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Trend Analysis

To wick or not to wick?Capturing the Full Price Range: Trendlines connect a series of highs or lows, but wicks represent the extremes of price movement within a timeframe. Including wicks can provide a more comprehensive picture of the overall trend by encompassing the entire price range (including temporary spikes or dips). Increased Accuracy: By using both the body and the wick, you might create a trendline that better reflects the actual price movement. This can be particularly helpful in volatile markets where prices can experience short-lived bursts above or below the main body of the candle. Identifying Potential Breakouts: If the price consistently pushes beyond the trendline established using wicks, it could be an early sign of a potential trend reversal. This can give you a heads-up on a possible change in market direction. However, there are also arguments against using wicks: Increased Noise: Including wicks can introduce more "noise" to your chart, making it difficult to identify the underlying trend. This can be especially true in highly volatile markets where wicks can be erratic. False Signals: Relying heavily on wicks can lead to false signals. Short-lived price movements might create the illusion of a trend change, leading to premature decisions. The Best Approach: Finding Balance The decision of whether or not to include wicks depends on your individual trading style and risk tolerance. Here are some things to consider: Market Volatility: In calmer markets, using just the bodies might be sufficient. In volatile markets, wicks might provide valuable information. Timeframe: For shorter timeframes, wicks can be more influential. For longer timeframes, the bodies might be more important. Trading Style: Day traders might find wicks more useful for identifying short-term opportunities. Swing traders might focus more on the bodies for longer-term trends. Here are some additional tips: Use a combination of technical indicators along with trendlines to confirm potential signals. Don't rely solely on trendlines for entry and exit points. Consider other factors like risk management and overall market sentiment. Practice drawing trendlines on historical data to get a feel for their effectiveness.
BITSTAMP:BTCUSDEducation
by ParabolicP
Dunning-Kruger Effect in FinanceDunning-Kruger Effect in Finance The Dunning-Kruger effect, a psychological phenomenon named after social psychologists David Dunning and Justin Kruger, examines the cognitive bias in which people with low ability to perform a task overestimate their capabilities. This effect was originally identified in a study in 1999. The cognitive bias has far-reaching consequences, especially in finance and trading. This FXOpen article explores the Dunning-Kruger effect meaning and its real-life manifestation. Understanding the Dunning-Kruger Theory The Dunning-Kruger effect definition is as follows: it is a cognitive bias in which people with limited knowledge or competence in a particular area overestimate their abilities. So, as a trader, how do you know if you have the Dunning-Kruger effect? It manifests in traders through a dualistic challenge. Firstly, there is an overestimation of one’s trading skills — a misplaced confidence that can lead to risky decision-making. Simultaneously, there’s a tendency to underestimate the inherent risks associated with financial markets. Traders influenced by this effect often display behaviours such as excessive trading, overvaluation of personal judgement, and an unwillingness to seek advice or consider alternative viewpoints. They may place an overemphasis on recent successful trades without acknowledging the role of chance or external market factors. Dunning-Kruger Effect Explained: Psychological Side Psychological factors underpinning the Dunning-Kruger effect include a lack of metacognitive ability, meaning individuals affected struggle to accurately assess their own competence. This cognitive bias creates an erroneous self-perception that can lead to financial losses. It is not exclusive to novices; even experienced traders can fall victim to it, particularly if their high performance in previous markets leads to overconfidence. Effective self-assessment and feedback mechanisms are critical in identifying and combating this cognitive bias. To avoid making risky trades based on overconfidence, traders cultivate self-awareness, regularly evaluate their decisions, and seek constructive criticism. Additionally, fostering an environment that encourages open communication and feedback within trading communities is essential in mitigating the impact of this effect. Is the Dunning-Kruger Effect real? Now that you know the Dunning-Kruger syndrome meaning, let’s discuss whether it deserves attention and whether it is even real. The short answer is yes: it is a well-established and empirically supported psychological phenomenon. The original study by David Dunning and Justin Kruger was only the beginning of scientific research. Subsequent studies have consistently provided evidence for the existence of this cognitive bias. Dunning-Kruger Effect Examples The cognitive bias that affects individuals’ ability to assess their own competence is a real and impactful phenomenon. Here are some examples illustrating its presence in the financial world. Overconfident Day Trader Imagine a day trader who experiences a series of effective trades during a bullish market. The trader begins to overestimate their skills, attributing the high performance solely to their expertise. As a result, they may increase trade frequency and take on higher-risk positions. Such complacency may lead to considerable losses when market conditions change. Underestimation of Market Risks A seasoned trader who has been through many bull trends can fall victim to the Dunning-Kruger effect by disregarding the risks inherent in financial markets. Past good performance creates a false sense of security, causing the trader to overlook the unpredictability of market movements. Underestimating risk can result in a trader failing to properly diversify their portfolio or adopt risk management strategies. Inability to Learn from Mistakes Traders susceptible to the Dunning-Kruger effect may struggle to learn from their mistakes. Instead of critically evaluating and adjusting their strategies in response to losses, they may attribute failures to external factors. This reluctance to recognise and learn from mistakes may perpetuate a cycle of poor decision-making, hindering financial growth over the long term. Disregard for Professional Advice People experiencing the Dunning-Kruger effect often show a reluctance to seek or heed professional advice. A self-confident trader, convinced of their superiority, may ignore the opinions of financial advisors or market analysts. This disregard for outside perspectives can lead to missed opportunities as well as increased exposure to risks that could be mitigated with a more open-minded approach. Still, it’s worth maintaining critical thinking and using the advice of others in conjunction with your own market analysis. Factors Amplifying the Dunning-Kruger Effect in Trading Market conditions and recent successes, confirmation bias, and social dynamics within trading communities can greatly boost a trader’s confidence, clouding their minds and encouraging them to take excessive risks. Let’s see how it works. Market conditions , particularly during bull markets, can amplify the effect. High performance in such favourable conditions may lead traders to believe their skills are infallible, overlooking the temporary nature of their triumphs. It’s crucial to recognise that favourable markets can mask underlying deficiencies in trading strategies. Then, confirmation bias , where traders seek information that confirms pre-existing beliefs, coupled with selective perception, reinforces overconfidence. Traders may ignore warning signs or dismiss alternative viewpoints, further exacerbating the bias. Challenging these beliefs is paramount for objective decision-making. Additionally, the influence of trading communities contributes to the Dunning-Kruger effect. If a community fosters an environment that glorifies risky behaviours or lacks mechanisms for accountability, individuals are more likely to succumb to overconfidence. Encouraging a culture of continuous learning may counteract these negative social influences. Final Thoughts You might be asking: “What’s the Dunning-Kruger effect, and how can it relate to my experiences?” This phenomenon underscores the importance of self-awareness and a pragmatic assessment of one's capabilities as fundamental elements in the process of making well-informed decisions. Recognising the potential for overconfidence and actively seeking diverse perspectives and feedback are essential strategies for mitigating the impact of the effect. You can explore our blog to learn more about trading biases and ways to overcome them. And, if you want to continue your trading journey, you can open an FXOpen account and use the TickTrader trading platform to access advanced charts and trade various assets on a single account. 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.
FXOPEN:XAUUSDEducation
by FXOpen
2
Trade Like A Sniper - Episode 50 - EURJPY - (21st June 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis using ICT's Concepts in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing EURJPY, starting from the 2-Month chart. If you want to learn more, check out my profile.
Education
by Road_2_Funded
Long term mutual fund/index fund investment strategy INDICATORS: 50MA, 200MA, RSI(14) CHART: Index that you are planning to invest in(eg: nifty 50 -> niftybees). Index that mostly resembles your mutual fund(eg: cnxsmallcap -> smallcap mutual funds). BUYING SRRATEGY: When above 50MA, 200MA -> SIP min amt(eg 5000) When below 50MA, 200MA -> SIP double the min amt(eg 10000) When 1st dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 6 times the min amt, When 2nd dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 8 times the min amt, When 3rd dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 10 times the min amt, so on and so forth. SELLING STRATEGY: When 1st rise in RSI(14) above 70 & above 50,200MA -> Sell 4 times the min SIP amt, When 2nd rise in RSI(14) above 70 & above 50,200MA -> Sell 6 times the min SIP amt, When 3rd rise in RSI(14) above 70 & above 50,200MA -> Sell 8 times the min SIP amt, so on and so forth. POINT TO NOTE: Invest throughout the year even when RSI shows overbought. Your investment amount would be the min SIP amount while you'll be selling 4(+) times the min SIP amount hence you'll be net seller. DISCLAIMER: This has been back tested only on paper and not in real time. I'll be following this strategy starting from june 2024. Modifications can be done in future according to the performance of the strategy.
NSE:CNXSMALLCAPEducation
by kishankarmakar001
Long term mutual fund/index fund investment strategy INDICATORS: 50MA, 200MA, RSI(14) CHART: Index that you are planning to invest in(eg: nifty 50 -> niftybees). Index that mostly resembles your mutual fund(eg: cnxsmallcap -> smallcap mutual funds). BUYING SRRATEGY: When above 50MA, 200MA -> SIP min amt(eg 5000) When below 50MA, 200MA -> SIP double the min amt(eg 10000) When 1st dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 6 times the min amt, When 2nd dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 8 times the min amt, When 3rd dip in RSI(14) below 30 & below 50,200MA -> Lumpsum 10 times the min amt, so on and so forth. SELLING STRATEGY: When 1st rise in RSI(14) above 70 & above 50,200MA -> Sell 4 times the min SIP amt, When 2nd rise in RSI(14) above 70 & above 50,200MA -> Sell 6 times the min SIP amt, When 3rd rise in RSI(14) above 70 & above 50,200MA -> Sell 8 times the min SIP amt, so on and so forth. POINT TO NOTE: Invest throughout the year even when RSI shows overbought. Your investment amount would be the min SIP amount while you'll be selling 4(+) times the min SIP amount hence you'll be net seller. DISCLAIMER: This has been back tested only on paper and not in real time. I'll be following this strategy starting from june 2024. Modifications can be done in future according to the performance of the strategy.
NSE:CNXSMALLCAPEducation
by kishankarmakar001
XAUUSD 15M - Consolidations Trading Setups - C.I.R.C. MethodThe chart above showcases various consolidations and their formation dynamics. Consolidation, Initiation, Retracement, Continuation (CIRC) Consolidations What are “consolidations”? Consolidations, often labeled as “ranges” in mainstream trading, hold a deeper meaning at T.T.T. Here, consolidations are the playgrounds of the BFI, zones where prices oscillate between highs and lows, as illustrated below. Within these confines, intentions simmer as BFI stack orders to propel future price movements. We confidently trade consolidations, fully aware of the intricate dynamics unfolding within the market’s underbelly.
TVC:GOLDEducation
by Anonymous_Analyst
XAUUSD 1H - Consolidations Trading Setups - C.I.R.C. MethodThe chart above showcases various consolidations and their formation dynamics. Consolidation, Initiation, Retracement, Continuation (CIRC) Consolidations What are “consolidations”? Consolidations, often labeled as “ranges” in mainstream trading, hold a deeper meaning at T.T.T. Here, consolidations are the playgrounds of the BFI, zones where prices oscillate between highs and lows, as illustrated below. Within these confines, intentions simmer as BFI stack orders to propel future price movements. We confidently trade consolidations, fully aware of the intricate dynamics unfolding within the market’s underbelly.
TVC:GOLDEducation
by Anonymous_Analyst
Trading AUDUSD | Judas Swing Strategy 17/06/2024 Following a successful trading week, we approached our trading desks in high spirits, eagerly anticipating the start of the trading session. While our week included trading FX:EURUSD , FX:GBPUSD , OANDA:NZDUSD we’re showing this classic example using $AUDUSD. At 8:25 AM EST, we began the day by running through the essentials on our Judas Swing strategy checklist, which includes: - Setting the timezone to New York time - Confirming we're on the 5-minute timeframe - Marking the trading period from 00:00 - 08:30 - Identifying the high and low of the zone Now that our zones are demarcated, we anticipate a liquidity sweep on either side of the trading zone, as this will assist in establishing a bias for the trading session. Liquidity was taken at the lows after 5 minutes, signaling our focus would be on identifying potential buying opportunities. To increase the likelihood of success of our trades, we wait for a break of structure (BOS) towards the buy side. Once the BOS occurs, we anticipate price to retrace to the initial Fair Value Gap (FVG) created during the formation of the leg that broke the structure. We patiently waited for price to retrace into the created Fair Value Gap (FVG), and executed our trade upon the closing of the first candle that entered the FVG, as all the conditions on our checklist for trade execution were satisfied. Ideally, our stop loss should be set at the low of 0.65854, but that would place our stop loss at approximately 6 pips, which is too tight for our strategy. Extensive backtesting has shown that tight stop losses are often triggered before price reverses and moves in our intended direction. Consequently, we have implemented a minimum stop loss of 10 pips for all our trades. After executing the trade, we experienced a minor drawdown for approximately 25 minutes before price shifted in our favor. During the drawdown, we remained calm as we had only risked 1% of our trading account with the goal of achieving a 2% return. Price was progressing well in our direction, and all that was required of us was patience for the Take Profit (TP) to be reached. We expected to be in this trade for roughly 8 hours and 6 minutes, so we stayed composed and had faith in our strategy. After 3 hours and 50 minutes, our Take Profit was triggered, and our patience paid off as we hit our target on AUDUSD, resulting in a 2% gain from a 1% risk on the trade.
Education
by CleoFinance
Monitoring and AdjustingMonitoring and adjusting in gold trading involves continuously tracking your investments and the overall market to ensure your strategy remains effective. Regularly review your portfolio’s performance and compare it against your set objectives and benchmarks. Stay informed about market trends, economic news, and geopolitical events that can impact gold prices. Adjust your strategy as needed, which may include rebalancing your portfolio, modifying entry and exit points, or updating risk management measures like stop-loss orders. This ongoing process helps you stay responsive to market changes and maintain alignment with your trading goals and risk tolerance.
OANDA:XAUUSDEducation
by FrankFx14
Choosing a Trading PlatformChoosing a trading platform for gold trading is a crucial step to ensure a smooth and secure trading experience. Look for a platform that offers robust security features to protect your investments and personal information. The platform should provide real-time data and market analysis tools to help you make informed trading decisions. Low transaction fees are important to maximize your profits. Additionally, the platform should have a user-friendly interface and reliable customer support to assist you when needed. By selecting the right platform, you can enhance your trading efficiency and overall experience.
OANDA:XAUUSDEducation
by FrankFx14
Developing a strategy Developing a strategy for gold trading involves creating a comprehensive plan to guide your trading decisions and actions. This starts with conducting thorough market analysis, including both technical analysis (such as chart patterns and indicators) and fundamental analysis (considering economic data, geopolitical events, and market sentiment). Define your entry and exit points, set stop-loss orders to manage risk, and decide on the position size for each trade. Incorporate diversification to spread risk and set realistic profit targets. Regularly review and refine your strategy based on market performance and evolving financial goals to maintain an effective and adaptive approach to trading.
OANDA:XAUUSDEducation
by FrankFx14
Donchian Channel (Path detection in the price chart)This method can be used to find the direction of price movement and choose the best times in the chart. In the main image, you can look at this indicator from a distance, where the path is easily determined. In the second way of using it, you can use the price reversals as support and resistance, where the red dots are the supports that the price rejected and the white dots are the supports that the price reacted to. The prices and their movement do not happen according to the indicator, but the volume of entry and exit causes the price to move in the chart and the trader can more easily identify the decrease and increase in the price chart through the indicators.
CRYPTO:ETHUSDEducation
by sashacharkhchian
2
3 technical reasons for the growth of #Bitcoin ?!This post has an educational aspect, and in it I checked the reasons and conditions for the growth of Bitcoin based on different time frames 1-The first reason (daily time frame): Hitting two key daily time frame supports 1- Daily timeframe pivot level (pivot indicator) 2- Midline of the descending channel Hitting support, especially support of higher timeframes, can lead to positive reactions and growth. Important note: Pay attention to the shadows involved. As you can see in the photo above, after hitting the pivot support, the daily candle formed a long lower shadow. which must be closed under this shadow to fall. That is a difficult thing 2- The second reason (4 hours time frame): Formation of a falling wedge pattern on the support of a higher timeframe (previous photo) Important point: when the downward trend before the wedge pattern consists of 3 waves, the validity of the wedge pattern for reversal is higher 3- The third reason (4-hour time frame): Triple divergence: If the orange and blue lines of the MACD indicator cross again, the triple divergence is confirmed and the possibility of forming a bottom doubles. This post is educational in nature and you are responsible for any investment decisions. Thank you for your support
Education
by Eldorado_Land
Economic Calendar: Top Market Events You Should Watch Out forMarkets tend to get especially volatile whenever there’s an economic report or some data dump that takes investors by surprise. That’s why we’re spinning up this Idea where we highlight all the major market-moving events you should watch out for when you do your trading. Today, we look at the Economic Calendar . 🏦 Central Bank Meetings and Announcements • Federal Reserve (Fed) Meetings The US Federal Reserve holds Federal Open Market Committee (FOMC) meetings roughly every six weeks,or ( eight times a year ), to talk about monetary policy, including interest rates. Setting interest rates is arguably the most significant event with long-lasting consequences for markets. Each of these meeting takes two days and wraps up with a speech by the gentleman who moves markets with a simple “Good afternoon” — Fed boss Jay Powell. • European Central Bank (ECB) Meetings Similar to the Fed, the ECB holds regular meetings to decide on monetary policy and borrowing costs for the Eurozone. ECB officials’ decisions sway financial markets, especially those based in the old continent. Indexes such as the Stoxx 600 Europe (ticker: SXXP ) and the European currency tend to fluctuate wildly during ECB events. • Bank of England (BoE) Meetings The BoE's Monetary Policy Committee (MPC) frequently meets to discuss and set interest rates and other monetary matters. Decisions made by BoE policymakers mainly affect the UK corner of the financial markets. That means elevated volatility in the British pound sterling and the broad-based UK index, the FTSE 100, among other UK-based trading instruments . • Bank of Japan (BoJ) Meetings The BoJ holds policy meetings to decide on interest rates and monetary stimulus, among other central-bank topics. Until recently, the Japanese central bank was the only one to sport a negative interest rate regime . 📝 Economic Data Releases • Nonfarm Payrolls In the US, the Bureau of Labor Statistics releases the Employment Situation Summary on the first Friday of every month. The data package includes the non-farm payroll print , which tracks how many new hires joined the workforce, the unemployment rate, and average hourly earnings. • Consumer Price Index (CPI) Monthly CPI measures the rate of inflation at the consumer level. The reading is closely monitored by the Fed in order to gauge the temperature of the economy. A reading too hot indicates an expanding economy, and vice versa. • Producer Price Index (PPI) Similar to CPI, PPI measures inflation at the wholesale level and can provide signals about inflation trends. • Gross Domestic Product (GDP) Quarterly GDP churns out a comprehensive measure of a country's economic activity and growth. • Retail Sales Monthly retail sales indicate consumer spending patterns, which are a critical component of economic activity. The data shows whether consumers pulled back from spending or splurged like there’s no tomorrow. • Purchasing Managers' Index (PMI) PMI reports for manufacturing and services sectors lay out insights into business activity and economic health. 🏢 Corporate Earnings Reports Publicly traded companies around the world release earnings reports every quarter. The hottest ones are America’s corporate giants, such as tech stocks , banking stocks , and more. The quarterly earnings figures include financial performance for the most recent three months and forward-looking guidance, which comprises earnings and revenue expectations. 🌐 Geopolitical Events Political developments, such as Presidential elections, and geopolitical tensions can have immediate and significant impacts on financial markets. These events are less predictable but are closely monitored by market participants and can quickly fuel volatility across asset classes, prompting investors to shuffle their portfolio holdings. Final Considerations Pay attention to these reports, events, and economic data and you’ll get to understand what moves markets. Anytime you witness a sharp reaction in gold ( XAU/USD ) or a quick reversal in the US dollar ( DXY ), it’s likely that the underlying factor is an economic report you didn’t know about. If you do track them — which one is your favorite market report or economic news release? Let us know in the comments below!
Editors' picks
Education
by TradingView
3
RSI Indicator LIES! Untold Truth About RSI! The Relative Strength Index (RSI) is a classic technical indicator that is applied to identify the overbought and oversold states of the market. While the RSI looks simple to use, there is one important element in it that many traders forget about: it's a lagging indicator. This means it reacts to past price movements rather than predicting future ones. This inherent lag can sometimes mislead traders, particularly when the markets are volatile or trade in a strong bullish/bearish trend. In this article, we will discuss the situations when RSI indicator will lie to you. We will go through the instances when the indicator should not be relied and not used on, and I will explain to you the best strategy to apply RSI. Relative Strength Index analyzes the price movements over a specific time period and displays a score between 0 and 100. Generally, an RSI above 70 suggests an overbought condition, while an RSI below 30 suggests an oversold condition. By itself, the overbought and overbought conditions give poor signals, simply because the market may remain in these conditions for a substantial period of time. Take a look at a price action on GBPCHF. After the indicator showed the oversold condition, the pair dropped 150 pips lower before the reversal initiated. So as an extra confirmation , traders prefer to look for RSI divergence - the situation when the price action and indicator move in the opposite direction. Above is the example of RSI divergence: Crude Oil formed a sequence of higher highs, while the indicator formed a higher high with a consequent lower high. That confirmed the overbought state of the market, and a bearish reversal followed. However, only few knows that even a divergence will provide accurate signals only in some particular instances. When you identified RSI divergence, make sure that it happened after a test of an important key level. Historical structures increase the probability that the RSI divergence will accurately indicate the reversal. Above is the example how RSI divergence gave a false signal on USDCAD. However, the divergence that followed after a test of a key level, gave a strong bearish signal. There are much better situations when RSI can be applied, but we will discuss later on, for now, the main conclusion is that RSI Divergence beyond key levels most of the time will provide low accuracy signals. But there is one particular case, when RSI divergence will give the worst, the most terrible signal. In very rare situations, the market may trade in a strong bullish trend, in the uncharted territory, where there are no historical price levels. In such cases, RSI bullish divergence will constantly lie , making retail traders short constantly and lose their money. Here is what happens with Gold on a daily. The market is trading in the uncharted territory, updated the All-Time Highs daily. Even though there is a clear overbought state and a divergence, the market keeps growing. Only few knows, however, that even though RSI is considered to be a reversal, counter trend indicator, it can be applied for trend following trading. On a daily time frame, after the price sets a new high, wait for a pullback to a key horizontal support. Your bullish signal, will be a bearish divergence on an hourly time frame. Here is how the price retested a support based on a previous ATH on Gold. After it approached a broken structure, we see a confirmed bearish divergence. That gives a perfect trend-following signal to buy the market. A strong bullish rally followed then. RSI indicator is a very powerful tool, that many traders apply incorrectly. When the market is trading in a strong trend, this indicator can be perfectly applied for following the trend, not going against that. I hope that the cases that I described will help you not lose money, trading with Relative Strength Index. ❤️Please, support my work with like, thank you!❤️
Editors' picks
Education
by VasilyTrader
34
Turtle Trading: System, Rules, and StrategyTurtle Trading: System, Rules, and Strategy In the 1980s, the Turtle Trading system was born from a debate about whether trading skills were innate or could be taught. Richard Dennis and William Eckhardt decided to train novices in their trend-following trading strategies, thus giving rise to the Turtle Trading system. This article explores the Turtle system, exploring its various facets and applications in a modern trading environment. The Origins of Turtle Trading The concept of Turtle Trading emerged from a unique experiment conducted in the early 1980s by two seasoned commodities traders, Richard Dennis and William Eckhardt. Disagreeing over whether trading could be taught or was an innate ability, they decided to settle their debate with a real-world test. Dennis believed that with the right instruction, anyone could learn to trade effectively, while Eckhardt held that trading success was attributable to genetic factors. To test the hypothesis, Dennis placed an advertisement seeking trading apprentices in The Wall Street Journal. From over a thousand applicants, he selected 14 individuals for the original experiment—often referred to as the "Turtles." These participants, who came from diverse backgrounds, including a professional blackjack player and a fantasy game designer, were given a two-week intensive training in a simple trend-following system that traded a range of commodities, currencies, and bond markets. The training focused on rules, discipline, and managing risk. The Turtles were taught to buy price breakouts and sell market breakdowns. Additionally, strict rules were set for position sizing and the use of stop-loss orders to manage potential losses. After the training, each Turtle received a trading account funded by Dennis, starting with amounts ranging from $500,000 to $2 million. The results were extraordinary, leading some Turtles to earn returns in excess of 100% in a year. This outcome not only confirmed Dennis’s belief in the teachability of trading but also established the Turtle Trading System as a landmark in trading education. Core Principles and Rules of Turtle Trading The Turtle Trading system is anchored in the principle of trend following—specifically, capitalising on large, sustained price movements either upwards or downwards. This approach is rooted in the belief that financial markets move in trends more often than they behave erratically, and these trends can be identified and leveraged for substantial returns. To achieve his results, Dennis outlined a complete system. He specifically focused on position sizing and risk management, using mechanical rules to minimise emotion-based decision-making and produce positive replicable results. Here’s an overview of the key Turtle Trading rules: Market Selection The Turtle Trading system is designed to be applied across a broad spectrum of markets, which enhances its adaptability and potential for capturing trends in diverse asset classes. The original Turtles traded commodities, currencies, and bonds, but the principles are applicable to stocks and other financial instruments as well. Position Sizing Position sizing in the Turtle Trading strategy uses a volatility-based unit size calculation, which is central to the risk management strategy. The system measures volatility using the Average True Range (ATR) of the last 20 days, referred to as "N." This metric helps to standardise risk across different markets, regardless of the individual asset’s price volatility. For example, if a particular market has an N of $1.00 and the account size is $100,000, a single unit might risk 1% of the account, or $1,000. If N is $1.00, the position size would be adjusted so that a $1.00 move against the position would equate to a $1,000 loss. This method ensures that each trade carries a consistent level of risk proportional to market volatility. In practice, traders can use the ATR indicator—available in FXOpen’s free TickTrader platform alongside 1,200+ trading tools—to gauge a market’s volatility and adjust their position sizing accordingly. Entries Entry rules are straightforward yet strategically significant within the Turtle system. Traders typically buy or "go long" when an asset’s price exceeds the high of the preceding 20 days. Conversely, they sell or "go short" when the price falls below the low of the last 20 days. This approach aimed to capitalise on significant movements that signal the potential start of a trend, thereby aligning trades with the overall market momentum. The Donchian Channel indicator can be used to plot these highs and lows. It’s worth noting that while this entry system has the potential to produce positive results, it may be somewhat redundant today. While its simplicity may have worked well in the 1980s, the trading landscape has since shifted tremendously and typically calls for more complex entry strategies to compete against advanced trading algorithms. Therefore, the entry criteria can be adjusted to suit whichever trend-following system you prefer as long as it has a verifiable edge. Exits Risk management is rigorous within the Turtle Trading system. It specifies that no single trade should risk more than 2% of total capital. Initial stop-loss orders are set to manage and limit potential losses from any trade. For instance, if a position was entered based on a 20-day breakout, an initial stop might be placed at 2N below the entry point for a long position or 2N above for a short position. This method may help to cut losses quickly if the market does not move in the expected direction. Trailing stops protect gains. As the market moved favourably, stops were adjusted to either a 10-day low for long positions or a 10-day high for short positions, locking in profits while still allowing room for the trade to grow. Tactics One of the key tactics in the Turtle Trading system is pyramiding, where traders increase their position in increments as the market moves in their favour without increasing the total risk per trade. This was done by adding another unit of the trade as the market moves every 0.5N in the right direction, thus potentially enhancing gains on trends, up to four units. Another crucial aspect was the use of breakouts to both initiate and scale up positions, which aligns the trading strategy with the trend-following principle central to the system’s philosophy. Risk Management Besides stop-loss orders, diversification across uncorrelated markets was advised to spread risk and increase the likelihood of catching effective trends in different markets. Additionally, the system includes rules about the maximum number of units that can be held across correlated and uncorrelated markets, ensuring that exposure is capped and managed effectively. Psychology The psychological underpinnings of the Turtle Trading system emphasise discipline, patience, and consistency. Traders were taught to follow the system’s rules without deviation, which is crucial for maintaining performance across all market conditions. Emotional decision-making is minimised, focusing instead on systematic, rule-based responses to market signals. Adapting Turtle Trading to Modern Markets While the original Turtle Trading system has shown significant success in past decades, modern traders might find greater value in adapting rather than strictly adhering to its original rules. The philosophy behind Turtle Trading offers foundational insights that can be tailored to today’s diverse trading environments. Embracing the Trend-Following Philosophy At its core, Turtle Trading is a trend-following system. Richard Dennis, the system's creator, demonstrated that with well-defined entries and exits coupled with strong risk management, one can systematically exploit market trends for favourable results. Modern traders can focus on the principle of capturing momentum, which remains relevant across all market conditions and types of assets, including in cryptocurrencies* and global stocks. Risk Management A key lesson from Dennis is the importance of cutting losses early. The Turtle system enforced having a predefined exit point for every trade, ensuring decisions were made without emotional interference. The use of volatility-based position sizing is another critical component that many traders overlook, helping to potentially minimise the risk of loss in highly volatile markets and potentially maximise trade effectiveness in less volatile assets. In fact, volatility-based sizing, coupled with a strict 2% risk limit per trade and minimising cross-market correlations between positions, may form the basis of a robust risk management system that potentially reduces the drawdown. Profit Taking Rather than exiting at a predetermined profit target, the Turtles used trailing stops to let their effective trades run, maximising potential profits during strong trends. This strategy remains one of the most effective ways to capture substantial moves in the market without leaving gains on the table. Combined with a strict risk management system, the Turtle traders were able to follow the famous trading adage, “Cut your losses early and let your winners run.” Discipline and Systematic Trading Dennis proved that effective trading could be taught through a disciplined, systematic approach rather than relying on innate talent. Modern traders can focus on developing or following mechanical trading systems that minimise emotional decision-making and enhance consistency. This approach is particularly effective during extended periods of losses, as it helps maintain a strategic perspective, reinforcing that a well-tested strategy can yield positive results over time. In essence, while the financial markets have evolved significantly since the 1980s, the foundational principles of the Turtle Trading system—discipline, risk management, and trend exploitation—remain universally applicable. The Bottom Line The Turtle Trading system, with its robust framework and disciplined approach, has demonstrated that effective trading can be systematically learned and applied. While the original system has its roots in past market conditions, the principles of trend-following, risk management, and psychological discipline remain highly relevant. For traders looking to apply these time-tested strategies in today's dynamic markets, opening an FXOpen account could be the first step towards harnessing these powerful trading insights. FAQs What Is Turtle Trading? Turtle Trading is a systematic trading method developed in the 1980s by Richard Dennis and William Eckhardt. It involves a rule-based approach to buy and sell trading instruments using trend-following strategies. The name originates from Dennis's belief that traders could be "grown" like turtles on a farm. What Are the Turtle Rules? The Turtle Rules form a comprehensive trading system that includes guidelines on market selection, position sizing, entries, exits, and tactics. Key elements include buying 20-day highs, selling 20-day lows, and managing trades with stops and predefined risk limits. This system emphasises strict adherence to its rules to ensure discipline and minimise emotional decision-making. What Is the Turtle Traders Indicator? The Turtle Traders primarily used the Donchian Channel as their indicator, which identifies the high and low prices over a set number of past trading days, typically 20 days. This indicator helps traders determine breakout points for entering and exiting trades, aligning with the system's trend-following philosophy. *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.
Education
by FXOpen
6
Trade Like A Sniper - Episode 49 - GBPSGD - (18th June 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis using ICT's Concepts in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing GBPSGD, starting from the 3-Month chart. If you want to learn more, check out my profile.
Education
by Road_2_Funded
2
Trade Like A Sniper - Episode 48 - HKDTWD - (18th June 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis using ICT's Concepts in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing HKDTWD, starting from the 3-Month chart. If you want to learn more, check out my profile.
Education
by Road_2_Funded
Trade Like A Sniper - Episode 47 - USDTWD - (18th June 2024)This video is part of a video series where I backtest a specific asset using the TradingView Replay function, and perform a top-down analysis using ICT's Concepts in order to frame ONE high-probability setup. I choose a random point of time to replay, and begin to work my way down the timeframes. Trading like a sniper is not about entries with no drawdown. It is about careful planning, discipline, and taking your shot at the right time in the best of conditions. A couple of things to note: - I cannot see news events. - I cannot change timeframes without affecting my bias due to higher-timeframe candles revealing its entire range. - I cannot go to a very low timeframe due to the limit in amount of replayed candlesticks In this session I will be analyzing USDTWD, starting from the 4-Month chart. If you want to learn more, check out my profile.
Education
by Road_2_Funded