The Basics of Becoming a Swing TraderIn this educational lesson, we will explain the concept of swing trading so that aspiring traders can learn how it works and what it means. Swing trading is considered a short to medium-term strategy that aims to trade specific market “swings” or oscillations within a broader trend. Swing trading is not day trading, and it is not long-term investing. Instead, it fits somewhere between those two disciplines.
Swing trading typically spans a few days to several weeks and it begins with the trader spotting a large trend, finding a discrepancy in the current price within that larger trend, and then structuring a trade based on this intermediate price action. Swing traders primarily rely on technical analysis, using indicators and strategies to spot these specific swings within larger trends.
Before we discuss the details of these indicators and other concepts, allow us to give you the basics one more time. Here are the key points:
Timeframe: Medium term
Analysis: Mostly technical
Goal: Capitalize on moves within larger trends
Example: Open a chart of USD/JPY ( USDJPY Chart — Dollar Yen Rate — TradingView ) and look at the trend since early 2021. Now, within that trend, look for the oscillations and swings that occurred, showing quick drops and then quick rises or vice versa. Swing traders look to spot these price movements within the overall trend, placing trades that last a few days to several weeks.
Forex Swing Trading:
Forex markets are ideal for swing trading due to high liquidity, typically tight spreads, and around the clock trading. Traders usually focus on momentum peaks and dips, rather than long-term currency value. Both concepts are unique to forex markets and make it ripe for swing trading. In addition, like all other markets, technical tools can be accessed in forex markets as well.
If you’re interested in learning how specific indicators are used by swing traders, go give the following indicators a look:
1. A short to medium-term moving average like 5, 10 or 20 days.
2. MACD to research crossovers and divergence between price and moving averages.
3. Stochastic oscillators to look for overbought and oversold conditions.
4. Pivot Points to look for potential support and resistance levels on shorter time intervals.
Thanks for reading our latest educational post about becoming a swing trader! Be sure to follow us for more updates and educational resources like this.
Trend Analysis
How to Decode Market Days: Wide Range, Inside, and Outside DaysHey Traders! 👋
Let's break down some classic chart patterns that can clue you in on the market's next move. We're exploring Wide Range Days, Inside Days, and Outside Days today. These are your bread and butter for spotting potential volatility and directional shift s!
Wide Range Days (WRD)
These are the days when the market just can't sit still—volatility shoots through the roof, often without hitting new highs or lows.
Triggered by unexpected news or a sudden surge in order activity, a WRD can signal that a peak or pivotal reversal is near.
💡 Tip: If the market closes near the high or low of a WRD, it’s a strong hint at continued movement in that direction. But remember, extreme moves often lead to a pause or reversal as the market catches its breath.
Outside Days
An Outside Day steps out of the shadow of the previous day, with a high higher and a low lower than the day before.
This pattern often hints at a reversal, especially if it comes with high volatility.
💡 Keep in Mind: An Outside Day with low volatility and only slightly larger than the previous day is a weaker signal. It’s crucial to consider the context—what was the market like leading up to this?
Inside Days
📈 Why They Matter:
Inside Days are like the market taking a time-out, staying within the range set by the previous day.
This pattern usually signals a decrease in volatility and can indicate a consolidation phase after a big move.
Trading Strategy: Post-explosive move, if all the action has attracted everyone likely to buy in, the price might be too steep for new players, leading to a stagnant or reversing trend once the news fades or the market reevaluates.
Wrapping It Up 🙌
Single-day patterns are just pieces of the larger market puzzle. They’re common but need discerning eyes to interpret correctly. Always corroborate these patterns with other indicators and market context to enhance your trading strategy.
Remember, trading is not just about recognizing patterns but understanding the market's language. Keep refining your approach and stay ahead of the curve. Happy trading!
How to Use Fibonacci Retracements to Find Entry and Exit PointsAlright, traders, let’s talk about Fibonacci Retracements — the tool that’s part math, part mysticism, and all about finding those sweet spots for entry and exit. If you’ve ever wondered how seasoned traders seem to know exactly when to jump in and when to cash out, chances are they’ve got Fibonacci retracements in their toolbox (or they’re insider trading).
What Are Fibonacci Retracements?
Fibonacci Retracements are based on the famous Fibonacci sequence — a string of numbers discovered in the 1200s by the medieval Italian mathematician Leonardo of Pisa (later nicknamed Fibonacci, meaning "son of Bonacci"). The sequence of numbers starts with 1, 2, 3, 5 and grows by adding the sum of the two previous numbers.
These mystical numbers show up everywhere from pinecones and seashells to the human hand and the Apple logo and, of course, the charts. It all comes down to 61.8%, the golden child of market moves and corrections. But before you go off believing Fibonacci is some sort of market sorcerer, let’s break it down.
The Key Levels
23.6%, 38.2%, 50%, 61.8%, 78.6% : These are the Fibonacci retracement levels you’ll see on your chart when you whip up the Fibonacci Retracement. They’re acting as the market’s pit stops — areas where the price could take a breather or reverse altogether.
Traders use these levels to predict how far a price might pull back before resuming its trend. Put simply, it’s like finding the market’s sweet spot where it says, “Enough with the chit-chat, let’s bounce.”
How to Use Fibonacci Retracements
Identify the Trend : First, you need a clear trend — trace a price trajectory and make sure there is a well-defined and sustained move either up or down with a clear reversal at the end. No trend? No Fibonacci.
Draw the Retracement : Stretch the Fib tool from the start of the move (swing low) to the end (swing high). If the trend is up, draw from low to high. If it’s down, high to low. Watch as those golden ratios light up your chart like a Christmas tree. Now you’ve got your levels mapped out and you can easily start looking for the potential turning points.
Spot the Bounce : The series of horizontal lines on your chart — these are your Fibonacci levels, and they’re not just pretty—they’re potential support and resistance zones. When the price retraces to a Fib level, it’s decision time. Will it bounce, or will it break? The 61.8% level is the big one — the golden ratio. If the price holds there, it may be a sign that the trend could continue. If it breaks, well, it’s time to reassess. Think of it as the market’s line in the sand.
Finding Entry Points
Here’s where it gets interesting. Imagine the market’s been on a bull run, but then starts to pull back. You’re itching to buy, but where? This is where Fibonacci levels shine.
When the price retraces to a key Fibonacci level (say 38.2% or 50%), it’s like the market is pausing to catch its breath. That’s your cue to consider entering a position. You’re aiming to ride the next wave up once the market finishes its coffee break at one of these levels.
Nailing Exit Points
On the flip side, if you’re already in a trade and looking to lock in profits, those same Fibonacci levels can be your guide for exiting. If the price is approaching a key level from below, it might be time to secure your gains before the market pulls another U-turn.
For the bold and brave, you can even set your sights on the 161.8% level — this is where Fibonacci extensions come into play. It’s a target for when the market decides it’s not just going to bounce, but rocket into the stratosphere.
Pro Tip: Fib Confluence
Looking to up your game? Combine Fibonacci with other indicators like moving averages or trendlines. When multiple signals converge around a Fib level, it may be a strong confirmation that the trend could turn. Pay attention and always do your own research — fakeouts are real.
Why It Works (and Why It Doesn't)
Some say Fibonacci levels work because they’re rooted in natural mathematics. Others believe it’s a self-fulfilling prophecy because so many traders use them. And just like any strategy, it doesn’t work 100% of the time. The market has a mind of its own, and sometimes it just doesn’t care about your Fibonacci levels. But when they do work, they can give you a serious edge.
The Bottom Line
Fibonacci Retracements aren’t just a bunch of lines on a chart — they’re your reminder that maybe everything is indeed one from the universe’s perspective and there are naturally occurring patterns everywhere.
Whether you believe in the math and the or just like the results, one thing’s for sure: Fibs can give you an edge in spotting when to hold back or lean forward. So next time you’re stuck wondering when to buy or sell, try the Fibonacci.
How to Trade with a Momentum IndicatorHow to Trade with a Momentum Indicator
The momentum oscillator (MOM) is a vital instrument in the trader's toolkit. Designed to measure the velocity of asset price changes, it serves as a compass for traders, pointing them towards prevailing market trends. By analysing this indicator, traders can gain insights that allow them to seize budding opportunities in volatile markets. Keep reading to broaden your understanding and elevate your momentum indicator strategies.
Momentum Technical Analysis
Momentum technical analysis is a crucial aspect of understanding the financial markets. Traders and investors rely on momentum tools to identify potential trends and make trading decisions.
What Is a Momentum Technical Indicator?
While the term "momentum" is often tossed around in financial circles, its technical significance is profound. Momentum indicators are a class of technical analysis tools that quantify the strength and direction of market trends. They help traders and investors identify potential reversal points, overbought or oversold conditions, and the continuation of existing trends. These tools are based on the principle that price trends often exhibit momentum before they reverse or continue. However, there is also such a thing as a momentum oscillator.
Momentum Oscillator
The momentum indicator or oscillator (MOM) is a technical analysis tool that’s available on most trading platforms, including services like FXOpen’s TickTrader. It’s one of the best momentum indicators. The MOM displays the speed of change in a financial instrument's price over a specific time frame. You can apply the momentum indicator to forex, stock, commodity, and crypto* markets.
MOM formula = (Current Close/Close N Periods Ago)*100
By default, the indicator is set to 10 periods, but traders can easily change this in the settings tab. The calculated values are plotted below the trading chart as a single line that moves near the 0 line. If today's price is the same as it was 10 days ago, the indicator's value is plotted on the zero line. If today's price is higher than it was 10 days ago, the indicator plots above the line, and vice versa.
When trading stocks, the momentum indicator typically fluctuates between +/- 20, while for forex pairs, its range is more like +/- 0.02. The chart below provides an example of how the momentum oscillator is used on a daily GBP/USD chart.
How to Use the Momentum Oscillator
Here's a breakdown of the procedure for using the momentum indicator in trading:
Tapping into the potential of the MOM is quite straightforward. For those who swear by MetaTrader, it's as easy as venturing into the oscillators section to access the momentum indicator on MT4 or MT5. For TickTrader enthusiasts, a quick search on the list of indicators should yield the built-in MOM.
1. Zero-Line Crossover
Keeping an eye on the MOM indicator when it crosses the zero line is the most straightforward and fundamental trading technique. An upward momentum (with values above the midpoint) often suggests a potential buy signal, implying the asset is likely to continue its upward movement. Conversely, when the MOM consistently hovers below the midpoint, it indicates a sell cue, hinting at a possible continuation of the asset's downward trajectory.
Take, for instance, the GBP/USD pair. As the pair spirals downward, a consistent position below zero signals a dominant momentum steering, it further down and vice versa.
2. Divergence Trading Momentum Oscillator
The momentum oscillator is instrumental in pinpointing divergences on a chart. Essentially, a divergence arises when there's a discrepancy between the market movement and the MOM, akin to top momentum indicators like the Stochastic or RSI. It often hints at a forthcoming shift in market direction.
There are primarily two forms of divergences:
- Classic (Regular): This is used to anticipate potential trend reversals.
- Hidden: This aids in identifying the likely continuation of existing trends.
For instance, in the GBP/USD chart, we notice a hidden bullish divergence pointing to the trend's continuation and a classic bullish divergence pointing to a trend reversal.
3. Extreme Readings
Extreme readings in momentum indicators can provide valuable insights for traders by indicating potential overbought or oversold market conditions. As the momentum oscillator is unbounded, it’s harder to identify overbought and oversold conditions compared to the RSI or the Stochastic oscillator.
To do this, a trader needs to compare recent highs and lows. If the oscillator reaches a significant peak, the asset can be considered overbought and may fall soon. Conversely, if the oscillator falls to noticeable lows, the asset may be oversold and may rise soon.
In the chart above, the momentum oscillator reached a significant high, following the uptrend in the EURGBP pair. After that, the price moved down.
When using the momentum oscillator, traders incorporate additional technical indicators and filters to avoid overtrading and reduce market noise.
How to Combine the MOM with Other Technical Analysis Tools
By incorporating a 200-period EMA on the chart along with the MOM, we can discern the overarching market trend. A price positioned above the 200-period EMA is indicative of an uptrend, prompting traders to scout for bullish signals on the MOM. On the flip side, a price below this suggests a downtrend, warranting a lookout for bearish signals.
For instance, in the GBP/USD chart, we notice an upward market trajectory marked by two bullish divergence signals: a hidden one pointing to the trend's continuation and a classic one pointing to the trend’s reversal.
Conclusion
To succeed in trading, finding financial assets with momentum is key. The momentum indicator can help traders identify these assets before they make big moves, but it's important to remember that it’s not foolproof. Other technical and fundamental analysis tools are often used to evaluate market trends. To start utilising the MOM and many other tools, consider opening an FXOpen account.
*At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
e-Learning with the TradingMasteryHub - 3 Strategies You Need
Welcome to the TradingMasteryHub Education Series!
Are you ready to take your trading to the next level? Join us for another exciting lesson in our 10-part series where we dive deep into strategies that can transform your trading game. Whether you're a beginner or looking to refine your strategy, these lessons are designed to guide you on your journey to mastering the markets.
Three Proven Strategies That Can Make You a Fortune, When You Follow Them with Discipline!
In trading, having the right strategy is crucial, but even the best strategy won’t work if you don’t stick to it. Today, we’re uncovering three live-proven strategies that can potentially lead to massive gains—when executed with discipline and precision.
1. The Trend-Following Strategy: Ride the Waves
Trend-following is all about identifying and capitalising on sustained market movements. This strategy involves buying when the market is in an uptrend and selling when it’s in a downtrend. The key is to use indicators like moving averages and the ADX (Average Directional Index) to confirm the strength of the trend.
The beauty of trend-following lies in its simplicity. By aligning your trades with the market's momentum, you increase your chances of catching big moves. But remember, patience is key. Wait for clear signals before entering a trade, and always protect your position with a well-placed stop-loss to minimise risk.
2. The Breakout Strategy: Capture Explosive Moves
Breakout trading focuses on identifying price levels where the market has repeatedly struggled to break through—these are your key support and resistance levels. When the price finally breaks out of these levels, it often leads to significant moves.
To execute this strategy, use tools like the Volume-Weighted Average Price (VWAP) and Relative Volume (RVOL) to confirm the strength of the breakout. A high RVOL indicates that the breakout is supported by strong market participation, increasing the likelihood of a sustained move. The trick here is to act quickly but carefully, entering the trade as soon as the breakout is confirmed and setting your stop-loss just below the breakout level to protect against false moves.
3. The Mean Reversion Strategy: Profit from Market Extremes
Mean reversion strategies work on the principle that prices eventually return to their average or "mean" after extreme moves. This approach is particularly effective in range-bound markets where prices oscillate between defined levels.
To implement this strategy, you’ll need indicators like the RSI (Relative Strength Index) or Bollinger Bands to identify overbought and oversold conditions. When the market shows signs of exhaustion at these extremes, you can enter a trade expecting a reversal back toward the mean. The key to success here is timing—enter too early, and you might get caught in a continued move against you; enter too late, and the best part of the move may already be over.
The Key to Success: Discipline and Consistency
While these strategies have the potential to deliver significant returns, they only work if you follow them with discipline. That means sticking to your trading plan, setting realistic profit targets, and most importantly, managing your risk. Remember, no strategy is foolproof—losses are part of the game. The goal is to stay consistent, manage your emotions, and keep learning from each trade, win or lose.
Conclusion and Recommendation
These three strategies—trend-following, breakout trading, and mean reversion—are time-tested and can be incredibly profitable when applied correctly. But success in trading doesn’t come from the strategy alone; it comes from the discipline to follow your plan, manage your risk, and stay calm under pressure.
As you incorporate these strategies into your trading routine, focus on maintaining a strong risk/reward ratio and a consistent approach. Over time, this discipline will build the confidence and experience you need to potentially turn these strategies into a fortune.
Can’t Get Enough? Don't Miss Out!
Subscribe, share, and engage with us in the comments. This is the start of a supportive trading community—built by traders, for traders! Join us on the journey to market mastery, where we grow, learn, and succeed together.
What You'll Learn:
- Proven trading strategies
- How to confirm trade setups
- Risk management and execution
- And much more!...
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TradingMasteryHub
Profitable Gold Price Action Strategy For Beginners
To trade this Gold price action strategy, you need to learn just 2 simple things:
support and resistance levels identification
a couple of bullish and bearish price action patterns.
In this article, I will share with you a complete guide for Gold trading with price action and reveal the best patterns for XAUUSD.
Step 1
Your First task will be to execute complete structure analysis on a daily time frame.
It means that you should identify all vertical and horizontal supports and resistances.
From structure supports, we will look for buying opportunities.
From structure resistances, we will look for selling the market.
Above, you can see how a complete Gold support and resistance analysis should look.
Step 2
Patiently wait for the test of one of these structures.
In the example above, we see a test of Support.
Step 3
Your next task will be to look for a price action pattern on an hourly time frame on one of these structures.
You should look for a bullish pattern after a test of a structure support.
You should look for a bearish pattern after a test of a structure resistance.
Here is the list of classic bullish patterns that you should look for:
falling wedge,
bullish flag,
double bottom,
triple bottom,
inverted head & shoulders pattern,
cup & handle,
ascending triangle.
Once you identified a bullish pattern, simply wait for a signal -
with horizontal patterns like a double bottom or cup & handle you should wait for a bullish breakout of its neckline - an hourly candle close above.
With vertical patterns like a bullish flag or a falling wedge, you should look for a bullish breakout of its trend line - and hourly candle close above.
Here is the list of classic bearish patterns that you should look for:
rising wedge,
bearish flag,
double top,
triple top,
head & shoulders pattern,
inverted cup & handle,
descending triangle.
Once you identified a bearish pattern, simply wait for a signal -
with horizontal patterns like a double top or inverted cup & handle you should wait for a bearish breakout of its neckline - an hourly candle close below.
With vertical patterns like a bearish flag or a rising wedge, you should look for a
bearish breakout of its trend line - and hourly candle close below.
Sometimes there will be the situation when you will encounter multiple patterns. The rule is that the more - the better.
Above, we can see 2 bullish patterns on an hourly time frame, after a test of a key daily support on Gold: bullish flag pattern and cup & handle.
The price broke the resistance line of the flag and a neckline of a cup & handle, giving us a strong bullish signal.
Step 4
Open a trading position.
Once you spotted a bearish pattern after a test of a key daily resistance, and a signal - a bearish breakout of a neckline or a trend line, sell Gold on a retest of a broken neckline/trend line.
Stop loss will lie above the highs of the patterns.
Take profit will be the closest 4H support.
Once you spotted a bullish pattern after a test of a key daily support, and a signal - a bullish breakout of a neckline or a trend line, buy Gold on a retest of a broken neckline/trend line.
Stop loss will lie below the lows of the pattern.
Take profit will be the closest 4H resistance.
In our example, a long position was opened on Gold on a retest of a broken neckline of a cup & handle formation. Stop loss lies below the lows, TP based on a 4H resistance.
After some time, the price reached the target!
This Gold price action strategy is simple and very profitable. Try this strategy by your own and good luck in trading Gold!
❤️Please, support my work with like, thank you!❤️
A simple Stock strategy to trade with edge!A simple, profitable strategy.
If you’re struggling to trade profitability and searching for the ‘Holy Grail’ of trading strategies, then you’re in luck. I’ve got it for you….
DON’T SHORT STOCKS!
Well, that’s it in a nutshell. I will elaborate, but please read on because this was a game changer for me. It sounds too simple. Honestly, my win/loss ratio has improved , and my hairline has stopped receding.
The simplistic rationale for long only
1. Just look at the S&P500 chart since 2010. It is statistically impossible to lose money if you only buy.
2. People want to buy stocks! It’s just a fact. Everyone in the world is investing in stocks, whether it's for their retirement, their children's ISAs, speculating through the 30 apps on their smartphones, or visiting their local bank, with the aim of beating inflation and outperforming savings accounts.
3. During the most significant event of my life, the infamous COVID-19 pandemic, the S&P500 experienced a 30% decline, causing the world to stop, businesses to close, and a sense of impending doom! The S&P is now up 60%, reaching an all-time high!
4. The buy-only mentality, when combined with simple technical analysis, can eliminate 50% of trade ideas, clear your mind, reduce 50% of stress, and, as stated in Point 1, enhance your edge.
5. Most importantly, stocks are an appreciating asset; they want to go up. A company's entire purpose is to grow!
Okay, so that’s a really simple rationale. I get that some stocks do go down during market corrections or natural ebbs and flows; we want market pullbacks. We could go into boring stats like volatility and liquidity, etc., but the key point is that stocks go up! I can’t emphasise this enough.
The simple strategy
My strategy applies to stock indexes (US500, US100, etc.) as well as individual stocks; however, indexes are easier, in my opinion. I would recommend sticking to well-known stocks that fit this complex filter. Is it likely to fail? Here are some recent stocks I have traded using this filter. McDonald's (MCD) and Go Daddy's (GDDY)
We've already decided to focus solely on long-only trades, so how do we begin? We chase momentum using these complex , simple technical tools.
1. The daily price must be above these simple moving averages (SMA): 20, 50, 100 = momentum!
2. 4-hour price above these simple moving averages (SMA) of 20, 50, 100= short-term momentum.
3. Avoid trading at major resistance levels.
4. Enter trades on a 4-hour chart; don’t over-analyse.
5. Take profits.
To fine-tune an entry, you can apply this extremely simple framework to any existing TA skills, candlestick patterns (bullish engulfing, ABC pullback, pinbar, etc.), or market structure.
Here are some examples of trade entries on MCD, GDDY, and SPX. Follow the framework and keep your trading simple.
Why we always widen our stop loss when DAY TRADINGVery important and basic rule with Day Trading.
Always increase the stop loss when going short (sell) above the original stop loss.
Always decrease the stop loss when going long (buying) below the original set stop loss.
Reason: When the index touches the ASK or BID price (regardless of it actually trading there), it will get you out of your trade and hit your stop loss.
So, don’t be afraid to increase the distance between the entry and stop loss.
As long as the Risk to Reward stays above 1:1.5 – It’s fine.
How much do I increase the distance between the entry and the stop loss?
Notice what the spread is on the contract when you place your stop loss.
So wherever you wanted to put your stop loss originally, add the spread on top of that and that is where you would place your NEW stop loss.
Maybe 20 – 30 points is safe.
But other times it could be up to 50 points
8 Key qualities of a good traderA good trader often possesses a combination of skills, discipline, and mindset that sets them apart. Here are eight key qualities:
1. **Discipline**: A good trader sticks to a well-defined trading plan and doesn't let emotions drive their decisions. They consistently follow their strategies, whether in profit or loss, avoiding impulsive actions.
2. **Patience**: Successful traders understand that good trades don't happen every day. They patiently wait for the right opportunities that align with their trading strategy, avoiding the temptation to chase the market.
3. **Courage**: Trading often involves making difficult decisions under uncertainty. A good trader has the courage to take calculated risks, enter trades that align with their analysis, and stay in positions even when the market is volatile, as long as their strategy supports it.
4. **Confidence**: Confidence in their trading strategy and decisions is crucial for a trader. A good trader believes in their analysis and is not easily swayed by market noise or the opinions of others. This confidence helps them stick to their plan even in challenging situations.
5. **Consistency**: Consistency in execution is key to long-term trading success. A good trader applies their strategy consistently across different market conditions, refining it over time but maintaining a steady approach to achieve reliable results.
6. **Analytical Skills**: A strong ability to analyse market data, charts, and trends is essential. Good traders can interpret technical indicators, fundamental data, and market sentiment to make informed decisions.
7. **Risk Management**: Managing risk is crucial in trading. Good traders set stop-loss orders, position sizes, and risk-reward ratios to protect their capital. They understand that no trade is guaranteed, so they always prepare for potential losses.
8. **Adaptability**: Markets are constantly changing, and good traders can adapt to new conditions. They update their strategies as needed, learn from mistakes, and stay informed about market developments to remain competitive.
These qualities, combined with experience and continuous learning, help traders succeed in the long run.
Many happy trading years ahead.........NicheFX.
9 Common Misconceptions About Forex9 Common Misconceptions About Forex
Forex is a dynamic and complex financial market that is of great interest to investors and traders all over the world. Still, like any other industry, it’s not immune to misconceptions and myths. This FXOpen article looks into the origins of these myths and examines nine of the most common misconceptions about forex trading. Separating fact from fiction, it’s designed to give traders a clearer picture of foreign exchange trading.
How Do Myths About Forex Trading Occur?
Myths about trading currencies online often arise from a lack of knowledge and understanding of how the market works. The decentralised nature of the forex market can seem mysterious and incomprehensible to newcomers – there’s no central exchange, it’s available from almost anywhere in the world, and the web is full of stories of big gains and losses. All this can be confusing. In addition, the lure of quick profits and the prevalence of “get rich quick” schemes contribute to the myths about forex trading.
9 Most Common Myths
Myth 1: Forex Does Not Relate to Real Life
Let’s start with the main notion of the forex market: what is it? The false perception is that forex is a complex and mysterious market available only to financial elites. Some perceive it as a market where currencies are traded for speculative purposes but have limited real-world significance.
In reality, forex is the largest and most liquid financial market in the world, which facilitates the exchange of currencies to help the global financial system work. Nowadays, forex is available for anyone willing to participate.
Myth 2: Forex Trading Is Only for Financial Experts
Contrary to popular belief, forex trading is not the exclusive domain of financial experts or institutional investors. Anyone with a desire to trade and invest and a disciplined attitude to risk management can participate. There are many educational resources, online courses, and demo accounts available for aspiring traders.
Myth 3: Forex Trading Is a Guaranteed Way to Get Rich
Even though forex allows you to make profits, trading is not a guaranteed way to get rich. Success in the forex market requires a long period of study, practice, and risk management, and even after that, markets can behave in unpredictable ways.
Many inexperienced traders have lost money by acting rashly or relying on luck. Even with experience, it’s not possible to completely avoid losses; one can only reduce their number by learning to manage risks.
Myth 4: Forex Trading Is a Form of Gambling
Forex trading is not gambling. It is a legitimate financial market with oversight from financial authorities in various countries. Brokers must adhere to strict regulations and ensure transparency and fairness.
Unlike gambling, forex trading involves analysis, strategy, and risk management. Traders base their decisions on technical and fundamental analysis, not chance. In contrast, gambling often lacks such structured risk management and can be associated with underground activities.
Myth 5: A Trader Needs a Lot of Money to Engage in Forex
It’s a common misconception that one needs a large amount of capital to start trading in the forex market. In reality, forex trading offers a high degree of accessibility and flexibility. Many brokers offer the opportunity to open an account with a minimum deposit. However, it is important to trade with an amount you can afford to lose and use the right risk management strategies.
While some traders use advanced software and tools, these are not mandatory for trading. Many brokers offer free charting and analysis facilities, and there are many free resources available on the web. Consider using the TickTrader platform with advanced charts and tools. All the instruments are free of charge.
Myth 6: The Forex Market Is Manipulated and Unpredictable
While the forex market can be influenced by various factors, including economic events and central bank policies, it is not manipulated in the way some myths suggest. It operates in a decentralised manner, with a vast number of participants, making it difficult for any single entity to control or manipulate the market. The market’s behaviour is typically driven by supply and demand dynamics, making it more predictable with the right analysis.
Myth 7: There Is a Single Easy Profitable Forex Strategy
There is no one-size-fits-all strategy in forex trading that guarantees profit. The market is ever-changing, and what works today may not work tomorrow. In addition, traders have varying risk tolerance levels, capital, and trading goals. A strategy suitable for one person may not align with the objectives of another. Traders change the way they act to benefit from different market conditions and continuously learn and refine their skills.
Myth 8: You Must Trade All the Time to Be Successful
It is far from true that you need to devote all your time to day and night trading. This myth is also due to FOMO, fear of missing out, which makes people try to catch every opportunity. Overtrading can be detrimental to your trading account balance. In fact, quality outweighs quantity. It’s much better to have a well-defined trading plan and make trades only when all the criteria are met.
Myth 9: Forex Trading Is Tax-Free
Tax regulation of forex trading varies from country to country. In many countries, profits are subject to taxation. It is critical to understand your tax obligations and report your income accurately. Not knowing the law does not absolve you of responsibility.
Forex Trading: Is It Profitable?
Forex trading, while offering opportunities for profit, involves risk and offers no guarantees of success. Traders who approach the market with education, discipline, risk management, and a realistic outlook are better positioned to overcome challenges and achieve long-term profits. Forex trading should be viewed as a serious endeavour that requires dedication and continuous improvement to increase the likelihood of success.
Traders must dispel common misconceptions and approach trading with a disciplined and well-informed mindset. This helps them make more informed decisions. For those looking to learn to trade forex based on facts and analysis, it’s essential to seek out reliable educational resources. If you’re interested, you can open an FXOpen account and read our blog!
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
How to measure a true range in any asset!Hello to everyone familiar with ICT concepts!
If you already understand breakers, order blocks, and the principles of price premiums and discounts, you're in the right place.
I’m excited to share some insights with you, using the FOREXCOM:EURUSD
chart from August 20th, 2024.
One challenge I've always faced is accurately measuring the true range. It often feels like price moves towards balance, finding equilibrium before moving away again. ICT's teachings on this topic can sometimes be a bit vague, especially when it comes to the details of whether to measure wicks or focus solely on candlestick bodies. However, I’ve recently made a breakthrough and discovered the key to accurately measuring a true range!
This knowledge aligns with the idea of balances, but it’s crucial to understand that when one algorithm meets another, neither has the power to deviate far from the current price. But that's not what we need to focus on.
What truly matters is identifying when the price is moving away from its current state. This method works exceptionally well during trending markets, like we’ve seen recently with #EURUSD, #GBPUSD, and other forex pairs. It’s also effective in commodities like Gold, indices such as #NQ, #YM, #ES, and even in the crypto markets!
Take yesterday's trend in EURUSD, for example. We saw a significant 5-15 minute trend where the price perfectly retraced to its 50% level. But how did I know where to start measuring?
This time, I used a breaker from a different structure on the 15-minute chart to identify the key level. The answer lies in understanding breakers, order blocks, and supporting structures.
If this topic resonates with you, I’d love to hear your thoughts! Let’s dive deeper together—there’s so much more to explore. Feel free to share your insights or reach out if you’re curious about how to apply these concepts more effectively
EURUSD 21.08.2024 10:11
HOW TO CALCULATE PIPS ON TRADINGVIEWHere i show you how you can calculate pips using tradingview tool like ruler and forecast position to determine pips level . So with this you can be able to know what pips in trading weather is take profit or stoploss.
"History Repeats Itself" The Importance Of Historical Areas i disscussed the importance of historical areas on all charts and the saying " history repeats itself " is % right u should strongly believe it. and if we applies this to the GBPUSD pair I will see a very good potential in selling it now as the same area ( 1.30300 - 1.30200 ) did this before and pushed the price more that 300 pips easily.
tell what u think in the comments.
How to Trade with the Choppiness IndexHow to Trade with the Choppiness Index
The Choppiness Index is a valuable tool in the world of trading, particularly for experienced traders involved in analysing market trends and making informed trading decisions. Developed by Australian commodity trader E.W. Dreiss, this indicator is designed to measure price volatility or directionless behaviour. The Choppiness Index provides traders with insights into whether an asset is in a trending or ranging phase. This article describes the purpose, calculation, and application of this efficient tool. Continue reading if you need help adjusting and improving your trading strategies.
What Is the Choppiness Index?
The Choppiness Index (CI) is a technical analysis tool that helps determine whether a market is moving in a trend or consolidating. Sideways movements are challenging for traders to develop a viable strategy; thus, the Choppy market indicator, in conjunction with other technical tools, can help. A possible reversal of an existing trend can also be verified through the Choppiness Indicator. Yet, it is not a directional indicator and, therefore, cannot be used to predict future price direction.
The Choppy market index can be useful in all asset classes, but higher volatility conditions, like in stock index trading, can be more suitable for this index. If you would like to explore how to enhance your market analysis techniques using the Choppiness Indicator, head over to FXOpen and try out TickTrader’s charting tools.
How Is the Choppy Market Indicator Calculated?
The Choppiness Index is calculated through the following formula:
CI = 100 ∗ LOG10( ∑ n1ATR)( MaxHigh( n) − MinLow( n)) / LOG10( n)
Where:
ATR( 1) = Average True Range ( Period of 1)
SUM( ATR( 1), n) = Sum of the Average True Range over n periods
MaxHigh( n) = The highest peak over n periods
MinLow( n) = The lowest trough over n periods
Log10( n) = base-10 Log of n
n = defined period length
How to Use the Choppiness Index
The CI value provides insights into the market situation when crossing a certain level or entering a predefined area. As an oscillator-type analysis tool, the CI takes values between 0 and 100. The most common interpretations of the Choppy market indicator are derived from the Fibonacci retracement values. Generally, it is considered that a reading below 38.2 indicates a trend; a reading between 38.2 and 61.8 suggests choppy movements that would make traders wait for the emergence of a clearer trend; a high reading of the Choppy market indicator is considered above 61.8, and it indicates very choppy or consolidated prices when many traders would prefer to stick to range-bound strategies.
Depending on the specific asset, risk preference, or trading style, traders can apply different thresholds. For example, a fall below the level of 30 or a rise above the level of 50 could be considered a signal for a starting trend or the beginning of an indecision phase, respectively.
The Chop Index can be very useful in stock index trading. That market can get volatile, and the Choppy market indicator allows traders to identify potential breakouts or lower volatility periods. Below are three examples on the US SPX 500 chart of how the Choppiness Index can be implemented when analysing real markets.
A Trending Market (A Sudden Drop in the Choppiness Index)
The CI value dropping below a certain threshold (typically below 38.2) signals that the market is starting a trending phase. This suggests that there is a clear and sustained price movement; however, as the CI does not show the direction of price movement, it may be either an upward or downward move. Traders engaged in stock index trading or interested in other asset classes may interpret this signal as an opportunity to employ trend-following strategies, such as buying in an uptrend or selling in a downtrend.
Choppy or Ranging Asset Price (Moderate Levels of the Choppiness Index)
When the CI stays within the moderate range (typically between 38.2 and 61.8), it indicates that the market is relatively choppy or ranging. As seen in the chart below, such behaviour of the CI can also be accompanied by increased volatility, implying higher market risk. In such conditions, there may be no clear or sustained trend, and prices may move within a slightly broader range but with no clear direction. Traders may exercise caution when observing such readings of the Choppy market indicator, as it can be challenging to predict the price direction. Experienced stock index trading participants might choose to reduce risk or wait for a clearer trend to develop.
Consolidating Market (Choppiness Index Stays High)
A CI reading above a certain threshold (typically above 61.8) suggests that the market is consolidating within a narrow trading range. In the US SPX 500 stock index trading example displayed on the chart below, volatility is low, yet the price movement implies market indecision and possible unpredictable moves in either direction with no well-defined trend. In such conditions, combined with high values of the Choppy market indicator, traders may consider staying out of the market or employing range-bound or mean-reversion strategies, as breakouts and trend-following approaches may be less effective.
How to Combine the Chop Index with Other Technical Analysis Tools
Several other indicators can be combined with the Choppiness index indicator to analyse price action. Traders can identify support and resistance levels and consider the price level relative to Moving Averages, and then add the Chop index to determine an entry point in a trending market. Bollinger Bands provide another suitable indicator to be used together with the CI to identify potential breakouts of a trading range.
Combined with trading volume, the CI can provide a strong confirmation signal. After a period of sideways price action, low volume, and a high level of CI, a sudden surge in volume while the price is still in range, a drop of the index below the 38.2 level, combined with the price breaking the range, could confirm the breakout.
Conclusion
The Choppiness Index can be a valuable instrument for all asset classes, stock index trading being one possibility. It helps distinguish sideways movements from trending market activity, while it’s also used to evaluate an asset’s volatility. As the Choppiness Index cannot predict price direction, traders combine it with other technical tools, making it beneficial to a chart analysis strategy.
Interested in testing possible trading strategies using the Choppiness Index? Consider opening an FXOpen account, which grants you access to a wide range of markets and advanced trading opportunities.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Best Currency Pairs to Trade at NightBest Currency Pairs to Trade at Night
In forex trading, time is of great importance. The forex market operates 24/5, and it is divided into different trading sessions, including Asian, European, and North American. Each session has its own unique characteristics, and their overlap can impact activity and volatility.
Night trading presents both opportunities and challenges. To make the most of night hours, it is important to identify the best forex currency pairs to trade during this period. This FXOpen article will delve into the world of night trading, exploring the key elements affecting it and offering valuable insights.
Factors Impacting Nighttime Forex Trading
Time is a critical factor in forex trading because it influences market conditions, liquidity, and volatility. Traders consider the timing of their trades and adapt their strategies accordingly to maximise opportunities while managing risk.
Market Hours Around the World
Nighttime forex trading coincides with different market sessions. The primary session during the night for European traders is the Asian session (Sydney and Tokyo sessions). In addition, although the New York session is not technically a night session, the latter part of it often moves into the night.
The North American trading session, which includes markets in New York, Chicago, and Toronto, aligns with the evening and night hours for Australian traders. The European session overlaps with the late evening and early morning hours for Australian traders. This overlap is where traders can find significant trading opportunities.
Liquidity During Different Sessions
Nighttime trading sees lower liquidity compared to the major sessions, but this doesn’t mean it’s devoid of opportunities. Major forex pairs, for example, tend to remain relatively liquid, ensuring traders can enter and exit positions with ease.
Also, liquidity differs depending on the currency pair. For Europe, pairs with Asia-Pacific currencies (e.g. Japanese yen, Australian dollar, and New Zealand dollar) will have more liquidity at night. Meanwhile, for Asian and Australian traders, pairs with the USD and European currencies will be more liquid in the overnight hours.
Volatility Patterns
Night trading often sees more stable price movements than day sessions. Traders seeking smoother trends and reduced risk often find night trading attractive. Night traders analyse and react to the information accumulated during the day sessions. This allows for more methodical and less impulsive trading decisions, which also contributes to price stability.
Economic Events and News Releases
Despite the quiet hours, economic events and news releases can still impact nighttime trading. Keep an eye on economic calendars to avoid unexpected surprises and capitalise on market reactions.
Best Currency Pairs to Trade at Night
The choice of the best forex pairs to trade at night depends on your trading strategy, risk tolerance, and preferences. However, some currency pairs are generally considered more suitable for this. Here are some popular forex pairs to consider.
Major Currency Pairs
Major forex pairs, such as EUR/USD (Euro/US dollar), USD/JPY (US dollar/Japanese yen), and GBP/USD (British pound/US dollar), remain attractive options for night trading due to their liquidity and stable price movements. As these are the most traded pairs in forex, many market participants favour them.
Cross Currency Pairs
Cross currency pairs, like EUR/GBP (Euro/British pound), EUR/JPY (Euro/Japanese yen), and AUD/JPY (Australian dollar/Japanese yen), can provide diversification and trading opportunities during the night. They might exhibit different volatility patterns from major currency pairs.
Exotic Currency Pairs
While exotic currency pairs can be riskier, some traders find them intriguing during the night. You can consider, for example, USD/SGD (US dollar/Singapore dollar), USD/TRY (US dollar/Turkish lira), or EUR/TRY (Euro/Turkish lira). These are among the most volatile pairs in forex, and they often experience substantial price swings, offering the potential for higher profits.
Trading Strategies for Nighttime Trading
Trading strategies for night trading require careful consideration of market conditions and trader preferences. Below are a few trading strategies suitable for night trading.
Scalping
Scalping is a short-term strategy that allows traders to capitalise on small price movements. This strategy can be effective, as news that comes out at night can create more volatility in the market, which is the main benefit for scalpers.
Swing Trading
This approach involves capturing medium-term price movements. This strategy provides opportunities to identify and enter positions that can be held overnight or for several days. By using swing trading, traders reduce risks of price fluctuations that can affect day traders and scalpers. Swing traders typically need to conduct technical analysis to know when it’s best to enter and exit a trade.
Carry Trading
Carry trading utilises the difference in interest rates between currency pairs. Traders earn interest on the currency they buy (the currency of the country with a higher interest rate) and pay interest on the currency they sell (the currency of the country with a lower interest rate). For night trading, traders may look for pairs with favourable interest rate differentials and hold positions to accumulate interest income.
Range Trading
Range trading involves identifying price ranges or support and resistance levels and trading within those boundaries. During the night, many currency pairs consolidate within narrower ranges, making range trading an appealing strategy.
Risk Management Techniques
Regardless of the trading strategy, setting stop-loss and take-profit orders is crucial. They help limit potential losses and lock in profits. You can also consider managing your risk through proper position sizing. The theory states that you shouldn’t risk more than you can afford to lose in a single trade.
Another smart idea is to diversify your portfolio and trade different currency pairs to spread risk. Before entering a trade, a good way to go is to evaluate the risk-reward ratio. A favourable ratio ensures that potential gains outweigh potential losses.
Final Thoughts
To identify the best currency pairs to trade today, it’s crucial to conduct technical and fundamental analysis. The TickTrader platform can help you with the former, as there you will find the most advanced analysis tools, graphs, and more. To assess external factors, use news resources and analyses by experts, which you can find on our blog. You can open an FXOpen account and start trading tonight.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
The Dark Side of Prop Trading: Factors Leading to Financial LossA few years ago, few people were familiar with prop trading, but it has gained popularity in recent years as an alternative to traditional PAMM accounts. With PAMM accounts, traders manage investors' funds but must first attract and convince these investors. In contrast, prop trading offers a more straightforward approach to fund management that initially appears more convenient. A trader pays a fee (up to $1,000) to enter a challenge, and if successful, can be granted up to $1 million in management funds. However, the reality is more complex. A study conducted in the United States revealed that many prop traders are dissatisfied with their experiences working with prop trading firms.
📍 The Performance Of Prop Traders: Results Of A 2023 Study
A study conducted in 2023 examined the performance of prop traders by surveying 10 randomly selected prop trading firms in the United States. Additionally, the study included responses from 3,000 traders who had experienced varying degrees of success in their trading endeavors. The data was sourced from the website of the CFTC regulator, statistics from an investigation into a complaint against the prop firm MyForexFunds, and publicly available information about another prop firm FTMO.
📍 General Analysis Results
The study revealed some striking insights regarding the performance of prop traders:
◾ Approximately 94% of traders fail to complete the challenges during the first or second phase, with only 6% successfully meeting the profitability and drawdown requirements.
◾ A significant 73% of traders who fail believe their outcomes are unjust, attributing their failures primarily to the prop firms rather than their own mistakes. Many contend that the firms manipulate results, undermining their chances of success.
◾ Of the small percentage 6% who do succeed in completing the challenge, an overwhelming 98% choose to sever their ties with the prop firms within the following six months.
The failure rates at both the first and second phases of the challenges are approximately equal. This suggests that the stricter conditions imposed during the second phase do not significantly influence the overall outcome. Instead, it indicates that the mistakes and challenges encountered are consistent across both phases.
Importantly, the survey revealed that inexperience is not a primary factor in the failure of the challenges. Over 80% of traders reported having prior trading experience, with many having actively traded on demo accounts for several months. These traders stated they understood the risks involved, were aware of their trading strategies, and had previously achieved positive results during their demo trading sessions.
📍 1. Reasons Cited By Prop Traders For Failing The Challenges
◾ Lack of Time (79%). Many traders feel pressured by high revenue targets set by prop firms, which often need to be achieved within a limited time period of just 1-2 months. Although, since 2023, almost all prop firms do not set such strict time limits.
◾ Technical Problems (61%). A significant number of traders reported encountering technical issues during the challenge process. Problems such as unreliable quotes, slow platform performance, and unexpected widening of spreads were commonly mentioned as major obstacles to their success.
◾ Violation of Risk Management (27%). A smaller but still notable proportion of traders admitted to breaching risk management rules. Common mistakes included engaging in high-risk gambling behavior, mismanaging leverage, and neglecting to set stop-loss orders.
Some traders reported that their lack of understanding of the prop company's terms and conditions led to unintentional rule violations. Specifically, many were unclear about the guidelines surrounding practices such as copying trades, trading during news releases, and the use of trading advisors. This confusion contributed to their unsuccessful attempts in the challenges, emphasizing the importance of clear communication and thorough understanding of the rules set by the prop firms.
📍 2. Most Frequent Complaints From Traders About Prop Firms
◾ Non-Market Prices (92%). A staggering majority of traders reported issues with prices that do not reflect real market conditions.
◾ Order Execution Failures and Canceled Profitable Orders (73%). Many traders experienced problems with their orders not being executed as expected, particularly when they were set to generate profits.
◾ Slippage (67%). A significant number of traders reported encountering slippage, where their orders were filled at prices different from those expected.
◾ Technical Problems with the Trading Platform (52%). Technical glitches and issues with the trading platform were cited as major frustrations by more than half of the traders surveyed.
◾ Ambiguous Contract Conditions (45%). Many traders found the terms outlined in their contracts to be unclear, leading to confusion and misunderstandings.
◾ Insufficient Support Service (19%). A smaller proportion of traders expressed dissatisfaction with the lack of adequate assistance from customer support.
◾ Kicking Out from the Market Due to Non-Market Gaps (11%). Some traders noted instances where they felt they were unfairly removed from trading positions due to non-market gaps.
◾ Other Complaints (7%). A few traders reported additional issues not covered by the aforementioned categories.
Traders often encounter hidden rules when working with prop firms, such as minimum holding periods for positions, strict limitations on the minimum length of stop-loss orders, and restrictions on the use of certain trading strategies.
Additionally, many traders express concerns about the lack of transparency in the operations of prop firms. On average, over 50,000 traders attempt to pass these firms' challenges each year, but only about 6%, or around 3,000 traders, succeed. Once qualified, these traders are offered between $100,000 and $1 million of the firm's capital, which is sometimes claimed to be sourced from investors. However, there is little clarity regarding how these prop firms can amass such significant investor capital to support 3,000 traders annually.
📍 3. Main Difficulties Encountered By Prop Traders During The Challenge Phases
◾ Sharp Spread Widening and Violation of Maximum/Daily Drawdown Level Requirements (44%)
◾ Automatic Position Closures and Stopping of Challenges by the Company Due to Drawdown Violations (34%)
◾ Other Reasons (51%)
It's important to note that traders could cite multiple reasons for their difficulties. The survey results indicate that many successful traders perceive prop firms as having a vested interest in creating obstacles to intentionally disadvantage traders.
◾ Difficulty of Challenge Conditions. 89% of traders described the challenge conditions as difficult, stating they were able to pass only due to their prior experience.
◾ Funding Amounts. 96% reported receiving an amount equivalent to their initial challenge deposit, typically ranging from $20,000 to $200,000. The anticipated funding of $1 to $2 million, as promised by the prop firm, is not accessible until at least one year of successful trading.
◾ Retention Rate. 98% of traders exited the program within six months.
In theory, prop firms claim to offer the same trading conditions on a live account as they do during the challenge phases. Additionally, these firms are transparent about their model; traders often operate on demo accounts, while analysts copy their trades. A significant number of traders cited emotional burnout as a primary reason for leaving the prop firms. The tough conditions, restrictions on instrument use, and the risk of having their agreements terminated due to breaches create considerable emotional pressure.
Once traders recover the costs associated with the challenge fees and their time, many choose to transition to independent trading, where they can set their own restrictions.
📍 CONCLUSION
Prop trading presents several problems that diminish its appeal for novice traders. Many beginners struggle to pass the challenges, while seasoned professionals prefer the freedom of individual trading, free from the constraints typically found in prop trading.
Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Amateur vs. Professional GapsWhen analyzing gaps on a chart, the key question to ask yourself is this:
Did this gap result from amateur traders reacting emotionally, either buying or selling?
Or was it the professional traders, who base their decisions on logic rather than emotion?
To determine this, there's a crucial concept you need to grasp first...
Professional traders buy after a wave of selling and sell after a wave of buying.
Amateur traders, on the other hand, do the opposite! They see a stock rising and, driven by fear of missing out, rush to buy – right when the pros are preparing to sell.
Beware of Trading on Public Holidays!
In this educational article, we will discuss why is it recommendable not to trade during the public holidays. I will explain to you how banking holidays affect the financial markets and how it may impact your trading.
WHY???
🏦 The main source of problems comes from the fact that the big market players like:
banks,
hedge funds
investing firms
are absent.
Similarly to ordinary people, bankers and investors prefer to spend the holidays with their relatives and friends instead of staring at charts on Holidays.
HOW???
But how does it affect the market?
Big players are the main source of the market liquidity.
The liquidity itself is the measure to which an asset can be quickly bought or sold in the market at a price of its quotes.
Therefore, when the big players are missing, the market liquidity drops.
WHAT???
1️⃣ That fact instantly reflects in the market spreads.
They become substantially bigger, directly increasing the costs of each trade and making it problematic to open a position at a desired price.
2️⃣ Secondly, low liquidity leads to a decrease in volatility.
The market becomes weak and indecisive.
As traders, we make the money on market moves. Our goal is to catch a bullish or a bearish wave. Their absence deprives us of profits or, at least, dramatically decreases them.
Look at a chart above, it is EURJPY on a 4H time frame. Look how weak and boring the pair was in US Independence Day - official US banking holiday.
And here is how weak and slow was Gold during US Independence Day on an hourly time frame .
3️⃣ Thirdly, when the liquidity is low, even small market participants can move the market.
It dramatically increases the probabilities of false signals. Relatively low trading volumes may manipulate the market, substantially decreasing the efficiency of technical and fundamental analysis.
Look at a density of false breakout on Dollar Index DXY on 15 minutes time frame the 19th of June - Juneteenth National Independence Day in US.
All these breakouts were the manipulations and false signals.
The increased costs of trading, low volatility and manipulations should have convinced you to stay from charts during the holidays season.
However, the main reason to not trade on holidays is much simpler.
Holidays give you an opportunity to stay with your family, to take a break, to recharge and relax. Even a part-time trading is very exhausting and requires a constant attention. Let yourself be distracted and return after holidays.
❤️Please, support my work with like, thank you!❤️
Trend Strategy: Liquidity with DCF█ INTRODUCTION
This trading strategy is designed to maximize your chances of success by focusing on the most favorable currency pairs and aligning your trades with strong market trends.
Here’s a breakdown of how it works:
1. Identify the DCF (Daily Capital Flow) Index: Start by analyzing the overall flow of capital across various currencies. This involves identifying which currencies are gaining strength and which are weakening. By combining the strongest currencies against the weakest, you can select currency pairs that are more likely to move in your favor, taking advantage of minimal market resistance.
2. Wait for a trap play: A trap play is a market pattern where the price seems to move against the trend but then quickly reverses, trapping traders who took the bait. Look for this trap play to form in the direction of the identified capital flow. The key signal here is the price crossing the 10-period Exponential Moving Average (EMA), which acts as a trigger for entry into the trade.
3. Place your stop loss: To manage risk, place your stop loss just below the bar or candlestick that forms the trap play. This way, if the market moves against your position, your losses will be limited.
4. Stay in the trend: As long as the price remains above the 20-period Simple Moving Average (SMA) on a closing basis, you stay in the trade. This indicates that the trend is still strong, and there's no need to exit prematurely.
5. Take profit: Monitor the market for a trap play forming in the opposite direction of your trade. This suggests that liquidity is building up, and the market might reverse. This is your cue to take profit and close the trade.
6. Repeat: Once you've closed the trade, start the process again by identifying the DCF, finding new optimal pairs, and following the steps above.
By consistently applying this strategy, you can leverage market trends and manage risk effectively, potentially leading to consistent profits.
Key Elements of Market Trends: Strategies for Effective AnalysisNavigating the complex world of financial markets requires a deep understanding of market trends. These trends represent the general direction in which the price of a market or asset moves, influenced by a variety of economic, social, and political factors. By analyzing these trends, investors can identify opportunities, manage risks, and improve their trading strategies. This guide explores the core concepts of market trends, including their definitions, how to identify and confirm them, and their application in stock and forex markets. Whether you're new to investing or a seasoned trader, understanding market trends is essential for navigating financial markets and achieving your investment goals.
What Are Market Trends and Why Are They Important?
Market trends refer to the overall direction in which an asset, market, or index price moves over a specific period. Recognizing these trends is crucial for investors and traders, as they guide decisions on when to buy or sell assets. There are three main types of market trends:
1. Uptrend: An uptrend occurs when asset prices are rising, characterized by higher highs and higher lows. This trend indicates a bullish market sentiment, with investors showing optimism and increased buying activity.
EURUSD Uptrend 2022 -2023
2. Downtrend: A downtrend is identified by falling asset prices, with lower highs and lower lows. It reflects a bearish market sentiment, where pessimism prevails, leading to more selling than buying.
EURUSD Downtrend 2021 - 2022
3. Sideways Trend: Also known as a horizontal trend, this occurs when an asset's price fluctuates within a narrow range without a clear upward or downward movement, indicating a balance between buying and selling pressures.
EURUSD Sideways 2023 - Actual
Understanding market trends is vital because they are driven by factors like economic data, company performance, geopolitical events, and investor sentiment. By identifying these trends, investors can predict potential market movements and develop informed trading strategies.
How to Analyze Market Trends
Analyzing market trends involves looking at historical price data and other relevant information to forecast future price movements. The following methods are commonly used:
1) Technical Analysis
Technical analysis focuses on studying past market data, primarily price and volume, to identify patterns and trends. Key tools and techniques include:
Moving Averages : These averages smooth out price data over a set period, helping to determine the direction of a trend. For example, a simple moving average calculates the average price over a specific number of days, filtering out short-term fluctuations to provide a clearer view of the trend.
200 Moving Average SMA
Trendlines: Trendlines connect significant price points, such as highs or lows, on a chart. They visually represent the trend's direction and strength, aiding in identifying potential trend reversals or continuations.
Chart Patterns: Patterns like head and shoulders, double tops, and flags provide visual signals of potential trend changes or continuations, indicating whether a trend is likely to persist or shift.
2) Fundamental Analysis
Fundamental analysis evaluates economic indicators, financial statements, and qualitative factors to determine an asset's intrinsic value. Key elements include:
- Economic Indicators: Metrics such as GDP growth, unemployment rates, and inflation can influence market trends. For instance, strong economic growth can lead to an uptrend in stock prices, as companies typically perform better in a robust economy.
- Corporate Performance: Factors like earnings reports, revenue growth, and profit margins offer insights into a company's financial health and future prospects. These metrics help investors decide whether a company's stock is likely to rise or fall.
- Geopolitical Events: Events like political instability, trade policies, and international conflicts can impact investor sentiment and market trends. For example, political uncertainty might trigger a downtrend as risk-averse investors sell off assets.
By combining these methods, investors gain a comprehensive view of market trends. Technical analysis identifies patterns based on past price movements, while fundamental analysis uncovers the underlying forces driving these trends. A thorough understanding and analysis of market trends enable investors to make better decisions, manage risks more effectively, and improve their chances of success in the market.
The Importance of Market Trends
Understanding market trends is essential for successful trading and investing. These trends vary in duration:
- Short-term Trends: Lasting from days to weeks, these trends are often influenced by recent market news and events and are usually characterized by higher volatility.
- Intermediate-term Trends: Spanning weeks to months, these trends offer a clearer direction, filtering out short-term noise and focusing on more significant movements.
Long-term Trends: These trends, lasting from months to years, are shaped by macroeconomic factors and significant market shifts, reflecting broader economic conditions.
Market trends also follow specific phases:
- Accumulation Phase: Informed investors begin buying undervalued assets, often when prices are low and market sentiment is bearish.
- Advancing Phase / Mark-up: As more investors recognize the asset's value, prices rise, leading to bullish market sentiment.
- Distribution Phase: Savvy investors start selling as the asset reaches its peak, causing prices to stabilize or decline, with mixed market sentiment.
- Decline Phase: Increased selling pressure leads to falling prices, resulting in bearish sentiment among investors.
Market sentiment—whether bullish, bearish, or neutral—plays a crucial role in shaping trends and trading decisions. Economic indicators such as GDP growth, corporate earnings reports, interest rate changes, and geopolitical events also significantly influence market trends. Aligning investments with prevailing trends helps manage risks and avoid potential losses by staying in tune with market movements.
Techniques for Identifying Market Trends
Identifying market trends requires a combination of technical and fundamental analyses:
Technical Analysis Tools
- Moving Averages: Simple or exponential moving averages smooth out price data to reveal trend directions.
- Trendlines: By connecting highs and lows, trendlines help visualize trends and anticipate potential breakout points.
- Relative Strength Index (RSI): The RSI measures the speed and change of price movements, indicating overbought or oversold conditions, which can signal potential trend reversals.
- Bollinger Bands: These bands plot volatility levels around moving averages, highlighting potential reversals based on price reaching the bands' outer limits.
Validating Market Trends
Assessing the validity of a market trend is crucial for making informed investment decisions. Consider these factors to determine a trend's validity:
- Volume Confirmation: A valid trend is often accompanied by high trading volume. Significant price movements with increased volume indicate strong investor interest, which lends credibility to the trend.
- Trend Duration: The length of a trend provides insights into its strength and validity. Short-term fluctuations may result from market noise, while long-term trends reflect more enduring economic or corporate factors.
- Moving Averages: Analysts use moving averages to confirm trends. For example, a stock consistently trading above its 200-day moving average suggests a bullish trend, while trading below indicates a bearish trend.
- Support and Resistance Levels: Identifying key support and resistance levels helps validate a trend. A valid trend typically breaks through these levels and continues in the same direction rather than reversing.
- Market Sentiment and News: External factors like economic news and political events can influence market sentiment and validate trends. Positive or negative news aligned with the stock's fundamentals supports the validity of a trend.
- Divergence Analysis: Analyzing divergences between price trends and momentum indicators (such as RSI or MACD) can reveal potential weaknesses in a trend. For example, a rising price with a declining momentum indicator may indicate a weakening trend.
- Pattern Recognition: Recognizing chart patterns like head and shoulders, double tops and bottoms, and triangles can validate trends, as these patterns often precede significant price movements and confirm the trend's direction.
By carefully analyzing these factors, investors can gain a deeper understanding of whether a market trend is valid and make informed decisions accordingly.
Conclusion
Mastering market trends is crucial for investors at all levels of experience. Understanding the nature of trends, how to analyze them, and how to validate their validity are key steps in making informed trading decisions. By combining technical analysis, fundamental analysis, and staying updated on market news and events, investors can enhance their ability to identify and capitalize on market trends.
Whether you're trading stocks or navigating the forex market, leveraging these insights will help you navigate the complexities of financial markets and achieve your investment goals. Continuous learning and staying informed about market conditions are essential to developing successful trading and investment strategies.
4. e-Learning with the TradingMasteryHub - Risk Management 1x1🚀 Welcome to the TradingMasteryHub Education Series! 📚
Are you looking to level up your trading game? Join us for the next 10 lessons as we dive deep into essential trading concepts that will help you grow your knowledge and sharpen your skills. Whether you're a beginner or looking to refine your strategy, these lessons are designed to guide you on your journey to better understand the markets.
📊 Manage Your Risk with These Three Simple Methods!
In trading, managing risk effectively is crucial to long-term success. Even the best strategies can fail if risk management is ignored. In this session, we'll explore three key methods that every trader should master to protect their capital and stay consistently profitable.
1. Position Sizing: Trade Smart, Trade Safe
Position sizing is the foundation of risk management. I always set a daily and weekly stop-loss limit to ensure that I can recover mentally and financially from any losses. My daily stop-loss is capped at 5-10% of my entire trading account, and I never risk more than 30% of that daily limit on a single trade.
Each trade's risk allocation depends on the quality of the opportunity:
- 5-star setups: Up to 30% of the daily stop-loss.
- 4-star setups: Up to 15% of the daily stop-loss.
- 3-star setups: Up to 5% of the daily stop-loss.
I only trade 4-star setups and above to avoid overtrading and the temptation to jump into random market opportunities. This disciplined approach ensures that I’m only putting my capital at risk when the odds are strongly in my favor.
2. Stop-Loss Orders: Protect Your Trades with Precision
When setting stop-losses, I place them at strategic points highlighted by the market, such as significant support or resistance levels. To avoid premature stop-outs due to market noise, I set my stop-loss beyond the spread and the market’s natural fluctuations. For example, if the FDAX is in an uptrend with the last higher low at 17,000 points and the spread is 15 points, I would set my stop-loss at 16,967 points (17,000 - 15 - 17).
This ensures that my risk/reward ratio (R/R-ratio) is correctly calculated. Before entering any trade, I carefully assess whether the potential upside justifies the risk. If the R/R-ratio isn’t favorable, even for a 5-star setup, I might avoid the trade to protect my capital.
3. Diversification: Tailor Your Strategy to Your Comfort Level
Diversification is another critical aspect of risk management. As a trader, you can choose to focus on a handful of ticker symbols or spread your risk across a broader range of assets. The first approach, trading a few instruments, is easier to manage and ideal for strategies like market profile trading in FX or indices.
Alternatively, you might opt for a more diversified portfolio, trading up to 50 different stocks at once. In this strategy, each trade only represents a small fraction of your total risk capital—such as your daily stop-loss. This minimizes the emotional strain of trading, as each individual trade carries a smaller risk. With a solid strategy, you can manage all trades effectively, spreading your approach across calls, puts, different markets, industries, and volatility levels. However, this approach is typically better suited for larger accounts, where spread costs won’t significantly impact your profits.
🔚 Conclusion and Recommendation
Risk management isn’t just about protecting your capital; it’s about maintaining the psychological stability needed to trade consistently. By mastering position sizing, setting precise stop-loss orders, and choosing the right diversification strategy, you can navigate the markets with confidence and discipline. Remember, successful trading isn’t just about finding the right opportunities—it’s about managing those opportunities wisely to ensure long-term profitability.
By focusing on high-quality trade setups, calculating your risks accurately, and diversifying appropriately, you’ll find that you can maintain your composure even during losing streaks. This approach not only protects your account but also keeps your mind clear and your emotions in check, paving the way for sustained success.
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🔥 Can’t Get Enough? Don't Miss Out!
Subscribe, share, and engage with us in the comments. This is the start of a supportive trading community—built by traders, for traders! 🚀 Join us on the journey to market mastery, where we grow, learn, and succeed together. 💪
💡 What You'll Learn:
- The fundamentals of trading
- Key technical and sentiment indicators
- Risk management strategies
- And much more!...
Best wishes,
TradingMasteryHub
Mastering High Probability Trading Across All AssetsGreetings Traders!
Welcome back to today’s video! In this session, we're revisiting the critical concept of draw on liquidity. I'll guide you on how to take advantage of it with extreme market precision, focusing on when to trade, when to avoid the market, and how to increase your chances of high-probability trade outcomes.
If you're looking to enhance your trading strategy and make smarter decisions, this video is for you. Let's dive in and start mastering these concepts!
Refer to these videos as well:
Premium Discount Price Delivery in Institutional Trading:
Mastering Institutional Order-Flow Price Delivery
Quarter Theory Mastering Algorithmic Price Movements:
Best Regards,
The_Architect
Mastering the Moving Average: The Trendspotter for Every TraderTradingViewers, this one will take you back to basics. In this Idea we visit a tool that’s as essential as your morning coffee — the Moving Average (MA). This indicator is the market’s smoothing instrument, ironing out the noise and letting you see the trend for what it really is.
What’s a Moving Average?
Think of the Moving Average as the market’s highlight reel. It averages out price action over a specific period, showing you where the market’s been and giving you a clue about where it might be headed.
It’s the ultimate trendspotter, cutting through the daily chatter to reveal the bigger picture. Day traders and scalpers, don’t fret — it works on intraday time frames, too.
Types of MAs
Simple Moving Average (SMA): The old-school classic. It’s as straightforward as it gets — just an average of days you specify — 7, 9, 21, 50, 100, or even 200 days — that’s called “length”. This tool might be simple, but it’s a mainstay indicator for professional traders, institutional investors, and other big-shot money spinners.
Exponential Moving Average (EMA): The turbocharged version of the SMA. It gives more weight to recent prices, meaning it reacts quicker to the action. If the SMA is a steady cruise, the EMA is a sports car with a little more kick.
How to Use Moving Averages
Spotting Trends : The Moving Average is your trend-checking buddy. Prices above the MA? We’re in bull territory. Prices below? Looks like the bears are in control. Slap it on any time frame — it’s the same rules regardless of the time horizon.
Support and Resistance : MAs are like the guardrails of the market. They often act as support during uptrends and resistance during downtrends. When price bounces off an MA, it’s like a boxer bouncing off the ropes — watch for the counterpunch!
The Golden Cross & Death Cross : Now we’re talking setups that get traders buzzing. When a short-term MA crosses above a long-term MA, you get a Golden Cross – the market’s flashing a buy signal party. But when the opposite happens, it’s a Death Cross, and the bears start licking their lips.
Moving Average Crossover : Want some trading action? Watch for crossovers between short and long MAs. For example, throw in your chart a 50-day moving average and then top it up with a 100-day and a 200-day line. If they all cross over to the upside, you can expect a swing higher. And if they cross over to the downside, you can anticipate a swing lower.
Pro Tip: Tune Your Moving Average
Jot these numbers down — 20, 50, 100, 200 — these are the MA settings you’ll see most, but don’t be afraid to tweak them. A shorter MA (20 or 50) reacts quicker but can whipsaw you. A longer MA (100 or 200) is steadier but might be slower to catch reversals. It’s all about finding the balance that suits your trading style.
Bottom Line
The Moving Average isn’t about predicting the future — it’s about seeing the present more clearly. It’s the difference between getting lost in the noise and riding the trend with confidence. Whether you’re trend-following or looking for a noiseless entry, the MA is your go-to indicator.
So slap that Moving Average on your chart and let it take you beyond the clutter. Because when the market’s moving fast, it pays to have a steady hand guiding your trades. And as essential as MAs are, don't limit your analysis to just one tool: apply several indicators on your chart to spot trends more effectively and enhance your research with data from the economic calendar , screeners, heatmaps, and all kinds of tools available on TradingView to have a bigger picture of market activities.
Are you already using MAs in your charting and trading? Let us know in the comments below!
