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WHAT IS APY IN CRYPTO ?💹 APY (Annual Percentage Yield) is the amount of money an investor will earn in a year if the money is reinvested after each accrual period. The calculation formula is compound interest. In cryptocurrencies and decentralised finance (DeFi), APY is used to express the returns users can get from staking, liquidity mining and other types of income farming. 📍 UNDERSTANDING APY CALCULATION APY allows users to understand what annual returns they can expect from their investments, taking into account reinvestment of interest earned. This helps to compare different investment opportunities in cryptocurrency startups: ➡️ Comparing the returns of different cryptocurrencies in staking, income farming on one exchange. ➡️ Comparing the yield of staking one coin on different exchanges. The rate, which is calculated using the simple interest formula, only takes into account the initial investment amount. In comparison, APY gives a more accurate idea of how much an investor will earn, taking into account the re-investment of interest 📍 THE APY CALCULATION FORMULA IS: APY is the Annual Percentage Yield r is the interest rate per period (in decimal form, e.g. 0.05 for 5%) n is the number of times interest is compounded per year For example, if an investment has an annual interest rate of 5% compounded quarterly, the APY would be: APY = (1 + 0.05/4)^(4) - 1 = 5.127% This means that over a year, the investment would earn an effective annual return of 5.127%, taking into account the compounding effect. Note that this formula assumes that the interest is compounded at the end of each period, which is often referred to as "compounding frequency". The more frequently interest is compounded, the higher the APY will be. 📍 THREE CRUCIAL POINTS TO KEEP IN MIND ARE: 1️⃣ Frequency of interest accrual. The more frequently interest is accrued, the higher the APY will be, even if the nominal interest rate remains the same. 2️⃣ Reinvestment. APY assumes that all interest earned is reinvested, which increases the total return. 3️⃣ Transparency. APY provides a more accurate representation of potential returns compared to a simple interest rate. APY is a forecast and actual returns may vary. It may be affected by market volatility, changes in interest rates, risks associated with a particular investment product. APY is specified for each product and each coin separately, you can find this information on the website of the cryptocurrency exchange. To understand the amount of earnings, you need to know the period of accrual of income. For example, accrual in staking can occur both every minute and every day. In addition to APY, there is another key rate to consider: APR (Annual Percentage Rate). Similar to APY, APR is a rate that measures the yield of an investment, but it is calculated using the simple interest formula. While APR is commonly associated with the cost of borrowing at an interest rate, it can also be applied to investments. Like APY, APR is not a fixed value, as it can fluctuate based on network activity and other factors. 📍 CONCLUSION APY is a critical parameter that represents the return on an asset with compound interest, taking into account the reinvestment of profits after each accrual. This metric is essential when evaluating the feasibility of staking or other income-generating opportunities. For instance, it can help you decide whether to stake Coin A or convert it to Coin B and stake it instead. By comparing APY rates for different coins and staking options, you can make informed decisions about where to allocate your assets to maximize your returns. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Education
by Lingrid
3
Understanding Market Volatility and Its Impact on BitcoinIntroduction Market volatility is a crucial aspect that every Bitcoin investor and trader must understand. In this section, we'll explore what market volatility is, how it affects Bitcoin, and strategies to manage it. What is Market Volatility? Market volatility refers to the rate at which the price of an asset, such as Bitcoin, increases or decreases for a given set of returns. High volatility means that the price of Bitcoin can change dramatically over a short period, both positively and negatively. How Does Volatility Impact Bitcoin? Price Swings: Bitcoin is known for its significant price swings, which can be driven by various factors such as market sentiment, regulatory news, macroeconomic trends, and technological advancements. Investor Behavior: Volatility often influences investor behavior, leading to increased buying or selling pressure. This can result in rapid price movements, creating opportunities and risks. Market Sentiment: Positive news can lead to a surge in Bitcoin prices, while negative news can result in sharp declines. Understanding market sentiment is crucial for predicting these movements. Managing Volatility Diversification: Spread your investments across different assets to reduce risk. Diversification can help cushion the impact of volatility on your portfolio. Risk Management: Use stop-loss orders to limit potential losses. Setting predetermined exit points can protect your investments during periods of high volatility. Stay Informed: Keep up with the latest news and trends in the cryptocurrency market. Being informed allows you to make timely decisions and react appropriately to market changes. Long-term Perspective: Focus on the long-term potential of Bitcoin rather than short-term price fluctuations. A long-term perspective can help you stay calm during volatile periods. Conclusion Understanding market volatility is essential for navigating the Bitcoin market. By recognizing how volatility impacts prices and adopting strategies to manage it, you can better position yourself to take advantage of opportunities while minimizing risks. Stay informed, diversify your investments, and maintain a long-term perspective to thrive in the ever-changing world of Bitcoin.
BITSTAMP:BTCUSDEducation
by moneymagnateash
2
THE EMOTIONAL TRAP: UNDERSTANDING THE DANGERS OF TILT IN TRADINGAs everyone knows emotions are one of the main components of success in trading. And not only in trading, but also in life. And the problem is that everyone knows about the negative sides of excessive emotionality, but they still keep making the same mistakes. The mistake is that in the moment of calmness a person underestimates the harm that emotions can cause. They miss the moment when signs of leaving the state of calmness appear and then they have to deal with the consequences of actions made in an unbalanced state. In trading, tilt is an equivalent of an ordinary argument. A situation in which a person goes out of the balanced state and actually loses control over what is happening. In legal terminology, this is called a "Heat of Passion". But if in law the legislation calls the heat of passion a mitigating circumstance, then in trading the market does not care about emotions - all the consequences fall on the trader. 📍 THE HIDDEN DANGERS OF TILT The more emotion is eliminated from trading, the more logical and effective it becomes. However, emotions are an inherent part of human character, and it is impossible to completely eradicate them. Statistics reveal that traders between the ages of 20 and 30, as well as those above 50, are most susceptible to emotional influences. This can be attributed not only to their level of experience but also to their ability to manage themselves and remain objective. Young adults, just starting their careers, often exhibit a sense of recklessness, while the older generation tends to become complacent and lose their grip on their emotions. 📍 THE DANGERS OF TILTING IN TRADING ARE: • Loss of emotional control, leading to impulsive decisions that are not guided by logic or a well-thought-out trading system. • Emotions, whether negative (such as fear and anxiety) or positive (like euphoria and excitement), can take over, causing mistakes and irrational decisions. • Emotional reaction to every emergency situation becomes a habit, making it challenging to separate rational thinking from emotional responses. This habit can be difficult to break and can lead to consistent mistakes in trading decisions. • Tilting can also result in the violation of risk management rules, such as closing profitable trades prematurely or holding onto losing positions for too long, which can have severe consequences for one's trading account. One common occurrence that can lead to tilt is when a trade almost reaches its target level, only to suddenly reverse, resulting in a loss or lost profit. This can be frustrating and demotivating. Another scenario is when a trader opens a trade based on an obvious trend, only to see it turn unprofitable. When a trader is 100% certain of their forecast, but it proves to be incorrect, it can lead to an emotional outburst. This emotional response can cloud their judgment and lead to impulsive decisions that worsen the situation. Interestingly, professionals in other fields, such as poker and chess, have identified similar causes of tilt. In these games, tilt is often categorized into distinct groups. Understanding these causes can help us develop strategies to recognize and manage our own tilt, ultimately improving a performance and overall trading experience. 📍 THE CAUSES OF TILT IN TRADING CAN BE ATTRIBUTED TO SEVERAL FACTORS 1. Bad luck: Despite probability theory suggesting that the outcome of positive or negative events is 50/50, a streak of bad luck can still occur. This is due to the variability in trading systems and the role of luck. A trading system may perform well on one occasion but poorly on another. 2. Unfairness: Unjust market practices, such as sudden spread widening, market maker manipulation from brokers, can evoke feelings of tilt. Cryptocurrency markets, in particular, are susceptible to market maker games. While it's challenging to combat broker injustice, acknowledging and accepting market unpredictability can help manage tilt. 3. Fear of loss: Defeat is an inherent part of trading, but not everyone is willing to accept it. The way individuals perceive loss can significantly impact their emotional response. Some people learn from their mistakes, while others become overwhelmed by emotions. 4. Mistakes: Regrettable mistakes, especially those caused by inattention or failure to acknowledge a correct prediction, can lead to tilt. It's essential to recognize that mistakes are inevitable and develop strategies for addressing them without allowing emotions to dictate decision-making. 5. Uncertainty: Doubts about the accuracy of a signal or fear of loss can prevent traders from taking action, even when they're confident in their forecast. Developing intuition, trusting oneself, and practicing self-awareness through demo accounts or small accounts can help alleviate this type of tilt. 6. The desire to win back losses: The urge to recoup losses at all costs can lead to impulsive decisions and further losses. 7. Despair: This emotional state is characterized by a complete breakdown in judgment, leading to reckless decisions and potentially resulting in the loss of one's deposit and abandonment of trading altogether. 📍 THE CONSEQUENCES OF TILT IN TRADING CAN BE SEVERE AND FAR-REACHING Some common consequences include: 1. Impulsive and reckless trading decisions, often characterized by haphazardly opening trades without a clear plan or strategy. 2. Emotional fear can lead to premature exits from the market, even when the exit signal is not supported by technical or fundamental factors. This can result in missed opportunities and lost profits. 3. Doubts about the correctness of one's actions can lead to chaotic decision-making, causing traders to hastily change trade volumes, pending orders, and other settings. 4. When a stop-loss is triggered, emotional traders may impulsively open a trade in the opposite direction, often due to a local pullback on a strong trend or market maker manipulation. This is a classic example of emotional decision-making. 5. In an attempt to salvage a large loss, traders may decide to "wait it out" in the hope that the price will eventually break even. However, this approach often ends in a stop-out, as the loss continues to grow. 6. Greed can also be a consequence of tilt, as traders become obsessed with maximizing their profits and take excessive risks. This can lead to devastating losses and damage to the trading account. Tilt in trading is often more prevalent after a losing trade, rather than after a profitable one. This is because the emotional impact of a loss can be more significant and lingering, whereas a winning trade may prompt a sense of relief and complacency. However, this second type of tilt, which occurs after a winning trade, can be particularly dangerous. When a trader experiences a series of profitable trades, they may start to relax and let their guard down, leading to a loss of control and discipline. This can quickly snowball into a desire to win back their profits, which can spiral out of control and ultimately lead to emotional exhaustion and burnout. This phenomenon can be attributed to the psychological principle of "relapse," where individuals who have made significant progress in overcoming their biases or impulses may revert to old habits when faced with success. In the context of trading, this can manifest as reckless behavior, impulsive decisions, and an inability to distinguish between rational and emotional decisions. 📍 CONCLUSION Ultimately, the responsibility for our actions and emotional state lies solely with ourselves. The key to maintaining emotional control is to stick to our system, regardless of the outcome. This means resisting the temptation to deviate from our strategy, even when we're experiencing a streak of success or facing a series of losses. It's crucial to recognize that emotions can be unpredictable and potentially destructive forces. When we feel the urge to take action outside of our predetermined plan, whether due to elation or frustration, we must take a step back and reassess. If we're experiencing a series of successful trades, it's essential to take a break before we become complacent and let our emotions get the better of us. Similarly, if we're on a losing streak, taking a break can help us clear our minds and approach our trading with a clearer head. The ability to control ourselves is often the deciding factor between success and failure in any endeavor. By acknowledging this and prioritizing emotional regulation, we can develop the discipline necessary to maintain a consistent and profitable trading strategy. Remember, self-control is not about suppressing our emotions, but about acknowledging them and making conscious decisions that align with our goals. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Education
by Lingrid
14
ADVANTAGES OF DEX: A New Era in Cryptocurrency TradingDecentralized exchanges, or DEXs, revolutionize the way we conduct transactions by empowering counterparties to directly interact with each other without the need for a central authority. In contrast to traditional centralized exchanges (CEXs), where all transactions are controlled by a single entity, DEXs operate on the principles of smart contracts, ensuring the autonomy and decentralization of the transaction process. This decentralized approach eliminates the risk of a single point of failure, promoting a more secure, transparent, and community-driven trading experience. Binance, the world's largest centralized exchange by capitalization and trading volume, is a prime example of a traditional centralized exchange. With a clear chain of command, ownership, and management structure, this type of exchange operates under the oversight of its administrators. In contrast to DEXs, Binance requires users to undergo mandatory verification procedures, including facial recognition and recording, and stores user funds in its own accounts. This level of control and oversight makes it a prime target for regulatory bodies, which are increasingly seeking to establish clear guidelines and standards for the global crypto market. 💡 DIFFERENCES BETWEEN DEX AND CEX 🗝️ THE KEY POINTS OF CEXs: ➡️ Centralized Exchanges operate under the umbrella of a centralized organization, where a clear chain of command and management structure governs all operations. This means that the exchange has direct control over user assets, with specific individuals responsible for overseeing day-to-day activities. ➡️ The registration process for CEXs typically involves verification of identity (KYC) and compliance with regulatory requirements. While some exceptions may be made for marketing purposes, such as allowing withdrawals up to a certain amount without verification, this is not the norm. As a result, exchanges may be compelled to disclose transaction data and customer account information to tax authorities, courts, or other parties upon request. ➡️ In terms of ease of use, CEXs often feature a familiar interface and rapid transaction processing times. They can also act as intermediaries, providing a guarantee for transactions and blocking funds until the trade is complete. ➡️However, this centralized approach also introduces security risks. With user assets stored on the exchange, CEXs are vulnerable to hacking attacks, which are unfortunately all too common. The hacking of centralized exchanges has become a frequent occurrence, making it essential for users to prioritize security when choosing a platform. One notable example of a centralized exchange is FTX, which was once among the top 5 largest exchanges by capitalization. However, its collapse serves as a stark reminder of the risks associated with centralized exchanges. The exchange's management was accused of misusing funds, leading to its eventual bankruptcy. In a devastating blow to users, their assets were locked, leaving them without access to their money. This incident highlights the importance of regulatory oversight and accountability in the cryptocurrency space. Centralized exchanges, like FTX, are often touted for their ease of use and security features, but they also concentrate user assets, making them vulnerable to mismanagement or even theft. The collapse of FTX is a cautionary tale for investors and users alike, emphasizing the need for due diligence when choosing a platform and the importance of transparency and accountability in the crypto industry. 🗝️ KEY POINTS OF DEXs: ⚡️ Decentralized exchanges, on the other hand, operate on a different principle. Transactions are facilitated by smart contracts, which ensures that users retain full control over their assets at all times. Unlike centralized exchanges, there is no management or authority figure that can exert influence or control over the platform. Instead, developers work alongside the cryptocurrency community to maintain and improve the operation of the exchange. ⚡️ One of the significant benefits of decentralized exchanges is the lack of need for identity verification. Users can trade directly with their cryptocurrency wallets, ensuring complete anonymity and privacy. Additionally, decentralized exchanges do not require users to register an account, making it a more convenient and secure option. ⚡️ Transparency is another key advantage of decentralized exchanges. All transactions are recorded on the blockchain, providing a public ledger of all activity. While it may be challenging for average users to access this information, it at least ensures that there is no room for abuse or manipulation. ⚡️ However, decentralized exchanges are not without their risks. Since users retain control over their assets, the risk of hacking is significantly reduced. However, vulnerabilities in smart contracts can still pose a threat to the security of the platform. Despite this, decentralized exchanges offer a more secure and transparent alternative to traditional centralized exchanges. 💡 ADVANTAGES OF DEXs 📍 One of the most significant advantages of decentralized exchanges is asset control. Unlike traditional centralized exchanges, users maintain full control over their funds, storing them securely in their own wallets. This means that users are not reliant on a third-party exchange to manage their assets, reducing the risk of hacking or theft. 📍 Another major benefit is the enhanced security offered by decentralized exchanges. Since there is no central storage of funds, the risk of an exchange being hacked is significantly reduced. This provides an added layer of protection for users, giving them greater peace of mind when trading. 📍 Decentralized exchanges also offer unparalleled anonymity. Users can trade without having to provide personal information, allowing for a level of privacy that is not typically found with centralized exchanges. 📍 Furthermore, decentralized exchanges offer a unique advantage when it comes to geographical restrictions. With no central authority, there are no restrictions on countries or regions for users, making it accessible to a global audience. 📍 Finally, decentralized exchanges provide a range of tools for earning money. While they may not offer the same breadth of options as centralized exchanges (such as margin trading, bi-currency investments, and liquid staking), they do provide a platform for buying and selling cryptocurrencies, giving users a way to engage with the market and potentially generate returns. 💡 DISADVANTAGES OF DEXs 📍 While decentralized exchanges offer many benefits, they also come with some drawbacks. One of the main limitations is speed and scalability. Due to the load on the blockchain, transactions can be slower and more expensive, which can be frustrating for users who need quick and seamless transactions. 📍 Another challenge is the interface. Decentralized exchanges often have a more complex interface compared to centralized exchanges, which can be overwhelming for new users. This may require a steeper learning curve and more technical knowledge to navigate. 📍Liquidity is also an issue with decentralized exchanges. Often, the liquidity is lower compared to centralized exchanges, resulting in higher spreads and less attractive prices for users. This can make it harder for users to find the best deals and execute trades efficiently. 📍 Furthermore, decentralized exchanges require a certain level of technical expertise from users. To use these platforms effectively, users need to have a basic understanding of cryptocurrency wallets, how they interact with the blockchain, and other technical aspects of decentralized finance. This can be a barrier to entry for those who are new to the space. 📍 Finally, decentralized exchanges are not immune to vulnerabilities. Smart contracts, which power these platforms, can be vulnerable to errors in their code. This means that risks are associated with possible errors in the code, which could compromise the security and integrity of the platform. While developers work hard to ensure the security of these contracts, it's essential for users to remain vigilant and aware of potential risks. ✅ CONCLUSION Decentralized exchanges are often referred to as "shadow exchanges," but they don't belong to the gray market category. As the cryptocurrency community continues to grow, there is a growing trend towards adopting DEXs, which operate through wallets. The benefits of this approach are numerous. For one, users don't have to worry about regulatory interference, as there is no centralized authority to govern their transactions. Secondly, users are free from the risk of their accounts being blocked or their money being refused by the exchange. On the other hand, DEXs can act as an arbitrator in disputes that may arise during transactions, providing an added layer of security and trust. However, it's essential to note that transactions conducted through DEXs are fully the responsibility of the participants involved, and any errors or frauds would fall on the shoulders of the individual parties. Ultimately, using DEXs requires a higher level of technical expertise and responsibility from users. It also means that users must take steps to withdraw their funds to instruments controlled by regulators, such as banks or other financial institutions. Despite these added complexities, the appeal of DEXs lies in their ability to offer a decentralized, secure, and transparent way to buy and sell cryptocurrencies. As the cryptocurrency market continues to evolve, it's likely that DEXs will play an increasingly important role in shaping its future. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment 📣
Education
by Lingrid
1
How to Get into an Entry after the setup is passedIn the world of investing, it is not uncommon to come across a missed trade setup that tempts investors to make impulsive decisions. However, it is important to remain disciplined and avoid falling into the trap of #FOMO (Fear Of Missing Out). For instance, if an investor misses a trade setup on Ethereum ( CRYPTOCAP:ETH ), instead of rushing in with a full position, a more prudent approach would be to enter with half the intended position. This allows the investor to participate in the trade while minimizing the risk of committing too much capital at once. Once the initial entry is made, it is crucial to implement a strategy known as Dollar Cost Averaging (#DCA). This involves gradually increasing the position size by buying more ETH over time. By using DCA, investors can mitigate the impact of short-term market volatility and avoid making rash decisions based solely on emotions. To effectively implement DCA, it is important to maintain the original stop loss level. This means that even if the price of ETH decreases after the initial entry, the stop loss order should remain at the predetermined level. By sticking to this plan, investors can ensure that their risk management strategy remains intact and that they do not expose themselves to unnecessary losses. In summary, when faced with a missed trade setup on ETH, it is crucial to resist the urge to FOMO in with a full position. Instead, entering with half the intended position and utilizing Dollar Cost Averaging can provide a more measured and disciplined approach. By maintaining the original stop loss level throughout the process, investors can enhance their risk management and increase their chances of success in the long run.
Education
by XTradeSetup
BTC/USD Secondary trend cycles and halvings.The graph shows the main trend of bitcoin. Logarithmic chart. Timeframe 1 month. The main liquidity zone. The graph is linear (without “market noise”, i.e., without squeezes of minima and maxima for hamsters). The channel and all values are set according to it. Everything is extremely accurate (potentially accurate). All the same parameters, but candlestick chart. Pay attention to the timing of the halving and the evolution of the cycle . There are super resets before halvings, which are completely invisible on a large timeframe on a line chart after a short time. Pay attention to 17( 518 ) + 18( 547 ) and the treasured 1400. I am sure that in 1 year everyone will be very interested in the cryptocurrency and bitcoin market, in 2-3 years ( 123 ) up to 6 0% of market participants will no longer be interested (they will have completely different problems). In 6 years there will be no more than 6 0%. Secondary trend decline in the super cycle (the main, long-term trend), on a line chart, 1 month timeframe: 1) -81% 2) -75% 3) -67% (as of publication). #1 Super reset -44% after 1 cycle , already in the alignment zone (sideways, accumulation) the before BTC halving. Candlestick chart. Timeframe 1 month. All the same and the same “fear”, but on a line chart #2 Super reset -67 % (13). 2 cycle . Border closes, start of COD619 carnival, (hematria) 1.8 months before bitcoin halving and subsequent growth over +880 % (not from lows). From “fear hamsters” lows over + 1440 % (not liquid). Candlestick chart. Same on a line chart. Greed begets poverty. Focus on that part of the price chart of the cycle. The chart doesn't matter, what matters is what I can "silently" convey to you with it. It's important to understand what's important to you, what you want to guess, I'm not interested in that at all. It can't be a secret what's already been. It is simply reality. You don't have to understand the last paragraph. If you don't understand it, skip it and focus on the text above, the logical TA (probability game).
BITFINEX:BTCUSD
by SpartaBTC
20
Apple Next Target is Channel TopNow Apple Successfully Breakout above the Resistance level and Trading Within the Channel. Apple Next Target is the Channel Top. Refer this image, Before Breakout the Resistance level. I shared the Same Channel Pattern on TradingView for Bitcoin. Refer to this Images, showing Before and After the Target was Achieved. The Channel is used to identified the Next Target (or) Next Impulse. Refer below I want to help people Make Profit all over the "World". Additionally, I am Eager to Receive Money form Worldwide because of my Potential. Thank you
NASDAQ:AAPL
by SasikumarMani
NEW TOKEN LISTING: A Double-Edged Sword for Investors💡 The cryptocurrency market is a realm of endless opportunities, where prices can fluctuate wildly, shooting up 5-10% in a single day in either direction. This volatility can be both exhilarating and intimidating, as it can either wipe out investors or leave them with a quick windfall. However, not everyone is suited to navigate this fast-paced landscape. For those seeking more conservative returns, there are other options available. On the other hand, there are those who are willing to take greater risks in pursuit of substantial profits. One such strategy is to buy coins during the pre-sale period and sell them at their initial listing on the exchange. This approach can be lucrative, as savvy investors can capitalize on the initial hype and sell their coins at a significant markup. To generate buzz and attract attention, many new projects offer their coins for free in exchange for performing simple tasks or purchasing them at a discounted rate. When these coins are listed on the exchange, their value tends to plummet due to oversupply and subsequent sales. However, for those who manage to get in early and sell their coins before the price drops, the potential for significant returns – even 100% or more – is very real. 📍 PRE-LISTING INVESTMENT Recently, a new earning opportunity emerged in the online space, with BINANCE:NOTUSDT being the center of attention. The project's developers cleverly leveraged their marketing expertise to create a buzz around the coin. As a result, it gained widespread visibility, with numerous media outlets and cryptocurrency channels promoting the project. The idea was to generate revenue by simply tapping on your smartphone screen, with active users potentially earning around $300-$400. However, as soon as the coin listed on Binance, its price took a drastic dip. The price recovered after a few weeks, though. In a recent analysis of cryptocurrency tokens listed on Binance, it was found that a staggering 80% of new tokens have lost significant value over the past six months. The notable exceptions to this trend are a few meme coins, including BINANCE:MEMEUSDT and BINANCE:WIFUSDT , as well as tokens associated with the Solana protocol. 📍 THE STUDY HIGHLIGHTS THE FOLLOWING KEY REASONS 1️⃣ Firstly, developers often artificially inflate the cost of their tokens by issuing them at an undervalued price, which creates a surge in demand. Simultaneously, they sell their own share of the tokens, reaping the benefits. 2️⃣ Moreover, many coins lack a genuine long-term investor base and a strong community backing. This lack of support can be a red flag, indicating that these coins may be pre-destined to fail as a potential scam. 3️⃣ Furthermore, listed coins often lack growth potential, failing to meet the criteria for a sound investment instrument. Instead, they tend to attract attention from insiders and retail buyers who are willing to take risks and gamble on their investment. A portfolio comprising newly listed coins suffered an 18% decline in value over the past six months, while the market's blue-chip coins enjoyed significant gains during the same period. This stark contrast has led analysts to sound the alarm, warning that such a phenomenon can have far-reaching implications for the market's integrity. When investors, serving as the primary source of liquidity, inject their funds into poorly performing projects, they become disillusioned with the entire market. As a result, their money migrates towards established coins, leaving new initiatives struggling to secure funding and ultimately forcing them to shut down. Even innovative ideas with great potential are stifled by a lack of interest and resources. The solution to this problem lies in stricter regulation by cryptocurrency exchanges, which currently allow unscrupulous projects to exploit the market. However, exchanges are driven by profit, so this issue remains unresolved for now. 📍 CONCLUSION Identifying a token with potential for significant profit after listing can be a challenging and high-risk endeavor. The key factor in determining success is the interest of investors. If a coin is solely speculative, it is likely to experience a decline in value after listing. Conversely, if a token is backed by developers and has inherent value, it may have a chance to grow. However, with the vast majority of new tokens being scams, the risk of loss is significantly higher than the potential gain from a successful investment. From a risk perspective, this investment model appears unreasonable compared to long-term investments in established coins like BINANCE:BTCUSDT or top-tier cryptocurrencies. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment📣
Education
by Lingrid
5
Optimizing Returns: Position Sizing, Leverage and Spot TradingWhomever told you "Size doesn't matter" in trading, has never had a big "size" and probably just borrowed someone elses. In the dynamic landscape of trading, where fortunes can be made and lost in the blink of an eye, various strategies vie for attention. Position sizing, leverage trading, and spot trading each offer distinct approaches to navigating the volatile markets. Understanding the nuances and risks associated with each is essential for traders seeking to optimize their returns while managing risk effectively. Position Sizing: A Prudent Approach Position sizing is a strategy that emphasizes determining the appropriate amount of capital to allocate to a trade relative to one's overall portfolio. Rather than relying on borrowed funds to amplify gains, position sizing focuses on prudent allocation and risk management. Consider this scenario: Here is something that happened to me recently: Over a week ago I invested just $80 in #Bitcoin and the price moved 12% since My return: $11.75 A few days ago I invested $1,000 in Bitcoin and the price moved only 3% My return: +$26.00 Despite the smaller percentage gain in the first scenario, the return on investment is substantially lower due to the smaller position size. This highlights a fundamental principle: the size of one's position significantly impacts the magnitude of returns. While the absolute gains may seem modest in the examples provided, they demonstrate the potential for consistent growth without the need for excessive risk-taking. Leverage Trading: Temptation and Risk Leverage trading offers the allure of magnified returns by allowing traders to control positions larger than their initial capital. However, this comes with inherent risks, including fees associated with borrowing and the potential for significant losses. Many traders are drawn to leverage trading in pursuit of exponential gains. Yet, they often overlook the substantial risks involved. Despite the promise of greater returns, the reality is that losses can mount swiftly, eroding profits and even leading to negative balances. Furthermore, the psychological toll of leverage trading can be significant. Constantly chasing high-risk, high-reward opportunities can result in emotional exhaustion and impulsive decision-making, fueling a cycle of loss and frustration. Spot Trading: Proceed with Caution Spot trading stands as a stalwart option for those seeking to invest without the complexities of leverage. However, even in this seemingly straightforward arena, there are nuances to be wary of, particularly when it comes to leveraging spot positions. Spot trading entails purchasing and holding an asset with the expectation of long-term appreciation. Unlike leverage trading, where borrowed funds amplify gains and losses, spot trading relies solely on the investor's own capital. This approach is often favored for its simplicity and reduced risk exposure. However, the temptation to employ leverage in spot trading can lead to unforeseen consequences. Leveraging spot positions increases the potential for losses, as the borrowed funds magnify both gains and losses. Moreover, the dynamics of unrealized and realized profit and loss (PnL) can confound inexperienced traders. Finding Balance: The Art of Risk Management The key to successful trading lies in finding the balance between risk and reward. While leverage trading offers the potential for rapid growth, it requires a disciplined approach to risk management. Instead of fixating on borrowed size, traders should focus on optimizing position size relative to their available capital. Understanding the interplay between unrealized and realized PnL is crucial for making informed trading decisions in both leverage and spot trading. By exercising prudence and restraint, traders can optimize their returns while safeguarding against undue exposure to market volatility. In the end, what truly matters is finding a harmonious balance between these strategies. Whether it's careful position sizing, navigating the highs and lows of leverage trading, or sticking to the grounded principles of spot trading, it's all about embracing a method that resonates with your risk tolerance and goals. With a keen understanding of the intricacies involved and a disciplined mindset guiding your every move, you'll be well-equipped to chart your course through the markets and seize every opportunity that comes your way.
by CoffeeshopCrypto
FLOATING SPREAD VS FIXED SPREAD🌐 The trading conditions of any account specify the type of spread: floating or fixed. As a rule, the value of a fixed spread is larger, but a floating spread has an insidious wording “from...” in the terms and conditions. This means that the floating spread may well be greater than the fixed one. Nevertheless, it is considered better. What are its advantages and disadvantages, what spread to choose? 📍 ADVANTAGES AND DISADVANTAGES OF FLOATING SPREAD ▶️ FIXED SPREAD The difference between the buy and sell price of an asset is constant. This indicates that the broker works according to Straight Through Processing (STP) model - directly with a specific liquidity provider, the size of the spread with which is pre-agreed. The broker charges its commission (markup) and the trader sees the final difference. The fixed spread is only theoretical. Often in the offer there is a clause that the broker can unilaterally change it. And broker does it at the moment of news release, when volatility increases sharply. ▶️ FLOATING SPREAD The difference between price/offer is formed by the market. The broker only adds its small commission, that's why there are no zero spreads. Floating spreads are set on ECN accounts, where orders are not placed to a specific liquidity provider, but to the general market. Such accounts have a high entry threshold and a fixed commission for each lot placed on the account. 📍 THE FLOATING SPREAD DEPENDS ON: 🔘 Market Liquidity. During the vacation season, on the eve of vacations, at the moment of flat trading activity decreases. The smaller the volumes and the fewer traders, the bigger the gap between Bid and Ask prices. 🔘 Currency Liquidity. Or investors' interest. The FX:EURUSD pair is liquid, the pair of the US dollar with the South African rand is called exotic and the spread on it is one of the largest. 🔘 Volatility. Or the speed of trend movement. If after the news release the imbalance of bids in the direction of buyers or sellers sharply increases, the spread will also grow. 🔘 Time of day. Or the period of activity of traders of this or that region. 📍 ADVANTAGES OF A FLOATING SPREAD: ➡️ Most of the time it is less than the fixed spread. ➡️ No requotes - the transaction is executed in any case. ➡️ Floating spread is more profitable than fixed spread for liquid currencies. Fixed spread is more profitable for “exotics”. ➡️ It is favorable for scalping, where every tenth of a point is important for profit. 📍 DISADVANTAGES OF FLOATING SPREAD: ➡️ There are slippages at the moment of sharp spread widening. ➡️ It is necessary to constantly monitor its change. ➡️ It can sharply increase when a fundamental factor appears. ➡️ There is still a risk of artificial spread widening by the broker (it is not easy to prove). ➡️ Increases emotional tension. With a fixed spread a trader always knows the amount of expenses. Expansion of a floating spread can turn a profitable trade into a losing one. If you open a new account with a broker, pay attention to the following points. In what cases the broker has the right to change the fixed spread. What quotes we are talking about. Outdated data on the website may turn out to be conditions for 4-digit quotes. Compare spreads at different brokers on a demo account; install a script showing the current spread. Run it on one asset, watch how and when the floating spread might widen. 📍 CONCLUSION The choice between a fixed spread and a floating spread depends on several factors, including market liquidity, currency pair, volatility, and time of day. While fixed spreads offer a set and predictable price difference, floating spreads can be more competitive and profitable, especially for scalping strategies. However, floating spreads also come with risks, such as slippage and the need to constantly monitor spread changes. When opening a new account with a broker, it's essential to pay attention to the terms and conditions, clarify quotes, compare spreads across different brokers, and test the floating spread on a demo account. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
5
Divergence - asset price directionDivergence is the discrepancy between the direction of an asset's price and the readings of an indicator. There are three types of divergences: classical, extended, and hidden. The first two can be used to gauge market sentiment and to trade in the opposite direction. Hidden divergence, however, is more significant and can serve as a powerful supplementary factor in determining the price direction and opening positions. The use of extended divergence is not necessary, as it rarely occurs and forms at equal highs or lows. In such cases, an indicator is not needed to gauge market sentiment; the chart itself will suffice. Classical Divergence Classical divergence indicates a potential trend reversal or the beginning of a correction. Bullish classical divergence is identified when a lower low (LL) forms on the chart while a higher low (HL) appears on the indicator. The masses buy when classical bullish divergence appears, anticipating significant growth. An upward price movement may begin, but after short-term liquidity for buying is exhausted and the price rebalances, a reversal will occur, and the decline will continue. Long positions opened during the correction will become unprofitable. In a bear market, classical bullish divergence typically appears before the start of a correction. Bearish classical divergence is identified when a higher high (HH) forms on the chart while a lower high (LH) appears on the indicator. The masses sell when classical bearish divergence appears, expecting a significant decline. A downward price movement may begin, but after short-term liquidity for selling is exhausted and the price rebalances, a reversal will occur, and the growth will continue. Short positions opened during the correction will become unprofitable. In a bull market, classical bearish divergence typically appears before the start of a correction. The formation of multiple divergences is common. The masses will seize every opportunity to open their positions, leading to unprofitable outcomes. The number of divergences before the start of a correction is not limited. It is recommended to wait for the price to react after reaching the resistance zone. In the example above, the correction began after partially filling the imbalance on the 1D timeframe within the imbalance on the 1W timeframe. Hidden Divergence Hidden divergence serves as a confirmation of trend continuation. Bullish hidden divergence is identified when a higher low (HL) forms on the chart and a lower low (LL) appears on the indicator. In an uptrend, hidden bullish divergence may form before the continuation of growth, acting as a strong supplementary factor in determining the future price direction and considering positions. Bearish hidden divergence is identified when a lower high (LH) forms on the chart and a higher high (HH) appears on the indicator. In a downtrend, hidden bearish divergence may form before the continuation of the decline, acting as a strong supplementary factor in determining the future price direction and considering positions. Notes - The RSI (Relative Strength Index) indicator is used to identify divergences. - RSI is plotted without considering candle shadows. - Divergence should be viewed as an additional factor to your analysis, not a standalone tool. - Divergence below the chart will always be bullish, while divergence above the chart will always be bearish.
Education
by truepersonal
TYPES OF MARKET ANALYSIS1) Fundamental analysis. fundamental analysis focus mainly on micro and macro event that will control market situations in the present and in the future. it includes various events in economic calendar like PPI CPI NonFarm Payroll, Interest rate decisions, and geopolitical senarios like election war climate issues etc 2) Technical analysis. Technical analysis mainly focus on indicators chart analysis volume analysis, various analysis like following candle stick pattern, trading strategies based on indicators 3) Market sentiments Market sentiments focus mainly on how the crowd anticipate wheich direction will market go, like when xauusd reached at its all time top everyone believed it will have a retracement from that zone like share and follow us for more such informative contents
Education
by realmillionairefx
EXPLAINING LIQUIDITY IN SIMPLE WORDSLiquidity plays a vital role in shaping market prices, particularly among large market players such as banks, hedge funds, and other influential entities. These entities, often referred to as market makers, manipulators, and others, are driven by their pursuit of liquidity. In fact, liquidity is the foundation upon which successful trading is built, and it's where traders should begin their journey. In the context of Smart Money Concepts (SMC), liquidity refers to the levels of asset price where multiple market participants have placed limit orders, stop orders, and liquidations. Stop orders are essentially reverse orders designed to mitigate losses by buying back positions that have gone against a trader's expectations. When a trader sets a Stop-Loss order, they're essentially trying to limit potential losses if the market moves against them. The concentration of stop orders creates a gravitational effect, making it attractive for larger players to gain an advantage. By identifying areas with high concentrations of stop orders, big players can exploit these liquidity zones to collect profits from retail traders who are unaware of these market dynamics. As a result, the movement of prices from one liquidity zone to another is driven by the actions of these powerful entities, ultimately shaping the market landscape. ❓ HOW TO IDENTIFY LIQUIDITY ON THE PRICE CHART? Before we dive into trading and trades, we must first identify obvious liquidity pools. These will be our closest target for the price to converge upon. There are several types of liquidity in the market: Equal highs and lows (EQH/EQL), which mark significant turning points Swing structural points, including notable highs and lows that can be significant drivers of market activity Boundaries in sideways price movement, such as ranges or sideways trends, where liquidity is concentrated Trend movement, where liquidity tends to accumulate below or above the trendline 📊 SIGNIFICANT PRICE HIGHS AND LOWS The SMC features six key extrema that significantly impact trading: • The previous month's high and low values • The previous week's high and low values • The previous day's high and low values • The current trading day's high and low values • Equal highs and lows, which can be particularly significant in determining market trends 📈 Equal Highs (EQH) or Equal Lows (EQL) 📉 The double bottom or double top candlestick formation is a common indicator of a potential price reversal. When the price reaches these formations, it typically signals a change in direction, with the price moving in the opposite direction. For retail traders, equal highs and lows are crucial levels of support and resistance, prompting them to place stop orders at these levels. These levels act as a gravitational force, attracting large capital flows and creating a significant amount of liquidity. When the price approaches these levels in reverse, it's not uncommon to see a cluster of stop orders forming, as traders anticipating a bounce from the level wait for the price to react. However, large players often take advantage of this expectation by executing stop-loss orders through a false breakout, ultimately triggering a price reversal. 💲 SIGNS OF A SUCCESSFUL LIQUIDITY GRAB Let's consider a buy scenario as an example. Traders identify a strong low price, and large capital players recognize an obvious accumulation of liquidity at this point. When the price returns to this low and breaks it, but without forming a full candle, the price closes above the broken low. To better understand this concept, let's examine the schematic representation of liquidity grab in buying scenario. Liquidity is a top priority for big players, known as “smart money”. A significant player is actively seeking to find it to secure their position. The reason is that if they were to open trades without sufficient liquidity, they would be exposed to price slippage, as there may not be enough buy or sell orders in the market to execute their trades efficiently. 🔎 IS IT A LIQUIDITY GRAB OR NOT? Distinguishing between a liquidity grab and a breakout of market structure is crucial, as they share similarities. In the case of a liquidity grab, the price fails to close at an important structural highs or lows, instead takes liquidity forming long tailed candles. In contrast, a breakout of the structure sees the price breaks and closes above or below new level. Notably, liquidity grab often precedes a price reversal, whereas breakout of the level typically perpetuates the underlying trend. 📍 TREND LIQUIDITY In a clear trending market, liquidity forms in both directions, at the lows and highs. Let's take a closer look at a downward trend movement. When we see the price moving downwards, we initially take liquidity at the lows, which has been building up since the price reached its maximum. Then, we take liquidity at the minimum, creating a natural flow. At the highs, we deliberately leave liquidity on purpose, allowing it to build up and eventually be taken away naturally. The liquidity at the lows acts as a price magnet, attracting a large player who begins to accumulate their position. In some cases, the price may form equal lows, known as a double bottom in technical analysis. This signals to traders that it's time to enter a trade, and they place stop losses above these levels. At this point, a major player manipulates the price, taking this liquidity and reversing the trend. The first target is then the trend highs, where liquidity is located – it was left earlier to be taken away. 📝 HOW TO WORK WITH LIQUIDITY? When working with liquidity, it can be a valuable tool for entering a trade, as well as helping to set a stop loss by avoiding arbitrary price levels. Instead, you can use liquidity to guide your trading decisions and create more informed stop-loss strategies. Moreover, take profits can also be placed on liquidity levels, as the price is constantly moving between these levels, making it essential to take profits before they're taken away. 💎 CONCLUSION The benefits of liquidity analysis extend to any time frame, whether it's weekly, daily, or even 1-minute charts. This means that liquidity can be effectively applied to analyze forex market, indices, cryptocurrencies and shares of companies for investment purposes, making it a versatile tool for traders and investors alike. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
23
All Roads Leads to RomeIf you wish to analyze the index using traditional Japanese candles and Heikin-Ashi candles, and compare that using Bollinger Bands, Elliott Waves, Fibonacci series, and Ichimoku Kinko Hyo indicators. And you want to conduct the analysis on various time frames including daily, hourly, and every five minutes to discover the confluence between these indicators, you will find what pleases you in this tutorial video. #traders4traders ***This channel is intended for educational purposes only and should not be construed as an investment proposal. Disclaimer: The content provided is for Educational purposes only. It should not be interpreted as legal, tax, investment, financial, or any other form of advice. Investing in stocks carries inherent risks and may lead to potential losses, including the loss of principal. It's important for investors to recognize that past performance does not guarantee future returns, and market fluctuations can impact investment value. Stocks discussed here are not synonymous with, nor should they be seen as a replacement for time deposits or similar saving instruments. Investing in securities of smaller companies may involve higher risks compared to larger, more established firms, possibly resulting in substantial capital losses. Decisions to buy, sell, hold or trade in securities, commodities and other investments involve risk and are best made based on the advice of qualified financial professionals. The practice of "Day Trading" involves particularly high risks and can cause you to lose substantial sums of money. Before undertaking any trading program, you should consult a qualified financial professional. Please consider carefully whether such trading is suitable for you in light of your financial condition and ability to bear financial risks. Under no circumstances shall I be liable for any loss or damage you or anyone else incurs as a result of any trading or investment activity that you or anyone else engages in based on any information or material you receive through TradingView
EGX:EGX30Education
by ICHIMOKUontheNILE
WHAT ARE REAL WORLD ASSETS (RWA)?Just 3-5 years ago, the concept of "real assets" was clear-cut - physical items that could be owned such as stocks, gold, and currency. On the other hand, "derivatives" referred to intangible assets like swaps, options, and CFDs that allowed for profit-making. However, the emergence of cryptocurrencies and blockchain technology has completely transformed this landscape. Not long ago, cryptocurrencies were seen as a separate entity, often labeled as a risky and unsecured financial scheme. But today, they are being recognized as valuable commodities and even as securities. What's even more fascinating is the rise of a new category - Real World Assets. 💡 Real World Assets are a unique category of financial instruments that are based on blockchain technology. 💹 Real World Assets is a market where real world assets are tokenized on the blockchain. These tokenized assets, which we refer to as real assets, are essentially moving traditional assets into decentralized financial applications. The goal is to leverage technology to potentially lower fees and management costs associated with these assets. 📍 REAL WORLD ASSETS EXAMPLES: ➡️ Stablecoins are a type of cryptocurrency that are centralized and backed by real assets. For instance, Tether's USDT is backed by stocks, government bonds, and fiat currencies, and undergoes some level of auditing. This process is known as tokenization, where the value of the collateral is denominated in stablecoins equivalent to fiat money. The pegging ratio is 1:1, meaning that the value of the stablecoin is directly tied to the value of the underlying assets. Any fluctuations in the value of the assets are balanced out by adding more collateral to maintain the stability of the stablecoin. 🔴 One major drawback of this model lies in the vulnerability to fluctuations in exchange rates of the real asset. In the event that stocks experience significant drawdowns of 20-30%, it is essential for the collateral to be able to mitigate this risk. Furthermore, as the stock value increases, Tether continues to issue additional USDT. Traders are already familiar with the challenges of decoupling stablecoins from their corresponding assets, particularly in the case of centralized stablecoins as opposed to algorithmic ones. ➡️ Private lending, specifically in the form of decentralized lending, has seen a significant player emerge in the form of DAO MakerDAO, the issuer of the DAI stablecoin. In a major move, this startup secured a hefty $100 million credit line with a US bank in mid-2022, backed by real assets as collateral. The startup was able to profit from this arrangement with an impressive 3% annual return. It is noteworthy that regulators did not pay attention to this deal. ➡️ Government bonds are a popular choice for investors seeking stability. Some companies have taken this a step further by issuing stablecoins that are backed by government securities. For example, Ondo Finance offers the USDY stablecoin, while Mountain Protocol offers USDM, which is based on Ethereum. These startups manage stablecoins backed by U.S. Treasury bonds, considered one of the most reliable instruments in the market. Investors can also earn passive income of 5% on top of the stability these investments offer. ➡️ Tokenized securities are on the rise, although the market has not yet reached its full potential. Bitfinex exchange is at the forefront of this trend, with their subsidiary launching the first tokenized bonds in October 2023. These bonds offer investors a tempting yield of 10% and a three-year maturity period. In essence, these tokenized securities work much like traditional bonds, where investors trade tokens for a share of the security and receive passive income in return. 🔴 Investors should be intrigued by the inquiry into how the issuer plans to allocate the funds raised and where the profit is being generated from. This question remains unanswered, as the tokenization process is still evolving. By 2024, HSBC, the British bank, is gearing up to introduce a service for managing tokenized bonds. In October 2023, JPMorgan and Barclays, along with investment firm BlackRock, unveiled a platform for transforming shares into digital assets called the Tokenized Collateral Network. ➡️ Green tokens are an emerging trend in the world of digital assets, with artificial intelligence specifically identifying them as a key player in the future. An interesting fact is that KlimaDAO, a startup backed by billionaire Mark Cuban, ultimately did not succeed in its mission to raise funds to incentivize companies to reduce their emissions. Despite this setback, the concept of green investments and tokens is likely to become a prominent tool in the future. This new form of investment may revolutionize the way companies approach sustainability and incentivize environmentally conscious behaviors. Stay tuned for more developments in the world of green tokens. ➡️ Paxos, a startup in the cryptocurrency industry, has made a connection to precious metals through the creation of gold tokens. Pax Gold has successfully replicated the value of physical gold, allowing investors to easily participate in the gold market without the need to purchase actual bullion or deal with brokers and confusing financial instruments like CFDs and swap fees. By purchasing PAXG cryptocurrency, investors can securely store it in a cold wallet, minimizing the risks associated with exchange bankruptcies or broker insolvencies. ➡️ In January 2023, the real estate startup MarketDAO facilitated a $7 million loan in cryptocurrency DAI to a French conglomerate. The loan was backed by mortgage bonds worth $40 million in US dollars. While this practice is still inconsistent, it marks the beginning of a promising trend in the real estate industry. ➡️ Paintings, sculptures, and other works of art, as well as collectibles, have long been valued for their beauty and uniqueness. The original concept behind NFTs was to revolutionize ownership by tying it to the blockchain, thereby ensuring copyright protection. In 2021-2022, we witnessed the initial steps towards digitizing and transferring paintings onto the blockchain. The future of this trend remains uncertain, but the concept has proven to be functional and shows promise for the art world. 🔴 The prospects for Real World Assets are significant and promising. However, accurately assessing these prospects is currently difficult as the tool is still in development and has not yet found its niche. Several factors are necessary for its success. 1️⃣ Firstly, there needs to be greater user engagement in cryptocurrency and digital technologies. Despite the widespread availability of the internet, not everyone has sufficient knowledge about these topics, let alone blockchain technology. 2️⃣ Secondly, there needs to be real interest and potential benefits from the tool. This can manifest in various ways, such as generating profit or simplifying certain actions. For example, the tool could speed up data transfers, protect copyrights, and make it more accessible for everyday users. Users must see the usefulness of the tool for it to be successful. 📍 CONCLUSION Currently, the reality is that the global market is valued at hundreds of trillions of dollars, a figure that the cryptocurrency market cannot compete with. For instance, as of 2020 estimates, the worldwide real estate market is valued at approximately $326 trillion in US dollars. According to RWA.xyz, the funds locked in blockchain technology total $4.5 billion, with just over $500 million in loans issued. However, the revolution of Real World Assets technology is on the horizon. In the next 1-2 years, this tool will begin gaining traction among the masses, similar to the rise of artificial intelligence in 2023. It is predicted that in 5 years, RWA technology will reach its peak of popularity. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
2
High Volume Times to Trade / Part 1 🔣Hello traders welcome back to another Concept video. In this video, we detail some of the best times to trade the Eur/Usd Currency pair. This happens to be at Session opens. We go through the 3 Session opens and walkthrough examples of increasing volume ( Large candles). Session opens can provide a great catalyst for 1) a continuation of momentum of the preceding trend or 2) a dramatic reversal. The Euro and the U.S. Dollar are not open during the Asian session and so the candles are much smaller and the average volatility is much less. However, the same concept applies regarding the former.
Education
by ShrewdCatfx
11
“DRAGON” PATTERN IN TRADINGAs we dive into studying price action, we can't help but be intrigued by the interesting names given to various patterns. Names like "Two Rivers" and "Shooting Star" not only sound captivating but also accurately describe the patterns they represent. In this post, we'll introduce you to another powerful pattern known as the Dragon. This pattern, belonging to the reversal patterns, is not only commonly found in the Forex market but is also highly effective. 💡 HOW THE DRAGON PATTERN IS FORMED? The pattern has known points, without which the formation is not possible: HEAD LEFT FOOT RIGHT FOOT HUMP TAIL Each of the points, should be placed in the specified place, without distortions and various force majeure. The Dragon pattern is a reversal pattern in the forex market. In order to successfully trade the Dragon formation, it is crucial to have a clear understanding of the important data associated with it. 📍 Firstly, in a downtrend, you must identify the last local lower high, which will serve as the head of the Dragon pattern. Subsequently, the market will continue to decline and reach a specific level that it cannot surpass, marking the left foot of the formation. 📍 The Dragon's Hump is then formed through a corrective movement from point 1 to point 2. It is essential that this correction does not exceed 38.2% to 50%. Following this correction, the market should attempt to retest the previous lows, ideally failing to do so. This failure indicates a potential shift in momentum, allowing for a buying opportunity. 📍 Drawing a trendline from the head to the hump serves as a signal line. Once this trendline is broken, the Dragon pattern is confirmed, signaling a long position entry. 📍 Setting a Stop Loss below the dragon's feet helps to manage risk, while the first target is set at the level of the hump and the second target at the head. Take Profit levels can be set at these targets to maximize profitability. Another possible scenario is when the bears successfully bring the market below the initial support level. Personally, I find this detail somewhat undermining to the pattern. In such a situation, it can be interpreted as follows: if the bears succeed in pushing the market to new lows, it indicates that they may not be as weak as they seemed at first, which encourages caution in buying. However, if the price returns above the last local low and creates a false breakout with a bullish divergence, it can be considered a strong signal. The bullish reversal pattern Dragon has its counterpart in the bearish reversal pattern known as the Inverted Dragon. Just like its bullish counterpart, the Inverted Dragon follows similar patterns and characteristics, so there is no need to describe it separately. As mentioned earlier, these patterns are named for their resemblance to real-life examples, and I have included a chart overlay in the screenshot below for reference. It is essential to have a strategy and a set of rules when considering any reversal combination in forex market. As many books suggest, patterns often form at the bottom of the market. Although the market bottom may shift quickly, it is important to stay disciplined and adhere to the rules. The concept of identifying the market bottom involves recognizing key levels where the market has previously rebounded. If a price has bounced off a certain level in the past, there is a higher probability of it happening again in the future. Therefore, it is crucial to look for potential patterns, such as the Dragon pattern, when the price nears a support level (for bullish patterns) or a resistance level (for bearish patterns). 📒 TO AVOID MISIDENTIFYING PATTERNS, IT CAN BE HELPFUL TO FOLLOW THESE GUIDELINES: 1️⃣ Start by identifying the current trend movement. In a downtrend, look for a dragon pattern, while in an uptrend, look for an inverted dragon pattern. 2️⃣ Remember that price reversals are more likely to occur at important levels. Without a significant level, there may not be a reversal. 3️⃣ Pay attention to the hump of the dragon pattern, ensuring it does not exceed 38.2% to 50% of the distance from the head to the left foot. 4️⃣ Consider the length of the right foot, which should be 5-10% of the distance from the left foot. Ideally, the right foot should be higher, but it can also be lower. 5️⃣ If there is a trendline breakout, take your time before opening a trade. Assess the potential gain and compare it to the expected loss. If everything checks out, go ahead and take the trade. 📊 USING THE DRAGON PATTERN IN TRADING As you can see, identifying the pattern is not difficult at all. Remember the key rules: The hump should be between 38.2% and 50% of the head, indicating left foot movement. The right leg should be aligned as closely as possible with the left foot. Most importantly, pay attention to the pattern at significant levels. The appearance of a pattern does not guarantee that the trend will reverse, but it is considered a strong signal. It is important to make sure that the pattern is formed on a sufficient amount of data. Take into account other factors such as fundamental analysis and the market context. ✅ BOTTOM LINE The Dragon pattern is widely recognized as a strong indicator of a trend reversal, making it a valuable tool for traders looking to capitalize on market movements. While it can be a helpful guide for entering trades in line with the anticipated trend, it is important to remember that no technical indicator is foolproof and a pragmatic approach is always advised. In addition to the suggested rules, it is essential to incorporate your own money management strategies to ensure profitable implementation of the Dragon pattern. Your feedback and any further perspectives are welcomed. Thank you for your time and input. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
1
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
Mastering Naked Forex Trading: Strategies, Pros, and TipsEmbarking on the journey of "Naked Forex Trading" marks a departure from conventional trading methods, as traders eschew traditional technical indicators in favor of a purer, more intuitive approach. This article delves into the operational intricacies, diverse strategies, and nuanced pros and cons of naked trading, offering practical insights and tips to navigate this distinctive trading method successfully. Understanding Naked Forex Trading: Naked forex trading represents a paradigm shift in trading philosophy, where traders base their decisions solely on price action, devoid of the clutter of technical indicators. It entails analyzing raw price movements on charts, such as identifying support and resistance levels, drawing trendlines, and interpreting candlestick patterns. By embracing the " naked " approach, traders aim to gain a clearer, unfiltered perspective on market dynamics and sentiment. Operation Of The Naked Trading Strategy: At its core, naked trading simplifies the trading process by stripping away the complexities of technical indicators and focusing solely on price action. Traders develop a keen eye for key support and resistance levels, draw trendlines to identify market trends, and meticulously analyze candlestick patterns for potential trading opportunities. This approach emphasizes disciplined adherence to entry and exit rules based on observable price movements, fostering a deeper understanding of market dynamics. Naked Trading Strategies: Naked trading encompasses a spectrum of strategies, each tailored to exploit specific aspects of price action. These strategies include: 1. Identifying Support and Resistance: Traders discern significant support and resistance levels on price charts, observing price reactions near these levels and making decisions based on historical significance and current market dynamics. 2. Drawing Trendlines: Trendlines are sketched to delineate the prevailing market direction, enabling traders to identify potential entry and exit points aligned with the trend's trajectory. 3. Analyzing Candlestick Patterns: Traders scrutinize candlestick patterns to gauge market sentiment and anticipate potential reversals or continuations. Patterns such as doji, engulfing patterns, and pin bars provide valuable insights into market psychology. 4. Recognizing Price Action Patterns: Common price action patterns, including double tops, double bottoms, and head and shoulders formations, are identified to anticipate future price movements and inform trading decisions. 5. Executing Breakout Trading: Traders identify consolidation zones or chart patterns signaling potential breakouts, entering positions when prices breach resistance or support levels, anticipating significant price movements. 6. Observing Engulfing Patterns: Bullish or bearish engulfing patterns, where one candle fully encompasses the preceding one, serve as signals for potential reversals or continuations, guiding traders in their decision-making process. 7. Naked Trading with Moving Averages: While purists adhere to pure price action analysis, some traders integrate moving averages to complement their naked trading strategy, providing additional confirmation of trends. 8. Monitoring Round Numbers and Psychological Levels: Round numbers and psychological levels on price charts act as additional support or resistance levels, influencing trader behavior and serving as strategic decision-making points. 9. Pattern Recognition: Traders develop proficiency in recognizing various chart patterns, such as triangles, wedges, and rectangles, leveraging breakouts or breakdowns from these patterns as potential trading opportunities. 10. Implementing Multiple Time Frame Analysis: Combining naked trading strategies with multiple time frame analysis enriches traders' understanding of market conditions, providing insights into both short-term fluctuations and long-term trends. Achieving success in naked trading demands a comprehensive understanding of market dynamics, disciplined pattern recognition, and the ability to interpret raw price charts effectively. Patience and effective risk management are essential to capitalize on high-probability trading setups and mitigate potential losses. Pros And Cons Of Naked Trading Strategy: The naked trading strategy offers several advantages: 1. Simplicity: Naked trading simplifies the trading process by eliminating the clutter of technical indicators, making it accessible for traders of all levels of experience. 2. Focus on Market Dynamics: By focusing solely on price action, naked traders develop a deeper understanding of market dynamics and trends. 3. Adaptability: Naked trading strategies can be applied across various financial markets and timeframes, providing flexibility and adaptability to changing market conditions. 4. Emphasis on Trader Psychology: Naked trading places a significant emphasis on understanding trader psychology and market sentiment, leading to more informed trading decisions. 5. Versatility in Strategies: Naked trading allows traders to customize their strategies based on their preferences and trading styles, incorporating a wide range of price action techniques. However, naked trading also presents some challenges: 1. Subjectivity: Naked trading often involves subjective analysis, as traders interpret price action based on their individual perspectives, leading to potential variations in trading decisions. 2. Lack of Confirmation: Without the aid of technical indicators, naked traders may lack confirmation of signals, increasing the risk of false signals and trading errors. 3. Limited Predictive Power: Naked trading primarily focuses on historical price movements, which may limit its ability to predict future market conditions accurately. 4. Vulnerability to Whipsaws: In volatile or low-liquidity markets, naked trading strategies may be more susceptible to whipsaws, resulting in unexpected losses or missed opportunities. 5. Learning Curve: Mastering naked trading requires a solid understanding of price action analysis and market psychology, posing a steep learning curve for novice traders. Tips For Trading Naked Without Indicators: To optimize naked trading strategies, traders can employ the following tips: 1. Practice on a Demo Account: Open a demo account to practice naked trading and refine your skills without risking real capital. 2. Incorporate Order Flow Analysis: Use order flow analysis to gain insights into market dynamics and identify potential trading opportunities. 3. Develop Trading Psychology: Cultivate a disciplined mindset and emotional resilience to navigate the ups and downs of trading without the aid of indicators. 4. Utilize Forex Correlation and Currency Strength Meter: Leverage forex correlation and currency strength meter tools to identify correlations between currency pairs and gauge market sentiment. 5. Explore Other Price Action Trading Strategies: Expand your repertoire of price action trading strategies, such as supply and demand trading or range trading, to enhance your trading toolkit. In conclusion Naked forex trading epitomizes the power of simplicity and reliance on price action analysis, offering traders a clear and unfiltered view of market dynamics. While it presents challenges such as subjectivity and a steep learning curve, traders can overcome these obstacles through diligent practice, analysis, and a deeper understanding of market psychology. By integrating diverse strategies, adhering to sound risk management principles, and honing their analytical skills, traders can harness the full potential of naked trading and navigate the forex markets with confidence and precision.
Education
by FOREXN1
1
SIMPLE STEPS IN CREATING A TRADING SYSTEMTrading system and strategy are often equated, but this is not quite right. Both a strategy and a trading system is a single algorithm of actions, including the process of searching for signals and opening trades. But strategy is often understood as following certain rules, while a trading system is a combination of technical, fundamental and psychological components. In other words, the creation of a trading system implies a combination of several strategies that work depending on the situation and their combination with external factors (emotions or news). 📊 CREATING A TRADING SYSTEM Creating a trading system is the basis of trading. No one prevents you from finding interesting strategies on the Internet, but a trading system is the very core that defines a trader's personality. After all, all people are different. A system is a set of rules, which takes into account the risk appetite, psychological qualities, and way of thinking. The market is influenced by hundreds of different variables, and in order not to drown in the flow of information, it is necessary to identify the basic path and the most influential factors. Building a trading system starts with choosing a narrow niche, which can/should then be gradually expanded. 📝 THE TRADING SYSTEM SHOULD ANSWER THE FOLLOWING QUESTIONS: • What is currently happening in the market? • What can happen in a fixed period of time? • How can a trader use the obtained information and forecast at the moment? There are several basic variants of price action, which most often form the basis of trading systems: 1️⃣ TREND FOLLOWING When it comes to trend following, the key is to pinpoint the start of a trend and monitor any corrections without mistaking them for a trend reversal. This strategy typically utilizes tools such as wave analysis, patterns, and support&resistance levels. Trend following strategies are commonly implemented on an intraday basis. 2️⃣ BREAKOUT OF RESISTANCE AND SUPPORT LEVELS The direction of the trend is not the key focus. What truly matters is the price breaking through significant levels. The primary challenge lies in distinguishing between a genuine breakout and a false one. 3️⃣ TRADING INSIDE THE CHANNEL This is an alternative to the second option. If the price does not break through the level, it returns to its average value. The main tools are the same levels, oscillators, channel indicators. Additionally, it is important to consider time allocation when creating a trading system. It is crucial to determine the timeframe that best suits your trading style and objectives. Different timeframes, such as intraday, mid-term, and long-term, offer various opportunities and challenges in the market. Understanding how to effectively allocate your time based on your chosen timeframe will help you make well-informed trading decisions: Intraday. Trades are opened and closed within the day with savings on swaps. They can also include scalping. But if scalping is a high-frequency exhausting trade, then intraday means strategies with the frequency of opening trades up to 3-5 per day. Mid-term. Can be held for several days, less often - several weeks. They have a strong dependence on the fundamental factor. Long-term. One of the investment options, providing for the creation of a diversified portfolio of different types of assets. ✔️ The trading system should also answer the following questions: Which asset optimally corresponds to individual preferences (level of average daily volatility, liquidity, winrate, principle of using leverage/margin percentage). What are the main parameters of the risk management system: risk level per one trade and for all open positions, lot calculation formula, etc. What timeframes and technical/fundamental analysis tools to use. What signals correspond to a successful point of opening a trade. At what moment to close trades. ✔️ All these points are obvious, but it is the lack of a clear plan that causes mistakes and panic. A trading system plan is a kind of "road map", which provides for: Different combinations of risk management system parameters. It is not necessary to stick to one risk control strategy. Sometimes an increase in risk is justified. Flexibility is important. Scenario in case of deviation of actual results of the trading system from statistical results (obtained during testing). Behavior in different emotional states. Sources of reliable information. Order of actions in case of force majeure. 📍 In conclusion , developing a trading system is essential for any trader looking to achieve success in the financial markets. A well-thought-out trading plan with a systematic approach helps traders make informed decisions, manage risks effectively, and stay disciplined in their approach. To trade without a plan is to hope for luck, and luck is not comparable with the theory of probability. Therefore, do not neglect the trading plan.
Education
by Lingrid
5
BITCOIN HALVING MYTHSIn a week, another bitcoin halving is expected to take place, which is expected by many cryptocurrency traders. Cryptocurrencies are still a dark horse for traders: sharp price fluctuations in both directions, high volatility attract traders with the supposed simplicity of making money. And although many consider the industry a bubble, there are still enthusiasts willing to take risks. What Is Halving In Simple Words? 📜 Halving is a reduction for rewarding miners for performing operations on the bitcoin blockchain network. Currently, the reward for solving equations for a block of data on the blockchain is 6.25 bitcoins. After halving, it will be cut exactly in half to 3.125 bitcoin. Basically, miners act as accountants in the blockchain network or as an equivalent of the collective Central Bank in the blockchain and serve as a guarantee of transparency and veracity of information: it is impossible to fake it in one block without other miners noticing it, but it is necessary to fake the entire chain of operations in the entire blockchain, which is practically impossible. Miners are responsible for processing all transactions: if there were no miners, there would be no new bitcoin transactions. How Bitcoin's Halving In 2024 Will Affect The Price? 📈📉 Bitcoin's halving in 2024 is one of the most expected and discussed events of the first half of this year. In most cases, analysts cannot clearly explain why the price of BTC (and subsequently other alts) changed, finding unconvincing reasons in hindsight. Therefore, the upcoming event is a reason to try to predict the future behavior of the price before it happens. Halving is a halving of miners' profits. That is, a miner bought expensive equipment, spends electricity in the hope that each block will be rewarded with 6.25 BTC. But then halving occurs and now the reward per block is 3.125 BTC. In theory, halving means that fewer coins will be mined and some miners will leave the market altogether. This will be followed by an increase in the scarcity of BTC, and therefore an increase in its price. At least, this is how optimists explain the growth of BTC price after halving. But the question is: how will the reduction in the volume of its production contribute to its price increase? 1️⃣ The Approaching Halving Is Already Priced In . This myth is taken from the fundamental analysis of stock market if investors are sure that, for example, if the Fed's interest rate is going to be exactly changed in a month, they buy or sell dollars in advance. However, this does not work in cryptocurrencies for several reasons: ✔️ Halving is embedded in the blockchain and for BTC it is done every 4 years. But that doesn't mean it is already factored into the pricing. ✔️ There are very few people involved in mining. And it is not a fact that investors are basically aware of what halving is and when it will take place. Short-term speculators may still be interested in this information. Those who bought BTC with the expectation that someday it will rise again (or did not sell it after a fall) are hardly interested in it. ✔️ The role of mining in the share of speculative circulation is not high. Market makers rule the market, which can simply squeeze miners with capital. 2️⃣ Bitcoin's Price Will Fall. The halving of bitcoin in 2024 may indeed affect the prices, but not as drastically as many investors would like. An argument in favor of a fall is the example of LTC, which got cheaper before halving profits. Compare the volumes of LTC and BTC, which occupies more than 54% of the entire cryptocurrency circulation. LTC is a speculative instrument, whereas BTC has a large share of long-term capital. 3️⃣ Halving Will Lead To The Annihilation Of The Mining Industry . Supporters of this myth argue that mining is becoming less and less profitable. In addition, more and more startups are being developed on more modern algorithms that do not involve mining. In reality, existing miners aren't going anywhere. Those who have already invested money in it will continue to "recoup" their costs. There will be no influx of new miners, so the mining industry will eventually disappear on its own. But halving will definitely not be to blame for this. ✅ Conclusion Halving bitcoin's price can affect the price significantly. The price may shift to one side or the other, but there are enough fundamental factors for growth, but not for a fall in price. Therefore, it is very likely that this event will be noticed.
Education
by Lingrid
4
MFI INDICATOR - STRATEGY FOR TRADINGIndicator MFI — model Incorporating technical indicators into your trading system requires a clear understanding of their fundamental principles. An innovative solution developed by Gene Cuong and Avrum Sudak allows the use of volumetric data in metric analysis. The Cash Flow Index serves as a graphical representation of the "cash ratio", requiring a preliminary derivation of the "cash ratio" and subsequent calculations, including the determination of typical price and cash flow. Similar to the relative strength index, the cash flow index is based on the concept of a “typical price,” calculated as the average of the high, low, and closing prices over a specified period of time. For example, if the daily time frame has a high of 70,000, a low of 65,000, and a closing price of 68,000, the typical daily price is calculated as follows: Typical daily price = (70000 + 65000 + 68000)/3 = 67666 Cash flow is then determined by multiplying typical price by volume: Cash Flow = Typical Daily Price * Volume. Comparing the resulting cash flow with the previous day's cash flow makes it easier to identify positive or negative trends. Positive cash flow indicates an increase, while a negative cash flow indicates a decrease. Cases of equivalent cash flow values are not taken into account. When positive and negative cash flows can be distinguished, the cash ratio is calculated by dividing the former by the latter: Cash Ratio = (Positive Cash Flow / Negative Cash Flow). Using this data, the cash flow index (MFI) can be calculated using the formula: MFI = 100 - (100/(1 + Money Factor)). Gene Cuong and Avrum Sudak have delineated three primary signals employed by the Cash Flow Index: Overbought or Oversold Levels: Traders strategically monitor for overbought or oversold conditions as indicators of unsustainable price extremes, signaling potential market corrections. Bullish and Bearish Divergences: Analysis of bullish and bearish divergences serves as a predictive tool for identifying potential trend reversals. Discrepancies between the direction of price movements and corresponding Cash Flow Index trends can offer valuable insights into shifting market dynamics. Fluctuations at 80 or 20 Levels: Observing fluctuations in the indicator readings around the 80 or 20 thresholds enables traders to discern potential market reversals. These pivotal levels serve as crucial points of reference, guiding traders in assessing market sentiment and making informed trading decisions. Determining overbought and oversold zones using the cash flow index While the relative strength index (RSI) and other oscillator-type technical indicators are capable of identifying overbought and oversold market conditions, the money flow index (MFI) stands out for its effectiveness in this area. Including additional volume information allows the MFI indicator to filter out false signals from overbought and oversold conditions, increasing its reliability, especially for traders looking to counter prevailing trends. Like most momentum indicators, the Money Flow Index ranges from 0 to 100. A Money Flow Index reading below 20 indicates an oversold signal. Conversely, a Cash Flow Index reading greater than 80 suggests an overbought scenario. One limitation of trading based solely on overbought and oversold signals is the inability to counter the current trend merely due to signals generated by the Money Flow Index (MFI). Optimal trading strategy involves exercising patience and waiting for a price action pattern to validate a shift in the prevailing trend before taking a position. By employing this approach, traders can make more informed decisions and reduce the risk of entering positions prematurely based solely on MFI signals. The MFI Indicator and Divergence Beyond its function in pinpointing overbought and oversold conditions, the Money Flow Index (MFI) indicator serves as a valuable tool for detecting divergence within the market. In essence, divergence manifests when the price moves in one direction while the indicator readings depict a contrary trend. Traders regard this occurrence as a strong indication that the price is poised to reverse in alignment with the technical indicator's trajectory. Utilizing the MFI indicator enables traders to readily recognize such signals, whether they manifest as bullish or bearish divergence. Bullish Divergence: Bearish divergence: What Should You Consider? By integrating volume into its mathematical framework, the Money Flow Index is adept at generating highly precise trading signals concerning overbought and oversold market conditions. Additionally, it demonstrates a notable ability to pinpoint emerging divergences within the market. However, like any technical indicator, it possesses inherent limitations. A primary constraint of the Money Flow Index is its propensity to persist in overbought or oversold states for extended durations, potentially leading to false signals. Yet, by crafting a trading strategy that incorporates price action signals, traders can harness the MFI indicator to identify potential reversal zones. Armed with this insight, traders can anticipate shifts in directional price movement with ease and strategize their trades accordingly. Summing It Up: The Money Flow Index stands out as a unique indicator amalgamating momentum and volume within the RSI formula. Its strength lies in its adeptness at identifying potential reversals through overbought or oversold levels, as well as bullish or bearish divergences. Nonetheless, prudent utilization of the Cash Flow Index entails supplementing its readings with additional technical indicators rather than relying solely on its signals.
Education
by truepersonal
8
What I mean when I say "Activate an algorithm" - Quick TutorialThis should be helpful for anyone looking to understand further what I define as an activation of an algorithm. This candle on the hourly is a beautiful example after my video this market where I said we want to see yellow "activated". It is basically proof that price is now respecting and following that algorithm/channel and this is so important to understand for my analysis and trading style. Always here to answer further questions for those who are interested in learning more! Happy Trading :)
NYSE:KSSEducation
by ReigningTrades