How to use the support and resistance the proper way.Very clear, a child should be able do understand this.
USD
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.
What moves exchange rates, and what exchange rates moveHere is a list of what impacts the strength of a currency, as well as the impacts this strength has on the currency country(ies).
Things are of course more subtle than a simple excel list binary check. For example, some inflation is not automatically bad, it can be the sign of a country economic growth, and as it gets bad the relationship is not linear, inflation slightly high will not scare many investors and industrials, but when it gets to a really bad high value investors flee at an exponential rate which exacerbates the currency devaluation further.
Where the currency goes it is said depends on where "the big boys" want it to go, in particular central banks. Capitalist countries look to increase profits, Communist/socialist countries seem to also like manipulating their currency which they use for propaganda purposes, to increase their control, fulfill their goals, and to increase their competitiveness so they may improve the lives of "the workers".
But the "big boys" do not have full control. Ask the BOJ, ask the BOE governor from the early 90s.
Here is the example - without getting into the details - of a bad everything horror story (no you can not short it they have capital controls):
Another example, after the initial "safe haven" rally of the USD in March 2020 following the stock market crash, the dollar went into a big downtrend against European currencies:
And a final example, China, the biggest holder of usdollars, has been selling its bags (public information), and their economy did much better in 2020 than the US one, the price has been unsurprisingly trending for over half a year now:
DXY vs. USDOLLAR - Which One Should You be Using??? DXY
The most common index used by many traders would be DXY. This is considered to be the go to index in interpreting USD strength against the other major currencies. When looking at this particular index, the first thing we should know is, what currencies are actually in the basket and how it is calculated. Below are the currencies included and the percentage weighted to each.
EUR - 57.6%
JPY - 13.6%
GBP - 11.9%
CAD - 9.1%
SEK - 4.2%
CHF - 3.6%
As you can see from these numbers, the standard dollar index is very heavily weighted towards the Euro, making up almost 60% of the entire basket. This gives a misleading interpretation of the overall strength of the USD as it compares it mainly to the Euro, almost ignoring the price action happening with other major currencies.
USDOLLAR
Many traders do not even know there is a second, arguably more reliable index available to them. This basket was created back in 2011 by FXCM and is weighted differently with a slight variation between the currencies involved. Below are the currencies included and the percentage weighted to each.
EUR - 25%
GBP - 25%
AUD - 25%
JPY - 25%
As you can see, EUR does not carry as much weight in this basket. The weight between the 4 currencies that are included in the calculation are evenly distributed giving a better interpretation to the overall strength of the USD.
EURUSD
Now finally, the last piece of the puzzle. Let's take a look at what this would have meant for you if you were trading EURUSD. Based on the chart itself, it appears that it has not broken the trend yet, which would align with DXY as well. Therefore, many traders would not have gotten involved in this trade or at least would not have seen as much weakness in the USD as what was presented in the USDOLLAR chart. If someone was swing trading long-term and using the USDOLLAR index to determine direction for the USD, this trader would have been able to start scaling in to their trades 3 months earlier and banking an extra 400 pips on this move.
Can this be used for day trading???
The answer to this question is very simply, yes!... Of course this index can be used for intraday trading just as well as DXY. Price action even on lower timeframes will be displayed with slight variations in certain swing highs and lows that can help determine possible entry points in the market. Another benefit of using the USDOLLAR index is that it trades 24/5, the same as every other currency pair, therefore there will be no gap displayed in price as you often see with DXY.
" INTRA-DAY PATTERNES " To Get 50-100 Pips Daily Hi Pro Trader's .. Hope You Be Fine ♥️
Today We Have New Education Lesson .. About INTRA-DAY PATTERNES
1- Ascending Triangle
2- Descending Triangle
3- Channel
4- Trends On 5 Minutes Frame
If you follow Those Pattern You Will Get Daily 50-100 Pips ✔️
Best Pairs : GBPUSD / EURAUD / EURNZD / Gold / Dawjones
Be Safe - Trade Safe ✔️✔️
The "PIN BAR" Story Hi Pro Trader's .. Hope You Be Fine ♥
Today We Have Very Important Education Lesson .. THE PIN BAR STORY
The Pin Bar In Candle .. Came To Change The Pair Direction ..
we Have 3 Levels For It
Strong .. That's Came And Change Direction With High Move
Medium .. That's Came And Change Direction With Medium Move
Week .. That's Came And Change in Direction Will Happen
Start Trade Now With PIN BAR .. And Tell US Results
Be Safe -- Trade Safe
🎓 EDU 4 of 20: A PROFESSIONAL TRADING APPROACH (FIST)Hi traders, wish you a happy and prosperous New Year.
In the last EDU post, we touched on the main factors that move currencies in the short, medium, and long run. Professional traders follow these influences to determine what currencies to buy and sell.
However, each trader has its own time horizon, so following long-term market determinants if you want to hold your trade for a few hours doesn’t make much sense. In fact, it’s counterproductive. Currencies can move in the opposite direction of their Purchasing Power Parity (PPP) rate, or Terms of Trade (ToT) for months and even years.
While these models work well to provide us with a possible market direction in the long-term, their short-term track-record is rather poor.
At CommaFX, we hold our trades mostly intraday or for a few days, and close them ahead of the Weekend (if a trade is still open on Friday.) This way, we can make more short-term trades and avoid the market risk of holding trades over the weekend. News that are releases over the weekend can have a significant impact on open trades after the markets open on Monday!
I am following the FIST approach, which is a global macro approach that allows us to take only high-probability trades. FIST stands for Fundamentals, Intermarket, Sentiment, and Technicals.
On the Fundamental side, I am following:
1. The current business cycle of a country through leading economic indicators such as housing starts, durable goods orders, and PMIs. Countries that are in the expansionary phase of the business cycle see their currencies strengthen, while countries that are in the recessionary phase usually see their currencies weaken over time.
2. Important news and themes: Such as Brexit, US stimulus, OPEC meetings, Central Bank commentaries...
3. Economic Indicators used by central banks to adjust their monetary policy: inflation rates, labor market indicators, economic growth.
On the Intermarket side, I am following the performance of other markets and asset classes that can have an impact on the FX market, such as:
1. Commodities: For commodity currencies like CAD (oil), INR (oil), AUD (copper, gold), NZD (dairy).
2. Stocks: The performance of the stock market can provide clues for future exchange rates (e.g. higher Nikkei 225 usually leads to JPY weakness).
3. Bonds and yields: Global capital chases the highest yield. When bond prices fall and yields rise in a country, the country’s currency will often strengthen.
If I see a strong divergence in the Intermarket (for example oil rises but the Canadian dollar falls, such as the case in the previous week), it gets our attention. I become bearish on the CAD from an Intermarket perspective.
On the Sentiment side, I am following risk appetite indicators and market sentiment as shown by the options and futures markets. What I pay attention to is:
1. The performance of risky assets vs safe-havens: stocks (risky), risk-currencies (AUD, NZD), oil (market optimism), metals (silver, copper) vs safe-havens such as gold, bonds, JPY and CHF. When risk sentiment is positive (risky assets are bought and safe-havens sold), I become bullish on stocks, AUD and NZD, and bearish on the JPY, CHF, and USD, for example.
2. Market positioning: I follow the positioning of fast money (hedge funds) and smart money as shown by the Commitment of Traders report. When the big guys become bullish on a currency and increase their bullish bias week over week, I become bullish as well.
3. Options put/call ratio: The put/call ratio shows how many put and call contracts are active for a currency. As the ratio rises (i.e. more puts than calls), this is usually a bearish sign for a currency, and vice-versa.
Finally, once I see a promising trading opportunity in the market after performing my Fundamental, Intermarket, and Sentiment analysis (matching strong vs weak currencies), it’s time to identify possible entry and exit points with the use of Technicals.
Bear in mind that I know what direction I want to trade (i.e. short USD/CAD) before even opening a price-chart! The chart is only used to find suitable levels for a selling position.
On the technical side, I focus on important retracement levels, volume profile, and price-action. I don’t trade breakouts, but wait for the market to come to my level (using LIMIT orders) to enter into a trade with an attractive reward-to-risk ratio.
This was a short introduction to how professional traders find trading candidates in the market. Unlike the usual retail trader who focuses only on charts, we know what we want to trade before even opening the chart!
A chart is the last thing I pay attention to, and my technical analysis takes me around 5 minutes to find where I want to enter into a trade. 90% of the time, I am only focused on fundamentals, intermarket, and sentiment.
If you found this post useful, please hit the “LIKE” button and follow. Also, I’ll try to respond to all questions you might have, just post them in the comment section below.
Stay tuned for the next part of our Educational Series! In total, there will be 20 posts that will CHANGE the way you trade and look at the markets – PROMISED!
🎓 EDU 3 of 20: Here is What Moves the Forex Market 📈EDU 3 of 20: What Moves the Forex Market?
Hello traders! First of all, I wish you a merry Christmas and a happy holiday season.
Now that markets are closed and liquidity is thin, we have got some time to learn more about what it takes to become a successful Forex trader. In the last educational post (2 of 20), we have covered why you shouldn’t rely only on technical analysis in your trading. That’s the most common mistake that new traders make! They follow only charts, and trade when they see a trendline breakout, triangle breakout, MA crossover, or any other signal that won’t return consistent profits over the long run.
Professional traders in banks and other large market participants don’t trade with technical analysis! We do use technical levels to find appropriate entry and exit levels, but we will never enter into a trade because of a simple trendline breakout! That’s why institutional traders make millions in the markets, and the average retail trader loses 90% of its capital within 90 days of trading.
My mission is to teach you how to trade like a professional trader. So, what are my credentials to claim this? I am a full-time profitable trader and follow the markets since 2008, I worked in the trading department and have first-hand experience, and my passion for the markets helped me to gain academic degrees in financial markets (MSc in fundamental analysis of currency markets.)
So, what moves the Forex market? What causes the EUR/USD pair, for example, to move from 1.15 to 1.20? Here are the main determinants in the short-term, medium-term, and long-term.
Short-term determinants:
1. Trend-following behavior and herding effect : Market participants tend to buy into uptrends and sell into downtrends, which accelerates the original moves and causes the trend to continue.
2. Investor sentiment : When investors are bullish on a currency, they tend to buy. When they are bearish, they tend to sell. There are ways to measure investor sentiment in the market, and we’ll cover this later in our educational series (hint: We use the futures and options markets to measure investor sentiment)
3. Risk appetite : When investors are willing to take on risk (risk-on), they tend to buy riskier high-yielding assets, such as stocks and high-beta currencies like the AUD and NZD. When they are risk-averse, they tend to park their capital in safe-havens (“Flight to Quality”) such as bonds, gold, the JPY and the CHF. If you can measure the current risk appetite, this can help you identify great day trading opportunities.
4. Market positioning : Certain groups of market participants take longer to change their positions, while others are quicker in rebalancing their portfolios. When large players show a tendency to buy a certain currency, we can expect higher prices for the currency in the future. Real money (like pension funds) are less price-sensitive, while smart money (like hedge funds) are more price-sensitive and quicker in identifying new market trends.
Medium-term determinants :
1. Real interest rate differentials : Currencies follow interest rates, and Forex traders are basically interest rate traders. The real interest rate differential between two countries tends to be a leading indicator of future exchange rate movements. The real interest rate represents the nominal interest rate minus the current inflation rate.
We follow the real interest rate differential of 10-year government bonds of respective countries (like between the UK and the US for the GBP/USD pair) to get a hint of where the currency pair is heading to.
2. Monetary and fiscal policy : Changes in monetary and fiscal policy can create strong and long-lasting trends in the Forex market. Usually, a tighter monetary policy will put buying pressure in a currency, while looser monetary policy will exert selling pressure in the currency. Tighter fiscal policy is usually bearish for a currency, while looser fiscal policy (i.e. more public investments) is usually bullish for a currency (at least until more fiscal spending starts to negatively impact a country’s budget deficit, which is then bearish for a currency!)
3. Trends in the current account : Countries that run a current account surplus (i.e. they export more than they import) often see their currency appreciate (rise in value) because of capital inflows and higher foreign demand for their currency.
A typical example for this is Japan in the 80s and 90s (When the US imported Toyotas, they had to buy Japanese yens to pay for them). Countries that have a current account deficit (i.e. they import more than they export) see capital outflows, which then lead to currency depreciation (fall in value).
Long-term determinants :
1. Purchasing Power Parity (PPP) : The PPP is a macro-economic principle that says that different currencies need to have the same purchasing power over time. Let’s say a Porsche costs 100,000 pounds in the UK, and 120,000 USDs in the US. If the current GBP/USD rate is 1.40, a buyer from the UK could exchange 100,000 pounds to 140,000 USDs and buy the Porsche in the US for 120,000 USDs.
Over time, this demand for US dollars will cause the GBP/USD exchange rate to fall towards 1.20, which is the Real Exchange Rate according to the PPP. Of course, the buyer has to take into account import taxes and shipping costs to the UK, as well as the time required to complete the purchase and import the car. We also have to make the assumption that Porsches are the same and have the same built quality in the UK and the US. It can take years until a currency pair finally moves towards its PPP equilibrium level.
Fun fact : The Economist magazine has created the Bic Mac Index, which compares the prices of a McDonald’s Big Mac in different countries to calculate the PPP exchange rate for different currencies.
2. Terms of Trade : Terms of Trade for a country measures the trends in prices for imports and exports. For example, when oil rises, oil exporting countries will experience a positive trend in their Terms of Trade and likely see their currencies rise in value (take Canada for example.) On the other side, countries that rely on cheap oil will likely see their currencies fall in value when the price of oil rises (India for example.)
In the upcoming educational posts, we'll combine the most important currency determinants into an effective framework used by professional traders: The FIST analysis.
The stuff I deliver here for free is world-class trading education! There isn't anything like this on the world wide web, and you'll learn a full and profitable trading framework (analysis + execution + risk management) used by professional traders!
We are still developing your "Analyst brain", and will then move on to your "Trader brain" (execution) and "Manager brain" (risk and money management) in this fully free 20-part Educational Series!
Upcoming post: Introduction to FIST Trading
Don't forget to FOLLOW and LIKE to receive new posts! Also, if you have any questions, let me know in the comment section below.
Happy holidays again!
🎓 EDUCATION 2: STOP Trading (Only) with Technicals ❌Happy Thursday traders! It’s time to continue with our Educational Series on how to become a successful trader with a professional trading approach. It's holiday season, and closed markets mean more time to sharpen our trading skills! Let's go...
In the last post, we touched on the main ingredients of a successful trader (check the link to "related idea"). Let’s reinforce those again:
1. Market Analysis – Your “Analyst” side. Here, you are going to combine Fundamentals, Intermarket analysis, Sentiment analysis, and (the correct) Technical analysis (FIST approach).
2. Trading – Your “Trader” side. Once the analyst in you spots a promising trade idea, the trader in you is responsible to execute the trade with proper entry and exit levels.
3. Management – Your “Manager” side. Every trader is a risk manager. Your manager side is responsible to manage your trade and risk levels, scale in and out of positions, open the correct position sizes, evaluate the reward-to-risk of your trades, etc.
Alright, so far we are still covering your “Analyst” side. Your analyst side determines whether you will buy EURUSD, sell GBPJPY, buy gold, and sell silver. It’s the part of your trading that constantly scans for profitable trade ideas and setups in the markets, and passes them on to your “Trader” side.
Why You Shouldn’t Rely on Technical Analysis?
The majority of new traders I see in the retail space place too much attention on technical analysis. They search the internet for TA articles, look for the “holy grail” indicator, read dozens of technical analysis books, but still don’t manage to improve their trading performance.
The truth is, they don’t understand the markets. I don’t care how many TA books you’ve read in your entire life, if you don’t understand how markets work and what moves prices up and down, you won’t succeed as a trader.
Unfortunately, almost every retail trading website promotes and publishes those articles, because they are attracting clicks of inexperienced traders.
Here is a hint: When I worked in the trading department of a large European bank, I didn’t even look at charts. There are almost no charts and no indicators on the trading floors of big banks and hedge funds!
Do you really think that banks will move hundreds of millions into a trade because the 50-day MA crossed the 100-day MA, or because the price formed a Head & Shoulders pattern? The first time you do this in a bank will likely be your last day as a professional trader.
So why do retail traders trade like that? Because they don’t know of better ways to trade. No one has taught them that trading based purely on technical analysis will never work. It’s in nobody’s interest to teach you this because large market participants need the “dumb money”. Yes, they make a profit when you trade badly and lose money.
So, what’s moving the market if it’s not technicals?
The Forex market is the marketplace for the world’s currencies, and currencies are influenced by supply and demand. To be more precise, interest rates influence currencies, with higher interest rates increasing demand for a currency (therefore leading to higher prices) and lower interest rates decreasing demand for a currency (therefore leading to lower prices.)
We as Forex traders are interest rate traders. We trade currencies based on (short-term) views about their future interest rates. For example, let’s say the market expects higher inflation rates (inflation represents the change in the price of goods and services during a year) in Australia, which could lead to a response from the Reserve Bank of Australia by hiking interest rates. This will create demand for the AUD (remember, global capital is always chasing yield), which in turn would lead to a higher exchange rate of the AUD.
If you only followed technicals and identified a bearish divergence on the RSI in AUD/USD - and you entered short - it’s your fault. The pair would likely move higher on higher interest rate expectations in Australia.
So, when do technical levels work? When the market trades in fair value (in fundamental equilibrium), you’ll find that simple technical rules work. If large market participants agree that the current exchange rate of a currency pair is “fair” given the current fundamentals, smaller players may move the market when the price reaches a support or resistance level, or when the price breaks above or below a triangle. Unfortunately, markets are always in a state of flux and rarely in equilibrium, so following other analytical disciplines (besides technical analysis) will improve your trading performance dramatically.
This chart shows the Band of Agnosticism. This band represents a span of exchange rates where fundamental-based traders are unlikely to join the market because the market is already in a fundamental fair-value zone. As the exchange rate starts to approach the upper or lower band, fundamental-based traders (which happen to be large banks and hedge funds) start considering opening new positions. The volume of their orders pushes the price back inside what is considered fair value.
Professional traders first look at a variety of other factors before they decide what currency pair they want to trade. Once we identify a good trading candidate (our “Analyst” side does that), then it’s time to open the chart and find areas where we could enter with a long position (and those are not trendline breakouts!)
We will cover all of this, step by step, in the coming Educational posts.
Don't forget to FOLLOW to receive all future trade ideas and educational posts!
Happy holidays everyone. 🎆
Is the US Dollar dying or dead?In this very busy chart, I compare 6 forex pairs. It needs some study. What seems clear to me is that the USD strength has been heading south manly since March 2020.
This is not unexpected of course, following the FED's money-printing spree, now called QE infinity. I'm not here to say whether that's a good thing or a bad thing.
The overall effect of a weak USD is to keep the US stock indices afloat. I'm not saying that is an intended effect of what the FED is/was doing.
I think the effect is dangerous on both Bond and Stock markets, because at some point people or banks are gonna wake up and wonder 'What's the value of money?'. In a sense that's already happening, as in other posts I've shown that there is movement of value into metals and Bitcoin.
The above are speculative opinions that may well be wrong. This means that you ought not to make decisions based on anything I say.
Disclaimers : This is not advice or encouragement to trade securities on live accounts. Chart positions shown are not suggestions. No predictions and no guarantees supplied or implied. Heavy losses can be expected if trading live accounts. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
🎓 EDUCATION 1: What Does It Take to Become a Successful Trader?EDU 1: What Does It Take to Become a Profitable Trader?
Hello traders. With this post, I am starting an educational series on TradingView unlike any other. We’ll go through all the aspects and nuances of becoming a professional, consistently profitable, and successful trader.
Now, those are big words. You have likely heard them from various other sources that claimed to teach you the holy grail of trading or that offered some sorts of “secret indicators” that would pave the way to financial freedom.
The truth is, nothing is secretive about successful trading. Thousands of professional traders are consistently profitable, and large institutional traders manage to beat the markets, year over year. The key is learning how to trade the correct way. That’s my trading approach as well: Institutional trading for the retail trader.
I have been fascinated by the markets since the early 2000s. I am not only a self-taught trader, but also have an academic background that has helped me tremendously in understanding market forces and applying them in my daily trading.
I enrolled at the Faculty of Economics in 2008, finished my undergraduate degree in technical analysis and my Master’s degree in fundamental analysis in the FX market.
Since then, I have been following markets daily, created various trading strategies, backtested them, and chose the ones that work best for me.
Alright, now it’s time to finally start the educational part.
What does it take to become a successful trader?
A successful trader is an analyst , trader , and (risk and psychology) manager – all at once.
The analyst side of a trader generates trading ideas, the trader side executes the trades, and the manager side manages both the risk and psychological aspects of trading.
We’ll go through each of them in this educational series.
Trading is not about following technicals all day long. Professional traders and large players in this market don’t buy EUR/USD (or any other pair) when a Moving Average crosses above or below another Moving Average, or when the RSI shows overbought or oversold levels.
Forget about trendlines and wedge patterns for a moment (how many times did you catch a fake breakout trading them?) and open your mind to a trading approach that combines:
Fundamentals
Intermarket analysis
Sentiment analysis
...and (the correct) technical tools
Those disciplines form the cornerstone of what I like to call the FIST analysis. We’ll use technicals only to enter into a trade after we already have a direction derived from the other types of analyses.
So, this educational series will start with your analyst side (FIST), continue with your trader side (process/strategy/execution), and finish with your manager side (managing risks, managing yourself, position-sizing, scaling in and out of positions, etc.).
By the end of the series, you’ll hopefully get a completely different picture of trading than you had before.
If you find this trading educational series useful, please follow and hit the “LIKE” button.
Have questions? Post them in the comment section below.
Coming Up: Why Technicals Alone Are Not Enough?
