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GBP/USD on watch for me today.GBP/USD: • If price pushes up to and ideally just above our upper trend line and the last part of the move is corrective, then I'll be looking for a risk entry after a phase line break on either the one hour or the fifteen minute chart because we will have had a completed three touch structure. • If price pushes up impulsively to and ideally just above either our upper trend line, our upper rayline or our lower rayline, then I'll be waiting for a convincing push back down followed by a tight flag where I'll be looking for a reduced risk entry on the break of the flag and if the flag forms just below our lower rayline as illustrated I'll be hiding my stop loss above it for extra protection as illustrated. • If price pushes up to and ideally just above our lower rayline, then regardless of how price does so I'll be waiting for a convincing push back down followed by a tight flag where I'll be looking for a reduced risk entry on the break of the flag. • If none of these setups present themselves then I will simply wait until another setup which meets my plan materialises. • If there's any ambiguity then I will not place any of these trades.
Short
by StewySongs
44
Five Points to consider before placing a trade🖐Five points to consider before choosing an Entry /Exit point📈📉 ☝️ Point1: Before choosing an entry point. We need to put into consideration the general market sentiment. Get informed about economic events, news, and indicators that can influence the market🤔. ✌️ Point 2: Pickup your trading journal run a proper technical analysis. Determine the market trend by examining charts, patterns, and indicators. Identify potential entry and exit points based on your trading strategy🤔📈📒. 🤟 Point 3: Place the trade. Follow your strategy and risk management rules. Set clear parameters for position size, stop-loss, and take-profit levels. Always Stick to your plan to maintain discipline‼️🏋. 🖖 Point 4: Manage the trade. Once you're in the trade, let your stop-loss follow the price, protecting your capital and securing profits. Consider adjusting your stop-loss or taking partial profits if the trade moves in your favor🫣🚫. 🖐 Point 5: Post-trade analysis. After the trade is closed, take the time to review, analyze, learn, and improve. Reflect on your decisions, outcomes, and emotions. Identify strengths and areas for improvement to enhance your future trading performance, make proper use of your trading journals🙂📔💰. Remember, successful trading requires patience, discipline, and continuous learning. Adhering to these five points,will cause an exponential growth in your trading game. Happy trading! 👨‍🎓📚💰
Education
by Freaky_Josh
MOST POWERFUL TRADING SETUPThe fakey setup is a powerful trading strategy that can be used to identify high-probability entries in the forex market. It combines three different chart patterns and requires the trader to be patient and wait for the right setup to form. With a bit of practice, traders can become very proficient at spotting fakey setups and taking advantage of them. Fakey setup begins with an inside bar or false breakout pattern. This is when price breaks out of a range but quickly reverses and closes back inside the range. This shows that the breakout was false and signals a potential reversal. The false breakout is followed by a pin bar. This is a strong candlestick pattern that has a long tail and a short body. The long wick indicates a rejection of a certain price level. Simply put, this setup is formed when a false breakout of the triangle pattern occurs. The inside bar is actually a triangle if you look at the small timeframe, and its false breakout forms this strong setup. On a bitcoin chart for example, you can find many such setups. This is another version of the fakey setup. Where a false breakout of the triangle leads to a strong bullish movement. In the forex market this setup is traded as usual. Fakey setup in Forex market *️⃣ The main form occurs when one of the highs or lows of the mother bar breaks with a bar with a long tail. IMPORTANT TO KNOW *️⃣ In the forex market the fakey setup is traded only on H4 timeframes, better on D1 only on the trend, it is very risky to catch reversals on its tops or lows. As in any Price Action pattern, there must be a confluence point, which can be support or resistance levels. Fibonacci levels or trend lines are right place to take trade if you find this setup. Trading is conducted by pending buy and sell orders. Take profit can be taken at a distance of "stop loss multiplied by n", where the recommended value of n = 2 (there can be more), or at the nearest horizontal level. But each trader's method of exiting a trade may be different. You can trade fakey setup against the main trend, but like any other counter-trend setup, it must be absolutely obvious with a perfect shape and must be on an obvious and strong daily level. You should not trade fakey against the trend until you learn how to trade this setup with the trend on the daily charts. Keep in mind that fakey on hourly charts has almost no power. Only the breakout of the mother candle following the breakout of the inside bar is a is a signal to enter the trade. Because there was not a substantial breaking of the mother candle as in a significant fakeout, there is a need for further confirmation that the market is actually going in our favor. The fakey is a particularly successful setup since a false-break that developed in the opposite direction of the strong trend suggests that the trend is going to continue. Even if false breakout of horizontal market support and resistance levels don't happen frequently. The price crosses the horizontal level in the example below, but the subsequent candle bounces rapidly and moves upward, indicating that the level was a false breakout and also forming Inside Bar setup: A false triangle breakout can be found in any market. Bitcoin really likes this pattern, but in a slightly different form although the essence remains the same. How does it happen? The market essentially consolidates, after a trend movement forms a triangle, and a false breakout of this pattern leads to a continuation of the movement. This pattern can be found from 2014 on the BTC chart.   Fakey is one of the best sets of price action since it reveals market activity and predicts what is likely to occur in the near future. Because a strong trend has both technical and fundamental reasons to move in one direction or another, this setup works best in trend markets. A fake breakout happens when "amateurs" try to buy at the top or sell at the bottom because professional players enter the market and profit from the brief retreat brought on by the "amateurs'" greed and emotional trading.
Education
by Lingrid
13
Why 90% Of Traders FAIL⁉️ Trading is one of the most fascinating and exciting professions in the world. It promises huge profits, financial independence, and the ability to work from anywhere. But with great rewards come great risks, and 90% of traders fail. Why do so many traders fail? Let's explore the reasons. 📚Lack of education: Many traders jump into trading without the proper education or training. They don't understand the market dynamics, technical analysis, and risk management. Trading is a skill that needs to be learned and practiced over time. Without education, traders are like blind people trying to navigate through a maze. 💔Emotional trading: Emotions are the biggest enemy of traders. Fear, greed, and hope can cloud judgment and lead to poor decision-making. Successful trading requires discipline and emotional control. Traders must learn to keep their emotions in check and stick to their trading plans. 📉Overtrading: Many traders believe that more trades translate into more profits. However, overtrading can lead to burnout, stress, and losses. Traders must focus on quality trades, not quantity. 🆘Lack of risk management: Trading involves risk, and traders must learn to manage it. Risk management includes setting stop-loss orders, using proper position sizing, and diversification. Traders who don't manage risks can quickly wipe out their accounts. ❌Unrealistic expectations: Trading is not a get-rich-quick scheme. It requires patience, persistence, and hard work. Many traders have unrealistic expectations about their profits and timelines. They give up too soon or take too much risk in search of quick profits. So, what can traders do to avoid failure? ✅Firstly, educate themselves. Learn the fundamentals of trading, technical analysis, and risk management. Investors can take various online courses for trading like those from Udacity, the Trading Academy, etc. ✅Secondly, manage emotions and develop discipline. Learn how to control your emotions and stick to your trading plan. Traders must treat trading as a business and follow strict rules like any other business. ✅Thirdly, trade with proper risk management. Develop a risk management strategy before starting trading. Use stop-loss orders, never risk more than you can afford to lose, and diversify your portfolio. 🧠In conclusion, trading can be a rewarding profession that offers many benefits. However, traders must be aware of the risks and pitfalls. By educating themselves, managing emotions, and developing robust risk management strategies traders get a good chance of succeeding in trading. Good luck! 😸Thank you for reading buddy, hope you learned something new today😸 Do you like this post? Do you want more articles like that?
Education
by ProSignalsFx
14
Trading Mindset: The Winning Edge!In the world of trading, strategy, and market knowledge are typically seen as the twin pillars of success. However, this is only part of the picture. The psychological aspect of trading is often overlooked but can be equally, if not more, influential in shaping trading outcomes. This component involves understanding and managing the emotions, biases, and mental states that can impact trading decisions. Emotional decision-making can lead to costly mistakes, such as panic selling during market dips or holding onto a losing trade for too long out of hope or fear. Therefore, it is crucial to cultivate a clear, disciplined mindset for more profitable and consistent trading outcomes. This tutorial will delve into the psychological landscape of trading, providing valuable insights and practical tips to master your mind and, consequently, the market. Common Psychological Traps in Trading There are several psychological traps that traders can fall into, which can seriously undermine their trading performance. One of these traps is overconfidence. After a streak of successful trades, it's easy to start feeling invincible, which can lead to riskier trading behaviors and impulsive decisions. Fear and greed are two more emotions that often dictate trading decisions. They are the key drivers behind market trends and can lead to significant financial losses if not managed properly. The fear of missing out (FOMO) can push traders into hasty, poorly thought-out trades, while greed can create a reluctance to sell even when all signs point to a market downturn. Another common psychological pitfall is anchoring. This occurs when a trader becomes fixated on specific price points or values, which can distort their perception of a security's true value and hinder rational decision-making. Understanding Your Trading Emotions To manage your trading emotions effectively, you first need to understand them. One practical way to do this is by keeping a trading journal. Besides recording your trades and their outcomes, this journal should also note down your emotions and thoughts at the time of each trade. Over time, you may start to see patterns in how your emotions affect your trading decisions. Knowing your risk tolerance is another crucial factor. Each trader has a different level of comfort when it comes to taking risks, and understanding this can significantly shape your trading strategy. A risk-averse trader might prefer more stable assets, while a risk-tolerant one might be comfortable with higher volatility. Strategies for Managing Trading Emotions Being in the right mental state before you start trading is paramount. Developing a pre-trade routine that helps you calm down and focus can prepare you for the trading day ahead. This routine could include activities like meditating, exercising, or going over the latest market news and your trading plan for the day. Having a clear trading plan can also provide a solid foundation for managing your emotions. This plan should outline your strategy, including risk management tactics, potential entry and exit points, and your objectives for each trade. It serves as a roadmap and can keep you grounded when market volatility triggers emotional responses. In addition, learning stress management techniques can be invaluable in trading, a field often fraught with stress. Taking regular breaks, deep breathing exercises, and ensuring you have a balanced lifestyle outside of trading can help maintain your mental equilibrium. Conclusion and Further Reading Trading psychology is a vast and complex field, but understanding its fundamental principles can drastically improve your trading performance. By being aware of the common psychological traps, understanding your own emotions and risk tolerance, and employing effective strategies to manage your trading emotions, you can make more informed and profitable trading decisions. Continuous learning and emotional self-awareness are keys to successful trading. There are numerous resources available for those who want to delve deeper into trading psychology, risk management, and market analysis. While the journey to master your trading psychology can be challenging, the potential rewards - improved trading outcomes and personal growth - are well worth the effort.
Education
by ShawnMCR
4
SWING FAILURE PATTERNHello, fellow forex traders! Today we will talk about one of the most powerful Price Action setups, which is little known to the public. The Swing Failure Pattern(SFP)is a false-break of the maximum or the minimum level of the previous swing. The UK trader Tom Dante is mostly responsible for spreading this pattern. The effectiveness of SFP is such that after mastering the skills of identifying of this pattern many traders use it as a full-fledged trading system. ✴️ How and why is this SFP formed? SFP occurs as a result of a failed attempt by market participants to form a new swing high or swing low. The failure is due to the desire of a pool of large traders or investors to take advantage of the accumulation of liquidity of pending breakout orders (Buy Stop, Sell Stop) and loss limit orders (Stop-loss) to enter the position. The placing of a large number and large volume of pending orders in a relatively narrow price range leads to a swing, very similar to the classic trend. Traders are attracted by a "clean" move up or down and place orders virtually in one spot, just above the highs or lows, hoping that the trend will continue. The described example in the growing trend is shown in the picture above. The evident upward movement of the currency pair leads to the desire to enter the market and place the order immediately after the nearest maximum. Stops of the traders who are in a counter-trend position will also be placed there, as it is obvious to them now. ✴️ The SFP pattern: The rules for the formation and entry points SFP is formed on a swing high or a swing low of any timeframe, but the most preferable timeframes for its search are those starting from H1 and above. A false breakout is always preceded by a clear correction, leaving a "clear space" to the right of the previous maximum or minimum. When looking for the SFP pattern, the main condition for its formation must be the evident trend and correction, as well as the breakout of the previous swing level (high or low). If there are several extreme levels, the pattern candlestick should ideally break all previous values, or at least the nearest extreme. The picture below shows the formation of low on the correction of a rising trend. The candlestick of the SFP-pattern should break of the swing low. As in the first case considered, the entry in the pattern is made at the opening price of the next candle, the SFP candle itself can be of any configuration, shape and size, you should only pay attention to the mandatory high/low and the closing of the candle body above/below the extreme. ✴️ Stop Loss and Take Profit levels for the SFP pattern The strategy is best utilized with a dynamic stop loss, the size of which can be determined using the ATR indicator, which measures the current volatility at the period specified by the trader. If the trader is looking for a pattern on the hourly chart, then a stop loss should be set by the size of the daily volatility. Change the period of the ATR indicator to 24. On the daily timeframe you can leave the standard value of 14. Or set it to 20 (the average number of working days in a month). The pattern is not designed for a long-term or medium-term trading, the task of the trader is to catch the pullback. Set a take profit just below the nearest high or above the low, at the nearest level. ✴️ Key Features The pattern can be detected on any time frame, but traders should look for SFPs starting with hourly candles. The liquidity of pending orders and stops, which attracts large players, is the key to the successful working out of the false breakout, which simply may not be present on small timeframes. For the same reason, the visibility of a pullback from the swing-high and swing-low for all traders is important, you should not look for a pattern in the flat market, on the minimums and maximums of which there will not be the necessary number of pending orders. When multiple lows are accumulated in a row (double, triple bottoms or tops), the SFP candlestick should ideally use its tail to break all previous extremes, but the closing price should be lower than the maximum (higher than the minimum). The shape of the candle can be anything, it will often be similar to a pin bar, it's allowed to retest, if it occurs in the next working intervals (timeframes, chosen by the trader). ✴️ Conclusion False breakout often leads to missed profits and an additional stop loss. The SFP pattern demonstrates how you can profit from it with high probability. The figure shows that traders should pay attention to it.
Education
by DeGRAM
3
👻3 Steps To Become A Professional Trader👻 Becoming a professional trader is not an easy task. While trading may seem exciting and lucrative, it requires dedication, discipline, and a sound understanding of the markets. In this article, we’ll share with you three key steps to becoming a professional trader. 🌺Step 1: Build a Strong Foundation Before beginning your journey as a trader, it’s essential to build a strong foundation. This involves educating yourself about the financial markets, including learning about different trading strategies, technical analysis, risk management, and market psychology. The good news is there are plenty of resources available online to learn about trading principles and strategies. Another part of building a strong foundation involves studying the market and practicing with demo accounts. Demo accounts allow you to practice trading in a simulated environment that replicates the real market. 🌸Step 2: Develop a Trading Plan Developing a trading plan iscrucial to becoming a successful trader. A trading plan should outline your objectives, risk management strategies, trading rules, and decisions about entry and exit points. It would help if you also identified what type of trader you are, whether that’s a day trader, swing trader, or a position trader. A trading plan gives you a framework to base your trading decisions on, which can help you remain disciplined and make smart choices based on data, not emotions. 🌼Step 3: Consistency is Key Consistency is key in trading. It’s not enough to have a single profitable trade; you need to be able to make profitable trades consistently. To achieve this, you need to have patience, discipline, and a strong mindset. One of the essential aspects of consistency in trading is understanding and managing risk. This involves limiting potential losses and setting profit targets to ensure you don’t go overboard. Lastly, you need to set realistic expectations and maintain good habits like keeping a trading journal, analyzing your trades, and continuously improving your trading strategies. In conclusion, while there isn’t a specific recipe for success when it comes to trading, these three steps outline the fundamental elements of becoming a professional trader. With dedication, effort, and discipline, you too can make a living or even a fortune from trading! Please cheer me up with a like and a nice comment😸❤️ Please, support my work with like and comment! Love you, my dear followers!👩‍💻🌸
Education
by AnabelSignals
8
BASIC MARKET STRUCTUREMany traders use indicators these days in trading the markets and they certainly have their place. But the most effective method of market analysis remains the method of determining market structure. Trading based on the underlying market structure can be quite easy because the principle is very simple. What is market structure? We look for trading opportunities because of the market structure. We constantly search for opportunities to buy when the market is trending upward and sell when it is trending downward; in other words, sell high and buy low. The fundamentals of market structure As much as we all would like to see nice capital curve, especially if one has a trade in that direction, unfortunately that is not how the market works. In the trading world, one would like to see the market always reach its target after opening a trade. But in reality, the market is neutral and it has its own laws and principles. The market functions in another way. As a wave, the market movement has its ebbs and flows. The market moves up and down as it breathes in motion. The basic price movement, which consists of four points: Higher High Higher Low Lower Low Lower High Equal high and lows It is more complicated on a chart than in the illustration above. In between the major swing points, the price makes even smaller swings: a swing within a swing and this usually causes confusion for beginners. You can see it on the live chart below. Price moves in alternating swings between lower lows and lower highs. On the timeframe higher, though, the scene can be different: on the higher timeframe, price goes up, and on the lower timeframe, price can go down. This is the nature of the financial markets. Can we use basic market structure to predict potential trend changes? Of course, there are no tools that can identify trend changes in all cases. It is probable, but unrealistic! Nevertheless, by using the basic principles of market structure shown, it is possible to identify exactly where the strength is. On the side of the sellers or buyers, which can lead to a reversal of the market trend. A market that makes a series of higher highs and higher lows usually attracts buyers who want to join that bullish movement by pushing the price even higher. But when the price fails to make a new high and cannot support the rising move, going lower to form a lower low, it is an indication that a possible down-trend change may be underway. And here on the live chart of the EURUSD: Implementing the market structure in trading? In a bull market, we expect price to roll back to the optimal trading zone in anticipation of the market eventually forming a higher low. Fibonacci levels allow us to identify these zones in the market. In the BTCUSD chart below we can see the association of support and resistance zones with the underlying market structure and Fibonacci points. We have clearly identified three potential buy zones based on the underlying market structure. We must remember that price should move smoothly and should look nice, no choppy moves.
Education
by UnknownUnicorn15614419
9
LOGICAL PLACES TO ENTER THE MARKETFormations in price action trading include candlestick patterns, often known as triggers. They can, with a high degree of likelihood, identify the direction in which the price movement will occur if they have the right location on the chart. The important factor is not simply the patterns' use but also how they interact with the structure levels and trends. The apparently "right spots" are these. They may be misused by many traders. Therefore, where is the best place to enter the markets? Support and Resistance 📊 Determining the trend is an important trading process. The correct step is to classically define higher highs and higher lows compared to lower lows and lower highs. But in practice there is a lot of room to interpret the trend at different timeframes, so it is very helpful and important to have clear principles and rules. It is quite logical, if there is a trend in the market, to be able to trade in its direction or apply reversal signals. If the market is trading in a range, then the trader is best off using a range trading tactic. Once market structure has been identified, traders can look for entry points at these levels. Traders may look for price action signals, such as candlestick patterns, around the support or resistance level to indicate a possible entry point. Additionally, traders can use overbought/oversold conditions by using indicator and divergences. Fibonacci Retracement 📈 Fibonacci levels are often used to confirm a market reversal, and they can be used to identify potential trading opportunities. For example, after a strong trend, if the market pulls back, this is the best place to open a trade. Fibonacci levels are 38.2%, 50.0%, and 61.8% where you should pay attention. If these levels are near psychological levels, or levels of support and resistance, this is a very good place to enter the market. Trendline Breakouts 📉 A trendline reversal and breakout is a chart pattern that occurs when the price of an asset breaks through a trendline connecting the highs and lows of the asset over a period of time. This is usually seen as a sign that the current trend has reversed and the price of the asset will begin moving in the opposite direction. Traders usually watch for a trendline reversal and breakout to enter a position in the opposite direction, long or short. A trendline breakout is a good indicator that the current trend is fading. If a trendline breakout occurs in large candles, it means there is a supply or demand zone above or below, which pushes the price in the opposite direction. Range Breakouts 📃 Markets often break out of ranges or other chart consolidation patterns like triangles or flags. Identifying breakouts and waiting for confirmation can help you enter a trade with a better risk/reward ratio. For example, if you are bullish, waiting for a breakout can help you enter a trade with a lower risk/reward ratio. The purpose of a range breakout is to capitalize on a sudden increase in the volatility of an asset. When the price of an asset moves out of its range, it means that there is strong pressure from buyers or sellers behind the move. Accumulation always leads to distribution and entering a trade when the price moves out of range, the trader can benefit as the price usually makes an impulse move after the breakout.
Education
by Lingrid
5
Best Qualities of a Signal Provider❇️ Finding the right signal provider for your trading journey can be a daunting task. With so many signal providers out there, it's hard to know which one to choose. But don’t worry—here, we’ll go over the best qualities of a signal provider so you can make an informed decision. ❇️ The first and the most important quality to look for in a signal provider is track record. A track record is important for signal providers because it gives potential clients an indication of their performance and reliability. A good track record shows that the signal provider is consistently able to generate reliable signals and generate profits for their clients, meaning that the provider has a good trading strategy. It also gives potential clients an idea of the provider's risk management practices and their ability to stay profitable in different market conditions. So before using any signal provider's services, you have to first check their track record. ❇️ The second quality to look for in a signal provider is transparency. A good signal provider should be able to explain how their signals are generated and how they interpret the data. This will allow you to assess whether their signals are suitable for your trading style. For example, if you're looking for signals for day trading, you'll want to make sure that the signal provider is generating their signals based on historical price data for that day. In order to succeed in the market, it is essential to have a comprehensive risk management strategy. See how the signal provider manages risks and takes losses in a responsible and timely manner. ❇️ The third quality to look for in a signal provider is customer service. You want to be sure that the provider is available to answer your questions and provide helpful advice. Make sure to check out the provider's customer support options before signing up. Is their customer service team responsive and helpful? Do they have a history of providing reliable signals? Also, it's important to make sure that the signal provider you choose offers a money back guarantee. This will ensure that you can get a full refund if you're not satisfied with their services. This way, you can feel confident in your decision and know that you'll be able to get in touch with support if you need it. ❇️ Cost of services. When it comes to choosing a signal provider, it's crucial to do your research and compare the cost of the signal to other providers to ensure you're getting the best value for your money. Additionally, some providers may offer discounts or other incentives to encourage the use of their services. It is best to contact the provider directly to get an accurate estimate of the cost of the signal. ❇️ This should include a step-by-step process for how they assess each signal, and how they decide whether to move forward with the investment. Additionally, you should find out whether the provider uses a computer algorithm or a team of experts to analyze the markets. Generally, larger providers will charge more for their services than smaller providers, as they have more resources and infrastructure to support the signal. ❇️ In conclusion, a good track record pretty much sums up any signal provider's trading performance and reliability. It shows you can really make good returns from them by using their services. If a signal provider doesn't have a track record, this is a bad sign and makes it hard to value their trading ability as well as signals. And eventually, it can lead to a loss of money.
Education
by UnknownUnicorn15614419
9
HOW TO USE FIBONACCI EXTENSIONFibonacci is a technical tool, essentially an automatic tool for building support and resistance levels. They need to be supplemented by: Standard support and resistance lines Trend lines Japanese candlesticks and additional indicators Then they will be a good assistant in your trading. This is how a trading strategy is created, based on the combined instruments and the study of their features in different market conditions. The three most important Fibonacci retracement levels are: 0.382 (38.2%) 0.5 (50.0%) 0.618 (61.8%) All other levels, say 0.236 or 0.764 are secondary. And these are important expansion levels: 1.272 (127.2%) 1.414 (141.4%) 1.618 (161.8%) It's not difficult to use Fibonacci. Swings (upper and lower), as the maximum and minimum price values, are taken. From them, a fibo is drawn, and its lines are used as hints for support and resistance levels. It is up to you to decide whether to use Fibonacci in your trading. As we know from self-fulfilling prophecy, the more traders use a certain tool, the more important it become to the markets. Also, Fibonacci is a very popular tool, which often pops up on the charts of professional currency traders as well. So, it's a prophecy that comes true quite often. Now let's expand our Fibonacci tool by examining the uptrend. We see that the 1.272 and 1.414 levels work as resistance, and after a couple of unsuccessful breakout attempts, as we can see many pinbars, the price might just go down and make another pullback. Now let's do the same thing with the downtrend. Let's pull the fibo extension tool. And here's what's happened: Price ran into support, then broke through it. It was the level that was held up before the price went down. Price action made a new low. Fibo extension level 1.414 lines up with psychological level 1.59000. From these examples we can see that Fibonacci extension level is logical and often (though not always) form temporary support and resistance levels. Remember, there is no guaranteed way to tell when a Fibonacci level will work as resistance or support. However, by applying all of the technical analysis techniques you've learned so far, you'll significantly increase your ability to identify these situations. Therefore, you should consider Fibonacci expansion and retracement levels as an auxiliary tool that may be useful in some cases. But don't expect the price to bounce off right away. Fibonacci levels are your area of interest. If any candlestick combinations are formed near these levels, if oscillators or other instruments show anything curious, it is time to be alert.
Education
by DeGRAM
26
Key Levels are Magic 🪄 Create only the Best Risk/Reward Ideas!Someone recently asked me if the zones I draw on the chart is an indicator. This speaks to the amount of experience and level of competence that is easy to forget about. My ability to spot key level's and price areas on the chart is not something that is acquired overnight. It's a culmination of trial and error over the years and a loss of a significant amount of cash. It came at a large cost. The Latter is not necessary to understand the best key level's and price areas to trade off. Something that I recall over the years is the fact that I was never Self-Conscious about looking like a fool. We are all fools when we begin a new endeavor. I never hesitated to share my analysis with my mentors. Feedback can be quite painful but if you make it a habit, then it will return unto you by the tenfold. Take this zone (27,136$ ) which was our 4Hr Support zone. I Say "was" because there was once a time when the 4Hr timeframe respected it as a Support area on May 28th. It is now characterized as a 4Hr S/R Zone because we have seen multiple candles clearly close below it.. and it could, and I say could because there is no guarantee in the markets. It could act as a Resistance zone now and facilitate the distribution of orders as we continue our short term descent down to our next Key Level -- Weekly Level 26,770 $. If we arrive at the weekly level we will most likely have a reaction. A general rule of thumb to go by in the markets as a Price Action Trader - The Higher Timeframe the key level, the more probable it is that price will offer a good Risk/Reward trading idea off that level. The only guarantee is that there are good Risk - Reward Ideas and bad RR Ideas. So I might as well use my knowledge of the best price areas to create only the best Risk/Reward Ideas. For example, I will only trade off the 4Hr timeframe and Timeframes above that ( I have found this to be a good rule in the Forex market). I will only take trades that in which I Risk 1 to earn 3. In that way my win percentage may only be as good as 30%, yet after paying commissions/spreads to the intermediary, I earn a profit. It is important to note that the monthly candle is closing in 2.5 Hours. Th Monthly candle is closing bearish and this may cause volatile price swings as position traders and Institutions manage their trades. It seems that we have accumulated a significant amount of liquidity after the market was pushed up to 28.5K because look at the daily timeframe. The market didn't hesitate all that much to quickly drop back and retrace a majority of the gains. As we move into the next monthly candle, we may very well go to create a bottom wick first as the current monthly candle is closing bearish. This is reasonable argument. Idk what are your thoughts? Please comment below.
COINBASE:BTCUSDShort
by ShrewdCatfx
WHAT IS THE WYCKOFF METHOD?The Wyckoff Method is a trading strategy developed by Richard D. Wyckoff. It is based on the principles of supply and demand and is used to analyze price movements in financial markets. The Wyckoff method involves identifying support and resistance levels, analyzing volume and volatility, and studying the relative strength of different markets and uses these patterns to identify trading opportunities. The strategy is used by traders to identify trends and determine entry and exit points. The four cycles defined by Wyckoff's model of market behavior are: Accumulation Impulse leg is an upward trending movement Distribution Downward movement Three Wyckoff Principle 📜 The supply and demand law, the cause-and-effect link, and the connection between effort and results are the three rules that make up the Wyckoff trading strategy. The principle of supply and demand. If there is an increase in demand over supply, it leads to an increase in the value of a financial instrument. Prices rise because the quantity of an asset is limited and investors are willing to pay more when there is a shortage of the asset. If the demand for the asset falls relative to the supply, the asset loses in value. When supply and demand are in balance, the price is roughly in the same place, which causes the volatility in the market to decrease to a minimum. According to Wyckoff, accumulation time correlates with an uptrend, while distribution, in contrast, leads to a downtrend in what is called a supply and demand imbalance. When an asset spends a lot of time in the accumulation or distribution zone, there are often strong impulsive moves to break through the zone. A bullish trend will continue upward if a higher price is accompanied by high volume. However, if prices are rising and volumes are high, the trend will shift downward. According to Wyckoff's method, the market should be viewed from the point of view of the main participants, or market makers. Accumulation 📊 Market makers accumulate assets. Accumulation is when investors buy a lot of a certain asset over time. This makes their holdings bigger, which can lead to higher returns. Some investors believe a certain asset is undervalued and will go up in value. Also, some investors want to diversify their portfolio by adding a new asset. Impulse move 📈 Market makers eventually start to trade more assets, which causes the price to rise. Investors are becoming greater in number and demand goes up. The volume rises and a trend quickly ascends to new highs. It is typically characterized by a sharp, sustained move in price. This type of movement is often seen during a bull or bear market, when investors are trying to capitalize on the sudden change in price. Distribution 📉 Market makers distribute assets they have purchased by offering profitable positions to participants who just recently joined the market. Indicators of the cycle include sideways price movement and rising volumes. The demand is absorbed up until the point of exhaustion. A lot of securities or other financial instruments are sold in a short time. This is usually done by institutional investors, like mutual funds, hedge funds, and pension funds, to raise cash or to reduce their securities holdings. Sell-off 📉 Supply exceeds demand. The market maker reduces the price to a certain level. As soon as the decline is completed, the market enters the next accumulation cycle. On the gold chart, we can see each of Wyckoff's cycles: accumulation, momentum, distribution and depreciation. The phases of accumulation and distribution may differ. Conclusion 💡 The Wyckoff technique gives detailed principles and strategies, to assist traders in making reasoned decisions. His work explains the market's logic and psychology, which determine how decisions about buying and selling are made. Numerous oscillators are integrated with cluster analysis in the method.
Education
by Lingrid
17
1,2,3 Confirmation PatternWhat does it consist of? It consists primarily of 3 candles, and the fourth one is where we will enter the operation. In a bearish scenario the High of 2nd candle must be higher than the high of the 1st candle. The high of the 3er candle must be below the high of the 2nd candle. The 4th candle must re test the point of origin of the 3er candle. How can you use it? It is extremely important to complement and use this with a strong idea of where the price is heading. To know where the price will move, we need to understand that it moves towards the most liquid areas. The most liquid areas can be the unfulfilled Daily, Weekly, or Monthly lows and highs. Where should you place the entry? You should wait till the 3er candle close and place the entry at the point of origin of the 3er candle. Where should you place the stop loss? The stop loss should be above the 3er candle. Important I use this technique in D,W and M timeframes. After establishing a bias I look for the pattern. After the 3er candle is complete I move to 1hr or 15minutes to find the point of origin of the 3er candle.Then, I place the order.
Education
by Wiiso
3
SIX LESSONS FROM THE "TRADING IN THE ZONE"The book Trading in the Zone, written by Mark Douglas, is a financial trading classic. It explores the psychological aspects of trading and how they can be used to improve your trading performance. Douglas emphasizes the importance of having a clear understanding of the psychology of trading and how it affects your trading decisions. He also stresses the importance of having an edge in the markets and understanding the risks associated with trading. Douglas argues that traders must also be prepared for the emotional roller coaster associated with trading. He encourages traders to remain calm and focused on the task at hand and not to give into emotional responses. Douglas also stresses the importance of having a plan and sticking to it, no matter what the markets are doing. He believes that having a plan allows traders to focus on the task at hand and reduce the risk of emotional trading. Here 6 lessons from the book “Trading in the Zone”: 1. A trader's edge is the set of core beliefs and methods that he relies on to make decisions about when to enter and exit trades. Understanding your edge and following it with discipline is essential to successful trading. A trader's edge is the set of core beliefs and methods that he relies on to make decisions about when to enter and exit trades. Understanding your edge and following it with discipline is essential to successful trading. 2. Risk management is the key to success in trading. It involves understanding the risks associated with each trade, setting stops and limits accordingly to protect your capital, and limiting your trading exposure to the most optimal level. There are a number of different risk management strategies you can use when trading, including stop-loss orders, stop-limit orders, and position limits. You can also use risk management tools, such as risk gauge monitors and stop-loss calculators, to help you understand your trading risks and measure your success. 3. Managing your emotions is crucial to being a successful trader. Emotions can lead to poor decisions and increased risk-taking, and if you're not aware of this, you could end up losing trades and money. To be a successful trader, you must be able to control your emotions and make rational, objective decisions. 4. Focus on Process, Not Outcome: To be successful in trading, you must focus on the process of making good trading decisions, not on the outcome of the trade. This will help you remain consistent and disciplined, and it will also help you to optimize your chances of success. 5. It's crucial to accept responsibility for your own actions as a trader. You must be willing to take full responsibility for your decisions, no matter how good or how bad they may be. You need to constantly be learning and improving your trading skills in order to succeed as a trader. 6. Have a Plan and Stick to It: Developing a trading plan and following it with discipline is essential for success. A good trading plan should include your entry and exit points, money management rules, and risk management strategies. A trading plan is a roadmap that helps you stay on track by detailing your desired outcome and the steps you will take to get there. In the end, Douglas' main message is that trading is a game of probabilities and that traders must learn to understand and manage the risks associated with trading. He encourages traders to remain disciplined, have a plan, and focus on the long-term. He also emphasizes the importance of controlling emotions and having an edge in the markets.
Education
by DeGRAM
13
VWAP explanation, description and usage examples.Hello Traders:) Enjoy this small tutorial about VWAP 1. Definition: VWAP is a popular technical indicator used in trading to assess the average price at which a security has traded throughout the required time range, weighted by the volume of each trade. It provides a reference point for traders to evaluate whether they are buying or selling at a favorable price relative to the average market price. 2. Using VWAP: - Trading Decisions: Traders use VWAP as a benchmark to make informed trading decisions. They may aim to buy when the current price is below VWAP, indicating a potential value opportunity, and sell when the price is above VWAP, suggesting potential overvaluation. - Order Execution: VWAP can help traders with large orders execute trades efficiently. By splitting the order into smaller portions and executing them at intervals close to the VWAP, traders can minimize market impact and obtain more favorable prices. - Identifying Trend Strength: VWAP can be used in combination with other technical indicators to assess the strength of price trends. When the price consistently stays above VWAP and VWAP slopes upward, it suggests a strong bullish trend, and vice versa for a bearish trend. 3. Different Types of VWAP and their purpose: - Intraday VWAP: This calculates the VWAP over a single trading session, typically from market open to close. - Rolling VWAP: It calculates the VWAP over a specified rolling time period, such as the past 20 days, providing a longer-term average. - Volume Profile VWAP: It calculates the VWAP for specific price levels within a range, giving insights into the distribution of volume at different price levels. - Additional option available on TradingView: Fixed Range Volume Profile. We can set the VWAP from literally any time and select only part of the intraday session. Useful, for example, to track your VWAP trade from the start of our trade. This allows us to determine the strength of the trend during our open trade. 4. Settings for Different Purposes: - Timeframe: Traders can choose different timeframes for VWAP calculations based on their trading strategies. Shorter timeframes (e.g., 5-minute or 15-minute) provide a more granular view of intraday trading, while longer timeframes (e.g., 1-hour or daily) capture broader trends. - Volume Weighting: Traders may consider using different volume types, such as total volume, buy volume, or sell volume, depending on their specific objectives and the information they want to incorporate into the VWAP calculation. 5. Visual Possibilities: VWAP can be plotted on trading platforms as a line or a ribbon overlaying the price chart. It is often displayed alongside other indicators, such as moving averages or Bollinger Bands, to provide additional context and facilitate analysis. 6. Additional Ranges of VWAP: - Standard Deviation Bands: Traders may add standard deviation bands around the VWAP line to identify potential overbought or oversold conditions. These bands help highlight when the price is deviating significantly from the average and can signal potential reversals or mean reversion. - Multiple Timeframe VWAP: Traders may plot VWAP calculations for different timeframes on the same chart to gain insights into intraday and longer-term trends simultaneously. This allows for a comprehensive view of price dynamics across different time horizons. Remember to adjust the settings and interpret VWAP in the context of specific trading strategies, market conditions, and the characteristics of the securities being traded. Additionally, it's recommended to backtest and validate any trading strategy before applying it in live trading. If you enjoy this tutorial please follow for more content and live trading:) At the end example of how I am using VWAP with Heikin Ashi on BTC:
BITSTAMP:BTCUSDEducation
by Vezzeris
2
HEAD and SHOULDERS PATTERN Hello my friends! The most famous figure of technical analysis in the world. It consists of three tops, where the middle one is the highest. Accordingly, two shoulders and one head. The neckline in this case connects the two minimum values of the extreme top. ✳️ Pattern Breakdown The Head & Shoulders pattern is a common psychological pattern of market players that hasn't changed for decades. Each new price is the result of bulls and bears struggle, but on the relatively long-time interval this struggle gets the more correct recognizable form. Since all traders see the same chart, their behavior is synchronized when a familiar pattern is identified the emotion factor kicks in. The pattern itself consists of three parts a high peak in the middle and two smaller peaks on the sides. Thus, the first and the second tops form shoulders of the pattern, while the peak in the middle is the head. Support line drawn on the pattern minimum is also a signal line. is also a signal line - its breakdown defines the change of the trend? The first small peak and the subsequent fall mean the weakening of the upward impulse the loss of the bulls' enthusiasm. However, maintaining the momentum, the price continues to move upwards, forming a higher maximum. At this stage there is still the possibility of a continuation of the bullish movement. But as soon as the price goes down to the previous low, the future development is already predetermined. The bulls make one last attempt to go up, but the price usually only reaches the nearest resistance level, the level of the first peak, and then it has to wait for the support level to be broken down to enter the downside. There is also an inverted Head & Shoulders pattern that creates a buy signal. In this case instead of three peaks we have three lows, with the lowest one in the middle. The pattern signals completion of the downtrend and formation of a new movement direction. ✳️ Application in practice Having received a signal about the formation of a new pattern, the first thing we need to determine is the presence of a continuous unidirectional movement. Further, having determined that the trend is bullish, we wait for the formation of a pattern. At the beginning of formation of the second arm we draw a support line by the swing minimums. This will be a signal line, breakthrough of which will indicate a price reversal. It is necessary to enter the market after breaking through the support level. Confirmation is the closing of the candle behind the level at the opening of the next one, we open a market order to sell. Stop loss is placed just above the peak of the second shoulder. In some cases, the price may try to test the nearest resistance level again, and this moment should be taken into account when setting a stop. ✳️ Conclusion Head and Shoulders is a time-tested figure, which, if identified correctly, allows you to enter the market at the beginning of a long-term trend. All you have to do is analyze the set-up and make a final decision about entering the trade.
Education
by DeGRAM
10
HOW TO TRADE 1-2-3 PATTERNHello everybody! 👋 🤗. Today we are going to learn about the 123 chart pattern. The 123 pattern is a typical reversal pattern that traders use to identify if an existing trend might change. These patterns can be a signal to enter the market. At the peaks or bottoms of the market trend, you can see 123-patterns, which signal a change in the trend. Sometimes they form after the completion of corrections in the current trend and may also occur in sideways markets. The Pattern Formation 📈 1. The price makes a pullback following the rally 2. The price hardly shows a new maximum/minimum. No sign trend continuation 3. A breakout the previous high/low, shows a change in market trend This happens as a result of traders opening positions when they anticipate the rally is going to continue. Furthermore, these traders will immediately close their trades and enter in the opposite direction if their stops are taken out. How to Identify a Solid Pattern ✔️ 1. The first step in trading the 123 pattern is to determine the existing trend by analyzing and identifying the highs and lows of the price action. The chart below shows one of the setups; it is labeled 1, 2 and 3. The trend was bullish. The market reached a peak. Then a pullback occurred. The result was point 2. Price then attempted to retest the high which was not successful. The price started a bearish movement and then reversed. We should not open the sell trade until we get confirmation of the breakout of line 2. 2. Look for a potential reversal. After identifying the existing trend, the next step is to look for a potential reversal point. This is done by looking for high or low points on the chart. Once a potential reversal point is identified, we can then look for signs that the reversal is actually happening. These signs can include things like a change in price momentum or candlestick patterns. The candlestick that represents the first point should have a wick, and the longer it is and if the wick is directed against the main price movement. 3. Once a potential reversal point has been identified, the we should wait for confirmation that the reversal is happening before taking any action. This confirmation can be provided by a subsequent candlestick close above or below the reversal point 2. 4. Finally, we should place stop-loss and take-profit orders to manage out risk and lock in profits. A breakout of the previous high (or low, depending on the context) is the area to place the orders. Depending on whether the pattern is bullish or bearish, the stop loss should be placed at level 1 below or above. Price should be given breathing room to avoid hitting the stop loss. Determine the distance between the low at point 3 and points 1 and 2 in this formation. As you can see from the previous example, the price initially was in the bullish trend. After the pullback, the price breaks the support line of the trend, signaling a trend shift which indicates that price doesn’t have enough momentum to move above the previous high. Stops should be placed above point 1 of this formation. This illustration shows how easily the price exceeds price target, providing an opportunity to successfully open a sell trade with R:R ratio 1 to 1. The 123 pattern can be a great tool for traders looking for a simple yet effective way to open trades in the markets. It is important to remember that no trading strategy is perfect, and traders should always use risk management to protect their capital. With practice and experience, traders can learn to identify the 123 pattern and use it to trade successfully in the forex market.
Education
by Lingrid
10
Inside Futures Trading: Key Lessons from My Years of ExperienceIn my years as a futures trader, I've learned valuable lessons. I'd like to share these insights with you, hoping to help you navigate the complex world of futures trading. The Importance of a Plan A well-structured trading plan stands as the cornerstone of successful futures trading. Like a roadmap, it navigates your journey through the often turbulent market conditions, providing clear guidance on your trading activities. It helps outline your specific trading goals and defines the strategy to achieve them. Whether you aim for short-term profits or long-term investments, a trading plan ensures your objectives align with your financial situation and risk tolerance, thereby averting overambitious goals that could lead to increased risk. Furthermore, a solid trading plan encompasses your risk management strategy. This safety net is crucial in protecting your capital from significant downturns. Determining the level of risk you're comfortable with, often based on your financial situation and risk appetite, forms a key aspect of this strategy. Besides, your plan should provide explicit criteria for entering and exiting trades, eliminating impulsive, emotion-driven decisions. Such a plan, therefore, operates as a comprehensive framework that synchronizes your trading activities with your financial goals, risk profile, and market understanding. Over-Expectation and High-Risk Bets A common pitfall I've witnessed in many traders, especially those just starting out, is the temptation to make substantial profits with a single trade. This approach often involves placing a small amount, say $100, with low leverage, and expecting it to yield significantly high returns, even double the initial investment, in one trade. This aspiration, while alluring, is fraught with high risks and often overlooks the fundamental principle of market volatility. The likelihood of an asset's value doubling in a short timeframe is generally low unless the market conditions are extraordinarily favorable. Furthermore, while leverage can amplify profits, it can also magnify losses, increasing the risk of liquidation. It's important to note that futures trading is not a scheme to get rich quickly but a strategic financial activity that requires prudent planning, risk management, and realistic expectations. Patience and consistent smaller wins can often lead to more reliable, long-term profitability. Over-expectation can lead to an increased risk appetite, causing one to disregard safety measures like stop-loss orders and prudent leverage, making their position highly vulnerable to market volatility. Remember, in futures trading, managing risks and preserving your capital is as crucial as making profits. The goal should be long-term sustainability in the market rather than short-lived, high-risk gains. The Dangers of Overtrading In my initial trading years, I subscribed to the notion that more trades equated to more profits. However, I soon discovered that this belief led to overtrading, which increased my costs and risk exposure. Overtrading occurs when one trades excessively, often reacting to minor market fluctuations. This approach not only amplifies trading costs but also elevates the risk of encountering losing trades. A better strategy I've found is to focus on the quality of trades rather than the quantity, ensuring each trade is well-reasoned and supported by robust market analysis. Risk Management is Key The significance of risk management in successful futures trading cannot be overstated. It is the safety net that can cushion you from inevitable market downturns and unexpected volatility. Without proper risk management strategies, a single unfavorable trade could potentially inflict considerable damage to your trading capital. In practical terms, effective risk management involves setting stop-loss orders to limit potential losses on each trade. It also means not risking too much capital on any single trade, regardless of how promising it might seem. Keeping risks within manageable limits preserves your trading capital and ensures your survival in the trading arena, despite the inevitable setbacks. Be Careful with Leverage In futures trading, leverage is a powerful tool that can enhance potential profits but also amplify losses. It provides the ability to control substantial positions with only a fraction of the investment typically required. However, it's crucial to remember that leverage is a double-edged sword. Leverage can magnify gains when the market moves in your favor, turning a small investment into a substantial return. However, the market can also move against your position. In such cases, the same leverage that amplifies your gains can intensify your losses. Losses can even exceed the initial investment, leading to margin calls and possibly the liquidation of your position. Consequently, I've found it prudent to use leverage judiciously and to never risk more than I can afford to lose. Understand the Underlying Asset One of the key components in futures trading is the underlying asset of the contract. The value of a futures contract is inherently derived from this asset, which can range from commodities like gold or oil to cryptocurrencies like Bitcoin. Understanding the intricacies of the underlying asset is pivotal for making informed trading decisions. It involves scrutinizing its historical performance, the factors influencing its price movements, and its potential future trends. This knowledge can provide crucial insights into the asset's volatility, helping traders formulate effective strategies and manage potential risks. Researching and continually staying updated about the asset you're trading is not just a recommended practice; it's a necessity. It equips you with the essential information required to navigate the ebbs and flows of the market, potentially turning uncertainties into profitable opportunities. The Value of Stop-Loss Orders Stop-loss orders play an instrumental role in prudent risk management within futures trading. They function as automated safeguards designed to close out a trade when the price moves against your position to a pre-defined extent. Utilizing stop-loss orders allows you to establish the maximum amount you are willing to lose on a particular trade, providing a degree of certainty in an inherently uncertain market. It effectively mitigates the potential impact of adverse market movements, protecting your trading capital from substantial losses. From my experience, using stop-loss orders is not just a recommendation—it's an essential trading practice. Avoiding the Pitfall of Chasing the Market Another invaluable lesson I've learned over the years pertains to the timing of market entry. Many traders fall into the trap of entering a trade after a trend has already been well established—a practice known as 'chasing the market.' Chasing the market can often lead to buying high and selling low, which is the antithesis of profitable trading. This happens because once a trend is firmly established, it's likely closer to its end than its beginning. Jumping onto a fast-moving trend in the hope of riding it further can result in entering the market at an unfavorable price point. Instead, it's more effective to develop a strategy that allows you to identify potential trends early and enter the market at a more advantageous time. The key here is patience and discipline, waiting for the right market conditions before committing your capital. By not chasing the market, you can avoid costly mistakes and enhance your trading performance. Cut Losses Short One of the toughest yet most valuable lessons I've learned is the necessity to cut losses short. It's a human tendency to hold onto losing positions in the hope that they'll rebound. However, in futures trading, this approach can lead to substantial losses. A losing trade is not just a financial setback—it can also impose a psychological burden. Hoping for a market reversal when stuck in a losing position can cloud your judgment, causing you to overlook other potentially profitable trades. It's crucial to accept that not all trades will be winners, and knowing when to exit is as important as knowing when to enter. Trade with the Trend Predicting the market can be alluring, but it often results in entering trades against the trend. Over time, I've realized that it's usually more beneficial to trade with the trend. After all, 'the trend is your friend' is a well-known adage in trading for a reason. Trends have a propensity to continue for longer than expected, and trading against them can be perilous. Recognizing and trading in the direction of the prevailing trend can increase the likelihood of successful trades. It reduces the chances of being caught on the wrong side of the market and enhances the potential for consistent profits. Keep Records Maintaining records of your trades is an essential practice for ongoing learning and improvement. A detailed trading journal allows you to review your past trades, identify recurring mistakes, and refine your strategy accordingly. Keeping track of each trade, including the reasons for entering and exiting, the profit or loss, and any relevant market conditions, can provide valuable insights. It creates a feedback loop for self-improvement, promoting conscious trading decisions and encouraging disciplined trading. In conclusion, futures trading is a challenging yet rewarding endeavor that demands careful planning, disciplined risk management, and relentless learning. The lessons I've shared from my years of trading are by no means exhaustive, but they provide a solid foundation for anyone embarking on their futures trading journey. That being said, learning never stops in the world of trading. If you've come across any valuable lessons or insights that I've not covered in this discussion, please feel free to share them in the comments. It's through our collective experiences that we all become better traders.
Education
by ShawnMCR
29
DOW THEORY OR HOW TECHNICAL ANALYSIS EVOLVEDSometimes it's useful to go back to the basics in order to fully comprehend the progress achieved. Today technical analysis is taken for granted, and very few people think about what is really behind the well-known market terms. The Dow Theory, and Charles Dow himself in particular, we can say, were at those very basics. In this case, at the present moment the postulates of the theory have not lost their relevance. How they can be applied in practical work on the market, particularly in Forex, is presented in today's post. Dow Theory and Technical Analysis At the beginning of the formation of financial markets there were no suitable automatic tools, and most of the work on the analysis was done manually for a long time. That's why you can notice a great attention to detail in the description of the theory, when nowadays many details are usually omitted. A brief biography of Charles Dow Dow's first job in the financial environment was as a reporter for the Wall Street news bureau. It was there that he met his partner, Edward Jones. Unlike most other journalists, their work was characterized by straightforwardness - Doe and his partner did not take bribes as a matter of principle. In 1882 Doe and Jones felt the need for a separate publication. So, they founded their own company, Dow Jones & Company, which at first issued daily financial reports. Later the two-page booklet grew into a full-fledged newspaper, The Wall Street Journal, which is now one of the most authoritative publications in the financial environment. The publication's slogan stated that its main purpose was to tell the news, but not opinions. By 1893, there were many mergers taking place, which increased the proportion of speculation in the markets. At this time Dow saw the need for some indicator of market activity. Thus, he created the Dow Jones Industrial Average, which at that time was a simple arithmetic average of the prices of 12 companies (it now included the 30 largest U.S. companies). Dow drew attention to the fact that prices capture much more information than many people assume. That is, by analyzing prices alone, we can predict their future behavior with great probability, which eventually became the basis of his theory. Principles of the Dow Theory The Market Discounts Everything Of course, the market cannot take into account events which, by definition, cannot be predicted. However, the price takes into account the emotions of participants, economic data of some companies and states, including inflation and interest rates, and even possible risks in case of unforeseen developments. This does not mean that the market or its participants know everything, even future events. This only means that all what has happened has already been recorded in the price, and any new information will also be taken into account. On this basis, a huge number of technical indicators have been created, and today you can find an indicator for the analysis of literally anything. But while indicators are often used thoughtlessly, Dow analyzed the entire market, relying on the natural segmentation of market players. An extreme reflection of his work is the industry and transportation indices. The very composition of the index plays an important role. It is not fixed and is periodically reconsidered taking into account changes of the situation on the markets. The essence is that shares of enterprises working in one field are analyzed. As a result, the index is in some way a closed system, where the major part of funds is distributed between the participants and does not go beyond the portfolio. Three Market Trends A straight-line market movement is a science fiction. In fact, price almost always moves in a zigzag pattern, forming characteristic ascending/descending highs/minimums. In other words, forming an uptrend or a downtrend. There is a major initial trend in the market. It is the most important to find out, because the basic trend reflects the real price movement direction, when all the lower trend levels depend on the basic one. The duration of the initial trend is from 1 to 3 years. The most important thing is to determine the direction of the initial trend and trade in accordance with it. The trend remains in force, as long as there was no confirmation of its reversal. The price closing below the previous extremum, for example, can be a prerequisite for trend reversal. So, the initial trend determines the main market direction. In turn, the secondary trend moves in the direction opposite to the main trend. In fact, it is a correction to the main trend. The secondary trend has one interesting characteristic - its volatility is usually higher than the initial movement. The last, the smallest trend is nothing more than a secondary trend pullback. Such movement lasts no longer than one week. The classical representation pays the least attention to it. It is considered that there is too much price noise on this time period, and fixation on the smallest movements can lead to irrational trade decisions. Trend phases The next principle of the theory of Dow the phases of the trend formation: The first phase is usually characterized by price consolidation. This is a period of market indecision, when the previous trend is at exhaustion. In other words, this period is marked by the accumulation of forces before the spurt and is also the most attractive entry point (although risky). As soon as the new direction is confirmed, the participation phase begins. This is the main trend phase, the longest of the three, which is also marked by a large price movement. When the motivating conditions have been exhausted, the saturation phase begins. During this period, savvy players begin to exit positions as soon as there are signs of instability, such as increased corrections. This phase can be described as "irrational optimism", when the price may continue to rise by inertia, despite the lack of clear prerequisites. Identification of trend movements In order to identify both trends and reversals on a chart, it is necessary to understand the techniques used by Dow. The main technique in identifying reversals a sequential analysis of extremes. For example, in the picture, points 2, 4, and 6 mark the maximum of the upward movement, while points 1, 3, and 5 mark the minimum. An uptrend is formed when each successive top and trough is higher than the previous one. A downtrend, on the contrary, is characterized by descending highs/minimums. The Dow Theory states that until we get a clear signal for a reversal, the trend remains in force. Here we can draw a parallel with Newton's law of inertia, where a moving object tends to move in the intended direction until another force interrupts its movement. The formation of a lower minimum (5) within the upward movement is an obvious signal of the coming reversal. In the case when the trend is directed downward, the situation is the opposite. If the price failed to form a lower low and still closed above the current high, it means that the market is influenced by a force opposite to the original movement. Conclusion The Dow Theory, as many hope, does not answer the question "how to enter the market at the stage of trend formation?" It is a long-term reversal strategy aimed at minimal risk. Nevertheless, the theory helps us better understand technical analysis in general, and why it works at all because price and is a derivative of all the factors affecting it.
Education
by DeGRAM
18
WHAT IS ATR AND HOW TO USE IT?Investing and trading in the stock market can be a daunting task, especially for those new to the game. With so many different indicators and metrics to consider, it can be difficult to know which ones to focus on. One key metric that traders often use to measure market volatility is Average True Range (ATR). In this blog post, we’ll explore what ATR is, how it’s calculated, why it’s important for analysis, and how it can be used as an exit strategy. We’ll compare ATR with other popular technical indicators as well, so you have all the information you need to make informed decisions about your trading strategies. Defining ATR Average True Range (ATR) is an important metric used by traders to measure market volatility. It’s a technical indicator that can provide insight into strength or weakness in the markets, and can be used to identify breakouts and set stop-loss points for trades. ATR is calculated as an exponential moving average of true range values over a given period. True range is defined as the maximum of three values: the current high minus the current low, the absolute value of the current high minus the previous close, and the absolute value of the current low minus the previous close. This calculation provides a more accurate reading than simply measuring one day’s trading range or attempting to track changes in individual stock prices. ATR values are generally presented in decimal form (e.g. 0.1 or 0.3) rather than percentage form (e.g. 10% or 30%). This allows for more precise measurements when tracking market movement, which can be especially important for day traders who need to act quickly on market changes and opportunities. Traders use ATR to gauge overall market volatility as well as individual stock movements over time; it can also be used for trend identification and momentum strategies when combined with other technical indicators such as moving averages and Bollinger bands. And because ATR takes into account both recent highs and lows, it can also help traders set stop-loss points for their trades – at least until they become comfortable enough with markets to make decisions without them. Whether you’re new to trading or seasoned professional, ATR is an invaluable tool that should be incorporated into your analysis strategy if you want to stay ahead of markets and take advantage of opportunities when they present themselves. How to Calculate ATR In conclusion, ATR is a valuable tool for traders and investors alike. It helps measure market volatility and can be used to set stop-loss points as well as combine with other technical indicators to get a more accurate picture of where the markets are headed. Understanding and employing ATR can help traders become better informed about their investments, allowing them to make more informed decisions when entering or exiting positions. Analyzing ATR in Trading When it comes to analyzing the markets for trading decisions, Average True Range (ATR) is an invaluable tool that helps traders gain insight into market volatility. By understanding how ATR works, investors can measure the current conditions of a stock or index in comparison to its past performance, allowing them to identify trends and set stop losses accordingly. It also provides them with an effective exit strategy so they can take advantage of opportunities while minimizing their risk exposure. Ultimately, having a good grasp of this indicator will allow traders to make more informed decisions when engaging in securities markets globally. Using ATR as an Exit Strategy Using ATR as an Exit Strategy Average True Range (ATR) is a powerful technical indicator that can be used to measure market volatility and identify trends. It can also be employed as an exit strategy in trading, allowing traders to determine when the best time is to exit their positions and take profits or minimize losses. When using ATR as an exit strategy, it is important for traders to set the parameters for their strategy correctly. The most common approach is to set a multiple of ATR for both profit taking and stop loss levels. For example, if a trader sets the multiple at two times ATR, then they will take profits when the price moves by two times the average true range from their entry point and cut their losses if it moves against them by two times the average true range. In addition to setting up these parameters in advance, traders should also consider any potential rewards and risks associated with using ATR as an exit strategy. On one hand, it can help protect capital from large losses due to quick market movements, but on the other hand, it may cause traders to miss out on larger gains if prices move further than expected. There are various types of ATR-based exit strategies that traders can employ. Some of these include: fixed percentage or dollar exits; trailing stops; dynamic exits; time-based exits; or support/resistance exits based on chart patterns or technical indicators such as moving averages. Each type of strategy has its own advantages and disadvantages depending on market conditions so it is important for traders to understand which one will work best for them before implementing it into their trading system. Finally, traders should look at real-world examples of profitable trades made using ATR as an exit strategy. By studying these examples they can gain insight into how successful trades were managed and use this knowledge when formulating their own strategies going forward. With enough practice and experience, traders will eventually become adept at using ATR as part of their trading system and be able to capitalize on profitable opportunities more effectively in future investments. ATR vs Other Technical Indicators Average True Range (ATR) is a technical indicator used to measure market volatility and identify trends. Unlike other indicators, ATR measures the degree of price movement instead of the strength or weakness of a trend; this makes it ideal for spotting trading opportunities in volatile markets. Compared to indicators like Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), ATR offers traders a greater understanding of market volatility so they can more easily recognize good entry and exit points. In addition, ATR allows traders to set stop-loss points that are tailored to their individual risk tolerance levels. This helps them reduce losses when prices move against them but still provides an opportunity for profits if prices turn back in their favour. Ultimately, ATR is not meant to be used as an isolated indicator when making decisions about trades, but combining it with other indicators will improve accuracy when entering and exiting positions. Overall, ATR is a powerful tool designed for those looking to gain insight into market volatility and make informed decisions about their trades. By using this indicator in combination with others, such as RSI and MACD, traders can better understand the kind of environment they are working with which can help them maximize profits while minimizing losses. Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩‍💻
Education
by Lingrid
16
HOW TO IDENTIFY ORDER BLOCKSHello traders! Today we are going to look at the pattern Order Blocks, what this pattern means and how to trade it. ✳️ What is Order Block? The largest (from open to close) closest bearish candle to support before a strong impulsive bullish move (last sell candle before the buy candle). The last falling candle before the impulse growth. The high of this candle must be broken by the next candle to confirm it is an order block. The largest (from open to close) closest bullish candle to resistance before a strong impulsive bearish move (the last buy candle before the sell candle). The last rising candle before the impulsive decline. The low of this candlestick must be broken by the next candlestick to confirm that it is an order block. Order blocks are those areas/zones where financial institutions have manipulated the price and where some of their orders are in drawdown. This "footprint" they are leaving is clearly visible in the order block. Price will usually return to these areas and we will react to this in some way. Order block is a sign of big players in the market. ✳️ The idea behind the pattern and why it works The movements triggered by big players leave open positions which must be closed. And in order to do that, the price has to test those levels. Smart money works according to certain algorithms, and we are trying to make money on this. Behind these candlesticks are financial institutions: they deliberately move the market, themselves falling into a drawdown, so they need to return the price to the order block with an imbalance, to reduce losses (to return their open positions to breakeven levels). Why not close manipulative positions earlier? There is no one to cover them. When we close large positions, the price automatically moves in the direction of the order block, and it is convenient for the large capital to close the previous manipulated positions, which causes a bounce which we want to jump into. In other words, we find a liquidity gathering point and wait for the return to it. Order Block is a level to enter or exit. ✳️ Order Block Trading Strategy Mitigation is a test of a supply/demand area. In our case a block of orders. Closing of old manipulative positions. 1) We are looking for a block of orders. 2) Were the stops pulled out (collecting liquidity, breaking through the obvious highs and lows)? If no, then it is not an order block, let it go. You are not sure? Do not enter. 3) If yes, we consider entering. A bullish block of orders: We enter - on price returning to this candle (at least to the high). Stop - for low. Take - the nearest level. A bearish block of orders: Entry - on the return of the price to this candle (at least to the low). Stop - behind the high. Take - the nearest level. Each Order block can be tested only once.
Education
by DeGRAM
39