The Fundamentals of Forex - Lesson 1 PMIIn the next following days I am going to work on a full education course designed for understanding the fundamentals behind Forex market and at the same time showing how it can be used for days trading using fundamental news strategy.
Our first lesson : U.S. ISM Manufacturing Purchasing Managers Index (PMI)
Understanding the ISM Manufacturing PMI and Non-Manufacturing Reports
The Service and Manufacturing sectors comprise the majority percentage of US GDP. As such it is important to gauge the overall health of these components. One of the most useful sentiment studies that can help traders and investors to forecast future economic trends is the ISM PMI Manufacturing report, and the ISM Non-Manufacturing report.
What is the ISM Non-Manufacturing Report ?
The Non Manufacturing Purchasing Managers Index (PMI) is released by the Institute of Supply Management (ISM). The Institute was founded in 1915, and was the first supply management institute in the world. The report on business is a composite index that helps measure the economic health of the US economy.
Though the Manufacturing PMI has been around for much longer, there was a need to measure the economic situation within the service sector as well. This is especially true since the service sector is attributed a majority percentage of US GDP in real terms As such the ISM Non-Manufacturing report was born. This report has been published by ISM starting in 1998.
The data is compiled from surveys of approximately 400 purchasing managers in over 65 various non-manufacturing industries including mining, agriculture transportation, retail, and more. The report is released on a monthly basis on the third day of each month and reflects the data for the previous month. The Non Manufacturing Composite Index (NMI) is based on four equally weighted indicators: New Orders, Business Activity, Employment, and Supplier Delivery. All of these indicators are seasonally adjusted expect for the Supplier deliveries.
Generally speaking, when the index is over 50, it demonstrates that the economy is growing, while an index of less than 50 signals a contracting economy. In addition, a better than expected reading is usually bullish for the US Dollar, and conversely a lower than anticipated reading is usually bearish for the US Dollar. Positive readings over time will also tend to help boost stock prices.
Typically, the ISM Non-Manufacturing Index has a somewhat diminished market impact compared to the Manufacturing PMI release. One reason for this is that the non-manufacturing sector is generally much less volatile and more foreseeable than its US Manufacturing Index counterpart.
What is the ISM PMI Manufacturing Index ?
PMI Manufacturing Index on trading view MAN_PMI chart
It measures the manufacturing output for a particular time horizon. The ISM PMI Manufacturing report is released every month, on the first business day of the month. The data reflects the prior month’s activity.
The manufacturing sector is an integral component of the overall economic health of a country. Although the manufacturing sector of the US economy is less than 15% of total GDP, it is nevertheless an important economic report and often highly watched by many Forex traders.
The report is produced by ISM and is a diffusion index, which basically means that it has various components that comprise the index. The resulting number is then updated to take into account seasonality factors. The PMI Index composite takes into account the following indicators: New Orders, Employment, Supplier Deliveries, and Inventories.
The ISM Manufacturing report is gathered by surveying over 400 Purchasing and Supply managers about their future expectations on production, inventories, employment, and new customer orders. The benchmark number is 50 for the index. So, if the number is higher than 50 then this hints of economic growth, while a reading of 50 or lower is considered to be contractionary.
The ISM PMI index is considered to be a leading indicator. It helps foretell future spending and expenditures that contribute to economic expansion. The indicator tends to reflect changes before the economy does. If there is an uptick in the PMI index, meaning there is more manufacturing output, then this is likely to lead to stronger economic considerations. And contrary to this, if there is a downtick in the PMI manufacturing index, meaning there is less manufacturing output, then this is likely to lead to weaker economic conditions.
Trading the ISM Numbers
As we have learned in the earlier section, an ISM composite index number above 50 indicates that the US economy is expanding. In addition, when the number has been above the 50 baseline for several months, it tells us that the economy is stable and strong.
Conversely, when the number is below 50 it indicates that the US economy is contracting. And a number that has been below the 50 baseline for several months, can warn us of a potential recession.
Aside from the longer term forecast that we can make using the ISM figures, short term traders, can take advantage of the ISM economic release for short term price movements. One of the more popular types of news trading methodologies using the ISM report is to trade a divergence between expected results and the actual figure that came in.
For example, if economists are expecting a reading over 55 and the actual index composite comes in at 52 or 53, then the market may react to this discrepancy after the release. In this case, fundamental news traders would likely expect the lower than expected figure to be bearish for the Dollar, and a day trading opportunity could exist to ride the short term momentum on a weakening Dollar.
You could sell the USD/JPY pair for example, or buy the EUR/USD pair for a short term day trade or scalp. However, this trading idea is a generalization and traders need to keep in mind other news events and/or technical levels that could override the ISM reading.
Real examples
For this analyse, lets take a look at EUR/USD pair since December 2020 using 15/30min time frame chart.
Rules :
Actual data is lower than forecast -> EURUSD LONG opportunity.
-> USDJPY SHORT opportunity
Actual data is higher than forecast -> EURUSD SHORT opportunity.
-> USDJPY LONG opportunity
Risk reward ratio : 1:1.5 OR 1:2
Also from my volatility calcuations over the last years, I found out that the best it should be to look for 10-20 pips movements in case of EUR/USD after the release of the PMI.
Release Date Time Actual Forecast Previous
Dec 01, 2020 (Nov) 11:00 57.5 58.0 59.3 -> EUR/ USD LONG OPPORTUNITY
In this case we would have won the trade
Release Date Time Actual Forecast Previous
Jan 05, 2021 (Dec) 11:00 60.7 56.6 57.5 -> EUR/ USD SHORT OPPORTUNITY
In this case we would have won the trade
Release Date Time Actual Forecast Previous
Feb 01, 2021 (Jan) 11:00 58.7 60.0 60.5 -> EUR/ USD LONG OPPORTUNITY
In this case we would have won the trade
Release Date Time Actual Forecast Previous
Mar 01, 2021 (Feb) 11:00 60.8 58.8 58.7 -> EUR/ USD SHORT OPPORTUNITY
In this case we would have lost the trade
Release Date Time Actual Forecast Previous
Apr 01, 2021 (Mar) 10:00 64.7 61.3 60.8 -> EUR/ USD SHORT OPPORTUNITY
In this case we would have lost the trade
Release Date Time Actual Forecast Previous
May 03, 2021 (Apr) 10:00 60.7 65.0 64.7 -> EUR/ USD LONG OPPORTUNITY
In this case we would have won the trade
Release Date Time Actual Forecast Previous
Jun 01, 2021 (May) 10:00 61.2 60.9 60.7 -> EUR/ USD SHORT OPPORTUNITY
In this case we would have lost the trade
Release Date Time Actual Forecast Previous
Jul 01, 2021 (Jun) 10:00 60.6 61.0 61.2 -> EUR/ USD SHORT OPPORTUNITY
In this case we would have won the trade
RESULTS
5 Wins and 3 Losses
Giving us a 60% win rate with a risk reward of 1:1.5
USD (US Dollar)
How to trade based on a Multi-Timeframe Analysis?Good morning, traders! Today we will do an explanatory post on how a Multi-Timeframe Analysis (Weekly-Daily-4H) can be used to take a trade. The benefit of this is that we will be trading taking into account the short, medium, and long-term behavior of the price, which gives us a higher success rate. Many times, we take a trade focusing only on one timeframe, and we are missing relevant information of higher temporalities, such as areas that we are not seeing.
Let's see how it would look in practice:
🔸The first thing is to start with the chart with the higher temporality, in this case, the Weekly:
- We see here that the price is in a range and bouncing in the support zone where a strong bullish momentum was previously generated. This gives us a first bullish hint.
🔸Then, in the Daily chart (published), we see that the price bounces off the previously marked zone and breaks the downtrend channel. This is the second bullish sign.
- In addition, in this chart, we proceed to mark the potential targets of the movement.
🔸Finally, in the 4H chart is where we will look for our entry into the market:
- After the break of the bearish channel, the price begins a corrective process at the edge of the trend line. When the breakout of this structure happens, the optimal thing is to place an income above the last lower high of the structure to avoid potential fakeouts.
Found something awesome about DXY and BTC!Hi every one
today we wanna talk about something that Is pretty Interesting and quite awesome for Crypto Traders! so we observed the chart of DXY and BTC and from last year they've been moving in the opposite direction! pay attention to the charts! you can see that the price of BTC starting from may 11th 2020 has started a bullish rally while on DXY chart the price has the started a Bearish movement exactly starting from that date! and In a single year DXY has kept Decreasing and BTC kept increasing . starting from may 11th 2021, DXY has started a bullish movement and you can see that the BTC price has started a bearish rally from that point. so we can come to a conclusion that If DXY moves (weather It's Bullish or bearish) BTC always moves in the opposite direction and of course Crypto market follows BTC. So this thing can be quite helpful for Traders such as you to understand the market better.
Have a nice day and Good luck.
Amazing exclusive indicator for Scalping and Swings here on this chart you can see entrance signals generated by X-shot indicator... blue means buy and orange means sell
this is a V.I.P indicator if you would like use it leave below a comment
3-days free trail
one month = 99$
3 months= 199$
lifetime access=249$
***3-days free trail for you***
The bread and butter of global macroBefore you trade stocks, bitcoin, FX, bonds or anything you have to try and understand how our monetary system works not to miss the big picture.
This video helps you by providing a 10.000 foot view of the global macro landscape. Don't miss the forest for the trees.
Tune in and enjoy!
THE REASON WHY CRYPTOS AREN'T PERFORMING WELL LATELY.AS I MARKED, THIS BIG MONTHLY CANDLE PRINTED BY THE DXY IS SHOWING A LOT OF STRENGTH BY THE $DOLLAR WHICH COULD THEORETICALLY PUMP A BIT HIGHER BEFORE I REALLY START TO WORRY, IF WE BREAK THE TL AT AROUND 93.00 THEN I'LL BE EVEN MORE SKEPTICAL THAT CRYPTOS CAN RECOVER THE DIP EASILY.
THE CORRELATION BETWEEN THE DXY AND THE CRYPTOS IS REALLY SIMPLE: CRYPTOS ARE THE HEALTHIER ALTERNATIVE OF THE DOLLAR AND THE CURRENT FINANCIAL SYSTEM, IF THE DOLLAR KEEPS ON PERFORMING WELL THERE IS NO REASON TO SWAP WORLD CURRENCY FOR A DIGITAL ONE. I PERSONALLY BELIEVE THERE ARE MANY REASONS TO STILL OPT FOR BTC INSTEAD OF THE $ BUT THE MARKET REACTS DIFFERENTLY, IT DOESN'T HAVE BRAIN NOR SOUL.
CRYPTOS FOR THE LONG HAUL ARE GONNA FULFIL OUR DEEPEST DREAMS BUT FOR NOW WE JUST GOT TO SURF THE WAVE UNTILL IT LASTS.
PAY ATTENTION ON THE DXY AND HOW IT WILL BEHAVE IN THE SHORT TERM TO HAVE A TRUE HINT OF HOW THE CRYPTOSPACE WILL MOVE IN THE SHORT TERM.
DON'T FORGET TO LIKE AND FOLLOW FOR MORE CONTENT.
What is a Cup and Handle Pattern? GBP/USD Real ExampleGood morning, traders! Today we will make an educational post about a specific behavior in the market in certain circumstances, and we wanted to take advantage of the situation in GBP/USD that is currently happening.
The pattern we are talking about is the CUP AND HANDLE PATTERN . This pattern is widely used in stocks or indices since they are trend instruments by their essence, and it serves to catch a potential rise in price after a correction. The premise for this pattern to be valid is that the asset is in a CLEAR trend, either bullish or bearish, and has initiated a corrective process.
A cup and handle is a technical chart pattern that resembles a cup and handle where the cup is in the shape of a "u," and the handle has a slight downward drift.
There are three key things to consider when forming these patterns:
🔸Length: Generally, cups with longer and more "U" shaped bottoms provide a stronger signal (this case). Avoid cups with sharp "V" bottoms.
🔸Depth: Ideally, the cup should not be overly deep. Avoid overly deep handles, as handles should form in the top half of the cup pattern.
🔸Volume: Volume should decrease as prices decline and remain lower than average in the bowl base; it should then increase when the stock begins to make its move higher, back up to test the previous high.
🔸In addition, it is also an important factor that the handle is a clear corrective pattern and has some point of support or support. In this situation, we see that in the daily chart, the price is touching the uptrend line, and also in the published chart, we see how it is also testing the broken zone of the range. The current reversal point is solid.
The Importance of Yearly Open / CloseAs you see, yearly open (usually its the same as yearly close) is crucial for determining the price bias during the year.
For euro to continue bullish, it needs to close ABOVE yearly open on weekly. But even if it does, there will be struggle at this level.
Then, as you see, yearly pivots usually serve as yearly tops and bottoms.
We saw price reversal at yearly pivot this year. Also during previous years price always stops or reverses at yearly pivots. Watch them!
Keep an eye on yearly opens!
For educational purposes only.
Trend Continuation Patterns with Real-Time ExamplesGood morning, Traders! Today we will make an educational post about the most used corrective patterns. There are numerous patterns, even more complex, such as Elliott counts where each internal wave of corrections is explored, but the reality is that it is not 100% necessary to apply it in the market.
The idea of this information is to provide a simplified, useful and applicable overview. For this, we will explain the corrective patterns and then we will show real-time examples that are being presented in the market at the moment or that have happened recently.
The examples will be in high temporalities so that the charts are valid for a few days/weeks.
One concept that encompasses all the corrective patterns that we are going to talk about is that they are all trend continuation patterns. That is to say, it is a correction that is formed and then continues to the previous trend. That said, in all cases, it is necessary that prior to the pattern, there is an impulse in that direction, that is, if we see a triangle, for it to have an upward resolution it is necessary that the previous trend be upward. While there are some cases where the patterns can go in both directions depending on the context, we won't get into them.
Keep in mind that we ALWAYS have to analyze the context of the pattern correctly. For example, if we see a bullish continuation pattern forming near a major resistance or trend line that could interrupt the price movement, it is clearly not the place to put your money. You should always look for the correct pattern + the appropriate scenario for the trade, where the risk-benefit ratio that we obtain is appropriate.
🔸Pennant Pattern: is a type of continuation pattern formed when there is a large movement in a security, known as the flagpole, followed by a consolidation period with converging trend lines—the pennant—followed by a breakout movement in the same direction as the initial large movement, which represents the second half of the flagpole.
🔸Ascending Triangle: it is created by price moves that allow a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. The two lines form a triangle. Traders often watch for breakouts from triangle patterns.
🔸Flag Pattern: when price moves counter to the prevailing price trend observed in a longer time frame on a price chart. It is named because of the way it reminds the viewer of a flag on a flagpole. The flag pattern is used to identify the possible continuation of a previous trend from a point at which price has drifted against that same trend. Should the trend resume, the price increase could be rapid, making trade timing advantageous by noticing the flag pattern.
🔸Descending Wedge: The wedge pattern is a continuation pattern formed when the price bounces between two downward slopings, converging trendlines. It is considered a bullish chart formation but can indicate both reversal and continuation patterns – depending on where it appears in the trend.
🔸Rectangle: is when the price reaches the same horizontal support and resistance levels multiple times. The price is confined to moving between the two horizontal levels, creating a rectangle.
Real-Time examples:
AUD/USD Descending Wedge:
EUR/GBP Rectangle:
EUR/NZD Rectangle:
GBP/USD Flag:
NZD/USD Flag:
USD/JPY Flag:
📚 Learn More 💰 Earn More with us: FLAG = Impulse + Correction
📚 LEARN MORE
💰 EARN MORE
FLAG pattern Definition :
A FLAG pattern is a continuation chart pattern, named due to its similarity to a flag on a flagpole.
A flag is a relatively rapid chart formation that appears as a small channel after a steep trend, which develops in the opposite direction.
After an uptrend, it has a downward slope. After a downtrend, it has an upward slope.
IMPULSE Definition:
A “flag” is composed of an explosive strong price move forming a nearly vertical line.
This is known as the "IMPULSE" or ”flagpole”.
The sharper the spike on the flagpole, the more powerful the bull flag can be.
Corrective Wave Definition:
After an uptrend, it has a downward slope. After a downtrend, it has an upward slope.
This downward or upward slop known as "Corrective Wave".
Flag patterns can be bullish or bearish:
A bullish flag is known as a Bull Flag .
A bearish flag is known as a Bear Flag .
How to Trade FLAG Patterns:
When the trend line resistance on the flag breaks, it triggers the next leg of the trend move, and the price proceeds ahead.
Breakouts happen in both directions but almost all flags are continuation patterns.
This means that Flags in an uptrend are expected to break out upward and Flags in a downtrend, are expected to break out downward.
Trading suggestion:
There is a possibility of temporary retracement to the suggested support line (14.730).
. If so, traders can set orders based on Price Action and expect to reach short-term targets."
Technical analysis:
. LUNAUSD is in an uptrend and the continuation of uptrend is expected.
. The price is above the 21-Day WEMA which acts as a dynamic support.
. The RSI is at 62.
Take Profits:
TP1= @ 17.978
TP2= @ 19.619
TP3= @ 22.431
TP4= @ 26.000
TP5= @ 29.460
TP6= @ 33.744
SL= Break below S2
❤️ If you find this helpful and want more FREE forecasts in TradingView
. . . . . Please show your support back,
. . . . . . . . Hit the 👍 LIKE button,
. . . . . . . . . . Drop some feedback below in the comment!
❤️ Your Support is very much 🙏 appreciated!❤️
💎 Want us to help you become a better Forex trader?
Now, It's your turn!
Be sure to leave a comment. Let us know how you see this opportunity and forecast.
Trade well, ❤️
ForecastCity English Support Team ❤️
📚 Learn More 💰 Earn More with us: FLAG = Impulse + Correction
📚 LEARN MORE
💰 EARN MORE
FLAG pattern Definition:
A FLAG pattern is a continuation chart pattern, named due to its similarity to a flag on a flagpole.
A flag is a relatively rapid chart formation that appears as a small channel after a steep trend, which develops in the opposite direction.
After an uptrend, it has a downward slope. After a downtrend, it has an upward slope.
IMPULSE Definition:
A “flag” is composed of an explosive strong price move forming a nearly vertical line.
This is known as the "IMPULSE" or ”flagpole”.
The sharper the spike on the flagpole, the more powerful the bull flag can be.
Corrective Wave Definition:
After an uptrend, it has a downward slope. After a downtrend, it has an upward slope.
This downward or upward slop known as "Corrective Wave".
Flag patterns can be bullish or bearish:
A bullish flag is known as a Bull Flag .
A bearish flag is known as a Bear Flag .
How to Trade FLAG Patterns:
When the trend line resistance on the flag breaks, it triggers the next leg of the trend move, and the price proceeds ahead.
Breakouts happen in both directions but almost all flags are continuation patterns.
This means that Flags in an uptrend are expected to break out upward and Flags in a downtrend, are expected to break out downward.
Trading suggestion:
There is a possibility of temporary retracement to the suggested support line (14.730).
. If so, traders can set orders based on Price Action and expect to reach short-term targets."
Technical analysis:
. LUNAUSD is in an uptrend and the continuation of uptrend is expected.
. The price is above the 21-Day WEMA which acts as a dynamic support.
. The RSI is at 62.
Take Profits:
TP1= @ 17.978
TP2= @ 19.619
TP3= @ 22.431
TP4= @ 26.000
TP5= @ 29.460
TP6= @ 33.744
SL= Break below S2
❤️ If you find this helpful and want more FREE forecasts in TradingView
. . . . . Please show your support back,
. . . . . . . . Hit the 👍 LIKE button,
. . . . . . . . . . Drop some feedback below in the comment!
❤️ Your Support is very much 🙏 appreciated!❤️
💎 Want us to help you become a better Forex trader?
Now, It's your turn!
Be sure to leave a comment. Let us know how you see this opportunity and forecast.
Trade well, ❤️
ForecastCity English Support Team ❤️
How I work in Forex: Nzd-Usd analysisIn this article, I show you my way of working in Forex, starting with the choice of the currency pair, passing through all aspects of the operation (position size, maximum loss, etc.), until the analysis of the currency pair and the strategy to be adopted (entry-level, stop-loss and target).
Looking at the table of currency pairs I follow, the one that caught my eye was Usd-Nzd. The price is at a level that is not sustainable in the long run for the New Zealand economy. In the last few years, the area 0.72300/0.72800 has been a very important level for Nzd-Usd and above that, the currency pair would be in an area of excess price (actually, already above 0.70000 Nzd-Usd is in an area of excess price).
The operation that I am going to open has an optical of the medium-long period, if you are not in a position to hold open the position also for several months, do not replicate it.
Let us proceed. The first thing I decide in each of my operations is how much I am willing to lose. My maximum loss is not equal for all the operations, with some more "particular" I have a smaller propensity to the risk. An example is precisely this operation. Although Nzd-Usd belongs to the currency pairs so-called "Majors," the New Zealand dollar is very similar to an "Exotic" currency, therefore with less volume and consequently more volatile and easily speculate. And besides, I already have other long positions on USD. For these reasons, I have decided that my maximum loss on the whole operation is $ 500, and based on the stop-loss, I will decide the position size to open.
I now analyse Nzd-Usd trying to understand how it might move in the coming weeks and establish the type of trade and the entry-level. Above, you can see the daily chart with the Nzd-Usd sensitive levels highlighted.
New Zealand had less impact from the covid-19 pandemic and this allowed its economy to be less affected. This led to a strong rise in its currency to the 0.75000 area against the US dollar. New Zealand, however, has a strongly export-based economy and a currency so strong, as mentioned earlier, is not sustainable in the long run.
The New Zealand dollar also strengthened as many expected the central bank to intervene with a rate hike, "the Committee agreed that the risks to the economic outlook remain balanced, conditional on ongoing stimulatory fiscal and monetary policies. The Committee agreed that, in line with its least regrets framework, it would not remove monetary stimulus until it had confidence that it is sustainably achieving the consumer price inflation and employment objectives. Given that uncertainty remains elevated, gaining this confidence is expected to take considerable time and patience."
However, this is currently unlikely, at least in the short term. Also because in recent months the New Zealand economy has slowed down, "Economic activity in New Zealand slowed over the summer months following the earlier rebound in domestic activity. December quarter GDP was weaker than expected and more recent indicators suggest that momentum has reduced. Some members noted that supply chain disruptions could potentially constrain domestic activity in the near term. In addition, business credit growth and investment remain subdued."
As for the US, the focus in recent weeks has been on inflation following the entry into force of Biden's economic stimulus plan, "with inflation running persistently below this longer-run goal (2%), the Committee will aim to achieve inflation moderately above 2 per cent for some time so that inflation averages 2 per cent over time and longer‑term inflation expectations remain well-anchored at 2 per cent."
In the March "Summary of Economic Projections," the PCE inflation forecast for 2021 rose to 2.4% from 1.8% in December, and the Core PCE inflation forecast rose to 2.1% from 1.8% in December. Inflation is forecast at 2.0% in 2022 and 2.1% in 2022 for both. In the same document, you can see (you can find it on the Federal Reserve's website) that in March compared to December the GDP forecast was raised (to 6.5% in 2021 from 4.2% in December) and the unemployment rate lowered (to 4.5% in 2021 from 5.0% in December).
Macroeconomic analysis shows what has already emerged above with New Zealand's data deteriorating in recent months while US data is improving almost steadily. If the vaccination continues apace, the US economy will recover quickly, as the UK economy is doing in Europe.
Once the analysis is complete, how do I intend to proceed? I do not want to open the operation at once. The moment is particular and I would not be surprised to see Nzd-Usd go up even 300 pips. So, I decided to open a spy order at 0.72400 to see how the currency pair will react to that level.
I will place the primary order, which is larger in size as it is closer to the stop-loss, at 0.73700. For both orders, spy order and primary order, I destine the same maximum loss, which I had decided to be $ 500, so my maximum loss for the two types of orders is $ 250 each. Now with the Value-at-Risk, I calculate the stop-loss and with the stop-loss, I calculate the size of the two orders.
To be precise, I use CVaR to calculate the stop-loss (it is all explained in my book on fundamental analysis in forex) and the calculation gives me a stop-loss at 0.75200. I now calculate the two position sizes.
Ultimately, I will open a short position of $ 9,000 at 0.72400 (spy order) and a short position of $ 17,000 at 0.73700 (primary order), with a stop-loss at 0.75200. As for the target, I always like to see how the currency pair moves to assess where to take profit.
This, somewhat summarised, is how I work in Forex, how I analyse a currency pair and how I organise the whole operation.
📚 The Perfect Impulse - Correction - Impulse 📚NZDUSD has recently given us the perfect impulse, correct, impulse move, which is probably our favourite pattern to trade.
The market moves in waves. There's an impulse wave, followed by a brief period of consolidation/correction where buyers and sellers accumulate their orders. This is often followed by another impulse wave in the same initial direction as the first impulse.
The great thing about these patterns is that we can have a clear stop placement, which is above the correction. If you have a closer look at this chart, you will be able to notice various impulse waves followed by corrections.
Do your best to find them in your trading!
📚 The Perfect Impulse - Correction - Impulse 📚NZDUSD has recently given us the perfect impulse, correct, impulse move, which is probably our favourite pattern to trade.
The market moves in waves. There's an impulse wave, followed by a brief period of consolidation/correction where buyers and sellers accumulate their orders. This is often followed by another impulse wave in the same initial direction as the first impulse.
The great thing about these patterns is that we can have a clear stop placement, which is above the correction. If you have a closer look at this chart, you will be able to notice various impulse waves followed by corrections.
Do your best to find them in your trading!
How To Lose Money With CONFUSION (timeframe mixing) The issue for many new traders is understanding the correlation between timeframes. We often get caught up in indicators, news hype, chat room posts, and various other things.
One of the biggest challenges I see when talking to new traders is simply the lack of "experience" in reading multiple timeframes. This causes confusion and even self-doubt. The issue with the internet being so vast is there is a lot of info - but what do you go with & why?
In this post I have tried to "dumb it down" - the simple idea is to pick your timeframes based on your trading style.
Now if work gets in the way and you need to trade end of day or even swing (Longer-term) then really, you shouldn't stress so much about a 15 minute candle. A lot can happen throughout the day. But on the opposite side of the spectrum, if you are sat in front of your screen every minute the market is open. (scalping) then trying to work out what the monthly is doing whilst you hold a trade for an hour is not going to affect your trade (in general).
To give you a great example of this - I trade COT data as it's swing, with Monthly and weekly bias. I will have a mentee say something like "COT is a buy, but the price has dropped". Yes if you're looking at the 4-hour candle. If you think what institutional players can manage in terms of drawdown, especially using hedging techniques. It's far greater than the guy investing £5k of savings into Bitcoin.
If a hedge fund buys Bitcoin at 45k and the price drops to 22.5k - the likelihood is they have a hedged position & will be buying it all back at fair value. Whereas Mr £5k has lost some sleep & half of his capital - bailed, only to see the price shoot back up above his original entry.
You think of someone like Elon Musk - if his entry of a Billion Dollars was at 40k (example) and price drops to 20k, he has a paper loss of 500m for sure, it will hurt. But again if the Tesla share price drops from 800 to 700, he has a paper loss of (say 20 Billion) - a 500m loss on paper is less of a concern. *** You get the picture.
Investors & traders know that things don't just moon! they have dips, impulsive moves and so on.
So take the charts into account - You have an idea of what timeframes to pick based on your own personal availability or your style you have already identified. As a scalper it's easy to use 4 hour or even a 1 hour candle for your bias - a 15minute for a local area of interest & an entry on a 1m - 5m chart. (example only).
If you trade swing trades (depending on the overall time & expectations) a weekly bias, a daily interest and a 4hour trigger could be what you look for.
Here are some examples;
In these examples - all I have done is used 1 tool. This is only to show the idea - If stochastic is up then I want to be Bullish, if down I'll consider Bearish moves. Keep in mind this could be anything from above/below a moving average, a key price level or a magnitude of other things. Even other tools like RSI for example.
Example of step down
The idea is this gives you a directional bias.
Then we look at the area of interest.
And finally - we want to look down on the next timeframe for the trigger (entry)
Traders can easily get confused with one timeframe saying one thing and the next timeframe up or down saying something else. If you can treat it like a tick sheet, you can step down with confidence and work on a strategy favouring your directional bias & that's in confluence with the time period & your expectations.
This really is an oversimplified breakdown. Just to give a general idea.
Have a great week!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
On-Balance Volume | How to Anticipate Trend Reverse?Hello, dear subscribers!
Today we have a very useful information about the potential trend reverse anticipation and trend's strength measurement. On-balance volume (OBV) is one of the most powerful indicator for these purposes. The rising OBV means that the bulls control the market, falling OBV means the bearish pressure, OBV on the sideways means the equal strength of the bulls and bears.
Here are 9 combinations of the price action and the OBV which can help you to forecast the future trend.
1.Price Uptrend + OBV Uptrend
It means that the uptrend is strong and confirmed by the volume. There is a high probability of the uptrend continuation.
2.Price Uptrend + OBV Sideways
The uptrend is not so strong as in the previous point, but bears are not so strong to reverse it.
3.Price Uptrend + OBV Downtrend
There is a sign of the potential reverse to the downtrend, be careful.
4.Price Downtrend + OBV Uptrend
There is a sign of the potential price trend reverse from downtrend to uptrend.
5.Price Downtrend + OBV Sideways
Here is the sign of weakness of the uptrend, but the bulls still have not enough power to reverse the trend.
6.Price Downtrend + OBV Downtrend
It means that the downtrend is strong and there is no potential reverse anticipated.
7.Price Sideways + OBV Uptrend
Bulls accumulates the power to reverse the sideways to the uptrend. This is the bullish sign.
8.Price Sideways + OBV Sideways
This is indefinite situation. Trade execution is not recommended.
9.Price Sideways + OBV Downtrend
Here is the sign of the potential downtrend beginning.
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
📚 The Beauty of Combining Technical & Fundamental Analysis 📚What is Fundamental Analysis?
Fundamental analysis is a way of looking at the forex market by analysing economic, social, and political forces that may affect currency prices. The idea behind this type of analysis is that if a country's current or future economic outlook is good, its currency should strengthen (Baby Pips - www.babypips.com)
What is Technical Analysis?
Technical analysis is the study of historical price action in order to identify patterns and determine probabilities of future movements in the market through the use of technical studies, indicators, and other analysis tools (Forex.com www.forex.com)
Technical analysts look for similar patterns that have formed in the past and will form trade ideas believing that price could possibly act the same way that it did before.
From the chart above, you can see how key fundamental news created incredible volatility in the market but the underlying technical analysis was still intact. From this, we can gather that although fundamental analysis is important, technical analysis is just as important.
See charts below to identify how we could have traded the key fundamental moments over the past few years.
See links below for more trade ideas and in-depth analysis!
📚 The Beauty of Combining Technical & Fundamental Analysis 📚 What is Fundamental Analysis?
Fundamental analysis is a way of looking at the forex market by analysing economic, social, and political forces that may affect currency prices. The idea behind this type of analysis is that if a country's current or future economic outlook is good, its currency should strengthen (Baby Pips - www.babypips.com)
What is Technical Analysis?
Technical analysis is the study of historical price action in order to identify patterns and determine probabilities of future movements in the market through the use of technical studies, indicators, and other analysis tools (Forex.com www.forex.com)
Technical analysts look for similar patterns that have formed in the past and will form trade ideas believing that price could possibly act the same way that it did before.
From the chart above, you can see how key fundamental news created incredible volatility in the market but the underlying technical analysis was still intact. From this, we can gather that although fundamental analysis is important, technical analysis is just as important.
See charts below to identify how we could have traded the key fundamental moments over the past few years.
See links below for more trade ideas and in-depth analysis!
Do you suffer from (Retail Sentiment)What is retail sentiment?
Have you ever noticed on your broker site that it has a statement along the lines of "70%+ of retail traders lose money"???
This is directly related to retail sentiment - in short, institutional money make their money on others losing money in the online marketplace.
Every forex trader will always have an opinion about the market.
“It’s a bear market, everything is going to hell!”
“Things are looking bright. I’m pretty bullish on the markets right now.”
Regardless of the technical analysis or the news that comes out, traders often get it wrong.
There's some simple logic to this, If you look into COT reports (Commitment of Traders) 🍪 see the last COT post if you're not familiar with COT. Well in addition to COT there is also a tool called sentiment - this info shows what traders are doing on global broker platforms such as IG index.
In this current condition and at this precise time it has a mixed bag of;
SPX 47% of retail are long - now you would assume with a long stock market it would correlate to a weaker DXY situation, yet retail are also 57% to the short side on EURUSD. Which makes very little sense. Now assume this is only a small minority on one platform like IG index.
Well - with another look, you will see retail are currently;
Long - USDJPY 67% (Long DXY)
Short AUDUSD 63% (also long DXY)
However, 76% long USDCAD - and then long Gold 83%.
Do all the numbers match up?
Knowing 70% or more of retail traders lose money - what would you say?
Unfortunately, since the forex market is traded over-the-counter, it doesn’t have a centralized market. This means that the volume of each currency traded cannot be easily measured, but again this is where COT can be used in parallel to the sentiment. This might be 👽 to you right now. But it's a very powerful tool.
On the COT side, you can see into the volume traded and will notice if brokers are net-long, institutional investors are often net-short. Buyers need sellers.
It's as simple as that.
IG sentiment can be found here - www.dailyfx.com
Hope this helps someone.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Gartley Pattern Cheat SheetHello, guys!
Here is a cheat sheet for the very reliable pattern - Gartley. If you are able to find it on a chart the successful trade can be executed. The most important thing for gartley is the proportions which should be approximately like on the chart. There are four most popular Gartley's types:
-Crab
-Butterfly
-Bat
-Classical
Please, write in comments how are your trades with this pattern, it's very interesting to know!
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
Ultimate Divergences Types Cheat SheetHello, traders!
This is a cheat sheet for divergences defining between the price and oscillator. As the oscillator the RSI, Stochastic, MFI, CCI, MACD and other indicators can be used.
Regular Bullish Divergence
The price shows lower lows, oscillator - higher lows. This is the sign of downtrend weakness and potential reverse to the uptrend.
Regular Bearish Divergence
The price shows higher highs, oscillator - lower highs. This is the sign of the potential reverse from the uptrend to the downtrend.
Hidden Bullish Divergence
The price shows highers lows, oscillator - lower highs. This is the uptrend strength sign, it is going to continue.
Hidden Bearish Divergence
The price shows lower highs, oscillator higher highs. This is the downtrend strength sign, it is going to continue.
Try this powerful tool in your analysis and share your results in comments!
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.