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Trend Analysis

27 Articles That Helps You to Avoid MONEYGONE PatternAre you tired of feeling like your money disappears into thin air? Say goodbye to the ' MONEYGONE ' pattern with our collection of 27 articles packed with tips and tricks to keep your finances on track. In #VestindaTips we've put together this big guide all about how prices move and patterns in trading. Whether you're new to trading or you've been doing it for a while, we want to give you helpful info to understand the ups and downs of the financial world. So, let's learn together and get ready to navigate those tricky markets! Dynamics of Bull Market Cycles: Understanding the ebbs and flows of bull markets is essential for capitalizing on upward trends. Dive into the intricacies of bull market cycles to identify opportunities and optimize your trading strategies. Dynamics of Bear Market Cycles: Conversely, bear markets present unique challenges and opportunities. Explore the dynamics of bear market cycles to mitigate risks and maximize profits during downward trends. Diamond Pattern: How-To Guide: Uncover the secrets of the diamond pattern and learn how to recognize and interpret this rare yet powerful formation in trading. Drawing Trendlines: A Practical Guide: Master the art of drawing trendlines with precision and accuracy. This practical guide offers valuable tips and techniques to identify trends and make informed trading decisions. Think You Know Candlestick Patterns? Delve deeper into the realm of candlestick patterns and refine your understanding of these fundamental tools for technical analysis. What is a Bearish Pennant Pattern? Decode the mysteries of the bearish pennant pattern and discover how to spot this bearish continuation formation in the market. Market Gaps: Strategies, Types, Fills, and Crypto: Explore the phenomenon of market gaps and uncover effective strategies for navigating these price discontinuities across various asset classes, including cryptocurrencies. Three White Soldiers: Learn to recognize and interpret the significance of the three white soldiers pattern, a bullish reversal formation that signals a potential shift in market sentiment. Bullish Pennant Pattern: Gain insights into the bullish pennant pattern and harness its predictive power to identify lucrative trading opportunities in the market. How to Island Reversal Pattern: Navigate the waters of the island reversal pattern and understand its implications for trend reversal and market sentiment. The Triangles: With Real-Life Examples: Explore the various types of triangle patterns, including symmetrical, ascending, and descending triangles, with real-life examples illustrating their significance in technical analysis. Cracking the Short Squeeze: Demystify the phenomenon of short squeezes and learn how to capitalize on these explosive market dynamics for potentially substantial gains. Hammer of Trend Change: Discover the hammer candlestick pattern and its role as a potent signal for trend reversal, providing traders with valuable insights into market dynamics. Basics of Elliott Wave Theory: Unlock the foundational principles of Elliott Wave Theory and leverage this powerful tool for predicting market cycles and trends. The Core Confirmations Every Trader Must Know: Equip yourself with essential trading confirmations to validate your analysis and make well-informed trading decisions with confidence. What are Tweezer Top and Bottom Patterns? Unravel the mysteries of tweezer top and bottom patterns and learn how to interpret these candlestick formations for identifying potential trend reversals. How to Altseason Cycle || Cheat Sheet || Bitcoin Dominance: Navigate the altseason cycle with ease using this comprehensive cheat sheet, complete with insights into Bitcoin dominance and its implications for the broader cryptocurrency market. Rising and Falling Wedges Explained: Understand the characteristics of rising and falling wedges and learn how to effectively trade these patterns for profit. How to Head and Shoulders: Master the head and shoulders pattern, a classic reversal formation that can provide valuable insights into market trends and potential trend reversals. Double Top vs. Double Bottom Patterns: Distinguish between double top and double bottom patterns and learn how to identify and trade these reversal formations effectively. Triple Top vs. Triple Bottom Patterns: Explore the nuances of triple top and triple bottom patterns and their implications for market trends and price action. DIVERGENCE CHEATSHEET: Decode divergence patterns with this comprehensive cheat sheet, providing invaluable insights into market dynamics and potential trend reversals. Supply and Demand Zones: Buying Low, Selling High: Master the art of identifying supply and demand zones to capitalize on optimal entry and exit points in the market. Ascending Channels: The Guide: Navigate ascending channels with confidence using this comprehensive guide, complete with strategies for trading within these bullish formations. Wyckoff Accumulation & Distribution: Unlock the secrets of Wyckoff accumulation and distribution phases and learn how to spot these market manipulation tactics for profitable trading opportunities. The Cup and Handle Pattern in Trading: Discover the cup and handle pattern, a classic bullish continuation formation that can signal significant uptrends in the market. The ABCD Pattern: from A to D: Explore the ABCD pattern and its role in identifying potential entry and exit points in the market, providing traders with a structured approach to trading. With all the cool stuff you've learned from our guide on price action and patterns, you'll be ready to tackle the twists and turns of the financial world like a pro! It doesn't matter if you're just starting out or you've been at it for a while, getting the hang of these basic ideas is super important for making good trades and winning big. So, go ahead and dive in! Happy trading, everyone!
Education
by Vestinda
1
COT reports + SMT. How to determine the long-term trend (BIAS).A pattern in the COT reporting curve to determine long-term trend or bias (BIAS). With a scope from several weeks to months. Of course, reports arrive with a delay, but on a long-term scale this is not a big problem. Many people use divergences, or SMT in the teachings of Smartmoney Michael Huddleston (ICT), when analyzing charts. Why not use COT and divergence reports together as a useful chart analysis tool. Everyone probably noticed that the positions of Commercial traders in the curve constructed from reports coincides with the price movement (there is some direct correlation, and a large one). After a long observation and playing with the scale, obvious discrepancies in correlations and emerging divergences (SMT) caught my eye. And very often at the peaks of movements, followed by a reversal. Data reports are of course released once a week. Therefore, tracking such SMTs can be used as an additional factor to determine bias in the analysis of higher time frames. And already having a bias for the next few weeks, or even a couple of months. You can look for signals in trades with confirmation on lower timeframes. I like these divergences, they are built on an indicator that is completely independent of price. unlike any RSI, Stochastics, etc. The curve is constructed solely based on trading volumes on the CME exchange, and does not depend in any way on the price, therefore it does not follow the price further to infinity. This is a direct correlation of two different data streams, and their divergence (divergence). I think I’ll make a separate short article about “data streams”, what I mean by this. And finally, of course, the tool is not the holy grail. But with a proper and adequate approach in skillful hands, it is a very good tool that can be kept in mind during a complex analysis of charts. At a minimum, if divergence occurs, you can be wary and reconsider your plans. I hope the information will be useful. Don't forget to like, subscribe, share with friends, leave comments. All you have to do is click a button, and I love seeing feedback. Thank you.
CME:6E1!Education
by Forex_Hoby
What Is a Fib Spiral in Trading?What Is a Fib Spiral in Trading? In trading, the Fibonacci sequence, notable for its mathematical and artistic significance, is adapted into tools like the Fibonacci retracement and spiral. These tools provide traders with a unique perspective on market trends and potential reversal points, using ratios derived from the sequence to analyse price charts. This article focuses on the Fibonacci spiral, exploring its application and interpretation in financial trading. The Fibonacci Sequence and Trading Traders often ask, “What is a Fib in stocks?”. A Fib refers to a tool using the Fibonacci sequence, typically a Fibonacci retracement. This series of numbers, where each is the sum of the two preceding ones, has long intrigued mathematicians and artists alike. In trading, the Fibonacci retracement uses ratios (23.6%, 38.2%, 61.8%, and 78.6%) to identify potential reversal points on price charts. These levels are drawn by taking two extreme points, usually a high and a low, and dividing the vertical distance by the key Fibonacci ratios. The concept extends to the Fibonacci spiral, a more complex tool that incorporates the same mathematical principles. The Fib spiral applies these ratios in a circular format, offering a unique perspective on potential price movements. By wrapping the Fibonacci sequence into a spiral, traders can visualise both time and price movements in a dynamic way. What Is the Fibonacci Spiral? The Fibonacci spiral, meaning a graphical representation of the Fibonacci sequence in a spiral format, is a unique tool in technical analysis. Originating from the same principles as the Fibonacci retracement, it’s constructed by drawing circular arcs that connect the opposite corners of squares in the Fibonacci tiling. This sequence of squares, each with sides of Fibonacci-number lengths, forms the basis of the spiral. In a trading context, the Fib spiral is overlaid on a price chart. Its curvature is intended to match significant highs and lows, helping to identify potential areas of support and resistance. These points can indicate where prices might find temporary stability or change direction. Unlike straight lines of Fibonacci retracements, the spiral offers a more dynamic view, considering both price and time factors and providing traders with a visually intuitive way to analyse market trends and potential reversal points. Golden Spiral Definition A closely related concept is the Golden spiral, defined as a logarithmic spiral whose growth factor is, the golden ratio (approximately 1.618). It appears frequently in nature and art and is known for its aesthetically pleasing properties. A Fibonacci spiral closely approximates the golden spiral by employing quarter-circle arcs that are inscribed within squares, the dimensions of which are derived from the Fibonacci sequence. Practical Application in Trading Applying the Fibonacci spiral in trading involves a few key steps. To try it out, head over to FXOpen’s free TickTrader platform. There, you’ll find the Fib spiral alongside other 1,200+ trading tools. Placement: The first step is to anchor the centre of the spiral at a significant low (for upward trends) or high (for downward trends). The second point is set at an opposing significant high or low, respectively. Scaling: Traders adjust the spiral so that it expands or contracts to align with key price levels. The aim is to fit it in a way that its curves intersect with significant price points or trend lines. Analysis: Once the spiral is placed, observe where it intersects with price levels. These intersections often signify potential support or resistance areas, offering clues for potential entry or exit points. Confirmation: Using other technical indicators, like moving averages or RSI, to validate the signals provided by the Fib spiral is a good idea. Such cross-verification may reduce false signals and enhance decision-making. Adaptation: The last step is to continuously adjust the spiral as new price data emerges. A dynamic approach helps traders stay aligned with current market trends and conditions. Interpreting the Fib Spiral Effectively interpreting the Fib spiral involves recognising its intersections with key price levels as potential indicators of future market movements. These intersections can signal areas of support and resistance, offering critical insights for traders. Support and Resistance: If a price level aligns with the spiral, it may act as support in an uptrend or resistance in a downtrend. A breach of these levels could indicate a stronger trend or a potential reversal. Timing: The spiral may help traders determine time frames for potential price movements. Where the spiral intersects with the price chart may coincide with significant turning points or continuations in the market. Trend Confirmation: In a strong trend, the price often respects the spiral levels, reinforcing the trend’s validity. Conversely, consistent breaks through the spiral might signal weakening momentum. Limitations and Considerations While the Fibonacci spiral is a valuable tool, traders must be aware of its limitations and use it judiciously: Subjectivity: The placement of the spiral is subjective, depending heavily on the trader's choice of start and end points. This can lead to varying interpretations among different traders. No Predictive Guarantees: The spiral provides potential areas of interest but does not guarantee future price movements. It's an analytical factor rather than a crystal ball. Best with Other Tools: Relying solely on the Fib spiral can be risky. It's most effective when combined with other technical analysis tools for cross-verification. Market Conditions: The spiral's effectiveness can vary across different market conditions and asset classes. It may be more useful in trending markets than in range-bound or highly volatile ones. Learning Curve: Properly using and interpreting the Fib spiral requires experience and understanding of market dynamics, which can be challenging for novice traders. The Bottom Line As we've explored the Fibonacci spiral, it's clear that this tool can be a valuable asset in a trader's toolkit. While it requires practice and complementing analysis methods, its insights into market trends and potential pivot points are invaluable. For those looking to apply these techniques in real trading scenarios, consider opening an FXOpen account. Once you do, you’ll gain access to hundreds of unique markets, lightning-fast execution speeds, and competitive trading costs. Good luck! 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
3
EDUCATIONAL: Creating ConfluenceUsing different time frames and indicators is a key aspect of a well-rounded trading strategy. By analyzing an asset across various time frames, traders can identify larger trends and shorter-term price action. Higher time frames provide a broader context, while lower time frames offer more detailed data on potential entry and exit points. Combining technical indicators such as linear regression, Bollinger Bands, Elliott Wave, Fibonacci retracements, and Ichimoku Kinko Hyo enhances your confluence and confirms trends or reversal points across different time frames. This approach offers a more comprehensive analysis of market trends and potential price movements. Confluence occurs when multiple indicators and time frames align, increasing the probability of a successful trade. For example, if a trend is confirmed across several indicators and time frames, it suggests that the trend may be more reliable. Traders should also be aware of conflicting signals that might arise from different time frames or indicators. In such cases, you must prioritize your decisions based on your trading strategy and risk tolerance. This educational video will guide you on developing your confluence using the mentioned indicators and time frames. Larger time frames draw the bigger picture, while lower frames provide baby steps toward the bigger frame. Additionally, you might find confluence in smaller time frames that could override other indicators on bigger time frames. In summary, incorporating different time frames and indicators improves the quality of your analysis and leads to more informed and strategic trading decisions -------///// When faced with conflicting signals from different time frames or indicators, prioritizing decisions can be challenging. Here are some strategies to help you navigate these situations and make informed trading choices: Favor Higher Time Frames: Generally, higher time frames (e.g., daily, weekly) provide a broader context and are more reliable in identifying the overall market trend. When signals conflict across time frames, prioritize the signals from higher time frames as they represent longer-term market movements. Confirm with Multiple Indicators: Look for confluence among various technical indicators. When multiple indicators align in support of a trend or reversal, the likelihood of the market moving in that direction increases. Conversely, if indicators disagree, exercise caution and avoid trading until the signals are clearer. Risk Management: In cases of conflicting signals, adjust your position size and risk exposure accordingly. Reducing your risk can help protect your capital from potential losses due to market volatility. Wait for Clarity: If signals are ambiguous or contradictory, it may be wise to wait for more definitive price action before making a decision. Avoid impulsive trades based on uncertain signals. Use Price Action: In addition to indicators, consider using price action (e.g., support and resistance levels, candlestick patterns) to guide your decisions. Price action can provide additional context and may help confirm or negate signals from indicators. Set Clear Entry and Exit Points: Define clear entry and exit points based on your analysis and stick to your trading plan. This discipline can help you navigate conflicting signals more effectively. Keep an Eye on Market Sentiment: Market sentiment can offer additional insights into potential market movements. For example, extreme bullishness or bearishness can signal a potential reversal, even if indicators show conflicting signals. Stay Flexible: Be prepared to adapt your strategy as market conditions change. Flexibility can help you navigate conflicting signals and adjust your positions accordingly. By employing these strategies, you can manage conflicting signals more effectively and make informed decisions that align with your overall trading strategy and risk tolerance.
EGX:EGX30Education
by ICHIMOKUontheNILE
QBUY- QUICK BUY FOR SCALPING EXLPAINEDhow to take trade using marketsaarthi ? in today’s video we will see how q buy function in marketsaarthi should be used to take trade. q buy – it basically stands for taking quick buy option, since q buy signal would generate from extreme levels of low a script can make in intraday, we can’t go for big targets. a quick buy will give points in range of 7-30 (in index options) rules for valid q buy trade: - 1) next candle should be closing above or within the body of q buy candle, if next candle closes below qbuy candle the signal is invalid 2) in case candle is closing within the body of q buy candle, high of q buy candle can be used as entry point… 3) if q buy is formed near any level that is its high is near the level (2-3 points) gap only, we can wait for that level to be broken for entering in trade and above levels will be our targets. 4) stop loss- we can have stop loss as low of q buy candle or a user can keep sl as per their risk appetite. but stop loss in q buy trade is must. ideal time frame for q buy- 1mint & 3 mints application- index spot charts, index call chart, stocks (one can avoid using q buy feature on stock call option)
NEducation
by prasoon7007
Constructin of chartsThe first documented use of charts goes back to ancient Babylonia, where their early forms were used primarily for record-keeping by astrologists and merchants. Then, sometime between the 5th and 6th century A.D., these graphical representations developed into a form reminiscent of today’s charts. Further refinement and development of charting techniques continued through the centuries, influenced by advancements in mathematics, commerce, and technology, which propelled charts from hand-drawn illustrations to sophisticated computerized displays in the 20th century. Nowadays, there is a myriad of visualization options, but line charts, bar charts, and candlestick charts are the most widely used for the purpose of technical analysis. Key points: A chart is a graphical display of data, usually price and volume. In the context of financial markets, charts serve as tools for analyzing trends, patterns, and relationships in data. There is a wide array of visualization options available today, with line charts, bar charts, candlestick charts, and equivolume charts being among the most commonly used. Different types of charts are suitable for analyzing different aspects of data, ranging from long-term trends to short-term price movements and volatility. Line chart A line chart is represented by a single line that provides information about the price on the vertical axis and time on the horizontal axis. It is typically constructed by connecting a closing price. This type of chart is suitable for analyzing long-term trends, but its main drawback is that it provides only one piece of information, unlike a bar graph or a candlestick graph. Illustration 1.01 The illustration above shows the daily line graph of Bitcoin (BTCUSD) between 2020 and late 2022. Bar chart A bar chart is constructed with bars, each representing one particular time interval. These bars provide information about opening price, closing price, high, and low. As such, volatility and various price patterns can be easily observed. This type of chart fits short-term, medium-term, and long-term trend studies. Illustration 1.02 The image portrays the daily bar chart of silver (XAGUSD) throughout 2022 and early 2023. Candlestick chart A candlestick chart is very similar to a bar chart and provides information about opening price, closing price, high, and low. It consists of the real body and shadow. The real body is a rectangular area between the opening and closing prices. Shadows are the price extremes that occur within a trading session and are represented by thin bars above and below the real body. The shadow above the real body is called the upper shadow, and the shadow below the real body is called the lower shadow. Candlestick charts are appropriate for analyzing short-term, medium-term, and long-term trends. Illustration 1.03 Above is the weekly candlestick chart of gold (XAUUSD) between late 2007 and early 2017. Equivolume chart In an equivolume chart, the width of each bar or candlestick is proportional to the volume traded during that period, while the height represents the price range (high to low) for the same period. This type of chart aims to visually depict the relationship between trading volume and price movement, allowing traders to identify patterns and trends more effectively. Equivolume charts are especially useful for analyzing the strength of price movements in relation to trading activity. Illustration 1.04 The equivolume chart of silver (XAGUSD) is depicted above. Please feel free to express your ideas and thoughts in the comment section. DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor or any other entity. Therefore, your own due diligence is highly advised before entering a trade.
Education
by Tradersweekly
2
Best SUPPORT and RESISTANCE Indicator to Identify Key Levels In this article, I will show you a simple technical indicator that will help you to identify support and resistance levels easily trading any financial market. And what I like about this indicator is that it is absolutely free and it is available on all popular trading platforms: tradingview, meta trader 4, meta trader 5, etc. This indicator is called Zig Zag. After adding the indicator, the price chart will look like that. First, I recommend changing its settings. Price deviation - 1.5 Pivot legs - 5 Here are the inputs that I recommend for structure analysis on a daily time frame. And in style remove labels because they really distract. What this technical indicator does, it underlines the significant impulse legs. The completion and initial points of the impulses will be the important structures. Your key structures will be the areas based on the initial/completion points of impulses based on wicks and candle closes. A key horizontal support will be based on the initial point of the impulse and the lowest candle close. Key supports will be all the structures that are below current price levels. A key horizontal resistance will be based on the initial point of the impulse and the highest candle close. Key resistances will be all the structures that are above current price levels. Also, the completion/initial points of the impulses will occasionally compose the vertical structures - the trend lines. Underline all the supports/resistances based on Zig Zag indicator. All these structures are significant and can be applied for pullback/breakout trading. Also, remember that you can modify the inputs of the indicator. Increase Price deviation and Pivot legs number will show the stronger structures, while decreasing these numbers more structures will appear on the chart. On the left chart: Price deviation - 1.5 Pivot legs - 5 On the right chart: Price deviation - 5 Pivot legs - 10 The right chart shows just 2 structures, but very important ones. This indicator is very powerful and it can help you a lot in learning structure analysis. ❤️Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
8
Liquidity Hunt PatternLiquidity Hunt Pattern Uncover Hidden Opportunities in the Market Introduction: The Liquidity Hunt Pattern is a powerful technical analysis tool that helps traders identify potential turning points in the market. By understanding how this pattern forms and its implications, traders can gain an edge in uncovering hidden opportunities and making informed trading decisions. What is the Liquidity Hunt Pattern? The Liquidity Hunt Pattern is characterized by a series of price movements that create a distinct "W" or "M" shape on the chart. This pattern forms when large institutional players, known as "liquidity providers" enter the market to buy or sell large quantities of assets. Their actions create temporary imbalances in supply and demand, leading to price swings that can be exploited by astute traders. Identifying the Pattern: The Liquidity Hunt Pattern consists of three key elements: The "W" or "M" shape: This is the most recognizable feature of the pattern and is formed by a series of price swings that create the distinctive letter shape. Volume spikes: The pattern is often accompanied by significant volume spikes, indicating the presence of large institutional activity. Breakout or breakdown: The pattern typically resolves with a breakout or breakdown, signaling a potential change in the market direction. Trading the Liquidity Hunt Pattern: Traders can use the Liquidity Hunt Pattern to identify potential entry and exit points for their trades. By understanding the dynamics of the pattern, traders can: Anticipate potential turning points: The pattern can signal potential reversals or continuations in the market trend. Identify high-probability trading setups: The pattern can be used to identify areas where the risk-reward ratio is favorable. Manage risk effectively: The pattern can help traders set stop-loss and take-profit levels to manage their risk exposure. Conclusion: The Liquidity Hunt Pattern is a valuable tool for traders of all levels. By understanding its formation and implications, traders can gain an edge in the market and uncover hidden opportunities for profitable trades.
BINANCE:ETHUSDEducation
by TheGreatR00T
1
Draining Trading Habits: The Pitfalls to Avoid for Market SuccesYou know that trading is a mental game. And if you play it wrong, it can be very draining on the mind and the soul. Your aim is to make trading effortless and not overstressing. And to do this, you need to avoid making these draining trading habits. That’s what we’ll cover in this piece. Personalise Losses: The Emotional Pitfall Ever felt like the market is out to get you? Go look at any chart and you’ll see there were times where you would have won and would have lost. It’s a common trap. Losses are not personal attacks. And winners are not personal appraisals. They’re part and parcel of the trading game. Remember, the market is as impersonal as it gets. When you personalize losses, you cloud your judgment, making it harder to learn from mistakes. Instead you need to: Shift Your Perspective: View losses as the trading costs of doing business. And if you’re still learning, then you can see losses as tuition fees for your trading education. Keep a Trading Journal: Document your trades and reflect on your overall track record. This way you’ll see both losses and gains as part of the process. Cling to Long-term Trades: The Hope Trap Ah, the classic ‘hold and hope’ strategy. It’s easy to fall in love with a trade. It’s also easy to marry a trade or even an investment. But as a trader, you must NOT get married to a trade. See them as short term conquests where you take one – lose one win one. But know that the next one is on the way. So, how do you break free? Set Clear Exit Strategies: Before your enter a trade, know your exit points for both profit and loss. Practice Detachment: Treat each trade as just another business transaction. Or like I said – Conquest. Always checking your trades: The Anxiety Generator Checking your trades every five minutes? ‘ This can turn into an obsession. I must say. This is not a good for your stress levels and your trading performance. This habit can turn trading into a nerve-wracking obsession. So instead: Set Alerts: Use technology to your advantage. Set alerts for price movements. Schedule Check-ins: Limit how often you check your trades. Discipline is key! Overstress about trades: The Health Hazard Stress is the silent killer in trading. It not only harms your health but also impairs your decision-making abilities. So, how do we keep our cool in the heat of the market? Practice Mindfulness: Meditation and mindfulness can work wonders for stress management. Maybe even self-hypnosis at night to manage your worries, stress and to compartmentalize them. Physical Activity: Regular exercise helps in reducing stress and improving focus. You’ll be surprised what a simple walk, exercise or even punching the old bag can do to calm your mind. The complaint department: Trading’s Emotional Baggage Complaining about trades is like carrying around a bag of emotional bricks. It’s exhausting! It’s heavy on you! And it’s just plain unnecessary. This habit breeds negativity and affects your mindset. Focus on Solutions: Instead of complaining, channel your energy into finding solutions through your track record and money management strategies. Seek Constructive Feedback: Engage with a trading community for support and advice. FINAL WORDS: Your job is to manage stress, worry and to make trading as effortless and as easy as possible. This requires some physical and mental activities. And not just once off. On an ongoing basis… Let’s sum up the draining trading habits so you know what NOT to do. Personalise Losses: The Emotional Pitfall Cling to Long-term Trades: The Hope Trap Always checking your trades: The Anxiety Generator Overstress about trades: The Health Hazard The complaint department: Trading’s Emotional Baggage
JSE:J200Education
by Timonrosso
GOLD MACD StrategyRules for engagement: - Price must be below the 200SMA - MACD must cross above the 0 line (higher the better) - Price must then cross over short term SMAs (5&8) - Stops at previous high - Take Profits at the target low Here we saw price break down to create a new lower low and sweeping previous support. Price on the daily has broken below the 21 moving average and price is close to crossing the 200 moving average on the 4hr chart. Using the FIB we can set an expected target entry zone between the 382 and 618 zones which also aligns with previous support which could turn to resistance. We see price stall here and we look for entries short. two entries identified using the above rules with a 130SL and a 400+TP.
OANDA:XAUUSDEducation
by Youza
US30 Simple 8:am StrategyToday I'm explaining a very simple strategy that I use for trading US30 during the NY session. Basically just wait for the 8:am EST candle to close Once the candle closes, if it's red, you would enter a sell position with a 100 point profit target with a stop loss at 100 points as well. If it's green, enter a long position with a 100 point profit target and 100 point SL. If you end up getting stopped up, it's not a big deal. The following day you would just double the position size. Make sure you avoid trading Wednesday especially if there's anything related to the FED such as an FOMC. In terms of volume size to trade, for every $100k, start with a 1 standard lot position. If stopped out one day, the following day trade 2 lots, or execute two 1 standard lot positions at the same time. This is a very simple strategy with an 80% win rate. That's it - That's all Trade Safe
BLACKBULL:US30Education
by Michael_Harding
1
Options Blueprint Series: Debit Spreads - Precision InvestingIntroduction to Options on Corn Futures Corn Futures are one of the staple commodities traded on the Chicago Board of Trade (CBOT), representing a critical component of the agricultural sector's financial instruments. Each Corn Futures contract is standardized to 5,000 bushels, and the price is quoted in USD-cents per bushel. Contract Specifications: Point Value: 1/4 of one cent (0.0025) per bushel = $12.50. Margins: Trading on margin allows traders to leverage positions while only needing to cover a fraction of the total contract value. For Corn Futures, the initial margin requirement is set by the CME Group and varies based on market volatility: Currently $1,300 per contract at the time of this publication. Options trading introduces another layer of complexity and opportunity. Debit spreads involve purchasing one option and selling another, which helps manage the overall cost of entering the market. Margin for Debit Spreads: The margin for debit spreads typically reflects the premium paid for the long position minus any premium received from the short position. This results in a significantly lower margin requirement compared to trading the underlying futures contract outright. (In the below example the net premium paid for the spread is 7.26 points = $363, which is significantly lower than $1,300). Understanding Debit Spreads Debit spreads are a sophisticated options trading strategy utilized primarily to achieve a targeted investment outcome while managing risk exposure. They are constructed by purchasing an option (call or put) while simultaneously selling another option of the same type (call or put) but with a different strike price, within the same expiration period. The aim is to reduce the net cost of the position, as the premium received from the sold option offsets part of the cost incurred from the bought option. Mechanics of Debit Spreads: Long Position: You buy an option that you expect to increase in value as the market moves in your favor. Short Position: You sell another option with a higher strike (in the case of a call spread) or a lower strike (in the case of a put spread). This option is expected to expire worthless or decrease in value, offsetting the cost of the long position. Advantages of Using Debit Spreads: Defined Risk: The maximum loss on a debit spread is limited to the net premium paid plus transaction costs. This makes it easier to manage risk, especially in volatile markets. Potential for Profit: Although the profit potential is capped at the difference between the strike prices minus the net debit paid, these spreads can still offer attractive returns relative to the risk undertaken. Lower Cost of Entry: Compared to buying a single option, spreads typically require a lower upfront investment, making them accessible to a wider range of traders. This strategic application is what we'll explore next in the context of Corn Futures, where market conditions suggest a potential breakout. Application in Corn Futures For traders looking to harness the volatility in the agricultural sector, especially in commodities like corn, debit spreads can be a precision tool for structured trading. Given the current trading range of Corn Futures, with prices oscillating between 424 cents and 448 cents per bushel for a number of weeks, a strategic setup can be envisioned aiming for an upward breakout towards 471 cents, a resistance level indicated by Sell UnFilled Orders (UFOs). Strategy Implementation with Debit Spreads: Long Call Option: Buying a call option with a strike price near the lower end of the current range (450) positions traders to benefit from potential upward movements. Premium paid is 10.39 ($519.5) Short Call Option: Simultaneously, selling a call option with a strike price at 475 cents caps the maximum profit but significantly reduces the cost of entering the trade. This strike is chosen because it aligns closely with the expected UFO resistance level, enhancing the probability of the short option expiring worthless. Premium received is 3.13 ($156.5). The net cost of the spread ($519.5 - $156.5 = $363) represents the total risk. We are using the CME Group Options Calculator in order to generate fair value prices and Greeks for any options on futures contracts. Setting up the Trade To potentially capitalize on the anticipated market movement for Corn Futures, our debit spread strategy will involve a detailed setup of options trades based on specific strike prices that align with market expectations and technical analysis. This step-by-step guide will provide clarity on how to effectively enter and manage this options strategy. Trade Details: Long Call Option: Buy a call option with a strike price of 450. This option is chosen as it is near the current upper boundary of the trading range, providing a favorable entry point as we anticipate a breakout. Short Call Option: Sell a call option with a strike price of 475. This strike is selected based on its proximity to the identified resistance level at 471, suggesting a high likelihood that the price may not exceed this level before expiration. Cost and Profit Analysis: Net Premium Paid: $363 as discussed above. Break-even Point: Long strike price (450) plus the net premium paid = 457.26. Maximum Profit: The maximum profit for this debit spread is capped at the difference between the two strike prices minus the net premium paid = 475 – 450 – 7.26 = 17.74 = $887. Maximum Loss: The maximum risk is limited to the net premium paid. Risk Management By entering a debit spread, traders not only define their maximum risk but also set clear targets for profitability based on established market thresholds. This methodical approach ensures that even if the anticipated price movement does not fully materialize, the financial exposure remains controlled. Risk Management Techniques: Position Sizing: Determine the appropriate size of the position based on overall portfolio risk and individual risk tolerance. Stop-Loss Orders: Although the maximum loss is capped by the nature of the debit spread (the net premium paid), stop-loss orders can be used if the underlying asset moves against the trader. Rolling the Spread: If market conditions change or the initial price target is reached earlier than expected, consider 'rolling' the spread. Adjusting the Trade: If the price of Corn Futures approaches the short strike price (475) faster than anticipated, and market sentiment indicates further upward potential, the short call option can be bought back while a new higher strike call can be sold. This adjustment aims to extend the profitable range of the spread without increasing the original risk by much. Conversely, if the price seems unlikely to reach the 450 mark, reassess the viability of keeping the spread open. It may be prudent to close the position early to preserve capital if fundamental market factors have shifted negatively. Importance of Continuous Monitoring: Regularly monitor market conditions, including factors like weather reports, agricultural policies, and economic indicators that significantly impact corn prices. Stay updated with technical analysis charts and adjust strategies according to new resistance and support levels identified. Effective risk management not only protects from downside risk but also enhances the potential for profitability by adapting to changing market conditions. Conclusion The strategic use of debit spreads in Corn Futures options trading offers a balanced approach to leverage market opportunities while maintaining strict control over potential risks. Recap of Key Points: Corn Options on Futures: Understanding the contract specifics is crucial for informed trading decisions. Debit Spreads: These allow traders to benefit from expected price movements with reduced upfront costs and limited risk. Trade Setup: Focused on a potential breakout from the 448-424 range aiming towards 471, utilizing 450 and 475 strikes for the long and short calls respectively. Risk Management: Emphasizes the importance of position sizing, potential use of stop-loss orders, and the flexibility to adjust or roll the spread according to market changes. 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. 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.
Editors' picks
CBOT:ZC1!Education
by traddictiv
2
The Rocket Booster Strategy In 3 StepsNow when you are looking at this stock I want you to understand that this type of strategy is good for investment purposes only This means you are not allowed to use margin To trade these types of stocks. Otherwise, you will lose your money to trading commissions and market volatility So instead you can use the rocket booster strategy to take advantage of this market move You may think to yourself "What is the rocket booster strategy?" The Rocket Booster Strategy In 3 Steps: Step 1 - The 50 Day moving average has to cross above the 200 Day Moving Average Step 2 - The 200-Day Moving Average has to be below the 50-Day Moving Average. Step 3 - The price should be above both the 50 Day moving average and the 200 Day Moving Average. If you follow these steps then you will see the buying signal as shown in this chart above Rocket boost its content to learn more. Disclaimer: This is not financial advice please do your own research before you buy or sell anything
NYSE:MOEducation
by lubosi
Dynamics of Bear Market CyclesBear markets, characterized by declining asset prices and investor pessimism, are a formidable force in the financial landscape. Understanding the distinct phases of a bear market cycle is essential for investors to navigate turbulent times and identify potential opportunities amidst the chaos. Shot across the Bow: The onset of a bear market sends a shockwave through the financial markets, shattering the "animal spirits" that drive bullish sentiment. Investor confidence wanes as uncertainty looms large, marking the beginning of a challenging journey ahead. Bull-Trap: Amidst the downward spiral, occasional rallies can deceive investors into believing that the worst is over. The "buy the dip" mentality prevails as hopeful traders attempt to capitalize on perceived bargains, only to be ensnared by the bear's trap once again. The Lower-High: As the bear market persists, a crucial shift in market behavior and psychology becomes apparent. The formation of lower highs signals a fundamental change in sentiment, as optimism gives way to caution and apprehension. Breakdown: The breakdown phase marks the definitive confirmation of a change in trend, as selling pressure intensifies and asset prices plummet. This descent into the deflationary abyss underscores the severity of the market downturn and underscores the need for defensive strategies. Fear and Capitulation: With fear gripping the markets, sentiment reaches a nadir as pessimism pervades and panic selling ensues. Investors capitulate in droves, relinquishing their holdings in a desperate bid to salvage what remains of their portfolios. Bottom Fishing: Amidst the chaos, value buyers emerge, scouring the market for opportunities amidst the wreckage. However, their efforts are met with fierce resistance from residual sellers, as the battle for market equilibrium rages on. Despair, End of Bear: In the depths of despair, all hope seems lost as the bear market reaches its nadir. Yet, amidst the gloom, a glimmer of optimism emerges as residual selling dries up, signaling the potential for a new beginning. Bear market cycles are a testament to the ebb and flow of market sentiment, characterized by periods of turmoil and uncertainty. By understanding the key phases of a bear market cycle, investors can better prepare themselves to weather the storm and emerge stronger on the other side.
Education
by Vestinda
What Are Cyclical Stocks?What Are Cyclical Stocks? Cyclical stocks are well known for ebbing and flowing with the rhythm of the economy. These stocks, a reflection of economic trends, demand a keen understanding of how various sectors react to changing economic conditions. This article delves into the world of cyclical stocks, offering insights into their nature, impact, and strategies for navigating their unique challenges and opportunities in the financial markets. What Is a Cyclical Stock? The cyclical stocks definition refers to shares of companies whose performance closely aligns with the economic cycle. They thrive as the economy booms but often underperform in recessions. Unlike counter-cyclical stocks, which tend to be stable or even prosper during economic downturns, cyclical stocks mirror the highs and lows of the economy. Industries like travel, automotive, and luxury goods are typical examples where price performance is directly tied to consumer spending and the health of the economy. Characteristics of Cyclical Stocks Cyclical stocks are distinguished by a set of defining characteristics. Primarily, they exhibit high volatility in response to economic changes. When the economy is growing, they often see significant gains as consumer confidence and spending increase. Conversely, during economic downturns, they often experience steep declines. The revenues and profits of these companies are closely tied to economic activities. For instance, in a booming economy, the automotive sector might see increased sales, boosting the value of car manufacturers. Sector-specific sensitivity is a critical aspect of cyclical stocks, meaning investors and traders must be adept at interpreting economic indicators to analyse performance trends. Another key feature is their correlation with consumer behaviour. Cyclical growth stocks typically see fluctuating demand based on consumer confidence and disposable income, directly impacting the values of companies in these industries. Cyclical Stocks Examples Cyclical stocks encompass a variety of industries that are highly sensitive to the economic cycle. Automotive: Companies like Ford and Toyota. Sales in the automotive sector often rise with economic growth, as consumers are more likely to purchase vehicles. Consumer Discretionary: Retail giants such as Amazon and Nike. These securities depend on consumer spending, which fluctuates with economic conditions. Travel and Leisure: Airlines like Delta and hotel chains such as Marriott. Travel spending is typically high during economic booms and drops during recessions. Construction and Housing: Homebuilders like D.R. Horton and Lowe's. Housing market growth is directly linked to the economy, influencing construction activity and home improvement spending. Luxury Goods: Brands like Louis Vuitton and Rolex. Luxury purchases increase with rising consumer wealth in strong economies. Economic Indicators and Cyclical Stocks Economic indicators play a pivotal role in the performance of cyclical stocks. Key indicators such as Gross Domestic Product (GDP), employment rates, and consumer confidence indices offer insights into the health of the economy, which in turn influences these stocks. For example, a rise in GDP often signals growth, leading to increased consumer spending and higher corporate earnings, positively impacting this class of stocks. Similarly, low unemployment rates boost consumer confidence and spending power. Conversely, negative data may lead to declines in these stocks. During recessions, when GDP contracts and unemployment rises, cyclical sectors like travel and automotive often experience reduced demand, resulting in lower prices. Risks and Rewards Although when trading share CFDs, traders can take advantage of both rise and fall in the price of an asset, it’s important to be aware of the risks and rewards of cyclical stocks: Risks Economic Sensitivity: This stock type is vulnerable to economic conditions, leading to potentially greater risks due to the constantly changing environment. Timing Challenges: Predicting the peaks and troughs of economic cycles is difficult. Misjudging the timing might lead to losses. Volatility: They can experience sharp price fluctuations, adding to risks. Want to observe just how volatile these assets can be? Check them on FXOpen’s free TickTrader platform. Rewards High Growth Potential: During economic expansions, cyclical stocks may offer market-beating growth as consumer spending and corporate earnings increase. Market Opportunities: Savvy investors and traders may take advantage of the predictable patterns of economic cycles. Diversification: Including cyclical stocks in a portfolio can provide balance, as they often move opposite to defensive, counter-cyclical stocks. Strategies for Trading Cyclical Stocks In navigating the cyclical stock market, traders often employ several strategies: Searching for Undervalued Stocks During Recessions: It's common to look for undervalued cyclical shares at the end of recessions. Such a period often presents opportunities for buying at lower prices, anticipating a rebound as the economy recovers​​. Monitoring Economic Trends: Traders typically keep a close eye on indicators like interest rates and consumer spending. Recognising changing trends early may help in making informed decisions about when to buy or sell stocks. Diversification: Traders often diversify their portfolios by including a mix of cyclical and non-cyclical shares. This strategy may help mitigate risk, providing protection against economic fluctuations​​. Moving Into Defensive Stocks as the Economy Falters: As signs of downturn appear, traders may shift towards more defensive stocks, which are less affected by economic cycles. The Bottom Line These stocks, mirroring the economic cycle's highs and lows, offer unique opportunities but also pose specific challenges. By combining strategies such as monitoring economic trends, diversifying portfolios, and adopting a long-term view, traders may leverage the potential of cyclical stocks. For those seeking to delve deeper into this dynamic aspect of trading, opening an FXOpen account could be a valuable step towards engaging with the cyclical stock market. Happy trading! 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.
NASDAQ:AMZNEducation
by FXOpen
2
The ultimate guide on Elliott waves in crypto tradingMost of you have probably heard about Elliott waves and we are sure that you don’t use it in cryptocurrency trading strategy because it’s very complicated and subjective approach. Crypto trading for beginners is very challenging and stressful even without Elliott waves. To be honest when we first time tried to implement it to my crypto trading strategies it was a complete disappointment. We were sure that it does not suit for both trading bot and manual trades. Elliott waves were thrown into a garbage bin for almost two years and we developed our crypto trading algorithm using only linear programming approaches. While we have been trying to invent the best automated trading bot using only indicators and support and resistance levels, best crypto traders have been successfully using Elliott waves in their analysis. Finally we make a decision to have a deep dive in this popular crypto trading tool and studied in details all available literature. As a result we found that Elliott waves will ruin your trading if you use it without special indicators for confirmation. Now we have 2 years of experience in trading with waves and almost one year ago we implemented them into our algorithmic trading bot. Today we prepared the best ultimate guide ever on Elliott waves using best practices and our unique experience how to use them in developing your own profitable crypto trading strategies. Let’s go! Why it’s vital to use Elliott waves? Before answer this question, let me ask another one! Why is important to use map to reach the final destination? I think here is the obvious answer! Talking about Elliott waves it’s almost the same reason. This is the only one approach which gives you a map for a price chart. I think you agree that technical indicators or support and resistance levels will not give you the answer which direction the price will choose. When you have, for example Stochastic Oscillator crossover or RSI oversold area hit you just open long because this is the most common strategy. You buy asset like a blind kitten. We are not criticize this approach, because using proper risk and money management you will earn with almost every strategy, but understanding the Elliott waves concept will dramatically increase your profit even if you combine them with your ordinary strategy. Why it’s happening? The answer is easy, because Elliott waves in the underlying structure of the market. You will be aware when you shall use your signals and when it’s better to skip trade. Now let’s dive into the Elliott waves to understand how to find them on the price chart. In the first part we will give you all needed theory and after that we will show in the real charts how it works. Elliott waves In general, Elliott waves concept is pretty easy. All markets are globally moving up with the five waves formations and then show the pullback with at the reactive waves. On the Bitcoin price chart above you can see the most common picture for Elliott waves. We had the bull run which consists of five waves and then was the bear market represented with the ABC correction. Waves can be divided into two groups: impulsive and reactive. On the bullish phase waves 1, 3 and 5 are impulsive, 2 and 4 reactive. Impulsive waves consists also with five sub waves, while reactive have usually three waves (exception the triangle correction, will be covered later). On the bearish phase we have the opposite situation: waves A and C are impulsive, while wave B is reactive. Now let’s discuss each wave in details. What will stop every wave in 90% of cases? Before we will observe the wave it’s very important to understand what are the early signs that current wave is about to be finished. This is really crucial concept because without it almost impossible to use Elliott waves for profitable trading. We need four tools to make sure that our counting is correct. In this article we will not spend to much time for these indicators, we just show you in practice how to use them. These tools are: Awesome Oscillator, Market Facilitation Index (MFI), Fibonacci retracement and extension and Fractals. These four indicators produce five wave’s end conditions. Divergence with Awesome Oscillator. If you found five sub waves inside any wave and you can see that price set the higher high (or lower low for bearish case), while AO set lower high (or higher low) it’s divergence between wave 3 and 5. This is the most powerful signal that trend is over. Fractal at the top or bottom. When you see the divergence it’s just the first sign of trend weakness, we need confirmation with the fractal forming at the top or bottom. You can easily find this indicator in TradingView, it will show you all fractals. MFI squat bar. We will cover MFI in one of the next educational articles, now you just need to know that it has squat state - the last battle between bulls and bears. One of the three top bars will be the squat in 80% of waves end. You can also find this indicator in TradingView. AO momentum change. Another one confirmation that trend is over is when AO histogram changes color. It’s better to wait three consecutive columns of the other color or when AO will cross back the signal line, 5 period MA of the AO. Target area. Using Fibonacci extension and retracement we can find the area where the reversal is the most likely. We will show you this targets when talking about waves. Now you know the five basic rules and we are ready to discuss every wave using this concept. Wave 1 When the previous trend is over the impulsive wave 1 begins. We can define the wave 1 start only establishing the previous wave end. It could be wave 5, C or E. It does not matter. You just need to apply our five rules: divergence, momentum change, target area, squat bar and fractal. On the chart you can see how in theory wave 1 can be looks like. Wave 1 always consists of five waves. That’s why we can wait for the same five rules to complete between wave 3 and 5 inside the wave 1. When you anticipate the wave 1 finish you have two options: close trade and re-enter at the wave 2 bottom or hold for the entire cycle. Wave 2 When wave 1 ends, you will see pull back in wave 2. It’s important to catch wave 2 bottom because wave 3 will bring you a lot of profit. Wave 2 can be classical ABC zigzag, flat or irregular correction. 70% probability it will be ended inside 0.38 and 0.62 Fibonacci retracement range of wave 1, in rare cases it can ends higher or lower. That’s why it’s better t count waves inside wave 2 and do not miss when all five trend killing conditions are met in wave C inside 2. Wave 3 The most impulsive wave in the entire cycle is obligatory for trading. Here you can have the less risky and the most easy trading. Wave 3 has the great fundamental factors as a price drivers. For example, Bitcoin spot ETF triggered a huge pump recently. Let’s imagine you correctly entered at the wave 2 end. Now we have to define wave 3 targets. The target area using fibonacci extension can be found between 1 and 1.61. This is the most likely case. In crypto it’s very often when waves 3 are extended. To have the most precise target it’s highly recommended to count waves inside wave 3. Found five waves? Check our favorite trend killing rules to exit a trade at the top. We know it sounds fantastic, but we managed to buy the exact bottom and sell at the top many times, but to be honest, we have never caught the top of the extended wave 3. Need more experience for that. Wave 4 Wave 4 can be the most complicated because it has a lot of different variants: zigzag, flat, irregular or even triangle. But at the same time in wave 4 we can have the easiest setup. When you predicted wave 3 top, it’s time to setup the target for the wave 4. The most reliable one is between 0.38 and 0.5. This wave is not so rapid as wave 2 and takes much more time (up to 70% of all cycle). The very important tip here is to look at the price where wave 4 inside wave 3 has been ended. If this level coincides with the 0.38-0.5 zone it can give you much more confidence. We have never made a mistake using this technique. As usual you have to look for the five trend killing rules in wave C inside wave 4 as well. Another one thing we want to point out. You know the axiom, that wave 4 has not overlap wave 1 top. This rule can be slightly violated and we will show you the case. Don’t pay attention that much to this rule. Wave 5 Finally we are in wave 5. This is really vital to define it’s top because bear market will follow this wave and can destroy your deposits. The target area for the wave 5 is defined as the distance between wave 1 bottom and wave 3 top, measured from wave 4 bottom. Area between 0.61 of this distance and 1 Fibonacci level is our target. There you have to find trend killing rules as usual but this time for all cycle, not subwaves. Corrections The most dangerous place for trading is the correction. From our experience only wave C in zigzag is tradable. You would better to skip corrections and try to catch it’s end. We have four types of corrections, but the most important knowledges is that wave C and E are always consists of five waves. It means you can use the rules how to catch wave 5 end inside these waves. Zigzag ABC. If wave A consists of 5 waves the most like we will see zigzag. Wait when wave B reach 0.5-0.61 Fibonacci of wave A and be ready to trade in wave C. Flat. Wave A has 5 waves inside. Waves A, B and C are almost equal to each other. Irregular. Wave B top is higher that the previous impulsive wave. Wave A consists of 3 waves. Triangle. Consists of A, B, C, D and E waves. Wave E consists of five waves. Usually occurs inside waves 4 and B of higher degree. Now you have a theoretical description. It’s time to trade!
Editors' picks
Education
by Skyrexio
19
WHAT ARE THE DIFFERENT TYPES OF STABLECOINS?👋 Hello everyone, today we will be discussing stablecoins, which currently have a market capitalization of around $160 billion. Those who are not very familiar with cryptocurrencies often use stablecoins for various purposes such as making payments, storing money in a stable currency as an alternative to the US dollar, and for international transactions as well. However, stablecoins actually have a wide range of potential uses beyond these basic functions. In this post, you will learn about the different types of stablecoins available in the market. 💎 DIFFERENT TYPES OF STABLECOINS, THEIR APPLICATIONS, AND POTENTIAL RISKS The type of stablecoin and its purpose are typically defined by the developer, who also establishes the asset to which it is pegged, and creates the system for issuing and burning coins. Stablecoins that are listed on the top 20 exchanges globally in terms of capitalization are the ones that garner the most interest. 💎 SECURED BY FIAT WITH A PEG TO A SPECIFIC CURRENCY Binding can be done in various currencies such as USD, EUR, and others. One of the most well-known coins for binding is Tether. According to its developers, the coin is fully backed by real currency, stocks, bonds, and low-risk assets. ⚠️ However, there are risks involved with backing. For instance, Tether has faced challenges with verifying its backing. The company was not forthcoming in providing all necessary information to auditors. As a result, there are doubts about whether the security can serve as a protection fund in times of unexpected events. In another example, the second largest USDC stablecoin pegged to the USD fell below 87 cents in early March 2023. This drop was widely attributed to the bankruptcy of Silicon Valley Bank, where the startup had held approximately $3.3 billion in collateral. While the situation has since been stabilized, the potential for another bank failure to affect the value of a stablecoin remains a concern. 💎 SECURED BY A SPECIFIC ASSET One example of this is the PAXG coin, which is backed by physical gold. This means that the value of the coin is directly linked to the price of gold, eliminating the need for complicated stock market investments or futures trading. By simply purchasing the coin, you can potentially earn money. ⚠️ However, there are risks involved, particularly regarding security. The price of PAXG is not determined by traditional supply and demand forces, as it is tied to the value of gold regardless of the number of tokens in circulation. The algorithm controls the number of tokens, but there is uncertainty about whether the startup behind the coin will fulfill its obligations in case of unforeseen circumstances. 💎 ALGORITHMIC STABLECOINS One of the most complex models of operation to comprehend is the concept of stablecoins. These digital currencies are built on computer code, which is essentially an algorithm that governs the creation and destruction of coins. There are primarily two types of algorithmic stablecoins 1️⃣ The first type operates without any external backing. When the price of the stablecoin rises, the algorithm mints more coins. Conversely, when the price drops, it burns existing coins. This mechanism seems logical from an economic perspective, but it becomes problematic during times of crisis when everyone rushes to convert their virtual coins into real money. ⚠️ There are inherent risks associated with algorithmic stablecoins as they lack any physical backing. When you purchase stablecoins by providing USD, the developers may use the funds as they see fit. You can only expect to retrieve your investments if someone else injects more USD into the system. The story of Do Kwon and his Luna stablecoin serves as a cautionary tale of such a pyramid scheme. 2️⃣ The second type of algorithmic stablecoins introduces a more sophisticated concept, exemplified by the workings of DAI created by the startup MakerDAO. The innovative approach involves a redundant reservation system, where the responsibility of securing the collateral lies with the user rather than the developers. Each user can mint a DAI coin, pegged to the value of 1 USD, by locking up another cryptocurrency as collateral in excess of 100%. This surplus serves as a safety net in case the value of the pledged cryptocurrency experiences a significant drop, potentially by 50% or more. If the value of the collateral falls below the 100% threshold, the investor's position is automatically liquidated. Notably, developers have no control over the issuance of DAI, with the stability of its price reliant on the collateral provided by users. ⚠️ Despite the innovative approach, there are inherent risks involved. A sudden decrease in the value of the collateral cryptocurrency can result in standard "slippages", where users not only lose their collateral asset but are left with a stablecoin experiencing a drastic devaluation from 1 USD to just a few cents. 💎 WRAPPERD STABLECOINS One popular example is Wrapped Bitcoin (WBTC). Bitcoin and Ethereum are the two largest platforms, but they are not compatible with each other. Developers who deploy startups on Ethereum find that their users also work with BTC as a reliable investment tool. WBTC was created as an intermediary to bridge this gap. The coin is deployed on the Ethereum network and is tied to WBTC in a 1:1 ratio. ⚠️ However, there are risks involved in using WBTC. As it belongs to people, there is a lack of decentralization. Only the portion of WBTC that is in demand is secured, leading to a smaller capitalization compared to bitcoin. The extent to which this network can be trusted is a complex question that requires careful consideration. ✅ CONCLUSION Stablecoins are an effective asset when utilized as a medium of exchange rather than as an investment, unlike gold-backed coins which function more as an investment tool. These coins provide protection against price fluctuations as they are linked to a stable asset. However, they still carry similar risks to altcoins such as detachment from the collateral, a decrease in the collateral's book value, and potential fraud by developers. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
How to use different timeframesHello traders and investors! Today I'll talk about choosing the right timeframe and how you can use different timeframes when looking for trades. This will help us uncover what is hidden in this candle on the chart. When we look at something, we are usually limited by a certain viewpoint. From this point, we only see part of the whole picture. But if we move and look from a different perspective, we will discover new details and aspects that were previously unnoticed. The same applies to analyzing the chart of a financial instrument when using different types of charts or different timeframes. This post will focus on using different timeframes. On one timeframe, it may be difficult to understand the essence of what is happening, while on another, everything can become clearer and more understandable. I've already talked about using different timeframes when looking for trades in an educational article a few weeks ago (see the related post below). In that article, I highlighted 5 skills that help effectively trade in sideways markets. Discussing the first of them - how to combine higher and lower timeframes when looking for trades, I provided a practical example on the OPUSDT chart using the daily and hourly timeframes. In that practical example, I formulated target levels that are likely to be reached. You can see the results in the related post (see below). I'll provide another example of choosing the right timeframe and the correlation between timeframes, using the BTCUSDT chart. This will help us uncover what is hidden in this candle on the chart. In the update of this idea I noted that on the hourly timeframe at the contextual point of the seller (the beginning of the last seller impulse, level 66867), I didn't see an active seller and wasn't ready to join the sales at that moment. As a potential target, I indicated 62776. So, I looked at the chart on different timeframes and searched for what remains unnoticed. On the 7-minute timeframe, I discovered a sideways movement at the contextual point of the seller (level 66867), as mentioned in the idea update with a recommendation to look for a trade after exiting the sideways movement and protecting this exit: Now, let's analyze what happened next (on the bars chart, as bars take up less space and additional marks are better visible). The seller broke through the lower boundary of the sideways movement at 65626.87. The seller's impulse ended at 10:49 (New York time), when after breaking through the lower boundary of the sideways movement, the first buyer bar appeared. The key candle(bar) of the impulse (the largest volume in the impulse) is marked on the chart as "KC". Therefore, the seller's defense of this candle or the lower boundary of the sideways movement (65626) increases the probability of further price decrease. The price range of the key candle of the impulse is highlighted on the chart (from high to close). Now let's pick a lower timeframe to see more clearly what happened before and after 10:49. On the 1-minute timeframe by 10:49, a sideways movement formed, and at 10:49, the price attacked the upper boundary of the sideways movement (level at point 2). The key candle of the buyer's impulse ("KC" on the chart) is in the middle of the impulse. At 10:59, the buyer attacked a new boundary of the sideways movement (level at point 6 - 65249.01). Pay attention to the volume of the attacking candle. At 11:02, the seller pressed the attack candle, forming a seller zone (red background on the chart). On the buyer's candle at 11:04 (black downward arrow on the chart), you can sell because: On the hourly timeframe, the price is in the seller's impulse in the seller's area of interest, which defended the level 66867. On the 7-minute timeframe, the seller broke through the lower boundary of the sideways movement. On the 1-minute timeframe, the seller defended the level (65249.01) from the buyer's attack on a significant volume, which is within the price range of the key candle of the 7-minute timeframe impulse. And one more interesting point. Look where the seller's resumption on the minute timeframe came from - from the 50% of the key candle of the 7-minute timeframe seller impulse. Could the price, without reaching the target of 62776, go up? Yes, the probability of this event is not zero. And we see how the price did not reach the target by 18 dollars (black upward arrow on the chart) and turned upward. Where did the seller stop it? It stopped right there inside the key candle of the sideways movement exit on the 7-minute timeframe (black downward arrow on the chart). After that, the target of 62776 was reached.
Education
by AlexeyWolf
Here is WHY You Must Learn TRADE MANAGEMENT Hey traders, In this post, I will share with you my tips for trade management in Forex trading . But first, let me elaborate on what is exactly a trade management . Trade management is the set of rules and techniques applied for managing of an already active position. Trade management is a very important element of any trading strategy that should never be neglected. 1. Never remove a stop loss Being in a huge loss, many traders refuse to admit that they are wrong. Instead, watching how the price moves closer and closer to a stop loss, they remove stop loss hoping on a coming reversal. The alternative situation may happen when the price is going sharply in the desired direction. Watching the increasing profits, traders remove a stop loss (and occasionally take profit), being afraid to miss bigger profits. Both situations may lead to substantial, higher than initially planned losses. Driven by many factors, the market can easily burn all gains and move against the desired direction much longer than traders stay solvent. Take a look at this long trade on Gold. When the price comes closer and closer to a stop loss, many traders can not take a psychological pressure and remove stop loss, being afraid to take the loss. However, most of the time, stop loss will help you to limit your losses. You can see that after Gold reached stop loss, the price dropped much lower. Removing the stop loss, you would inquire bigger losses. Never remove a stop loss. It must be always set. 2. Never modify your stop loss if a position is in loss Watching how the price moves closer and closer to a stop loss is painful. Instead of removing stop loss, some traders move it and give the market more space for reversal. Even though such a technique is safer than the complete stop loss removal, it is still a very bad habit. Each stop loss adjustment increases the potential loss, not giving any guarantees that the market will reverse. It is highly recommendable to keep your stop loss fixed and let the price hit it and admit the loss. Above is one more example, why the earlier you close the trade in a loss, the better. Modifications and adjustment of your stop loss will most of the time lead to even bigger losses. 3. Know in advance your profit protection strategy Where do you take your profit? Do you have a fixed tp level or do you apply trailing stop? You should always know the answers. Coiling around take profit level but not being able to reach it, the price makes many traders manually close the trade or move take profit closer to current price levels. Another common situation happens when the market so quickly reaches the desired TP level so the traders remove TP hoping to make bigger than initially planned profit. Such emotional interventions negatively affect a long-term trading performance. TP removal may even burn all profits. Do not let your greed intervene, and always follow your rules. Above is the example of trade management rules in Forex trading. After GBPUSD reached a key support, a long position was opened from that. Once the price moves up by a certain distance, stop loss will be moved to entry. Take profit will be the closest key resistance. 4. Never add to a losing position Watching how the price refuses to go in the intended direction and cutting a partial loss, many traders add to a losing trade in hopes that the market will reverse and all the losses will be recovered. Again, such a fallacy usually leads to substantial losses. Remember, you can add to a position only AFTER the market moved in the desired direction, not BEFORE. Just imagine what could happen with your trading account, if you kept adding to a losing short position in a recent crazy bullish market on Gold. 5. Close the trades manually only following rules Quite often, newbie traders manually close their trades because of some random factors: they saw someone's opposite view, or they simply changed their mind. Remember, that if you opened a trade following your trading plan, you should always have strict rules for a position manual close. Do not let random factors affect your trading. Above is the example how you could easily miss a lot of pips on Gold, simply because the market temporarily stuck on some resistance. Following these 5 simple tips, your trading will improve dramatically. Remember, that it is not enough to spot and accurate entry. Once you are in a trade, you should wisely manage that, following your plan.
OANDA:XAUUSDEducation
by VasilyTrader
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