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Trend Analysis

How to Analyze a Cryptocurrency: Fundamental & Technical StyleCrypto is fashionable again (was it ever out of fashion?), with Bitcoin BTCUSD pumping to a new all-time high above $82,000 . But with all that buzz and excitement, it’s easier than ever to get swept away in the tide of social media hype, viral memes, and “expert” Telegram signals chats. Is that real success in crypto trading? Not exactly. Real success requires more than just blindly following the noise. The savvy investor knows how to analyze a coin, piecing together a mosaic of factors to make some trading choice. Let’s break down 🤸‍♂️ how to do this effectively. When looking to analyze a cryptocurrency, there are two distinct approaches you’d want to consider — fundamental and technical analysis. This pair of viewpoints cuts through the noise and gets to the real story behind a coin. Coupling them together can be a powerful recipe for success. The Basics: Why You Need Both Fundamentals and Technicals Crypto analysis is all about the combination of fundamental and technical approaches. Fundamental Analysis (FA) helps you determine whether a cryptocurrency holds long-term potential based on its real-world application, team, and project structure. Technical Analysis (TA) lets you gauge market sentiment and potential price moves by analyzing past price actions and trends. Master both, and you’ve got yourself a complete toolkit. FA tells you if a coin is worth your time, and TA lets you fine-tune your entries and exits. Fundamental Analysis: Reading Between the Blockchains Fundamentals give you the long-term view—what a project stands for, what problems it’s solving, and whether it has staying power. A coin with solid fundamentals usually has a strong foundation, dedicated team, and clear purpose. Here are a few key aspects to evaluate: Use Case: Does This Coin Do Anything Useful? Not all coins are created equal, and some are, well… kind of a pointless joke, or created to be a pointless joke but turned out to be a big deal (did anyone say Doge DOGE/USE ?) If you want a real-world use case, look at Ethereum ETH/USD — it opened up the entire decentralized finance (DeFi) and smart contract universe. Now compare that to yet another dog-themed token. The key is to ask yourself: does this coin solve a real-world problem, or is it banking on social media likes? A strong use case equals a stronger shot at lasting value. Team and Leadership: Who’s Running the Show? The team behind a coin is often the make-or-break factor. You want to see solid, experienced people who’ve been in the space and know their stuff. Look for LinkedIn profiles, past projects, and what industry insiders are saying. Pro tip: if you can’t find the team anywhere online, or if their CEO goes by something like “CryptoKing” on Reddit or Telegram, proceed with caution (or dump it). Investors and Backers: Who’s Got Skin in the Game? In crypto, a solid roster of backers can be like a seal of approval — big-shot VCs, famous angel investors, or major blockchain funds often bring more than just cash. Big names like Andreessen Horowitz (a16z) or Pantera Capital backing a coin? That’s a good sign as they likely see something worth the investment. But let’s keep it real: even the pros get it wrong. Sequoia’s high-stakes investment in FTX? That didn’t age well. It went from a headline win to a headline regret. The lesson? Big names can be a great vote of confidence, but they’re no substitute for doing your own homework. Dig into how engaged these investors are. Are they making decisions or are they just a logo on the website? If they’re actually involved, it adds weight. Just remember: your best edge comes from putting in the research, not just riding on who’s along for the ride. Partnerships and Network: Are They Walking the Talk? A strong project is often backed by legitimate partnerships. Real collaborations with reputable companies from the industry show a coin has a foothold in the market, a strong network. But watch out for overblown claims—a name drop isn’t the same as a partnership. The best projects are the ones where you can verify the collaborations and see real interaction. Technical Analysis: Getting the Pulse of the Market If FA tells you what a coin is, TA tells you how it’s behaving in the market. TA is all about catching trends, spotting patterns, and getting the timing right. Here’s where to start: Indicators to Watch: Moving Averages, RSI, and MACD Moving Averages (MA): These smooth out price action to show you the market’s general direction. A 50-day MA crossing above a 200-day MA? That’s usually a bullish sign . Relative Strength Index (RSI): The RSI tells you if a coin is overbought (above 70) or oversold (below 30), signaling potential reversals . MACD (Moving Average Convergence Divergence): When the MACD line crosses above the signal line, it’s a buy signal; below, it’s a sell signal. This helps you ride momentum without getting whipsawed. Chart Patterns: Know Your Shapes Patterns like head and shoulders, double tops/bottoms, and trend lines are your map to market sentiment. Look for breakouts past resistance levels or breakdowns below support as entry and exit points. But stay flexible — that’s crypto and things can change on a dime. Meme Coins and the Hype Machine: Beware the FOMO If you’ve been in the crypto game for any time at all, you’ve seen the lure of meme coins. From Dogecoin to Shiba Inu, these coins have made some people rich — but they’ve also created some bagholders. Don’t Chase Trends: Just because a coin is all over TikTok doesn’t mean it’s a wise investment. Meme coins often rely on community-driven hype rather than any real-world utility. FOMO is the quickest way to make a costly mistake. Be Wary of Telegram and Discord “Tips”: While some groups are genuinely insightful, many operate more like echo chambers. If your trading strategy is “I saw it in a chat,” it might be time to rethink your approach. Look for projects with substance, not just the latest meme. Bringing It All Together: Using FA and TA for Smarter Trades Blending FA and TA lets you go beyond hype. Here’s a solid plan to put these tools to work: Research the Fundamentals: Assess if a project has real value based on its use case, team, and partnerships. Look for Technical Confirmation: Use technical analysis to decide the best time to enter and exit. Set Goals and Limits: Establish your profit targets and stop-loss points before you buy. Crypto trading is part science, part art. Fundamental analysis gives you the big picture, while technicals keep you tuned in to market conditions. Use them together, and you’ll be a lot less likely to end up with a token that’s only valuable for a while. Final Take: Follow the Data, Not the Crowd Crypto success isn’t about catching the latest Twitter trend — it’s about staying grounded in facts and making decisions based on data, research, and analysis. Use FA to pick projects that last and TA to catch price action at the right time. So, Which Type of Analysis Do You Prefer? Are you more of a fundamentals fan, focusing on the project’s long-term vision and team? Or do you live by the charts, riding trends and tracking indicators? Maybe you’re a mix of both? Whichever camp you fall into, we’d love to hear your thoughts. Drop a comment and share your go-to analysis strategy—let’s get the conversation started!
BITSTAMP:BTCUSDEducation
by TradingView
13
Finding Ranging Market Before Happening! (X Empire)In the heart of ARZ Trading System, is a candle that we call it MC (Master Candle). Any time that we see a candle that matches following description, most likely we will have a ranging market, with specified range of oscillations: 1. Candle itself is in the direction of the trend 2. Body of the next candle is within high to low of this candle 3. In the next candle(s), price could retrace most of the MC candle The main ranging area is the high to low of the MC candle. The exact size of this area, from high to upper is UTP (here $0.00062), and from low to lower is LTP (here $0.00011). This means price could fluctuate between these levels. If market is going to continue the trend (here is uptrend), price should break the UTP level and continue strongly.
Education
by forexise
Practical Application of Order Blocks in Trading🔸In trading, especially in the context of institutional and supply-demand-based strategies, order blocks, imbalances, breakers, and entry points are all critical elements for spotting potential high-probability trade setups. Here’s a breakdown of each: 1. Order Blocks 🔸Definition: Order blocks are areas where large institutional orders (by banks, funds, etc.) are believed to have been placed, often leading to sharp price movements. These typically form after a period of consolidation, when a large entity enters the market to create momentum in a particular direction. Types: ▪️Bullish Order Block: An area where institutions have placed buy orders, resulting in an upward price move. It’s generally identified by a down candle (in a bullish trend) before a strong upward move. ▪️Bearish Order Block: An area with concentrated sell orders, leading to a strong price decline. It’s marked by an up candle (in a bearish trend) before a sharp downward move. ▪️Use in Trading: Traders look for price to return to these areas as potential entry points, expecting the area to act as support (for bullish order blocks) or resistance (for bearish order blocks). 2. Imbalances 🔸Definition: Imbalances (also called Fair Value Gaps or FVG) occur when there is a strong price movement in one direction, leaving a "gap" in liquidity. ▪️IThis happens when there’s more demand or supply than what the current orders can fulfill, leading to a price spike. ▪️Identification: Look for consecutive candles moving in the same direction without much overlap in their wicks. This often leaves a gap between the high of one candle and the low of the next. ▪️Use in Trading: Since price often "rebalances" itself, traders may expect price to return to this area before continuing its trend, using it as a potential point for entries in the direction of the larger trend. 3. Breakers 🔸Definition: A breaker is a failed attempt at reversing a trend, usually involving a break of structure that indicates a reversal but then fails, with price moving back in the original trend's direction. Types: ▪️Bullish Breaker: When a downtrend is invalidated, but instead of continuing downwards, price reverses back up. The previous support level that price broke and closed below may now act as a support zone. ▪️Bearish Breaker: When an uptrend is invalidated, but price moves back down, often causing previous resistance to act as resistance again. ▪️Use in Trading: Breakers are often used to identify failed reversals where traders might enter in the direction of the initial trend, as these zones tend to have strong support or resistance. 4. Bullish and Bearish Breakers in Trading Bullish Breaker: ▪️A level created after a failed bearish structure, turning into support as the price breaks upward. Look for confirmation of price moving above this level, with entry points often at or just above the zone. Bearish Breaker: ▪️A level created after a failed bullish attempt, creating a resistance zone as price breaks lower. Traders enter trades when price retests this breaker level and shows signs of rejection. 5. When to Enter Trades ▪️Order Block Entry: Look for price to return to an order block zone (after creating it), confirming it as a valid area of support or resistance. Confirmation methods include candlestick patterns or lower timeframe support/resistance creation. ▪️Imbalance Entry: Price may "fill" imbalances, and traders can look to enter as price retraces to this level with signs of rejection or confirmation. Watch for candles rejecting at the edge of the imbalance zone. ▪️Breaker Entry: Wait for price to test the breaker zone and show signs of rejection, typically with a smaller time-frame entry trigger (like a lower high or low in structure). ▪️Risk Management: When entering trades based on these points, place stops beyond the zone or recent high/low, and target areas of the next significant support/resistance or opposite liquidity pools. 6. Tips for Effective Use 🔸Multi-Timeframe Analysis: Check higher timeframe levels for stronger order blocks or breakers and use lower timeframes to refine entry. 🔸Wait for Confirmation: Often, a test of these areas with a reversal candlestick pattern (like a pin bar or engulfing candle) on a lower timeframe will provide better entries than immediately entering. 🔸Volume Confirmation: Higher volume in these areas can suggest more institutional interest and improve the chance of a successful trade. 🔸Mastering these concepts involves observing how price interacts with these levels across different market conditions, which enhances accuracy over time.
Education
by ProjectSyndicate
18
HOW TO GET RICH PREDICTING BITCOINS BULL RUN & CRASH! TUTORIALCOINBASE:BTCUSD NASDAQ:IBIT AMEX:BITX HOW TO GET RICH PREDICTING BITCOINS BULL RUNS & CRASHES! TUTORIAL In this must-watch tutorial, I'll reveal the secrets to predicting Bitcoin's rise and fall with stunning accuracy. Join me as I walk you through four distinct indicators that you can use to jump into Bitcoin before massive runups and dodge huge crashes. Whether you're a seasoned trader or a crypto newbie, these insights will transform how you approach the market. Don't miss out on this exclusive analysis that could change your financial future! Smash that like button and follow for more game-changing strategies, ideas, and tutorials!
COINBASE:BTCUSDEducation
by RonnieV29
3
Smart Money Market Structure Order Block Trading🔸The principles of "smart money" trading focus on understanding the behavior of institutional investors, often referred to as "smart money," to make informed trading decisions. By analyzing market structure, order blocks, supply and demand zones, and market cycles, traders aim to predict price movements and make profitable trades. Here’s a breakdown of these key concepts and how they interact: 1. Market Structure Market structure is the fundamental flow of price movement, typically defined by highs and lows that indicate trends. The market can be seen in three primary states: ▪️Uptrend: Characterized by higher highs (HH) and higher lows (HL). ▪️Downtrend: Defined by lower highs (LH) and lower lows (LL). ▪️Consolidation (Range-bound): Prices oscillate between a support (demand) and resistance (supply) level. ▪️Understanding market structure helps traders identify when a market is trending or ranging, which is essential for timing entries and exits. 2. Order Blocks Order blocks are areas on a price chart where large institutional traders, like banks and hedge funds, execute significant orders. These blocks often indicate strong levels of support or resistance due to the substantial buying or selling activity. ▪️Bullish Order Block: Typically found before a strong upward move. It's the last bearish (down) candle before the price rallies, signaling a demand zone. ▪️Bearish Order Block: Typically found before a strong downward move. It's the last bullish (up) candle before the price drops, indicating a supply zone. ▪️Order blocks provide clues to where "smart money" has entered the market, suggesting areas where price may return for liquidity and where retail traders may find good entry points. 3. Supply and Demand Zones Supply and demand zones are similar to support and resistance levels but with a focus on identifying imbalances. They represent areas where supply (sellers) and demand (buyers) are significantly unbalanced: ▪️Demand Zone: A price range where buyers are strong enough to prevent further price drops. This often corresponds to an area of support. ▪️Supply Zone: A price range where sellers have historically stepped in to prevent further price increases, serving as resistance. ▪️Prices often revert to these zones due to liquidity needs, creating entry points for trend continuations or reversals. 4. Lower Highs (LH) and Higher Lows (HL) These are essential markers in identifying trend changes: ▪️Lower Highs (LH): In a downtrend, the price fails to reach a previous high, indicating seller dominance and potential continuation of the downtrend. ▪️Higher Lows (HL): In an uptrend, the price creates higher lows, suggesting that buyers are gradually gaining strength, signaling a continuation of the uptrend. These structural points help traders understand potential trend reversals or continuations. 5. Accumulation and Distribution Phases These phases are critical to the Wyckoff Market Cycle: ▪️Accumulation: This phase represents a period where "smart money" accumulates positions at low prices. It typically occurs after a downtrend and is characterized by a consolidation or sideways price movement. This phase often signals a future uptrend. ▪️Distribution: This is the phase where institutional players offload positions after a significant price increase. Like accumulation, distribution appears as consolidation, often preceding a downtrend. ▪️Accumulation and distribution are often analyzed using volume patterns and price action to gauge when a trend may begin or end. 6. Market Cycles (The Wyckoff Theory) Market cycles are a sequence of phases that price undergoes over time. According to Wyckoff’s methodology, there are four phases: ▪️Accumulation: Institutions build positions, often at a market bottom. ▪️Markup: After accumulation, the price starts to increase as demand outstrips supply. ▪️Distribution: Institutions sell off their positions, often at the top of the cycle. ▪️Markdown: Price declines as supply overwhelms demand, leading to a downtrend. ▪️Understanding these phases allows traders to anticipate potential turning points, which is critical in smart money trading. Applying These Principles in Trading The smart money trading approach uses these principles collectively: 🔸Identify Market Structure: Determine whether the market is trending or ranging, then identify order blocks, supply and demand zones, and significant highs and lows. 🔸Recognize Key Levels: Watch for accumulation and distribution phases at these levels, helping to anticipate likely future movements. 🔸Confirm with Volume: Use volume analysis to confirm accumulation or distribution activity. 🔸Set Entries and Exits at Smart Money Zones: Utilize identified order blocks and supply/demand zones to enter trades with the trend (markup or markdown) or exit before a reversal. 🔸By combining these elements, traders seek to align with the strategies of institutional investors, capturing trends early and minimizing exposure during less favorable periods.
Education
by ProjectSyndicate
12
How to PREDICT MARKETS! Tops and BottomsIn this video, I go over the following in great detail: Predicting Markets with Williams %R, RSI, and MACD Predicting market movements can be challenging, but combining the Williams %R, Relative Strength Index (RSI), and Moving Average Convergence/Divergence (MACD) indicators can provide powerful insights for traders. Williams %R measures the current closing price relative to the high-low range over a specific period, helping identify overbought or oversold conditions. RSI gauges the speed and change of price movements, also indicating overbought or oversold levels. MACD analyzes the relationship between two moving averages of a security's price, identifying potential buy or sell signals. By using these three indicators together, traders can: Confirm Trends: When all three indicators align, it strengthens the signal for a potential trend continuation or reversal. Identify Entry and Exit Points: Overbought or oversold signals from these indicators can help pinpoint optimal entry and exit points. Reduce False Signals: Combining multiple indicators can help filter out false signals, increasing the reliability of predictions.
AMEX:SPYEducation
by RonnieV29
4
Trend Direction and Trading Indicator TutorialThe Tenoris Trend Indicator determines support and resistance using a proprietary method that I've not seen in other indicators. Over the last 10 days a potential gain of 15% on Bitcoin is shown on the chart. The key is knowing which Red and Green arrows are most likely to indicate the reversal of the price trend from short to long or long to short (red to green or green to red arrows and boxes). The arrows are used for trade entries and exits and the boxes in relationship to the price of a closed candle are used to predict price direction. The time frame of the chart is critical for maximizing the accuracy of the indicator. In general a 7D candle on crypto and a 30 day candle on stocks and a quarterly candle on indexes like the S&P provides the most accurate trend direction. On Bitcoin a 4H candle chart can be successfully used to determine entires for short term trades lasting a few days. In extensive back testing and live trading a gain of 10% a month or more is consistently possible. The key to using the indicator is knowing which arrows are the most indicative of a trend change. When a green candle closes above the red boxes it's likely that price is going to go from trending down to up. When a red candle closes below a green box it's likely that price will trend down. Compared to moving averages, and other directional trend indicators the Tenoris Trend Indicator is superior in detecting trend changes much earlier than other methods of technical analysis commonly used.
BITSTAMP:BTCUSDEducation
by TrendGuruX
Mastering the Anchored Volume Profile: Setup & Tutorial on TVMastering the Anchored Volume Profile: Setup & Tutorial on TradingView 📊 The Anchored Volume Profile is a powerful tool that traders use to visualize volume distribution over a specified price range, providing critical insights into market behavior. Here’s a detailed description of its setup and usage on TradingView: In this video, we will be going in-depth into the following areas: What is the Anchored Volume Profile? The Anchored Volume Profile is a specialized indicator that helps traders understand the distribution of traded volume at different price levels. Unlike traditional volume profiles that analyze data over a fixed time period, the anchored version allows traders to anchor the volume analysis to specific bars, candles, or price points. Why Use the Anchored Volume Profile? Identifying Support and Resistance Levels: You can easily identify key support and resistance levels by analyzing where the most volume has been traded. Spotting Trends and Reversals: High-volume nodes can indicate areas of strong interest, helping to predict potential trend continuations or reversals. Improving Entry and Exit Points: Knowing where the market participants are most active can significantly enhance your decision-making process for entries and exits. How to set up the Anchored Volume Profile on TradingView: Add the Anchored Volume Profile Indicator: Click on the “Indicators” button at the top of the chart. Search for “Anchored Volume Profile” in the search bar. Select it from the list and apply it to your chart. Anchor the Indicator: Click on the anchor icon that appears on the chart. Drag it to the specific bar, candle, or price point where you want to start your volume analysis. Customize Settings: Adjust the settings to suit your trading style. You can modify the range, color, and other parameters to better visualize the data. Using the Anchored Volume Profile: Analyzing Volume Nodes: Identify high and low volume nodes. High volume nodes often act as support or resistance, while low volume nodes might indicate potential breakout areas. Understanding Market Sentiment: See where the majority of trading activity has taken place to gauge market sentiment. Making Informed Decisions: Use the insights from the volume profile to make better-informed trading decisions regarding entries, exits, and stop-loss levels.
NASDAQ:TSLAEducation
by RonnieV29
21
A capture of inflation, dilution and stimulus /2024As we see by the chart, we had a series of events mostly around mega-stimulus for Covid and a massive dilution of currency as triggering events. Inflation rose and is now back down close to the desirable 2% inflation. We don't want prices to go back to where they were, that is deflation and is not healthy for an economy. We want prices to stay near the same year after year with modest inflation. When inflation rises too fast, we increase interest rates to slow down spending, to reduce inflation. The best we can do is work on wage growth to accommodate the inflation from our past years while maintaining modest inflation. At 2.4% inflation currently, there really is pretty much nothing to fix anymore, we just need to keep it around where it is, a little lower really and work on modest wage growth. Looking at this data, it really looks like the vast majority of the culpability of that inflation we had came from 2020, one of the single worst years financially as a country with inflation starting to rise immediately in 2021, and exacerbated some in 2021. Looking at this chart, there is a tangible possibility that we see >10% inflation by 2027 Here is the M2 money supply chart:
ECONOMICS:USIRYYEducation
by EncryptShawn
Election Year Cycle & Stock Market Returns - VisualisedIn this chart, we're analysing the open value of the week the US election took place and comparing it to the open of the following election, showing the gain (or loss) in value between each election cycle. Historically we can see prices in the Dow Jones Industrials Index tend to appreciate the week the election is held. Only twice has the return between the cycles produced a negative return. Buying stocks on election day, 8 out of 10 times has yielded a profitable return between the election cycles. 80% of the time in the past 40 years returning a profit, has so far been a good strategy to take. The typical cycle starts with the election results, an immediate positive movement and continued growth before finishing positive. The Outliers 2000-2004 was the only year which ended negative without prices going higher than the election day. 2004-2008 increased 41.84% before ending negative. 2008-2012 began the cycle falling 30.62% before finishing positive. The names of presidents who won their respective elections is to visualise who had the presidential term during that specific cycle.
TVC:DJIEducation
by Mt.BFX
SWING TUTORIAL - ABSLAMCIn this tutorial, we analyze the stock NSE:ABSLAMC (Aditya Birla Sun Life AMC Limited) identifying a lucrative swing trading opportunity following its all-time high in Oct 2021. The stock declined by nearly 57%, forming a Lower Low Price Action Pattern, but subsequently reversed its trend. At the same time, we can also observe the MACD Level making a contradictory Pattern of Higher Lows. This Higher Low Pattern of the MACD signaled the start of a Bullish Momentum, thereby also signaling a good Buying Opportunity. The trading strategy yielded approximately 114% returns in 63 weeks. Technical analysis concepts used included price action analysis, MACD, momentum reversal, trend analysis and chart patterns. The MACD crossover served as the Entry Point, with the stock rising to its Swing High Levels of 720 and serving as our Exit too. As of wiring this tutorial, we can also notice how the stock is making a breakout and retest of the Swing High levels and trying to continue its momentum further upward trying to make a new All Time High. KEY OBSERVATIONS: 1. Momentum Reversal: The stock's price action shifted from a bearish to a bullish trend, indicating a potential reversal. 2. MACD Indicator: The Moving Average Convergence Divergence (MACD) line showed steady upward momentum, signaling increasing bullish pressure. 3. MACD Crossover: The successful crossover in May 2023 confirmed the bullish trend, creating an entry opportunity. TRADING STRATEGY AND RESULTS: 1. Entry Point: MACD crossover in May 2023. 2. Exit Point: Swing High Levels - 720. 3. Return: Approximately 114%. 4. Trade Duration: 63 weeks. TECHNICAL ANALYSIS CONCEPTS USED: 1. Price Action Analysis 2. MACD (Moving Average Convergence Divergence) 3. Momentum Reversal 4. Trend Analysis 5. Chart Patterns NOTE: This case study demonstrates the effectiveness of combining technical indicators to identify bullish momentum. By recognizing Price Action, MACD movements, and Reversal patterns, traders can pinpoint potential entry and exit points. Would you like to explore more technical analysis concepts or case studies? Share your feedback and suggestions in the comments section below.
NSE:ABSLAMCEducation
by thepranam
Best Price Action Pattern For GOLD Trend Following Trading This bullish pattern is very powerful . Being spotted on a daily/4h/1h, any time frame, it will help you to accurately predict a strong bullish movement on Gold . In this article, I will teach you to identify a buying volumes accumulation on Gold chart and as a bonus, I will show you how I predicted a recent bullish rally with this price action pattern. The initial point of this pattern will be a completion point of a strong bullish impulse. At some moment, the price finds a strong horizontal resistance, stops growing and retraces. The second point of the pattern will be a completion of a retracement. It should strictly be a higher low - it should be higher than the low of an initial bullish impulse. After a retracement, the price should return to a horizontal resistance and set an equal high , that will be the third point of the pattern. Then, the price should retrace AT LEAST one more time from a horizontal resistance and set a new higher low. After that, the price should set one more equal high. 3 equal highs and 2 higher lows will compose a bullish accumulation pattern. Please, note, that the price may easily set more equal highs and more consequent new higher lows and keep the pattern valid. Above is the example of a bullish accumulation pattern on Gold on an hourly time frame. The price set 3 equal highs and 3 consequent higher lows. This pattern will signify the weakness of sellers and the accumulation of buying volumes. The point is that each consequent bearish price movement from a resistance is weaker than a previous one. It means that fewer sellers are selling from the resistance and more buyers start buying, not letting sellers go lower. In our example, we can clearly see the consequent weakening, bearish price movements. This pattern indicates a highly probable breakout attempt of the resistance. A candle close above that provides a strong bullish signal. The broken resistance will turn into support and will provide a safe point to buy the market from. In our example, the market broke the underlined horizontal resistance and closed above that. It indicates the completion of a bullish accumulation and a highly probable bullish trend continuation. You can see that Gold retested a broken structure and then a strong bullish wave initiated. In a strong bullish market that we currently contemplation on Gold, this bullish pattern will provide a lot of profitable trading opportunities. No matter whether you are scalping, day trading or swing trading Gold, this bullish accumulation pattern will help you to predict long-term, mid-term and short-term bullish movements. ❤️Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
1
5 Most Popular Momentum Indicators to Use in Trading in 20245 Most Popular Momentum Indicators to Use in Trading in 2024 Want to master the art of momentum trading? Look no further. In this FXOpen article, we’ll explore how to use momentum indicators, the signals they generate, and five most popular momentum indicators for trading in 2024. What Is a Momentum Indicator? Momentum in technical analysis refers to the rate at which an asset's price accelerates or decelerates, helping traders identify potential trend continuations or reversals. A momentum indicator is a tool used in technical analysis to measure the speed and strength of an asset’s price movements. By analysing changes in price over a specific period, these indicators provide insights into the underlying force driving market trends. Momentum indicators do not focus on the direction of the price movement itself, but rather the strength behind it. Traders use these tools to gauge whether the market is overbought, oversold, or losing momentum, which helps determine entry or exit points. A stock momentum indicator like the Relative Strength Index (RSI), for instance, may indicate that stocks are currently bought or sold too heavily and their price is due for a reversal. The Significance of Momentum Technical Indicators Momentum indicators do not focus on the direction of the price movement, but rather on the strength behind it. They’re able to quantify and represent hidden clues about the future market direction in an easily interpretable way. By learning to read momentum indicators, traders can develop effective trading strategies, identify potential opportunities, and manage risk more efficiently. Momentum tools produce a range of signals that offer traders an edge over the markets. Let’s take a look at some of the most common momentum signals. Overbought and Oversold Conditions These signals indicate when an asset's price has moved too far in one direction without sufficient support from fundamental or technical factors and is likely to reverse. For example, RSI generates overbought signals when the reading rises above 70 and signals oversold conditions when the reading falls below 30. Divergence Divergence occurs when the price of an asset moves in the opposite direction of the indicator, suggesting an upcoming reversal. For instance, when the price is making higher highs, but RSI is making lower highs, this indicates a bearish divergence that increases the likelihood of a downward move. Crossover These signals are generated when the indicator's lines cross each other or a certain threshold. A common example is the MACD, where traders look for crossovers between the fast MACD line and the slower signal line to spot potential entry and exit points. Top Five List of Momentum Indicators for Technical Analysis Now that we understand the types of signals that momentum tools produce, let’s break down five of the most popular with a momentum indicators list. If you’d like to experiment with them yourself, you’ll find each tool waiting for you in the free TickTrader trading platform. 1. Relative Strength Index (RSI) The RSI is one of the most popular and well-documented momentum indicators. It measures the speed and change of price movements by comparing the average gain to the average loss over a specified period, usually 14. RSI is an oscillator, moving between 0 and 100. Values above 70 reflect overbought conditions, while values below 30 indicate oversold conditions. When the RSI moves out of overbought or oversold territory, many traders interpret this as a reversal confirmation. Sustained movements above or below the midpoint (50) can also be used to confirm a bullish or bearish trend, respectively. Moreover, traders look for divergence between the RSI and price to identify weakening trends and possible reversals. 2. Average Directional Index (ADX) The ADX is a momentum indicator used to determine a trend’s strength. Unlike most other tools, its reading doesn’t move according to the direction of price action, i.e. it doesn’t move up if bullish or down when bearish. Instead, it ranges from 0 to 100, with values above 25 indicating a strong trend and below 25 suggesting a weak or non-trending market. ADX is commonly used in combination with other tools, as it simply confirms the trendiness of a market. For example, traders might use a leading indicator like RSI to anticipate bullishness and confirm the trend when ADX crosses over 25. 3. Commodity Channel Index (CCI) The CCI is a versatile momentum indicator. It uses a constant in its calculation to ensure that 75% of values fall between +/- 100, with moves outside of the range generally indicating a trend breakout or continuation. It can also show extreme overbought or oversold conditions when its value exceeds +/- 200. The CCI requires a more nuanced approach than other tools and is typically used to confirm a trader’s directional bias and to identify potential opportunities. For instance, a visually identifiable bullish trend can be confirmed by looking at the CCI. If its value is skewed toward 100+, traders can be confident in their observation. When the market cools off, CCI will fall below 100. Traders can then confirm a pullback entry with a move back into the +/- 100 range. 4. Moving Average Convergence Divergence (MACD) The MACD is a highly regarded trend-following momentum indicator that shows the relationship between two moving averages of an asset's price. It’s used in technical analysis to identify the relationship between two moving averages of a security’s price. It helps traders understand the trend’s strength, direction, and duration, as well as possible reversal points. Traders use crossovers between the MACD and signal lines as potential entry and exit signals. Additionally, when the MACD histogram crosses above or below the zero line, it can indicate bullish or bearish momentum in the market. Lastly, it’s also possible to spot divergences between price and the indicator’s peaks and troughs, similar to how divergences are identified with RSI. 5. Momentum (Mom) The Momentum indicator is a simple yet potentially effective tool that measures the rate of change in an asset's price over a specific period. The value of the Momentum depends on the market it’s applied to. For example, using the Momentum indicator in stocks will result in a fluctuating value typically between +/- 20, depending on the stock’s price. For forex pairs, its range may look more like +/- 0.02. The common feature across all markets, however, is the zero line. Generally speaking, positive Momentum values indicate upward price movement, while negative values suggest downward movement. It can also show overbought and oversold conditions, but its lack of defined boundaries means this can be tricky. However, Momentum is especially useful for identifying divergences. Advantages of Momentum Indicators Momentum indicators are valuable tools in technical analysis, helping traders assess the strength and speed of price movements. They offer several benefits that enhance trading strategies and decision-making: - Identify Trends Early: Market momentum indicators can reveal the start of a new trend and the end of the old trend, allowing traders to enter trades at opportune moments. - Objective Analysis: They provide quantifiable data, reducing reliance on subjective analysis and emotional decision-making. - Spot Overbought and Oversold Conditions: Momentum tools help traders identify when an asset is overbought or oversold, signalling potential reversals and exit points. - Confirm Trade Signals: Combining momentum indicators with other technical tools enhances the accuracy of trade signals, providing stronger confirmation for trading decisions. - Adaptable Across Markets: They can be applied to various assets, including stocks, forex, and commodities, making them versatile tools for traders. Things to Consider When Trading Momentum Indicators While momentum indicators can be an effective addition to any trader’s arsenal, there are a few things to be aware of: - Trade with the Trend: Trends often last longer than you may think, and constantly looking for trend reversals will only end in frustration. Look for bullish signals during an uptrend and bearish signals in a downtrend. - Use Multiple Indicators: Relying on a single tool can lead to false signals. Many traders combine a lagging indicator, like MACD, with a leading indicator, like RSI. Combining two or three tools can help confirm signals and improve trade accuracy. - Beware of False Signals: Momentum indicators can sometimes generate false signals, especially in sideways or choppy markets. Being patient and waiting for confirmation before entering a trade is vital. - Don’t Rely Too Heavily on Indicators: While momentum indicators can be helpful, relying solely on them without considering price action, market structure, or fundamental aspects can lead to poor trading decisions. Use these indicators alongside other tools for a momentum indicator strategy. Final Thoughts Now that you have a comprehensive overview of momentum indicators and the signals they produce, it’s time to put your knowledge into practice. After experimenting with a few tools and settling on your favourites, you can open an FXOpen account. You’ll be able to trade over 600+ markets with low costs and ultra-fast execution speeds while partnering with one of the world’s fastest-growing forex brokers. Good luck! FAQ How to Use Momentum Indicators? With momentum indicators, traders monitor the rate of price changes to assess whether it is gaining or losing strength. Traders look for overbought or oversold conditions, divergences, and crossovers to determine potential entry and exit points. What Is the Best Period for a Momentum Indicator? If we are talking about the Momentum indicator, the best period depends on your trading style. For short-term traders, 7 and 10 periods are common, while long-term traders may prefer 14 and 21 periods. Testing various periods based on asset volatility can improve results. What Is the Best Momentum Indicator for Scalping? There is no best momentum indicator for scalping but the Relative Strength Index (RSI) is often favoured by scalpers due to its ability to quickly identify overbought or oversold conditions. Its responsiveness helps scalpers make rapid decisions in fast-moving markets. What Is the Difference Between Momentum and Trend Indicators? Momentum trading indicators measure the speed of price changes, while trend indicators assess the direction and persistence of price movements. To put it simply, momentum focuses on strength, while trend indicators focus on the overall direction. Is MACD a Momentum Indicator? Yes, the Moving Average Convergence Divergence (MACD) is one of the most popular momentum indicators, especially in stock trading. It reveals changes in momentum and helps identify potential trend reversals. 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
1
Pulse of an Asset via Fibonacci: DAL Golden Genesis double top? This Concept is part of my study of Fibonacci Ratios applied to Assets. This Chart captures the life of Delta Airlines ruled by the Golden Ratio. This Post is to alert of possible double top and a reason for the last top. The growth of anything in nature is choreographed by the Golden Ratio. The growth of value or popularity of an asset is regulated by the same. Imagine: "Each person that bought this, told on average 1.618 others". The human collective as a whole must abide by the Golden Ratio. The previous top was the top only because of the Golden Multiple. The entire world is now very aware of this level, even the fib-blind. . Part of my Idea series collecting samples of my Methodology: (click links) Chapter 1: Introduction and numerous Examples Chapter 2: Detailed views and Wave Analysis Chapter 3: The Dreaded 9.618: Murderer of Moves Chapter 4: Impulse Redux: Return to Birth place Chapter 5: Golden Growth: Parabolic Expansions <= Current Example . . Ordered Chaos every Wave is born from Impulse, like a Pebble into Water. every Pebble bears its own Ripples, gilded of Ratio Golden. every Ripple behaves as its forerunner, setting the Pulse. each line Gains its Gravity. each line Tried and Tested. each line Poised to Reflect. every Asset Class behaves this way. every Time Frame displays its ripples. every Brain Chord rings these rhythms. He who Understands will be Humble. He who Grasps will observe the Order. He who Ignores will behold only Chaos. Ordered Chaos . . . want to Learn a little More? can you Spend a few Moments? click the Links under Related.
NYSE:DALEducation
by EuroMotif
Fundamentals and Strategy... The key.The result is clear and obvious, several factors had to be taken into account when operating this movement, first of all, the time had to be taken into account, it was still early to enter and I made them clear, then the fundamentals, the Yesterday I had announced in the morning that if Trump won, the movement would not only be upward but that we would break maximums and I had no doubts. and finally the fomo, where there was a sector divided between bulls and bears. I simply analyzed those 3 factors and waited for my zone, the last one was at the lowest point of the SL. Now? corrections and up, does the bullrun start? We'll see, since that would consist of movements of more than 5k per day
Education
by CriptoSolutions
1
Intra-Day Strategies: Part 1 – Mean ReversionWelcome to a three-part series on intra-day trading, a focused and fast-paced trading approach that, when executed with precision, can sharpen your trading skills and deepen your market understanding. We’re starting with mean reversion, a method centred on spotting price overextensions and profiting from quick corrections. What is Intra-Day Trading? Intra-day trading involves capturing small, rapid price movements through a series of trades opened and closed within the same day. Unlike swing traders or position traders who wait for larger price moves, intra-day traders zoom in on micro-movements around key levels in the market. They capitalize on the cyclical nature of price volatility, harnessing expansion phases that follow periods of contraction. While this style can be rewarding, it demands quick decision-making, refined technical skills, and strict risk management. It offers the chance to gain valuable experience and refine trading accuracy through regular practice. Pros and Cons of Intra-Day Trading Before diving into the mean reversion strategy, it’s helpful to consider some unique aspects of intra-day trading. Pros: Intra-day trading offers frequent trading opportunities, especially in volatile markets, providing the potential for steady profits. It also allows traders to refine their skills in real-time, building expertise at a faster pace than longer-term strategies. Cons: This style requires intense focus and continuous monitoring, which can be mentally demanding. The frequency of trades can also increase transaction costs, which may impact profitability if trades aren’t carefully planned. Mean Reversion Strategy The Elastic Band Effect Think of mean reversion like an elastic band. When a price is pushed too far from its “normal” level—perhaps by a sudden burst of buying or selling—the band stretches. Eventually, that tension snaps back, pulling the price toward its mean. Mean reversion traders aim to capture this snapback, profiting from the return to the average. The key is to spot when the band is overstretched and position yourself to capture the correction. Spotting Mean Reversion Setups on the Chart In mean reversion, timing and precision are essential. Here’s a three-step approach to identifying setups for this strategy: Level Identification: Start by identifying a clear support or resistance level, like the previous day’s high or low. The more timeframes that confirm this level, the stronger the opportunity for an intra-day trade. Such levels attract price reactions, especially when volatility is high. RSI Divergence: Use the Relative Strength Index (RSI) to spot divergences at overbought or oversold levels. If the price is pushing toward a key level while RSI diverges from the trend, this signals that the “elastic band” is overstretched. For example, if price reaches a strong resistance while RSI diverges downward, a pullback is likely. Candlestick Patterns: When levels and RSI align, watch for candlestick patterns as entry signals. Key patterns include: • Fakeout: When price briefly pierces a level before reversing, signalling that the trend might stall or reverse. • Engulfing Pattern: A strong reversal sign where a candle “engulfs” the prior one, indicating momentum has shifted. • Double Top/Bottom: A pattern where price hits a level twice before reversing, suggesting resistance or support is holding firm. Combining these three elements creates a high-probability setup, allowing traders to capitalize on short-term corrections effectively. Example: EUR/USD In this example, we’re using the 5-minute chart for clarity, though trades can be executed on lower timeframes, depending on market conditions. The first entry setup (labeled Fakeout 1) forms as the market tests the prior day’s high, with RSI divergence indicating a possible snapback. A second opportunity (Fakeout 2) appears on a retest, where both the price pattern and RSI continue to align for a high-confidence entry. EUR/USD 5min Candle Chart Past performance is not a reliable indicator of future results Stop Placement and Trade Management Intra-day traders must pay careful attention to stop placement and management, as short-term moves can quickly go against you. In a mean reversion setup, stops are generally placed just beyond the key level identified in step one. For example, if entering at resistance, place a stop just above that level to protect against a breakout. For trade management, keep these principles in mind: • Initial Target: Aiming for a 1:1 or 1:1.5 risk-to-reward ratio potentially allows for more frequent profit-taking, which can build up over time. • Trailing Stops: As price moves in your favour, a trailing stop helps secure gains. This allows you to capture more profit while staying protected against a reversal. • Exit Triggers: Be prepared to exit if the price quickly re-approaches your entry level or if RSI and candlestick patterns begin to weaken. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Education
by Capitalcom
Quantitative Analysis in Forex TradingQuantitative Analysis in Forex Trading Forex trading requires various methodologies to be employed to gain market insights and to allow participants to make informed decisions. One such crucial approach is quantitative analysis, a method that involves the use of mathematical models and statistical techniques to analyse financial assets. This article explores the significance of quantitative analysis in traditional forex markets, also mentioning some specifics related to the emerging domain of cryptocurrency* trading. What Is Quantitative Analysis? For traders engaged in quantitative forex trading, it's essential to grasp the fundamental principles that underpin this methodical approach. How Do We Define Quantitative Analysis? Quantitative analysis (QA), by definition, is a methodical and objective approach to examining financial assets and markets through the application of mathematical models, statistical techniques, and computational tools. It involves the systematic interpretation of numerical data to identify patterns, trends, and correlations, providing traders with a foundation for decision-making. Unlike qualitative analysis, which focuses on subjective factors such as management quality or market sentiment, quantitative analysis relies on quantifiable data to create informed trading strategies. Key Data and Metrics Used The QA process commences with comprehensive data collection, whereby a diverse range of financial data is gathered, for example, historical currency exchange rates and economic information. This extensive dataset serves as the foundation for subsequent analysis, enabling the identification of trends, patterns, and potential investment opportunities. Some of the most widely utilised key metrics within the quantitative framework include technical indicators like Simple Moving Average, Exponential Moving Average, Relative Strength Index (RSI), Bollinger Bands, MACD, Stochastic Oscillator, Fibonacci Levels, Standard Deviation, and Correlation Coefficient. On the other hand, relevant economic data for forex traders includes interest rates, GDP, employment data, inflation rates, and trade balances. Application of Quantitative Analysis in Forex Trading Algorithmic trading is an example of how quantitative analysis can be applied in practice, employing computer algorithms to automate trading processes. These algorithms execute trades based on factors such as timing, price movements, liquidity changes, and market signals. The automated approach may enhance trading efficiency. Consider a scenario where a quantitative analyst creates a trading model rooted in the technical analysis of currency exchange rates. Using machine learning algorithms, the model identifies market patterns, generating buy or sell signals. After successful backtesting with historical data, the analyst deploys the model in live markets through an automated trading platform. In another instance, the analyst may employ fundamental analysis, scrutinising interest rate differentials, inflation rates, GDP growth, and other macroeconomic indicators impacting currency exchange rates. Curious to try a quantitative-analysis-based strategy? Try the free TickTrader trading platform. Benefits of Quantitative Analysis in Trading Quantitative analysis offers several key benefits that contribute to its increasing use in trading: - Systematic Decision-Making: Quantitative analysis provides a systematic approach to decision-making, allowing traders to base their strategies on empirical evidence rather than subjective judgements. - Efficiency and Automation: The use of quantitative models enables automation in trading and enhances efficiency by executing trades based on predefined criteria, reducing the need for manual intervention. - Risk Management: Quantitative analysis facilitates the development of risk models that help traders measure and quantify various risk exposures within a portfolio. This contributes to better risk management and the implementation of mitigation strategies. - Backtesting and Optimisation: Traders can backtest quantitative models using historical data to assess their performance under different market conditions. - Objective Evaluation: Quantitative models provide an objective evaluation of market conditions, helping traders remove emotional biases from their decision-making processes. - Incorporation of Multiple Variables: Quantitative models can incorporate a wide range of variables simultaneously, allowing traders to analyse complex relationships and factors influencing financial markets. Some Drawbacks Along with the benefits of quantitative models, they also have some pitfalls that traders need to consider. - Data Dependency: One of the primary drawbacks is the heavy reliance on the quality and availability of numerical data. Inaccurate, outdated, or incomplete data can compromise the integrity of the analysis. - Complexity: Quantitative analysis methods and models can be inherently complex, demanding a high level of expertise for development, interpretation, and action. This complexity poses a challenge in interpreting findings effectively. - Incomplete Perspective: The absence of qualitative insights may result in having the 'what' without a clear understanding of the 'why' or 'how.' Qualitative analysis becomes essential to complement this inherent blind spot. - Over-Reliance on Historical Data: Quantitative analysis often relies extensively on historical data to predict future outcomes. However, rapidly changing markets or unforeseen circumstances can break an established pattern. Specifics When Applying Quantitative Analysis in Cryptocurrency* Trading At FXOpen, you can trade currency pairs and cryptocurrency* CFDs. Applying quantitative analysis to cryptocurrency* trading involves unique considerations due to the distinctive characteristics of the cryptocurrency* market. - Volatility and Liquidity: Quantitative models used in cryptocurrency* trading need to account for the rapid price fluctuations in crypto* assets and ensure that strategies are adaptable. - 24/7 Market Operations: Cryptocurrency* markets operate 24/7. Quantitative models must be designed to function seamlessly in continuous trading environments. - Data Sources and Quality: Cryptocurrency* markets rely heavily on data from various exchanges. Ensuring the accuracy and consistency of data from these sources is crucial. For newly launched projects, historical data may be missing completely. - Market Sentiment Analysis: Cryptocurrency* markets are strongly influenced by sentiments and news within the crypto community. Quantitative models may benefit from incorporating sentiment analysis tools to gauge the overall mood. Concluding Thoughts Quantitative analysis stands as a powerful tool in a trader’s arsenal, offering systematic methodologies to navigate the complexities of financial markets. By acknowledging both the strengths and limitations, market participants can harness the full potential of quantitative analysis methods, integrating them strategically and as a complementary element to qualitative insights for more comprehensive decision-making. Ready to test some quantitative trading strategies? You can open an FXOpen account and try out the possibilities. *At FXOpen UK, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules. 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
2
Options Blueprint Series [Basic]: Ready to Strangle a BreakoutIntroduction: Why Natural Gas is Poised for Volatility Natural Gas markets are showing signs of a potential volatility surge as recent data from the United States Natural Gas Stocks Change (USNGSC) displays a rare narrowing of the 21-day Bollinger Bands®. This technical setup often precedes sharp market moves, suggesting an upcoming breakout. Given the importance of fundamental shifts in natural gas inventory data, any unexpected change in USNGSC could significantly impact Natural Gas Futures (NG1!), leading to price movements in either direction. This Options Blueprint Series explores a strategy to capitalize on this anticipated volatility: the Long Strangle Strategy. By setting up positions that profit from sharp directional moves, traders may capture gains regardless of the direction in which the price moves. Understanding the Long Strangle Strategy A Long Strangle involves purchasing a call option at a higher strike price and a put option at a lower strike price. This setup allows traders to profit from significant price movements in either direction. The chosen strategy for this analysis includes: Expiration: February 25, 2025 Strikes: 2.5 put at 0.28 and 2.7 call at 0.29 This setup is ideal for capturing potential breakouts, with limited risk equal to the total premium paid. Unlike directional trades, a Long Strangle does not require forecasting the direction of the move, only that a substantial price change occurs before expiration. Technical Analysis with Bollinger Bands® The 21-day Bollinger Bands® applied to USNGSC have narrowed significantly, often an indicator that the market is building up pressure for a breakout. Historically, this type of setup in fundamental data can drive volatility in Natural Gas Futures. When the Bollinger Bands® width narrows, it indicates reduced variability and increased potential for data changes, awaiting release. Once volatility resumes, a dramatic shift can occur. This technical insight provides a solid foundation for the Long Strangle Strategy, aligning the timing of options with the potential for amplified price movement in Natural Gas. Contract Specifications for Natural Gas Futures To effectively plan and manage risk in this trade, it’s crucial to understand the contract details and margin requirements for Natural Gas Futures (NG). o Standard Natural Gas Futures Contract (NG): Minimum Price Fluctuation: $0.001 per MMBtu or $10 per tick. o Micro Natural Gas Futures Contract (optional alternative for smaller exposure): Minimum Price Fluctuation: $0.001 per MMBtu or $1.00 per tick. Margin Requirements The current margin requirement for a single NG futures contract generally falls around $2,500 but may vary with market conditions. $250 per contract for Micro Natural Gas Futures. Trade Plan for the Long Strangle The Long Strangle strategy on Natural Gas involves buying both a put and a call option to capture significant price movements in either direction. Here’s how the trade is set up: o Expiration: February 25, 2025 o Strikes: Long 2.5 Put at 0.28 ($2,800) Long 2.7 Call at 0.29 ($2,900) o Cost Basis: The total premium paid for the strangle is 0.57 (0.28 + 0.29) = $5,700 per strangle position. Profit Potential Profits increase as Natural Gas moves sharply above the 2.7 call strike or below the 2.5 put strike, accounting for the 0.57 premium paid. With substantial price movement, gains on one option can offset the total premium and yield significant returns. Risk Maximum risk is confined to the total premium paid ($5,700), making this a capped-risk trade. Reward-to-Risk Analysis Reward potential is substantial to the upside and downside, limited only by the extent of the price move, while risk is capped at the initial premium cost. Risk Management and Trade Monitoring Effective risk management is key to successfully executing a Long Strangle strategy, particularly when anticipating heightened volatility in Natural Gas. Here are the critical aspects of managing this trade: Defined Risk with Prepaid Premiums: The maximum risk is predetermined and limited to the initial premium paid, which helps manage potential losses in volatile markets. Importance of Position Sizing: Sizing positions appropriately can help balance exposure across a portfolio and reduce excessive risk concentration in a single asset. Using Micro Natural Futures would help to reduce size and risk by a factor of 10 (from $5,700 down to $570 per strangle). Optional Stop-Loss: As the risk is confined to the premium, no stop-loss orders are required. Exit Strategies For a Long Strangle to yield substantial returns, timing the exit is crucial. Here are potential exit scenarios for this strategy: Profit-Taking Before Expiration: If Natural Gas experiences a significant price swing before the February expiration, consider taking profits which would further reduce the exposure to premium decay. Holding to Expiration: Alternatively, traders can hold both options to expiration if they anticipate further volatility or an extended price trend. Continuous Monitoring: The effectiveness of this strategy is closely tied to the persistence of volatility in Natural Gas. Keep an eye on Fundamental Updates in USNGSC as any unexpected changes in natural gas stocks data can lead to sharp price adjustments, increasing the potential for profitability. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. Also, some of the calculations and analytics used in this article have been derived using the QuikStrike® tool available on the CME Group website. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
NYMEX:NG1!Education
by traddictiv
The Loss Effect: Why Traders Hold On To Losing Positions📍 In the realm of trading, the psychological weight of losses often outweighs the thrill of gains. This phenomenon, known as loss aversion , refers to the innate human tendency to prefer avoiding losses over acquiring equivalent gains. Within the context of financial markets, this bias can lead traders to stubbornly cling to losing positions, driven by the hope that market conditions will eventually shift in their favor. Consequently, their focus often shifts away from the potential for profit to a preoccupation with preserving their existing capital. 📍 Reasons Traders Avoid Closing Losing Trades Several psychological factors contribute to traders’ decisions to retain losing trades: 1. Emotional Attachment Traders are not immune to the emotions that accompany financial decisions. When individuals invest in an asset, they often form an emotional bond with that investment. Experiencing a loss can feel like a personal defeat, stirring feelings of shame, frustration , and anger. This emotional attachment can cloud judgment and impede rational decision-making. Rather than assessing the asset’s current market value objectively, traders may cling to the hope that conditions will improve, in an effort to circumvent the distress associated with acknowledging a loss. 2. Fear of Realizing a Loss The psychology of loss is complex, with many traders perceiving the act of realizing a loss as more painful than the prospect of missing out on potential gains. This fear can compel traders to hold on to losing positions, hoping that the market will rebound to their initial entry points. By postponing the realization of a loss, they believe they can mitigate its emotional impact. However, this paradoxical reasoning often leads to extended periods in losing positions, even as downward trends become increasingly pronounced. 3. Lack of Confidence in Their Strategy Traders often rely on specific strategies or analyses when making investment decisions. When the market begins to turn against them, a sense of doubt regarding the validity of their strategy can emerge. This internal conflict can make it challenging for a trader to acknowledge a mistake. Instead of reevaluating their positions and accepting the reality of a loss, they may irrationally hold onto failing trades, hoping for an unexpected turnaround—an approach that typically exacerbates their situation. 4. Challenges with Objective Analysis Emotional responses can significantly hinder traders’ ability to conduct objective analyses of their positions. Important data and market signals indicating a need to exit a position may be ignored, leading to cognitive dissonance. This disconnect between emotion and analysis often causes traders to remain in unprofitable trades far longer than warranted, despite clear evidence suggesting the necessity of a change in strategy. 5. Cognitive Distortions Traders are susceptible to a variety of cognitive distortions that can cloud their judgment: ⚫️ Selective Attention: Many traders may emphasize their winning trades while minimizing the importance of their losses. This selective focus can result in a failure to adequately analyze losing positions, leading to the selection bias known as " cherry-picking ." ⚫️ Confirmation Bias: This cognitive bias leads traders to seek out and prioritize information that reaffirms their initial decisions, while disregarding contradictory evidence. As a result, they may grow increasingly reluctant to close losing positions, insisting on data that supports their original decision to invest. 📍 Conclusion: To Hold or Not to Hold Losing Positions? Deciding whether to maintain or close a losing position ultimately hinges on one's tolerance for losses. If a stock continues to decline in value without signs of recovery, persisting in holding it may be misguided; in such cases, it may be more prudent to exit and then consider purchasing at a more favorable price. However, it is equally ill-advised to close positions at the slightest market correction. The crux of the matter lies in understanding the underlying reasons for the loss. If no fundamental issues exist and the downturn appears temporary—especially when the loss aligns with typical statistical drawdowns—there may be no need to exit the position prematurely. Ultimately, a balanced approach involving emotional detachment and a keen awareness of market dynamics can aid traders in making more informed and strategically sound decisions regarding their positions. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Education
by Lingrid
5
SMHI - Can an ugly chart actually be a good play?This is one of those charts I had on a watchlist titled "Waiting For Bottom". I checked in on Friday and it was touching the bottom of the channel. Boom! Is this post a prediction? Nope. Do I think this Elliott Wave count is for sure accurate? Nope. So what is this? First of all, remove all of the markings and look at the chart with nothing but price action. What do you see? If your answer is a "a complete mess that was generally melting up until the middle of 2024", you'd be correct. This is not a trending stock with a high probability setup. There is no clear 5-waves up pattern playing out. In fact, there is no clear anything pattern playing out. But that's exactly why I think this "might" be a diagonal and might be an interesting play for a solid risk/reward. What is a diagonal you ask? Let's make sure you understand. In Elliott Wave, there are only TWO types of bullish patterns. The first is the classic 5-wave impulse where the underlying trends up in odd numbered waves and correcting each one in the even numbered waves. Think of a lightning bolt. 1 - Up off a low. 2 - Corrects 1, can't move below it. 3 - The breakout, usually the most impulsive and powerful wave. 4 - Corrects 3, can't break below the top of 1. 5 - The final move up, can be powerful, can be weak, but will almost always give a higher high. 5-wave impulsive moves start when the underlying is very bearish. Wave 1 starts by getting back to or breaking a key resistance area. Those who jump in during it are considered early adopters. The only support is the previous low. The vast majority of market participants are avoiding. Once it tops and rolls over, the majority are convinced new lows are coming. Some early adopters sell out or take profit. But a successful Wave 2 holds above the previous low, giving a higher low setup. It is followed by a consolidation as momentum builds up in the beginning of the 3rd wave. Once Wave 3 breaks out above Wave 1, smart technical traders start jumping in. Maybe it happens on an earnings report and some fundies jump in. It starts to really trend as more heads start to turn and realize that not only did it hold a higher low, buts its also working on a higher high. And if it is powerful enough, it will break more resistance and more and more participants will jump in. Eventually though, Wave 3 tops. Many early adopters take their profit and leave. It consolidates into a Wave 4, holding another higher low above the Wave 1 top. But as it starts Wave 5, the majority of the participants are now the late adopters and retail traders, with a spattering of early adopters who still have a small tranche left, already being in the green on smart sales at the top of Wave 3. Wave 5 then completes, often trapping late adopters who were sure it was going to the moon. Well this stock doesn't seem to be that. This thing overlaps all over the place. It could be an upward corrective wave of some sort before a drop to new lows. But as of now, it's playing along nicely with what its called a diagonal. A diagonal is a 5-wave structure. But this one is different. With diagonals, Wave 3 "can" overlap below the top of Wave 1. And one of the leading clues you might be in a diagonal is when the subwaves break down into segments of 3 wave moves instead of 5 wave moves. Why does this exist? Well, it starts off similar to a standard 5-wave move. A low is formed and a move is commenced off of it. But the succeeding retracement of that move is VERY deep, retracing almost all of the first move up. The next higher high is then around 100-161.8% of the first move, with the retracement that follows also very deep. All of this is likely happening within Wave (1) and Wave (2) of the diagonal. See, market participants are so polarized with the underlying, that they are whipping it back and forth, neither side able to ultimately win very long, yet the bulls slightly nudging out the bears with marginal higher highs and higher lows. It continues this whipsaw with every move, slowly melting upward. Instead of the whole 5-wave pattern targeting the 176.4%-200% extension of Wave 1 from the bottom of Wave 2 (what happens in a standard 5-wave impulse), it targets lower extension levels, typically the 161.8% level. Diagonals are either LEADING or ENDING moves. They CAN NOT be 3rd waves in larger patterns. So you will either get one as a first wave of a larger move, or you will get one to finish a larger move. In this case, it would be a leading diagonal of something much larger. So back to this specific stock. Thanks for enduring the educational section. Let's talk why I think this is a diagonal. You can see the wave labels clearly outlining the 3-wave moves within the larger 5-wave diagonal. They are labeled ABC within the (1)(2)(3)(4)(5). At present, this is within $1 of the ideal retracement level of the (3)rd wave for Wave (4). And it's clearly the 3rd segment of the ABC we would expect for a corrective (4)th wave. Not only that, it's holding the channel (but that's not required, just an area of support). Diagonals do often retrace deep, so I wouldn't be surprised to see it continue to the 76.4% correction area around $4.50. If you are risk averse, you could enter in the current area with stop just under $4.49. But as long as it holds the Wave (2) low, the diagonal stays valid. Ideally, it would be either contracting (trendline connecting (1), (3), and (5) contracting toward trendline connecting (2) and (4)) or expanding (same thing, but trendlines diverging away from each other), with expanding diagonals being pretty rare, but possible. They can tend to run in channels as well. So ideally, this doesn't get much lower as that would turn it into an expanding diagonal, which we know is rare, and leads to future bullish action being even MORE unreliable. Standard supply and demand zones are on the chart representing major support and resistance areas. If this holds support, it likely finds renewed strength up toward resistance and will bounce around in mostly unpredictable, overlapping structures that generally melt up. But once it engages the next C Wave, you should be able to track a standard 5-wave pattern within that C, as C-waves are always 5-wave structures. As I stated at the beginning, in no way is this a reliable structure. But you see things like this fairly often, and anywhere from second to monthly charts. The longer the duration, the more confusing, as you can have years of price movement that seem to make no sense. Ultimately, you have to watch supports and play smart. Is this something you want to align a lot of your money in? Probably not. It's unpredictable at best. And it could fail at any moment at worst since diagonals are "technically" corrective structures even when bullish. But is a chart like this giving up a setup for potentially phenomenal risk/reward? You bet. Just make sure and manage your risk. And you do that with your position sizing, using an appropriate stop *and if you get stopped, stay stopped. You set it for a reason, don't second guess), and understanding your targets, making sure to de-risk as quick as possible by selling enough at key levels to get your original equity back should it move upward. Feel free to ask questions. This was meant to be educational and shed some light on a complicated chart structure while providing a thesis for how to potentially play it. Standard disclosures: 1. This is 100% my idea. It was not sourced from any other avenue. 2. I am not invested in this company, though I am likely buying shares soon. 3. I am not paid to post content nor do I receive any contributions of any kind. 4. While this is outlining a potential profitable setup, this article is not investment advice. You should do your own due diligence on any company you invest in and apply your own trading strategies. 5. I know nothing about the fundamentals of this company. I suggest doing your due diligence if fundamentals are important to you. 6. Readers should always remember that markets are their own creature made up of millions of individuals and institutions each following some combo of inherent bullishness, inherent bearishness, fundamentals, technicals, stupidity, and pure emotion. Elliott Wave, and specifically Fibonacci Pinball (developed by Avi Gilburt at elliottwavetrader.net and prominent Seeking Alpha author), merely provide a framework based on the observed price action to date. 7. I know that while my wave outline is based on years and years of data and application from not only me, but some of the best in the game, I also know that markets do not follow a set path and that sentiment can remain irrational far longer than I can remain rational. That is why you MUST consider the alternatives and manage risk appropriately. Know the pivot zones that could lead to the primary path failing. I warrant that the information created and published by me on TradingView is not prohibited, doesn't constitute investment advice, and isn't created solely for qualified investors. My analysis is not a recommendation for a specific trade. My analysis outlines a potential scenario and provides risk assessments for multiple alternate scenarios. My analysis is purely educational.
NYSE:SMHIEducation
by mazag08