support level is $50. They buy some stock at $50 and now it moves up and away from that level to $55. The buyers want to buy more stock at $50, but not $55. They decide if the price moves back down to $50, they will buy more. They’re creating demand at the $50 level.
Let’s take another group of investors. They were thinking about buying the stock at $50 but never did before. Now the stock is at $55 and they regret not buying it. If it gets to $50 again, they will not make the same mistake and they will buy the stock. This creates potential demand.
The third group bought the stock below $50; let’s say they bought it at $40. When the stock got to $50, they sold their stock, only to watch it go to $55. Now they want to buy it back at the same price they sold it, $50. They’ve changed their sentiment from sellers to buyers. This creates more demand.
A key concept of technical analysis is that when a resistance or support level is broken, its role is reversed. If the price falls below a support level, that level will become resistance. If the price rises above a resistance level, it will often become support. As the price moves past a level of support or resistance, it is thought that supply and demand has shifted, causing the breached level to reverse its role.
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Chart Patterns Cheat SheetHey guys!
Today we'll have a look at chart patterns - which ones are the most popular, what do they look like, and how you can leverage them in your own trading!
Chart patterns are technical analysis tools used to predict price movements based on chart formations. There are two main types of chart patterns - reversal patterns and continuation patterns . Reversal patterns suggest a shift in the prevailing trend, while continuation patterns suggest that the trend is likely to continue.
How to trade these chart patterns effectively using trendlines on Tradingview?
Draw the chart patterns you see on the cheat sheet.
Create alerts for your drawn trendlines. Set the alarms when the price crossing up/down of the trendline you draw.
Click on the "Alert" icon in the menu. This will bring up the alert creation window. You can select whatever conditions you want, I usually just use crossing up/down, and change the message to something I recognize.
Click "Create" to save the alert.
Setting alerts allows you to act quickly on the trading opportunities that the chart patterns indicate. This is a super-effective way to manage these chart patterns.
The Triangle pattern
It can be both a continuation and reversal pattern. It consists of three types of triangles:
Symmetrical Triangle
Ascending Triangle
Descending Triangle
Symmetrical Triangle
The symmetrical triangle is a classic sideways pattern where the market consolidates, creating lower highs and higher lows that look like a squeeze. Neither the bulls nor the bears have control over the current movement during the pattern.
Ascending Triangle
The ascending triangle pattern forms when the price creates a series of higher lows within a clear resistance level. This indicates that buyers are unable to break through the resistance, but selling pressure from bears is weakening with each attempt. The bulls may take control and drive a breakout.
Descending Triangle
The Descending Triangle is an inverse formation of the ascending triangle and is a bearish continuation pattern that typically forms in a downtrend. To identify this pattern, look for a clear support level followed by a series of lower highs. This indicates that buyers are unsuccessful in pushing the price higher and each attempt weakens, potentially leading to a bearish breakout.
Pennant Chart Pattern
A pennant pattern is a continuation pattern that forms when the price makes a significant move in either direction and then consolidates in a sideways movement.
Bullish Pennant Pattern
Bearish Pennant Pattern
Bullish Pennant Pattern
A bullish Pennant Pattern is where the price is likely to move in the same direction it was trading before entering the consolidation period. It forms after a sharp move higher, followed by a pennant, and then a continuation breakout. To trade this pattern, traders typically place a long order above the pennant and set a stop below the bottom of the pennant to avoid false breakouts.
Bearish Pennant Pattern
The Bearish Pennant Pattern is the inverse of the Bullish Pennant Pattern. It forms after a sharp move lower, followed by a pennant, and followed by a breakout to the downside, signaling a continuation of the overall downtrend. Traders often take advantage of bearish pennants by placing a short order at the bottom of the pennant and a stop loss above the pennant to limit their losses in case the price moves against them.
Wedge Chart Pattern
Wedge Patterns can be both continuations and reversals based on the market trend.
Rising Wedge Pattern
Falling Wedge Pattern
Rising Wedge Pattern
The Rising Wedge Pattern is identified by upward-sloping support and resistance levels in which the support level is steeper than the resistance level and creates a wedge. If the Rising Wedge Pattern forms during a downtrend, it is often used as a continuation. On the other hand, if it is formed during an uptrend, it could indicate a potential reversal. Traders typically place their entry orders when the price breaks out of the wedge formation.
Falling Wedge Pattern
The Falling Wedge Pattern is characterized by a downward-sloping resistance level and a steeper upward-sloping support level. This pattern is usually a continuation if it forms during an uptrend. And it could signal a possible reversal if it forms at the bottom of a downtrend.
Flag Pattern
The flag pattern is a continuation pattern and is useful for price action analysis.
Bullish Flag Pattern
Bearish Flag Pattern
Bullish Flag Pattern
The Bullish Flag Pattern is formed during a strong uptrend when the price makes a sharp move higher creating the pole, followed by a sideways consolidation which forms the flag. it can be formed by two rallies separated by a brief retracement period, with the first rally creating a sharp spike known as the flagpole.
Bearish Flag Pattern
The Bearish Flag Pattern is formed during a downtrend when the price pauses sideways to create the flag form after a sharp moving lower. Price often consolidates or rebounds slightly higher before continuing with the trend. The flagpole forms on an almost vertical panic price drop and is followed by a bounce that has parallel upper and lower trendlines to form the flag.
Channels
A channel chart pattern is a continuation and it consists of two parallel lines that act as zones of support and resistance.
Bullish Channel
Bearish Channel
Horizontal Channel
Bullish Channel
Bullish Channel is a continuation pattern with a positive slope. The previous uptrend will likely continue if prices break through the upper channel line. There is no theoretical price objective on this chart pattern, and the movement is bullish, which can continue as long as the bullish channel support line is not broken.
Bearish Channel
The Bearish Channel is a continuation pattern with a negative slope. The previous bearish trend will likely continue if prices break through the lower channel line. It's not recommended to go long when the price touches the lower band as the trend may continue moving along it. Corrections towards the upper band in a downward trend are usually weaker.
Horizontal Channel
Horizontal Channel forms when the price moves sideways or when it is in a consolidation phase. A line is said to be "valid" if the price line touches the support or resistance at least 3 times. The horizontal channel pattern is considered valid if the price touches the support line at least 3 times and the resistance line twice (or the support line at least twice and the resistance line 3 times).
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Top 15 mistakes and solutions in trading TOP 15 Trader's Mistakes
1 - Lack of knowledge of market operation, technical and fundamental analysis, mass psychology and market cycles
In the boom period, when a large number of new participants enter the market, many people believe themselves to be the "god of trading" and the "master of the markets."
Beginners are satisfied with a 10-20% profit during the expansion phase, whereas quotes for liquid cryptocurrencies show a gain of 30/50/150%. Everything is contrary to the logic of the majority, which is how markets function. Sadly or luckily, the majority of individuals make common errors and are unable, due to a lack of understanding, to differentiate the fine line when an uptrend is replaced by a downturn and the distribution phase is replaced by a prolonged decline.
At the moment of trend reversal, a psychological trap and a sequence of catastrophic events are established for the majority of participants, and a number of concomitant circumstances and lack of experience make it impossible to see the situation objectively.
When the market is at its "bottom," the majority loses faith in growth: some sell out and abandon the market, while others wait even lower, do not purchase, and begin shopping only when everything has increased by hundreds of percent.
Solution
Study theory. Dow Jones theory, the fundamentals of technical and fundamental analysis, and any information regarding market cycles will be of great use. Examining the graph using large timescales, such as days, weeks, and months. You may find a wealth of material about the fundamentals of trading in the public domain or in the trading part of our website.
2 - Covetousness resembles a psychological trap
Trading greed presents itself in numerous ways. Many are attracted to the cryptocurrency market by the idea of quick money, but the majority's problem is a lack of understanding of the mechanisms that move the market and how it functions.
In order to arouse greed, pampas are constructed with a single "stick to the sky." Everyone sees a growth of 1000%, and as a result, earnings of 20/40/50 and even 200% no longer appear so promising, people do not sell, they are waiting for more, and the price falls into the red.
Purchasing a full deposit's worth of cryptocurrencies in a single transaction is also greedy. The typical justification for such a "tactic" is that 10% of the overall deposit is greater than 10% of the portion of the deposit. Yet, when the price declines, the trader incurs losses and cannot cut the average entry price at lower values.
Another example is missed opportunity syndrome, or FOMO. The price of the item has climbed by an inadequate amount over the course of one or more candles. Seeing this process, a novice decides to purchase the asset because he believes the price will continue to rise, resulting in losses.
Many make the mistake of wanting to gain a lot of money quickly, but this is impossible. Fear and greed are particularly harmful emotions for traders.
Solution
The market requires a sensible strategy. Greed stems from inexperience and the fear of being late. Refrain from making decisions based on emotions and haste. It is essential to recognize that chances arise and disappear regularly on the market. Before initiating a trade, you should assess and justify your motives for doing so.
3 - Trading in emotional instability and excitement
Any emotion in trading is detrimental. The decision to enter or exit a transaction must be calculated beforehand, devoid of emotion and haste. Emotions make it difficult to appraise the situation accurately, and you run the danger of making a mistake that may result in losses.
Yet, since emotions are innate, it is impossible to eradicate them entirely; however, they can be managed. If emotions prevail, it is time to close the trading terminal and go on to other tasks.
If you wake up at night to check bitcoin prices or are unable to fall asleep, this indicates that you have already made key errors in your risk management system, or that you do not have one. And this requires immediate action and, as much as possible, a "cool" head.
Solution
Take a break from the trading terminal, spend time with loved ones, or go for a stroll; you need emotional relief and rest from time to time. Sports are effective stress reducers. If you have already reached the point of insomnia and emotional breakdowns, you must conduct a thorough analysis of your risk management strategy and take sometimes difficult measures.
If you have executed a number of unproductive transactions or one with an insufficient loss and you have the impression of "winning back," close the trading terminal immediately and do not trade on this day. Do not treat trading as a game of chance; in this emotional condition, you have no chance of success.
4 - leveraged trading
Margin instruments can be effective in the hands of a competent trader, though not always and only under certain conditions. This is simply an unmanageable machine for liquidating a deposit in the hands of a novice. Futures and margin are verboten for rookie traders, since you face the risk of not having time to develop experience, but losing your deposit instantly.
The average daily volatility of liquid instruments in a sideways movement can reach 3 to 10%, which indicates that squeezes may exceed adequacy when utilizing the 10th leverage - movements by 30 to 100% - on low-liquid pairs. When utilizing such leverage, setting a stop-loss is already problematic, as a stop-loss that is too far away would result in enormous losses in the event that it is triggered, and in nine out of ten situations it will be eliminated by an acceptable percentage. In addition, you will pay a commission for financing, taking into account leverage and transaction commissions.
Exchanges will gladly offer you with as much leverage as you like, but this is no longer trading; with this strategy, you have a greater chance of winning money at a casino.
Solution
Study the fundamentals of trading, master numerous techniques, develop your own trading strategy, and gain real-world trading experience on the spot market by physically purchasing and selling various assets. You will eventually comprehend how the market operates. Under certain circumstances, success on the spot market can be enhanced with margin.
5 - Uselessness of stops
Stops in trading are a substantial issue; stop-loss orders are covered in a different article. Stop-loss orders are frequently used irrationally or ignored by novice traders.
Traders can be roughly divided into two groups: those who always use stops and those who prefer to operate without them. However, these are extremes. A stop positioned too closely is liable to be obliterated, while the absence of a stop under certain conditions can result in enormous losses.
It is irrational to use stops during the accumulation phase because, in about eight out of ten instances, stops are eliminated precisely at those levels when there is a substantial accumulation of them, following which the price reverses and moves in the opposite direction. And when a significant upswing is established after a period of accumulation, a knockout almost always comes; it would be a shame to watch the price rise without participating. Yet there is a tight line here; you must be certain for a large percentage that this is the accumulation period, and you need also have a plan for price averaging, i.e. fiat in reserve.
It is irrational to work in the distribution phase without stopping, just as it is crazy to labor in the accumulation phase with a pause. This is significant because many people lose in these situations due to lack of expertise. Eventually, the distribution is finished and a decline occurs, frequently abruptly and by a substantial percentage. Stopping dramatically minimizes the loss.
If you have already opened a position and the price moves significantly in your favor, it becomes sense to place a stop-loss to safeguard profits so that if the price reverses, you will still make a profit and not a loss.
While dealing with margin instruments, stops are required!
Solution
If you have no trading experience, we recommend that you constantly utilize stops until you understand how they operate. If the fundamentals are understood, they should be applied sensibly to the circumstance. Similarly, if you were stopped out by a stop, you do not need to re-enter the trade, pause trading, identify what went wrong, and then determine the next entry point.
6 - Non-fixing losses incurred when the price moves against you but you do not close your position
If a trader becomes an investor owing to circumstances rather than his own volition, he is a poor trader. The "HODL strategy" is an explanation for a trader's insolvency and their own faults.
Long-term asset freezing is the worst thing that can happen to a trader - "I'll wait out the crypto winter and still sell for a profit" is not a trader's behavior model. It does not matter to a trader what the current trend is; he must have effective strategies for any scenario. Waiting out losses is a waste of resources since there is volatility at every price level, and volatility is an opportunity to make money.
Trading on financial markets necessitates the presence of lost deals; it's just the nature of the business. No trader has 100 percent profitable trades, and this is typical. Profitable trades must cover bad trades, and losses must be contained.
If you are unwilling to recover losses when the price moves against you, you lose control of the situation and become a victim of circumstances.
Solution
Before entering a trade, you should have a contingency plan in place in the event that the price moves against you. In certain circumstances, this may involve deliberate averaging, while in others, it may include fixing losses. Recognize that losing transactions are a normal part of the process.
7 - Transaction concluded too quickly
We touched on this topic briefly at the beginning of the article. The scenario is typical: a trader enters a position and the price begins to move in his favor. The trader takes profit at the predetermined level, but the price continues to rise. In itoge, fixed profit represents a modest proportion of the whole movement. The circumstance is representative of a powerful trend.
It would be a stretch to call this a mistake because the profit is fixed; however, in the case of a trading strategy with a limited number of assets, it can take a very long time to wait for the price to roll back below the exit point, in some cases an entire year, and in other instances, the quote may not return to its previous levels.
Solution
8 - Depending on your trading approach, there are a variety of solutions, including:
The gradual sale of a previously acquired asset at varying prices.
Selling of a portion of the asset to remove the invested funds from the transaction and earn a little return, reserving the remaining position (conditionally free asset) for longer-term objectives.
Profit protection with a stop-loss order and its progressive approach to the quote, but not too close so as not to be eliminated prematurely.
Deviation from the strategy or vice versa - lack of action flexibility
Confusion, agitation, and swinging between extremes are certain indicators of a lack of a trading strategy or an indication that it was constructed wrong. Planned action eliminates the possibility of unanticipated situations and makes risks manageable. The plan must account for both potential profits and losses. Frequent strategy adjustments during the trading process are typically detrimental.
The contrary is also true: a trading strategy must be adaptable to the current market environment. For instance, you are in a position and the price is moving in your favor, everything is going as planned, you are almost at your goals, but then you learn that the project whose coin you are trading was hacked. In such a circumstance, you will have very little time to make a choice. In such a circumstance, blind adherence to the strategy will definitely result in losses.
Solution
Your activities must be automated, and you must have a well-thought-out trading plan that takes into consideration all possible eventualities. In the event of a force majeure, it is vital to make swift decisions and build market-specific flexibility.
9 - "Finding knives."
Investing a major portion of the deposit in the purchase of an asset amid a severe price decline is a bad choice. It is known as "catching knives" in business parlance. No one can accurately predict where the price will stop fluctuating and begin to consolidate. Before making a decision based on a thorough analysis of the situation, it is vital to comprehend the core cause of such a decline.
You cannot make purchases after the upcoming autumn without comprehending the market's overall condition. After distribution at the peaks, the value of altcoins can decrease by 70 to 99 percent. To clarify, an asset in a bear market can lose 50% in a day, 50% in price, another 50% in a day, and another 50% in a day dozens of times before reaching its ultimate bottom. In addition, it is not a certainty that he would recover after this, particularly if it is an illiquid asset, of which there are thousands.
Solution
If you continue to employ this technique in your trading strategy, you should limit your exposure by allocating a smaller portion of your entire deposit and bear in mind that this "bottom" may not be the last one. With this strategy, it is crucial to master the fundamentals of technical analysis and how to construct horizontal levels and trend lines.
10 - Absence of system, algorithm, and subjective opinion
You must know beforehand where you are buying and selling, what portion of your deposit you are working on, the permissible losses, and the rationale for these activities at the same levels. All of this is a trading strategy. In acts, there should be no spontaneity, excessive self-assurance, or hesitancy.
You should not take the subjective opinion of another as the truth. The more confident words and assertions sound, the more confidence they inspire on a psychological level, directly into the subconscious, and you begin to feel that these are your own thoughts.
The bitcoin market is rife with numerous types of manipulation; therefore, every information must be double-checked. The situation is compounded by the fact that newcomers are frequently directed by their own expectations and desires rather than by objective data. For instance, a break in a trend or a breakdown of a horizontal level is objective evidence, whereas an item that is overbought or oversold is merely an opinion.
Solution
Incorporating risk management and financial management into your own trading strategy. Use objective knowledge, not the opinion of others, for analysis. If you consume a great deal of information regarding the crypto sector, you need carefully select your sources and listen to opposing viewpoints on the situation.
11 - Ineffective financial management
Money management should be the default inclusion in your trading plan. This entails splitting both the deposit and the assigned amount to join the asset, as for different trading techniques.
It is not suggested to purchase the entire anticipated quantity of cryptocurrencies in a single transaction, since it will be unable to equalize the entry price in the event of a price decline. Beginners frequently make this error while purchasing something with their entire deposit.
In addition, money management covers the distribution of trading and storage locations for assets. We do not encourage trading on a single exchange; use many exchanges. If your bitcoin is sitting idle on an exchange, withdraw it to a cold wallet or hardware wallet.
Solution
12 - Money management must be an important component of your trading plan
Too slothful to retain records
No professional trader would conduct business without keeping transactional statistics and records. It is impossible to comprehend one's own efficiency without this. Some exchanges provide account analytics at a high level, while others do not; however, all statistics are maintained for a specified time frame. After a while, you will forget the prices at which you acquired your own investment portfolio. It will be unusual to sell an item without knowing if you are making a profit or a loss.
A trading journal will educate you more than a dozen trading books combined. Record the purchase price, date, exchange, reasons for entry, feelings during the transaction, and similar information. After a period of time, you will be able to study and comprehend the causes of past errors and successful transactions.
Solution
13 - Notepad, pen, and a methodical approach.
Overestimated dangers
Regardless of the size of the deposit, restrict the allocated funds for high-risk strategies to a specific amount or percentage. In the event of a loss, continue trading with the current balance without replenishing it. If a profit is made and the balance increases, transfer a portion of the money to less risky methods or withdraw them to fiat.
Elevated risks include x5+ leverage, starting a trade with the full deposit or a substantial portion, entering an asset with a single order without averaging, and trading illiquid assets.
Solution
14 - A methodical approach to risk management.
Do everything and you will fail
There are various methods for constructing working portfolios. Someone trades many specific altcoins, someone trades simply bitcoin, and someone trades circumstances without reference to particular assets; however, success is the most important factor.
The enormous number of active cryptocurrencies is one of the primary obstacles for newbies. To handle the situation, it is required to comprehend a variety of project-related aspects, including fundamental analysis, technical analysis, order book status, transaction history, project-related news, price, etc. It is physically impossible to control more than five assets simultaneously without the assistance of a team of analysts.
By working with many cryptocurrencies, you run the danger of losing focus and overlooking crucial nuances that will effect the outcome.
Solution
Initially, do not trade more than three assets; if you can keep track of a larger number, you may gradually increase the quantity.
15 - Inability to withdraw from the market and await suitable conditions.
Staying out of the market is one of the most difficult aspects of trading for most novices. There are times when the wisest course of action is to monitor the market. It is not true that the more transactions there are, the greater the profit. You can conduct dozens of transactions per day and incur a loss in a month, or you can conduct two or three transactions per month and earn a profit.
It is easier to work during the growth phase, and without theory and experience, it is nearly difficult to earn a profit during the flat and downturn phases. If it were possible to make money during the growing phase, the ideal course of action during the turning point would be to take a vacation or limit the trading portion of the initial deposit in order to get expertise trading with little sums.
The remaining 99% of a trader's time is spent on self-development, market analysis, hunting for opportunities, and waiting for advantageous entry points into trades.
Solution
Utilize the time while you are out of the market to your advantage. Instead of mimicking a monkey's actions, participate in self-education: read foundational literature on trading, discover new trading tactics, and study the assets you're interested in as thoroughly as possible. In this way, at the moment when a beneficial situation occurs on the market, you will be ready for it.
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The 5 Outcomes Of a Trade | How not to blow your account
Successful traders know there are 5 outcomes that can come out of a trading position. When managed well these outcomes can lead to great success. However, when manage badly can cause disaster to a trader’s account.
Below I’ll highlight and discuss the possible 5 outcomes of a trade and how you can manage them.
1. Small Profit
This is when a position ends in a very small profit, for trend traders, this is usually the case. However, in this situation, there is no loss.
2. Small Loss
This is when you lose a small amount at the close of your position. This is part of normal and good trading. In fact, you should cut your losses early. Taking small losses or cutting your losses early will help you stay in this business long term.
3. Breakeven
This is a position where you really didn’t make or lose any money. They’ll come too, they are not necessarily bad trades. These types of trades may just mean you should find re-entry to the position or may just be a quick exit without a loss or profit.
4. Big Profit
This is when a position ends in a very big profit. This type of trade does not come too often but when they do come they are the trades that move your general account return for the period to the next level. As a trader, these are the type of trades you should look forward to.
5. Big Loss
This is when a position ends up closing at a very big loss. This type of trade should never happen on your trading account as a pro-trader. This is the type of trade that can blow your trading account. It’s why you should know how to cut your losses quickly and take a small loss.
I’m glad I’ve been able to share with you the possible outcomes of a trade and how you can manage them properly. A simple knowledge like this can suddenly turn your trading account to become profitable.
Dear followers, let me know, what topic interests you for new educational posts?
7 Things to Consider Before Trading Full-TimeFor many traders, the dream of full-time trading represents the ultimate freedom. Full-time traders have the ability to choose their own hours, trade from anywhere, and select which opportunities to pursue. However, not all traders are ready to make the leap to full-time trading. Just as too much freedom can harm some economies, not everyone is prepared for the challenges of full-time trading. So, how do you know if you're ready to trade full-time? Here are some signs to consider:
1. You have sufficient capital:
Trading full-time means quitting your current job and relying on your trading income as your primary source of income. Be realistic about the fact that you may not make significant profits in your first few months.
2. You have tried and tested various methods and strategies:
It's important to have a strategy that has proven profitable for you, as well as other strategies that are suitable for different market conditions. You never know when and for how long market trends may shift.
3. You have spent a significant amount of time trading live accounts:
Trading live accounts bring about psychological challenges that you may not encounter when trading demo accounts. It's important to have a good understanding of your trading strengths and weaknesses and to be able to stick to a trading plan before committing to full-time trading.
4. Trading is your passion:
If trading is what motivates you to get up and start each day, it may be a sign that you're ready to trade full-time.
5. You have a solid risk management plan:
Full-time trading requires a steady stream of income, so it's crucial to have a risk management plan in place to protect your capital and ensure that you can continue trading in the long term. This includes setting stop-loss orders, properly sizing your trades, and having a plan for handling losing trades.
6. You have a support system:
Trading full-time can be isolating, so it's important to have a network of friends, family, or other traders to talk to and share ideas with. It can also be helpful to have someone who can hold you accountable for your trading plan and help you stay disciplined.
7. You have a plan for your non-trading time:
Full-time traders often spend a lot of time in front of their computers, so it's important to have a plan for how you'll spend your time outside of trading. This could include exercise, hobbies, and social activities to help maintain a healthy work-life balance.
Making the decision to become a full-time trader shouldn't be taken lightly. It requires a significant commitment of time and capital, and it may not be right for everyone. By considering these factors and being honest with yourself about your readiness, you can make an informed decision about whether full-time trading is the right path for you.
We hope you found this post valuable and informative.