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How to Trade with Andrews’ PitchforkIn the world of trading, tools like Andrews’ Pitchfork stand out for their precision and versatility. Dive in to discover how to use the Pitchfork for stock analysis and more with this comprehensive article, including how it’s drawn, its applications, and its limitations. What Is the Andrews' Pitchfork Indicator? Andrews' Pitchfork is a popular technical indicator in the financial markets, designed by Dr. Alan Andrews. This tool helps traders visualise price channels and anticipate possible trend directions. At its most basic, the Pitchfork is composed of three parallel lines that trace the journey of an asset's price on a chart. To plot this tool, traders begin by identifying three significant points: a notable high, a low, and a subsequent high or low. The central line, known as the "median line," connects the first point to the midpoint of the second and third points. This median line represents the heart of the market's momentum over a given period. On either side of the median line, two parallel lines are drawn, stemming from the second and third points. These lines act as boundaries, indicating possible areas where the price may encounter support or resistance. In other words, the upper line showcases where the price might face hurdles in an uptrend, while the lower line pinpoints regions where the price could hold strong or face obstacles during downtrends. Together, these three lines create a channel that offers traders insights into potential price movements, making Andrews' Pitchfork a powerful tool in technical analysis. How to Draw Andrews' Pitchfork in Technical Analysis To effectively employ Andrews' Pitchfork in a strategy, one must first establish its foundation: the three pivotal points. Here's a systematic approach: Identify the Initial Point: Start with a significant high or low on the price chart. This point will form the base of the Pitchfork. Locate the Subsequent Points: After the initial point, identify the next major high and low in sequence. These points provide the width of the Pitchfork and help establish its angle. Draw the Median Line: Connect the initial point to the midpoint of the line formed by the two subsequent points. This becomes your median line. Form the Parallel Lines: Draw two lines, starting from the two subsequent points, running parallel to the median line. These will create the potential support and resistance boundaries of the Pitchfork. With these steps, Andrews' Pitchfork is plotted on the chart, offering a structured view of potential price movements and trends. If you’d like to practise drawing Andrews’ Pitchfork, head over to FXOpen’s free TickTrader platform to get started in minutes. How to Trade with Andrews' Pitchfork The Andrews' Pitchfork trading pattern offers a strategic lens to interpret market movements. Traders aren’t restricted to just using Andrews’ Pitchfork for day trading; it’s flexible enough to suit a wide range of timeframes and strategies. Leveraging this tool can be broken down into two primary strategies based on the price's interaction with the Pitchfork's lines. Support and Resistance (Trading Ranges) The outer lines of the Pitchfork chart pattern often act as dynamic levels of support and resistance: Support Levels: When the price is in a downtrend and approaches the lower line of the Pitchfork, traders watch for potential buying opportunities. A bounce off this line might indicate strong support, presenting a chance to buy in anticipation of a price increase. Resistance Levels: In an uptrend, the upper line represents a potential resistance point. If the price struggles to move past this line or shows signs of reversing, traders might consider selling or taking short positions, anticipating a price drop. Breakouts and Breakdowns (Trending Markets) Occasionally, prices can breach the boundaries of the Pitchfork: Breakouts: If the price convincingly moves above the upper line during an uptrend, it may signal a strong bullish momentum. Traders can consider buying or adding to long positions, expecting further upward movement. Breakdowns: Conversely, if the price closes below the lower line in a downtrend, it indicates heightened bearish sentiment. This can be an opportunity for traders to sell or initiate short positions, anticipating continued declines. In all scenarios, it's essential to incorporate other technical indicators and maintain stop-loss orders to manage risks effectively. Limitations of Using Andrews' Pitchfork While Andrews' Pitchfork is a valuable tool for technical analysts, it's crucial to be aware of its limitations. Firstly, the accuracy of the Pitchfork heavily depends on the correct identification of the three pivotal points. An incorrect selection can lead to misleading channels and false signals. Additionally, in highly volatile markets, the price may frequently breach the Pitchfork's boundaries, making predictions challenging. The tool also assumes that the market will respect the defined channels, which isn't always the case, especially during unexpected news events. Therefore, traders use Andrews' Pitchfork in conjunction with other technical indicators to enhance decision-making and minimise potential pitfalls. Final Thoughts Understanding the Pitchfork in technical analysis can provide traders with a strong framework to anticipate potential market movements. Its structured approach to visualising price channels is invaluable, yet it's essential to remember its limitations. To kickstart your trading journey with this tool, you can open an FXOpen account to gain access to a wide variety of markets, lightning-fast execution speeds, and competitive trading costs. Good luck! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
10
TradingView Masterclass: How To Use The Top ToolbarIn this guide, you’ll learn about all the different tools that are available to you on the chart. Specifically, we’ll be looking at the toolbars that are located at the top, bottom, left and right of the chart: To summarize the chart above, the breakdown looks like this: Top toolbar: Chart tools Left-side toolbar: Drawing tools Right-side toolbar: Community tools Bottom toolbar: Advanced tools Now, let’s dive into each one starting with the top toolbar where you’ll find many of the most important chart tools for all your research needs. Keep in mind that we’ve ordered each item below as if we are moving from the furthest point at the top left to the furthest point to the top right. Let’s begin! Symbol Search (Keyboard shortcut: type the ticker) Open the symbol search at the top left-hand corner to access over 100,000 global assets across equities, forex, crypto, futures, and more. You can find them by their ticker (e.g., type NVDA for NVIDIA Corporation) or by their description names (e.g., type the name Apple to find AAPL stock). It’s also possible to find your favorite symbols with partial searches, that is, to write part of the ticker or description name and then select the corresponding asset in the search results. If you want to filter by asset type, you can select one of the following: Stocks, Funds, Futures, Forex, Crypto, Indices, Bonds and Economy (economic indicators). Time Intervals (Keyboard shortcut: press ,) Select the time interval for the chart. For instance, say you’re looking at a candlestick chart and you choose a daily chart. That means each trading day will be represented by 1 candle. The most common time intervals are: 1m, 5m, 30m (intraday setups) 1h, 4h (swing trading setups) and 1D, 1W and 1M (long-term trading setups). Traders can create custom intervals as well by clicking on the Time Interval arrow and then selecting the specific parameters needed. Don’t forget to add it to your favorites if you want it to be featured in the Quick Access toolbar. Chart types We have more than 15 chart types available to analyze all price movements, including the new HLC area, Line with markers and Step line. Most traders prefer to use Bars, Candles and Area charts, but everyone has a different approach to markets. Be sure to find the chart type that fits your style. Indicators, Strategies, and Metrics (Keyboard shortcut: press /) Indicators, Strategies, and Metrics are designed to provide additional insight and information that may otherwise be difficult to see. We have over 200 technical and financial indicators while also supporting over 100,000 custom scripts coded by our community. The best way to get started here is to start exploring the Indicators, Strategies, and Metrics menu as soon as possible. Indicator Templates Here, you can save your custom indicator setups so that you can load them at any point in time. This tool is essential if you utilize different forms of analysis. For example, if you chart technicals and fundamentals, you can make two separate templates that can be loaded at any point depending on your need. Alert (Keyboard shortcut: Alt + A) Alerts are used to create custom price alerts. Instead of watching markets 24/7, go ahead and create an alert at a precise level and then wait for that alert to trigger. Let our alerts do the heavy lifting. They’re always watching markets for you. It is also possible to configure them different notifications so that you can be alerted through email, our free app or with a webhook. Bar Replay Bar Replay is a powerful, yet simple tool for backtesting. All experience levels can use Bar Replay for backtesting, practicing or learning about price history. To get started, click the Bar Replay button and then select a historical moment to rewind the chart backward to that point in time. Then, you can press play or pause, and retrade that moment to see how your strategy performs. Undo/Redo Scroll (Keyboard shortcut: Ctrl + Z / Ctrl + Y) Any changes made to the charts such as drawings or indicators can be deleted or recreated. This works just like a Word document you might create on Microsoft or Google. Use the keyboard shortcuts to quickly undo or redo specific actions. Multi-chart Layout If you have an Essential, Plus, Premium, or Ultimate plan, you can analyze multiple charts on your screen at the same time. Simply choose one of the available layouts from the menu to get started. You can also synchronize symbols, intervals, crosshairs, time and data ranges with the selected layout. Manage Layouts Create, rename and load all the layouts that you save. You can also share your layout and enable the autosave option, which is very handy so that all of your work is saved automatically. Managing your layouts is an essential part of your analytical process because it enables multiple different chart layouts to be accessed as quickly and easily as possible. Quick Search Need to find a function or tool on your chart? Open and use Quick Search to do that. The name of the tool is just as it can be used: quickly search for the things you need to edit, add or remove on your chart, and do it in a flash. Chart Settings This is where you can customize all of the fine details about your chart. The Chart Settings menu has everything from the chart color, to the gridlines and labels, the text of the scales, and more. Fullscreen Mode (Shift + F) When this is enabled, you will see only the chart. To exit Full screen mode, click ‘Esc’. Snapshot and Publish Here you can download your charts as images, copy links, share tweets, publish ideas, create live streaming video content, and comment on assets with our latest feature Minds. If you want to share your expert analysis or get feedback from others, you’ll surely want to learn how these social tools work. Go ahead and give it a try - join our community of traders. Thanks for reading and we hope this post helps all traders and investors. Whether you’re an experienced professional or someone just getting started, we plan to create more guides like this to ensure you know how to maximize the features on our platform. Next week, we’ll share part two of this series, and cover the drawing tools menu on the left-side of the chart. - Team TradingView
NASDAQ:NVDAEducation
by TradingView
40
Role of Risk Management in Trading and How to calculate riskThe Foundations of Solid Risk Management 🛡️📊: Risk management in trading involves a series of strategic decisions aimed at minimizing potential losses. It revolves around understanding the risks associated with each trade and employing measures to mitigate them. Whether you're a novice or an experienced trader, risk management remains a non-negotiable aspect of sustainable trading. 👍 Pros of Effective Risk Management: Shields your trading capital from significant losses. Provides a structured framework for decision-making. Fosters discipline and rationality in the face of market fluctuations. 👎 Cons of Neglecting Risk Management: Exposes your portfolio to undue risks that can lead to substantial losses. Increases the likelihood of emotional decision-making driven by fear and greed. The Emotional and Financial Benefits of Risk Management 🧘‍♂️❤️: Effective risk management isn't just about preserving your financial resources; it's also about maintaining emotional equilibrium. When traders implement robust risk management strategies, they reduce the psychological stress and anxiety that often accompany trading. This enables traders to make more logical decisions, avoiding impulsive actions triggered by heightened emotions. Calculating Position Size and Setting Stop Losses 📈🛑: Two key elements of risk management are calculating the appropriate position size and setting stop-loss levels. These practices are integral to controlling the amount of capital at risk in each trade. By determining the position size based on a percentage of your capital and setting stop-loss orders to limit potential losses, traders ensure that no single trade can significantly erode their account balance. Comparing Potential Losses and Gains for Different Risk Management Scenarios 💹📉: Let's explore how the 2% rule affects potential outcomes for different risk management scenarios: Risking 2% of a $1000 Deposit: Maximum Risk per Trade: $20 (2% of $1000) Potential Loss: Limited to $20 per trade Potential Gain: Can vary, but the focus is on maintaining risk control Risking 5% of a $1000 Deposit: Maximum Risk per Trade: $50 (5% of $1000) Potential Loss: Larger at $50 per trade Potential Gain: Higher, but the risk of significant losses is elevated Risking 10% of a $1000 Deposit: Maximum Risk per Trade: $100 (10% of $1000) Potential Loss: Considerably larger at $100 per trade Potential Gain: Higher compared to 2% risk, but risk of capital depletion is significant How to calculate your position size ? You can easily calculate risk directly in TradingView using the built-in calculator! Choose the direction of your position - long or short. The next step is to set up according to your deposit and risk per trade. After that, simply drag it onto the chart in line with your stop loss and take profit (more on this in the upcoming article), and it will automatically calculate the position size for you!
Education
by Yaroslav_Krasko
11
A Simple Method Of Evaluating Trade Setups For Everyone - PART IThis is a simple example of how anyone can attempt to understand price action, trade setups, and determine if the current trade setup is valid for any trading action. Unless you have a trading system that helps you identify highly successful trade setups, most people struggle to find opportunities before they turn into breakout trends (up or down). Ideally, most traders want to get into trades before the big breakout, or breakdown, happens. This video, part I of an extended series, will help you learn to use simple tools to identify qualified trade setups from invalid setups. You can trade whatever you want. But remember, the trend is your friend, and learning to understand price theory, trends, channels, and support/resistance is all you need to make better decisions. Watch this video to see if it helps you. Over the next few weeks, I'll create more videos highlighting simple techniques to help you become a better trader. I'll review dozens of charts and highlight what works and what doesn't. Trading is a matter of managing risks while attempting to generate profits. This will be a great way for me to share my thoughts with all of you while trying to help you learn techniques to help you build solid skills. Hope you enjoy this first video.
NASDAQ:CSCOEducation
by BradMatheny
19
Learn the 4 Best Strategies to Maximize Your Profits Today In the today's article, we will discuss 4 classic yet profitable forex and gold trading strategies. 1️⃣Pullback Trading Pullback trading is a trend-following strategy where you open the positions after pullbacks. If the market is trading in a bullish trend, your goal as a pullback trader is to wait for a completion of a bullish impulse and then let the market correct itself. Your entry should be the assumed completion point of a correctional movement. You expect a trend-following movement from there. In a bearish trend, you wait for a completion of the bearish impulse, let the market retrace, and you look for short-entry after a completion of the retracement leg. Here is the example of pullback trading. On the left chart, we see the market that is trading in a bearish trend. A pullback trader would short the market upon completion of the correctional moves. On the right chart, I underlined the buy entry points of a pullback trader. That strategy is considered to be one of the simplest and profitable and appropriate for newbie traders. 2️⃣Breakout Trading Breakout trading implies buying or selling the breakout of a horizontal structure or a trend line. If the price breaks a key support, it signifies a strong bearish pressure. Such a violation will trigger a bearish continuation with a high probability. Alternatively, a bullish breakout of a key resistance is a sign of strength of the buyers and indicates a highly probable bullish continuation. Take a look, how the price broke a key daily resistance on a daily time frame. After a breakout, the market retested the broken structure that turned into a support. A strong bullish rally initiated from that. With the breakout trading, the best entries are always on a retest of a broken structure. 3️⃣Range Trading Range trading signifies trading the market that is consolidating. Most of the time, the market consolidates within the horizontal ranges. The boundaries of the range may provide safe points to buy and sell the market from. The upper boundary of the range is usually a strong resistance and one may look for shorting opportunities from there, while the lower boundary of the range is a safe place to buy the market from. EURCAD pair is trading within a horizontal range on a daily. The support of the range is a safe zone to buy the market from. A bullish movement is anticipated to the resistance of the range from there. Taking into considerations, that the financial instruments may consolidate for days, weeks and even months, range trading may provide substantial gains. 4️⃣Counter Trend Trading Counter trend trading signifies trading against the trend. No matter how strong is the trend, the markets always trade in zig-zags. After impulses follow the corrections, and after the corrections follow the impulses. Counter trend traders looks for a completion of the bullish impulses in a bullish trend to short the market; and for a completion of bearish impulses in a downtrend to buy it. Here is the example of a counter trend trade. EURJPY is trading in a bullish trend. However, the last 3 bearish moves initiated from a rising trend line. For a trader, shorting the trend line was a perfect entry to catch a bearish move. Such trading strategy is considered to be one of the most complicated, because one goes against the crowd and overall sentiment. With the experience, traders may combine these strategies. Try them all, and find the one that suites you the most. ❤️Please, support my work with like, thank you!❤️
FOREXCOM:XAUUSDEducation
by VasilyTrader
38
How to Trade the Ascending TriangleWelcome to Part 2 of our 7-part Power Patterns series. In this series, we'll be equipping you with the skills to trade some of the most powerful price patterns which occur on any timeframe in every market. This week’s pattern, the ascending triangle can often precede fast and powerful breakouts. A strong understanding of this pattern is essential for any trader looking to trade with the trend. We’ll teach you: Why the ascending triangle is our favourite type of bull flag How to trade this pattern with precision Why volume is this patterns perfect companion I. Key characteristics of the ascending triangle: The essence of this pattern lies in the convergence of support and resistance lines, effectively compressing the market toward an impending breakout. Horizontal resistance : The upper boundary of the ascending triangle acts as a significant resistance level, representing the area where selling pressure has historically been strong. Ascending trendline : The ascending trendline connects higher swing lows, indicating increasing buying pressure as higher swing lows are formed. Preceding trend : The ascending triangle should be preceded by a clear and obvious uptrend. II. Not your average bull flag In the realm of pattern analysis, ascending triangles are often grouped with bull flags, which encompass various patterns like pennants, wedges, symmetrical triangles, and bull channels. These patterns typically signify a pause in an uptrend, indicating a period of consolidation in the market. However, during this consolidation phase, a subtle battle unfolds as buyers seek to accumulate while sellers aim to distribute. The challenge lies in determining which side has the upper hand and this is what makes ascending triangles so useful. Ascending triangles stand out from the crowd of bull flags due to one crucial distinction: Ascending triangles signal increasing buying pressure The sequence of higher swing lows meeting a horizontal resistance level serves as a unique indicator that buying pressure is on the rise even as the market consolidates. This particular characteristic sets ascending triangles apart from other bull flag patterns, rendering them notably more potent. III. How to trade the ascending triangle: Identifying the ascending triangle: Begin by scanning price charts for the distinctive pattern of higher swing lows connected by an ascending trendline and a horizontal resistance line. Confirmation of the pattern requires at least two reaction highs and two reaction lows. Entry points: Look for entry opportunities when the price breaks above the horizontal resistance line, signalling a potential bullish breakout. Some traders may prefer to enter early by buying near the ascending trendline with a stop-loss order below it. Stop-loss placement: To manage risk, place a stop-loss order below the ascending trendline or below the most recent swing low. Price targets: Calculate potential price targets by measuring the height of the triangle's vertical distance and projecting it upward from the breakout point. Additionally, consider previous swing highs or key resistance levels as potential targets. IV. The indicator which best complements the ascending triangle: While the ascending triangle pattern holds its own in providing valuable insights, incorporating volume can significantly enhance its effectiveness. This additional dimension serves as both a quality filter and a confirmation tool before committing to ascending triangle breakouts. Diminishing volume : During the development of the ascending triangle, a common occurrence is a gradual decline in trading volume. Breakout confirmation : Ideally, a breakout should be marked by a noticeable surge in trading volume. This surge acts as a validation of the breakout's strength and serves as a crucial deterrent against false signals. V. Managing risks and pitfalls: False breakouts: Be aware that ascending triangles can sometimes experience false breakouts, where the price briefly moves above the resistance line before reversing lower. This highlights the importance of waiting for confirmation and monitoring volume during the breakout. Risk management: Implement proper risk management techniques, such as position sizing, setting stop-loss orders, and diversifying your trading portfolio. This helps protect against unexpected market movements and potential losses. Additional analysis: Don't rely solely on the ascending triangle pattern for trading decisions. Supplement your analysis with other technical indicators, fundamental factors, and market sentiment to gain a comprehensive view of the market. Disclaimer: All content is provided for general information only and should not be construed as any form of advice or personal recommendation. The provision of this content is not regulated by the Financial Conduct Authority.
Education
by Capitalcom
35
The Best Forex Strategy I've Used in 3 Years | 4 IndicatorsHey Rich Friends, Here is my trading strategy in black and white. Nothing more, nothing less. Stop overthinking. Stop overtrading. Stop overleveraging. Focus on finding great setups that meet all confirmations and let the market do the rest. Indicators: 50 EMA (blue) 200 EMA (purple) Momentum (turn on price line) Stochastic (turn on price line) Bullish confirmations (Up, Above, Over, Higher): 1. Candles above/crossing up 1 or both EMAS 2. MOM is facing up AND/OR above 0. 3. Stoch is facing up. Stoch is above 50. The blue line is above the orange line. Must have all 3 or wait Bearish confirmations (Down, Below, Under, Lower): 1. Candles below/crossing down 1 or both EMAS 2. MOM is facing down AND/OR below the dotted 0 line. 3. Stoch is facing down. Stoch is below the dotted 50. The blue line is below the orange line. Must have all 3 or wait.
Education
0
by MoneyMantraCha
149
The 3 Musketeers of Risk AnalysisIntroduction: In the world of investing, managing risk is as crucial as seeking returns. Three vital tools for assessing risk-adjusted returns are the Sharpe Ratio, Sortino Ratio, and Omega Ratio. In this post, we'll explore these ratios, their calculation, their unique features, and when to use them. 1. Sharpe Ratio: Balancing Risk and Return Measures risk-adjusted returns using total volatility (both up and down). Formula: (Return - Risk-Free Rate) / Portfolio Standard Deviation. Strength: Widely accepted and provides a simple assessment of risk-adjusted return. Weakness: Assumes normal distribution and ignores skewness. 2. Sortino Ratio: Focusing on Downside Risk Emphasizes downside risk. Formula: (Return - Risk-Free Rate) / Downside Deviation (only negative returns). Strength: Ideal for risk-averse investors and non-normally distributed returns. Weakness: Ignores upside volatility. 3. Omega Ratio: Probability of Positive Returns Evaluates risk-adjusted returns based on the probability of achieving positive returns. Formula: Probability of Positive Returns / Probability of Negative Returns. Strength: Provides insights into return probabilities and considers tail events. Weakness: Less recognized and may require more data. Conclusion: Understanding these ratios helps investors make informed decisions. The Sharpe Ratio simplifies risk-return assessment, the Sortino Ratio prioritizes downside protection, and the Omega Ratio analyzes return probabilities. Combining these ratios offers a comprehensive view of investment performance in an unpredictable financial world.
NASDAQ:NVDAEducation
by AutomatedTradingAlgorithms
3
How to Use the Supertrend Indicator to Day Trade CryptoOne of the first pieces of advice given to new traders is to “trade with the trend.” That’s where a simple yet effective indicator known as Supertrend comes in. This tool can help you identify and get in early on emerging trends. Therefore, it has found significant popularity amongst crypto day traders. In this article, we’ll take a closer look at the Supertrend indicator, discussing its signals, the best Supertrend settings, and four strategies you can get started with right away. What Is the Supertrend Indicator? The Supertrend indicator is a technical analysis tool designed to help traders identify and follow market trends. It’s a lagging indicator that can be used to develop comprehensive trend-following strategies, assisting traders in spotting reversals and the start of new trends. Supertrend incorporates a volatility metric called average true range (ATR) into its calculations and is plotted with a single line overlaid on the chart. This line represents the trend direction. When price is above the Supertrend line, the line will turn green to signal bullishness. Conversely, when price is below the Supertrend line, the line will turn red, so the market is considered bearish. The indicator’s signals are simple and effective in trending markets but can be incorrect in ranging markets, meaning it’s best to seek extra confirmation before considering entries. Supertrend Indicator: Formula and Calculation The Supertrend indicator is calculated using two key components: ATR and a multiplier. The ATR measures the overall price range of an asset, offering an indication of its volatility. The multiplier allows traders to change the sensitivity of the indicator. The formula for the Supertrend indicator is as follows: Upper Supertrend Line (Red) = (High + Low) / 2 + (Multiplier x ATR) Lower Supertrend Line (Green) = (High + Low) / 2 - (Multiplier x ATR) The default settings for ATR and the multiplier are typically 10 periods and 3, respectively. A shorter ATR will give more weight to recent price action, while a longer ATR will smooth out values. However, changing this value won’t have as much bearing on the indicator as the multiplier. By moving the multiplier up or down, traders can adjust the Supertrend’s sensitivity. A lower multiplier increases the number of overall signals and false signals while allowing for a tighter stop loss. A higher multiplier will generate fewer entries and false signals, often at the cost of a wider stop. Identifying Trade Signals The Supertrend indicator offers fairly simple buy and sell signals, determined by observing the relationship between the price and the line. Buy signals occur when price crosses above the Supertrend line. In this scenario, the Supertrend line often acts as a dynamic support level, which could be an ideal entry point for a long position. The bullish trend is considered intact as long as the price stays above the Supertrend line. Sell signals are generated when price falls below the Supertrend line. Similarly, the Supertrend line acts as a dynamic resistance level, which may be a suitable entry point for a short position. Traders can maintain their short positions if the price remains below the Supertrend line. How to Use the Supertrend Indicator for Crypto Trading The indicator can be applied to various timeframes, from intraday charts to daily and weekly charts. However, shorter timeframes, such as the 5-minute or 15-minute charts, are more common for day trading, as they offer more frequent trading opportunities. What Are the Best Supertrend Settings for Crypto Trading? But what Supertrend settings are optimal for crypto trading? In truth, there is no one-size-fits-all setting. Generally speaking, the theory says it’s best to keep the ATR value somewhere between 10 and 20 since this will provide a good mix of sensitivity to recent price action and smoothing. As for the multiplier, the standard factor of 3 is suitable. Some traders may prefer to adjust it to 4, 5, or 6, to account for crypto volatility, although this may lead to a reduced risk/reward ratio. Ultimately, the best settings will depend on market conditions and the crypto asset you’re trading, so it’s wise to experiment to find your optimal configuration. Supertrend Indicator Settings for Crypto Intraday Trading For intraday trading focusing on short-term price movements, you could consider adjusting the Supertrend settings to increase sensitivity to price fluctuations. One possible configuration is to use a multiplier of 2 and an ATR period of 10. This setup can help identify more trade signals and adapt to rapid market changes, allowing traders to enter and exit within a few minutes or hours. Supertrend: Best Settings for Crypto Swing Trading Given that swing trading typically involves holding positions for several days or weeks, swing traders may prefer to adjust the settings slightly higher. This will offer a clearer reading of the broader trend. The ATR can be set anywhere between 10 and 20, while a multiplier of 5 will reduce the number of false signals. Trend-following swing traders may also benefit from setting a bias using the Supertrend on the 4-hour or daily charts and then using the hourly chart to enter trades. It’s not uncommon for an asset to range on the hourly chart and whipsaw above and below the Supertrend while remaining bullish or bearish on the higher timeframes. This can help to avoid confusion when the market ranges. How to Create an Effective Supertrend Indicator Strategy for Crypto Trading Now that we have an idea of what the Supertrend indicator is, how it works, and the best settings to use, we can begin to formulate some strategies. If you want to test them for yourself, you can try our free TickTrader platform at FXOpen. There, you’ll find the Supertrend indicator and dozens of other technical tools waiting for you to use. 1-Minute Supertrend Scalping Strategy Using the 10-period ATR and 2-factor multiplier mentioned, we can create a 1-minute Supertrend crypto scalping strategy. Entry: When the line turns green/red, we can enter with a long/short market order as the candle closes. Stop Loss: Above or below the nearest swing high/low, depending on the direction of the trade. Take Profit: You can close the trade when Supertrend switches to another colour. As seen in the example, this provides traders with some decent scalping opportunities to enter early with relatively tight stop-loss levels. Double Supertrend Strategy This strategy uses two Supertrends with different settings to reduce the number of false signals. It aligns the more sensitive Supertrend’s signals with a less reactive version while still allowing for relatively tight entries. Requirements: A fast Supertrend with lower settings (blue and orange) – default 10-period ATR and 3-factor multiplier is suitable. A slow Supertrend with higher settings (green and red), like 20 and 7. Entry: The fast Supertrend will typically precede the slow Supertrend, so observe the fast signals and wait for the slow lines to confirm the direction (both should show either bullish or bearish). Traders can enter with a market order once confirmed or wait for a retrace to the slow Supertrend and enter with a limit order. Stop Loss: Above or below a nearby swing high/low depending on the trend direction. Take Profit: You can close the trade when the slow Supertrend signals a change in direction. In the example shown, we can see that while the faster Supertrend switches back and forth between bullish and bearish, our strategy stays aligned with the stronger overall trend, allowing us to capture the bulk of the move until it reverses. 3 Supertrend Strategy This strategy seeks extra confirmation using three Supertrends and an exponential moving average (EMA). The EMA helps us classify the trend in another way (above = bullish, below = bearish). Simply put, we wait until all three align before considering an entry. Requirements: Three Supertrends with varying settings. We’ve used 10 and 2, 20 and 4, and 30 and 6. You’ll also need a 200-period EMA. Entry: Wait until all three Supertrends are green and price is above the 200 EMA for a long entry, and vice versa, to enter with a market order. Stop Loss: Above or below a nearby swing point. Take Profit: You may close the trade when all three turn red if bullish or green if bearish. While this strategy won’t offer many entries throughout the day, it can help traders jump on trends with strong confirmation. Relative Strength Index (RSI) Supertrend Strategy While the relative strength index (RSI) is best known for its ability to spot overbought and oversold conditions, it can also help us confirm trends. The midpoint (50) is regarded as the defining boundary, with action above indicating bullishness and below demonstrating bearishness. Here, we’ve also increased the Supertrend multiplier to 5 to get a clearer picture of the trend. Requirements: The default RSI with 14 periods and the Supertrend with a length of 10 and multiplier of 5. Entry: When Supertrend gives a bullish or bearish signal, confirm that RSI is above or below 50, depending on the direction. If both line up, traders may enter with a market order. Stop Loss: Above or below a nearby swing point. Take Profit: You can close the trade when the Supertrend switches or if RSI is reading above 70 or below 30, indicating extreme overbought or oversold conditions. The added benefit of using RSI means that traders can anticipate trend reversals when the indicator reads overbought or oversold or when divergences appear, allowing for some predictability as to when the Supertrend might switch. Stochastic Supertrend Strategy The stochastic indicator is similar in principle to RSI, helping traders spot overbought and oversold conditions. However, it frequently flashes these signals, offering us a way to confirm Supertrend signals and entries. Requirements: The default stochastic indicator, with settings 14, 1, and 3. Set the Supertrend to a multiplier of 5. Entry: After the Supertrend signals a certain direction, wait for the first time Stochastic reaches below 20 if bullish or above 80 if bearish to enter with a market order. Avoid trading if it’s not the first time. Stop Loss: Above or below a nearby swing high or low. Take Profit: You may close the trade when Supertrend changes colours. The Stochastic indicator allows traders to identify areas where the market is likely to reverse and, when combined with Supertrend, can assist us in finding optimal entries with strong confirmation. The Bottom Line In summary, the Supertrend indicator is a versatile tool that can help traders capitalise on new trends with fairly simple entry and exit signals. While it can produce false signals, particularly in ranging markets, the strategies described should help you filter out some of these losing trades. Moreover, these strategies aren’t exclusive to crypto; you can apply and adjust them to any market you see fit, including forex, commodities, and stocks. If you’re thinking of implementing these strategies, you can open an FXOpen account. You’ll be able to access over 600 markets in the highly customisable TickTrader platform alongside low-cost trading and tight spreads. Just complete the signup process to get started. Good luck! *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
BITSTAMP:BTCUSDEducation
by FXOpen
7
How to Trade the FakeoutWelcome to our Power Patterns series in which we teach you how to trade some of the most powerful price patterns which occur on any timeframe in every market. This week’s pattern, the fakeout is beautifully simple and has the power to be highly effective. It has stood the test of time and should be a key part of any price action traders arsenal. We’ll teach you: Why the pattern is so powerful How to identify and anticipate the pattern Three simple rules that can supercharge the patterns effectiveness I. Understanding the fakeout: The term ‘fakeout’ is trading slang for false breakout, the fakeout pattern occurs when a breakout fails at a key horizontal level in the market. We’ll be focusing on the single bar fakeout which means that the failure of the breakout must occur within the same candle or bar. The pattern can be applied to a bullish or bearish scenario: The bullish fakeout: This occurs when the market breaks below a key level of support only for the breakout to fail and for the market to close back above the support level. In trading, a picture really is worth a thousand words so check out the chart below. And if you want to take your learning of this pattern to the next level then please try and hunt down as many examples of this pattern as possible. NOTE: The horizontal support level and the fakeout candle must be on the same timeframe - the chart below is the daily candle chart but you can trade this pattern on any timeframe. The bearish fake-out: This occurs when the market breaks above a key level of resistance only for the breakout to fail and for the market to close back below the resistance level. Here’s an example on the hourly candle chart: Here’s an example of bullish and bearish setups forming when a market starts to trade in a sideways range: Why the fakeout can be so powerful The fake-out pattern can be so powerful because it can exploit herd behaviour in a deliciously effective way. When a market starts to breakout, FOMO (Fear of Missing Out) may herd traders into the market. This fear could drive them to enter positions hastily, often without waiting for confirmation. Then, as the breakout starts to fail, the herd may head for the exit and panic sets in as trapped traders cover losses. II. How to trade the fakeout: Identifying and anticipating the fakeout: First and foremost, traders need to identify key support and resistance levels. It’s worth setting a price alert at these key levels so you’re alerted to when the market tests them. When the level is tested, set a time alert for when the candle closes. Through the disciplined use of price and time alerts, you’re unlikely to miss a fakeout again! Entry Points: For bullish fake-out patterns, a trader may enter on a break above the fake-out candle high. For bearish fake-out patterns they would enter on a break of the fake-out candle low (see chart below for example). Stop-Loss Placement: Traditional stop placement for the pattern is above or below the tail of the fakeout candle depending on if you’re going long or short. An alternative stop placement method is using a volatility-adjusted stop such as placing your stop a multiple of the Average True Range (ATR) away from the current price. Whichever method you use, be consistent. Price Targets: A limit order to take profit at the next level of support or resistance can be a robust approach to profit taking for this pattern. Alternative methods include taking a set multiple of risk or trailing stops to lock in profits. Bullish scenario: Bearish scenario: III. Three simple rules that could increase the patterns effectiveness: Rule 1: The more prominent the level, the more powerful the fakeout can be Support and resistance levels should be clear and obvious, a breakout above or below multi-day or multi-week highs or lows are likely to gain the most attention, meaning a higher number of trapped traders should the breakout fail. Rule 2: The longer the tail, the more powerful the fakeout could be The tail of the breakout candle represents the prices which the market was pushed to prior to the breakout failing. Longer tails typically indicate a higher number of trapped traders. Rule 3: The less consolidation near the level, the more powerful the fakeout Traders should be wary when price starts to consolidate just below a key area of resistance or just above a key area of support. This ‘base’ raises the probability of a breakout holding. IV. Managing Risks and pitfalls: Risk Management: Implement proper risk management techniques, such as position sizing, setting stop-loss orders, and diversifying your trading portfolio. This helps protect against unexpected market movements and potential losses. Additional Analysis: Don't rely solely on the fakeout pattern for trading decisions. Supplement your analysis with fundamental factors and market sentiment to gain a comprehensive view of the market. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance.
NASDAQ:AAPLEducation
by Capitalcom
39
Improve Your Research With MindsOur new social feature, Minds, is now available on our free mobile app for iOS and Android. Minds is an exclusive chat for your favorite symbols. Want to read what other investors are saying about AAPL? Head to the AAPL Mind. Curious to discuss Bitcoin’s price action? Check out the BTCUSD Mind. There’s now a place to chat about every symbol no matter how obscure or popular. Gather around a specific symbol with other traders and start sharing your mind. To celebrate the launch of Minds on mobile, we’d like to show you how it works and specifically showcase how it can improve your research. If you don’t have our mobile app, get it now . How to use Minds from your mobile phone: Open the TradingView app and select a symbol from your watchlist. Then, find and select the tab that says “Minds” - depending on your screen size, you may have to scroll down. Now you can read what everyone is saying about that specific symbol! To post your own ideas, thoughts and analysis, click the cloud with a plus at the bottom right-hand corner of the screen. Type your message and then press the button that says “post” to share your message with everyone. This new social feature will make it incredibly easy to meet, chat, and discuss your favorite symbols with others. You now have access to a highly specific chat only for those who care the most about specific symbols. Remember: this is a community feature, so the more active you are, the better it’ll be for you and everyone else involved. Note: If you’re having trouble accessing Minds, double check that the Show symbol screen feature is on, which can be activated from the settings menu. Wait… don’t go anywhere yet! We have some tips to share because Minds creates a whole new way to research your favorite symbols. Keep reading… How can you improve your research with Minds? 1. Real-time sentiment analysis With Minds, you will be able to read what other people think about your favorite symbols. It is very common to see new perspectives with this approach and avoid one of the biggest mistakes in trading, which is believing you’re always right. You know what they say… one big mistake is enough to blow your account, so reading what other people are saying can open your mind in that sense. 2. Concise Insights Condensing intricate concepts or analysis into easily digestible bite-sized updates makes information accessible to a wider audience. Even those without a deep understanding of the charts can gain insights and stay informed, thereby fostering a more inclusive and informed community. In today's world, there's a lot of information everywhere, and it can be overwhelming. The Minds’ updates make things clear and simple. They show you just what you need to know, making it easier to stay in the loop without getting lost in the noise. 3. See how other traders use technical and fundamental analysis One of the most interesting features on Minds is the ability to share charts. This is useful as you can see Support or Resistance Levels, Triangles, Head and Shoulders and all sorts of chart patterns from different time intervals by traders all around the world. Every trader sees things differently so it is a great way to see how others analyze charts. 4. Timeliness and breaking news In the financial world, where split-second decisions can translate into significant gains or losses, timing stands as an important cornerstone. The Minds feature helps in facilitating the instantaneous dissemination of news, charts and analysis since you don’t have to write lengthy descriptions. Minds enables real-time sharing of analysis, ensuring that traders and investors are aware of developments that could impact their decisions almost as soon as they happen. 5. Personalization Imagine scrolling through a news feed – these updates are like short and interesting news pieces. You can easily look through them to find the ones that match what you're interested in or what you need to know. So, it's like getting the information you want without having to search too hard. This keeps you connected and up-to-date with what matters to you. Meet others, share, and interact to get started. Think about it as a way to get the most important updates about symbols on your watchlist without all the extra stuff that might confuse you. We look forward to seeing how you interact with Minds! Please write us in the comments below with any feedback, comments or suggestions. Team TradingView
NYSE:SEducation
by TradingView
22
How To Go Full Time As A TraderHey guys! In this video, we discuss some of the most important things to take into consideration before making the jump to becoming a full-time trader. Topics discussed: - Cash in, cash out and burn rate - The importance of a solid, time-tested strategy - Psychological pitfalls and how to avoid them - Long term wealth impacts Have questions? Let us know in the comments! Looking for more high-probability trade ideas? Follow us below. ⬇️⬇️
AMEX:SPYEducation
by PropNotes
60
HFT: Benefits, Controversies, and Technological AdvancementsIntroduction High-Frequency Trading (HFT) is a sophisticated trading strategy that utilizes powerful technology and algorithms to execute a substantial number of trades within fractions of seconds. While HFT has revolutionized the financial markets and brought numerous benefits, it has also stirred controversies due to its potential impact on market stability and fairness. In this article, we will explore the benefits of HFT, delve into the controversies it has sparked, and examine how advanced technology enables this lightning-fast trading approach. The Benefits of High-Frequency Trading a. Enhanced Liquidity: One of the primary advantages of HFT is its contribution to market liquidity. HFT firms frequently provide liquidity by being both buyers and sellers in the market, narrowing bid-ask spreads and ensuring smoother price discovery. b. Reduced Transaction Costs: The competitive nature of HFT leads to lower transaction costs for all market participants. This translates to cost savings for retail investors, institutional traders, and other market participants. c. Efficient Price Discovery: HFT's rapid trading enables the market to react quickly to new information, leading to more efficient price discovery and reducing information asymmetry among market participants. d. Market Efficiency: High-frequency traders help bridge the gap between different trading venues and ensure prices remain aligned, promoting overall market efficiency. Controversies Surrounding High-Frequency Trading a. Market Instability: Critics argue that HFT's ultra-fast trading can exacerbate market volatility, leading to abrupt price swings and destabilizing market conditions. b. Unfair Advantage: HFT firms, with their advanced technology and proximity to trading servers, gain an unfair advantage over traditional investors and retail traders, leading to an uneven playing field. c. Flash Crashes: HFT has been implicated in certain flash crash events where a sudden and severe market downturn occurs in a matter of minutes. Critics claim that HFT's aggressive strategies may contribute to these incidents. d. Regulatory Challenges: Regulators struggle to keep pace with the rapidly evolving HFT landscape, leading to concerns about potential market manipulation and inadequate oversight. Leveraging Technology for High-Frequency Trading a. Low-Latency Trading Infrastructure: HFT firms invest heavily in low-latency trading infrastructure, such as proximity hosting and direct market access, to minimize communication delays and execute trades swiftly. b. Advanced Algorithms: Complex algorithms form the backbone of HFT strategies. These algorithms analyze market data, identify patterns, and make split-second decisions on trade execution. c. Co-location Services: HFT firms often lease space near exchange servers to reduce network latency further. Co-location allows them to place their trading servers in close proximity to the exchange, gaining a speed advantage. d. Colossal Data Processing: High-frequency traders process enormous amounts of market data in real time to execute trades with precise timing and efficiency. Regulatory Efforts and Future Outlook In response to concerns surrounding HFT, regulators worldwide have been working to implement rules and controls aimed at maintaining market integrity and reducing the risk of disruptive events. Measures such as circuit breakers, minimum resting periods, and market-making obligations have been introduced to mitigate potential negative impacts. The future of HFT remains promising, with ongoing technological advancements driving the industry forward. Machine learning, artificial intelligence, and big data analytics are revolutionizing trading strategies and contributing to even faster decision-making. Conclusion High-Frequency Trading has undoubtedly transformed the financial landscape, introducing benefits like enhanced liquidity, efficient price discovery, and reduced transaction costs. However, its lightning-fast pace and perceived unfair advantages have sparked controversies and regulatory challenges. As technology continues to evolve, the future of HFT will likely see further innovations and improvements, but it will also require careful monitoring and oversight to ensure fair and stable markets for all participants.
Education
by financialflagship
24
How to Use the Chaikin Oscillator in TradingThe Chaikin Oscillator is a powerful momentum indicator that can help traders uncover hidden trading opportunities and spot emerging trends. In this article, we’ll delve into its inner workings, explore how to interpret its signals and show you how it can be applied. What Is the Chaikin Oscillator? The Chaikin Oscillator, developed by Marc Chaikin, is a momentum indicator designed to assist traders in identifying trends and predicting potential price movements. It combines the accumulation/distribution (A/D) indicator – a well-known Chaikin volume indicator – with the moving average convergence divergence (MACD) formula to demonstrate money flow in or out of an asset. Definition and Characteristics At the heart of the Chaikin Oscillator is the A/D line, which uses an asset’s closing price relative to its high-low range, weighted by its volume, to determine whether an asset is being accumulated (bullish) or distributed (bearish). Like MACD, the Chaikin Oscillator measures the distance between two moving averages. However, instead of closing prices, the Chaikin Oscillator is calculated using two exponential moving averages (EMAs) of the A/D line, typically 3 and 10. The resulting indicator oscillates above and below a zero line. Positive values indicate buying pressure or accumulation, while negative values suggest selling pressure or distribution. In other words, when the faster EMA moves above the slower EMA, the oscillator will turn positive. When the faster EMA crosses below the slower EMA, it’ll read negative. How the Chaikin Oscillator Is Calculated The calculation of the Chaikin Oscillator is a multi-step process that begins with determining the accumulation/distribution line. To calculate A/D, we first need to find the money flow multiplier (MFM), which is found using the following formula: MFM = ((Close - Low) - (High - Close)) / (High - Low) Next, we multiply the MFM by the volume for the period to obtain the money flow volume (MFV): MFV = MFM x Volume The ADL is then calculated cumulatively by cumulatively the MFV values over a given period: ADL = Previous ADL + Current MFV Finally, the Chaikin Oscillator is derived by subtracting a longer-term EMA of the ADL from a shorter-term EMA of the ADL. Using the default Chaikin Oscillator settings of a fast 3-period EMA and slow 10-period EMA would mean: Chaikin Oscillator = (3-day EMA of ADL) - (10-day EMA of ADL) Interpreting the Chaikin Oscillator Indicator There are three primary ways to interpret the Chaikin Oscillator: centre crossovers, divergences, and trend confirmation. Let’s take a look at each. Centreline Crossovers As discussed, a move above the zero line indicates that buying pressure is taking over and usually precedes further bullishness. Conversely, a bearish signal occurs when the oscillator crosses below the zero line, suggesting selling pressure. Divergences Divergences occur when the price of an asset moves in the opposite direction of the Chaikin Oscillator. A bullish divergence is seen when price hits a new low, but the oscillator forms a higher low. Likewise, a bearish divergence is where price makes a higher high, but the oscillator shows a lower high. In both scenarios, traders can anticipate a potential trend reversal. Trend Confirmation Lastly, the Chaikin Oscillator can be used to confirm the direction of the prevailing trend identified with other technical analysis tools. If the oscillator is consistently above the zero line during an uptrend, it signals buying pressure and vice versa. Want to try your hand at interpreting the indicator for yourself? Try our free TickTrader platform at FXOpen, where you’ll find the Chaikin Oscillator alongside dozens of other indicators and tools. How to Use the Chaikin Oscillator: an Example The nature of the Chaikin Oscillator means that it frequently fluctuates above and below the zero line, which can generate plenty of false signals. However, many traders get around this by using the centreline crossover as an entry signal following a divergence. As an additional filter, we can look to enter when a divergence occurs at an area of support/resistance. In the chart shown, we’ve identified three potential support and resistance areas. When price enters these areas, we can begin to look for divergences. Then, when the oscillator moves above or below 0 and confirms the divergence, we can make an entry. The theory says stops can be placed above or below the relevant support/resistance level, while profits can be taken at an opposing support/resistance. For best results, you can look for obvious divergences that stand out. While smaller divergences can work, they’re often less reliable. Limitations of the Chaikin Oscillator While the Chaikin Oscillator is a valuable tool, it has limitations. The first is that its interpretation can be confusing without strict entry criteria in place. As in the chart above, there are many times when the oscillator fluctuates above and below 0, despite the broader trend being bearish. While this can be mitigated by using higher periods, like 10 and 50, it can still easily throw up false signals when used in isolation. The second is a broader limitation of the A/D indicator. Since A/D relies on volume and price movements, assets with low liquidity or erratic price action can make interpreting the oscillator tricky. The simple answer here is to trade liquid, stable markets. However, in scenarios where you are trading these less liquid and volatile markets, you may need to employ other technical analysis tools. Your Next Steps Ready to create your own Chaikin Oscillator trading strategy? You can apply the example above in TickTrader and see how it works for yourself. Once you’ve backtested a few setups and got to grips with the strategy, you may want to open an FXOpen account. With low trading costs, ultra-fast execution speeds, and over 600 markets to choose from, you can rest assured you’re partnering with a trusted broker. Good luck! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
4
The Carry Trade With the current aggressive interest rate hikes happening with some of the world's leading central banks due to inflation problems, we figured it would be an ideal time to discuss the carry trade. This post will go into further detail about the carry trade and how it works in the forex market. We will also discuss one of the most popular carry trades to take place in forex history and the risks traders should be wary of when trying to implement this strategy. What is the carry trade? The simple explanation of the carry trade is that a speculator borrows one financial instrument to buy another financial instrument. For example, let's assume that you go into a bank and borrow $10,000, which then charges you a 1% lending fee ($100). You then take that $10,000 and purchase a Treasury bond that pays you 5% a year. Your profit is 4% (minus commissions and other costs). Basically, you have profited from the difference in the interest rate. This is the carry trade in its simplest form. The carry trade in the Forex market The carry trade in the forex market is one of the oldest and simplest forms of forex trading strategies. It was first developed by fund managers to take advantage of the interest rate differentials between currency pairs. A carry trade occurs when you buy a high-interest currency against a low-interest currency. For each day that you hold that trade, the broker will credit you the interest difference between the two currencies (this difference is called the 'interest rate differential'), as long as you are trading in the interest-positive direction. To understand this further, let's give an example: In the forex market, currencies are traded in pairs (so if you buy USD/JPY, you are actually buying the US dollar and selling the Japanese Yen at the same time). You receive interest on the currency position you BUY and pay interest on the currency position you SELL. What makes the carry trade unique in the forex market is that interest payments take place every trading day based on your position. This is because technically, all positions are closed at the end of the trading day in the forex market. You just don’t see it happen if you carry your position overnight due to the fact that brokers close and reopen your position, and then they credit or debit you the overnight interest rate differential between the two currencies (this is also called a rollover or swap). The amount of leverage available from forex brokers has made carry trades very attractive in the forex market. Most, if not all, forex trading is margin-based, meaning you only have to put up a small amount of the position and your broker will put up the rest. Many brokers ask traders for as little as 1% or even less as margin to trade a position. Continuing from our above USDJPY example, let's assume that interest rates are 6% for the US dollar and 1% for the Japanese Yen (so the interest rate differential is 5%). Let us assume that you deposit $10,000 with a broker and decide to buy USDJPY with the intention to carry trade and earn +5% interest a year. Let's say the broker offers you 100:1 leverage and you want to purchase $10,000 worth of that currency. Since the broker is offering you 100:1 leverage, you would only require a 1% deposit for the position; therefore, you hold $100 in margin. Now you have an open USDJPY trade that is worth $10,000 and is receiving 5% a year in interest. To get a clearer picture of this, let's see the image below: What will happen to your account if you do nothing for a year? There are three possibilities. Let’s take a look at each one in the image below: Due to the 100:1 leverage being offered to you, in this scenario you have the potential to earn at least 5% a year from your initial $10,000, but there are huge risks to this (we will get to that later). The infamous AUDJPY carry trade During the early to mid-2000s, traders experienced near-perfect combinations of these conditions across numerous forex pairs, most popularly the AUDJPY. This particular FX carry trade involved going long on the AUDJPY. The Australian dollar has historically yielded higher interest rates than other global currencies. The Bank of Japan has been keeping interest rates low since the mid-1990s in an effort to revive the economy after a stock market crash caused a recession. The Bank of Japan has persisted with its approach to low interest rates, and in 2016, it announced negative interest rates. This means Japanese banks now pay interest on the cash they deposit with the Bank of Japan instead of earning interest on it. AUDJPY Exchange Rate and Interest Rate Differential 2001–2014 As you can see in the image above, the interest rate differential between Australia and Japan was consistently high. Due to the Australian dollar yielding a much higher return on investment compared to the Japanese yen, the situation provided retail traders and big institutions great opportunities for carry trading to occur with this currency pair and reaped huge profits from it. These conditions boomed, especially throughout the early to mid-2000s; however, this seemed to change just before the end of the 2000s. In 2008, with the global recession, the economic conditions surrounding Australian and Japanese investments changed as interest rates in Japan drifted slightly upward from near zero to just above zero, while interest rates in Australia fell considerably. As a result of both countries having their interest rates close to each other, the Japanese yen drastically appreciated against the Australian dollar, which would have caused traders huge losses when implementing the carry trade method during this period. You can see this in the chart below: AUDUSD 3-Month Chart Interest rates have changed since then: as of August 2023, Australia's interest rates are now back up to 4.10%, while Japan's interest rate remains at -0.1%. Risks of the carry trade The biggest risk in a carry trade strategy is the absolute uncertainty of exchange rates. For example, if a trader is buying a currency to profit from that currency pair's interest rate differential and the country of the currency cuts its interest rate unexpectedly, the exchange rate of that currency will most likely drastically fall, which can potentially cause the trader to suffer sudden and big financial losses. Due to this, it is important to look at more than just the interest rates on the currencies before you trade on the forex market. Additionally, if a country’s economic outlook does not look positive, the demand for that country's currency will decrease, especially if the market thinks that their central bank will have to lower interest rates to help their economy. Another important risk factor for traders to consider with the carry trade is that if substantial leverage is used to implement it, then big market moves against the trader's favour could result in losses that may cause margin calls, the position being automatically stopped out, or worse, losing more than your initial deposit and the trader's account ending up in a negative balance. Lastly, global markets and economies have still not fully recovered from the global crash of 2008. Carry trades are very difficult to do now with major forex pairs due to the majority of brokers no longer offering positive swaps on major pairs. Traders have been looking at some exotic currency pairs as viable options because some of their countries' interest rates are still high. Exotics such as the Mexican peso, the South African rand, and the Nigerian naira are all options that many forex brokers offer, with currency pairs featuring USD, GBP, EUR, and even JPY variations. However, exotic currency pairs can be extremely volatile and dangerous as traders are susceptible to experiencing big market moves constantly in both directions, which makes these currencies very unpredictable and can cause traders big losses. These currency pairs can also be very expensive to trade due to the high spreads and possible additional commission costs. 1 Month MXNJPY chart example: The above chart shows that traders have been looking at exotic currencies as alternative options to continue carry trades, though they pose very high risks and can be very expensive to trade. The carry trade, while potentially lucrative and rewarding, can be very dangerous, and you must consider all risk factors if you are looking to implement this trading method. Trading this way with major and cross-currency pairs is very difficult to do now, and we cannot stress enough that you must trade with absolute caution if you’re implementing the exotic currencies into your own carry trading strategy. That being said, we may get to a time again where carry trades are possible with major currency pairs as interest rates are going back up globally in an attempt to recover from the global inflation crisis. Forex brokers may be open again to offer traders positive swaps on majors and crosses. BluetonaFX
Education
by BluetonaFX
24
Create & Organize Your 1st WatchlistA tutorial video walking you through how to create & organize a watchlist. In my experience I've found that organization is the key to consistency & that consistency is the key to success so having an organized watchlist is something that has been very helpful in both my trading and investing. Hope you enjoyed the video & if you have any questions, comments or request for future videos please leave them in the comment section below. Also if you have a second please hit that BOOST button to show me some love on your way you! Plan Your Trade, Trade Your Plan! Akil
NASDAQ:AMZNEducation
by Akil_Stokes
13
Level up your understandingThe Liquidity game is much, much easier than you think. Most people only want posts that align with their own beliefs, the reality is Bitcoin is becoming institutional and the more players coming does not simply equate to prices rising. Logic will tell you, these "professional money makers" will want better prices, the accumulation phase on this scale will have retail torn apart. Every $100 rally will feel like the time is now and every $50 drop will feel like the end is near. I've shared countless posts and live streams here, talking about the transition. Here's a whole new set of things to think about to educate yourself on the current situation. First of all here's one of the latest streams going into detail of some of the logic. www.tradingview.com In educational terms here we go. When price moves up and volume goes down, this is called divergence. Imagine you're at a party with your friends, and you see two people dancing together. One person is dancing really fast, moving a lot, and having a great time. The other person is dancing slowly and not moving much. This difference in their dance styles is like volume divergence in trading. In trading, volume refers to the number of shares or contracts that are traded in a specific time period. It's like how many people are buying and selling stocks or other financial assets. Volume divergence happens when the price of a stock or asset is going in one direction, like going up, but the volume is not matching it. For example, the price might be rising, but not many people are buying or selling it. It's like the dancing person who is moving fast (price going up) but not many people are joining the dance (low volume). Ok so step one, there is a clear divergence of volume... Next I can guarantee some people will question the relationship to the price. Well. I used a box to measure 50% of the move here, just to highlight the obvious. Look left and see the level to volume actually peaked higher on the right and then dropped off, so argument no longer valid. Secondly, the orange line represents the green spike in volume that we lack in the current move. Third point; Look at the Weiss wave moves, again I have covered this in several educational posts here as well as many of my streams, if you don't know what this is. Go back and look through the posts. I often use Weiss to justify a 3 wave in an Elliott wave move. It can quickly highlight the obvious level of impulsive nature. Or in this instance, the lack of. Zoomed in and then over to the monthly timeframe. So what you need to understand is that with lack of impulsiveness and clear divergence, what else can you see that backs up the logic? How about using Oscillators? The monthly stochastic clearly showing overbought. And an off the shelf OBV showing sideways balance If you can learn to read these simple points, your already onto a winner. Many newer traders have strategies that often include RSI, MACD or Moving Averages and 9 times out of 10 it's on too small a timeframe. "If in doubt, zoom out" Combining logical arguments to figure out where you are on the chart can help you develop a much better picture, if you still want to trade smaller times, then you have a bias based on the bigger picture. OK - so next, let's take a look at a slightly more advanced view. This is CVD (cumulative delta); What does the numbers mean? Imagine you have a piggy bank, and every day, you either put money into it or take some money out. The total amount of money you've put in or taken out is like the cumulative delta. In trading, cumulative delta is a way to keep track of the buying and selling activities in the market for a particular financial asset, like a stock. Instead of money, we use something called "contracts" or "shares" to represent the buying and selling. When traders buy a stock, it's like they are putting money into the piggy bank. And when they sell the stock, it's like taking money out of the piggy bank. The cumulative delta keeps track of the difference between the number of shares bought and the number of shares sold throughout the day or a specific period. This image above tracks the numbers for each swing. When coupled with other tools such as Footprint levels, you can see where the higher levels of liquidity is sitting. Now combine the stages above. Let's recap. Bigger players coming in will want better prices. We have divergence on volume. Weiss waves lack impulsiveness. Oscillators oversold or show sideways balance. CVD levels still mostly negative. Footprint key levels have wider gaps to the next layers of liquidity. =============================================================== Now, what else would be worth looking at? Well. one tool I have shared many times in the posts and streams is called COT. COT stands for "Commitment of Traders." It's like keeping track of who is doing what in a big game, but instead of players, we are talking about traders in the financial markets. Imagine you are playing a game with your friends, and you want to know who is on which team. You might have a list that shows how many players are on each team and what roles they play, like who's a striker, who's a defender, and so on. In trading, COT is a report that shows us how many traders are on each team, so to speak. It tells us how many traders are buying and how many are selling certain financial assets, like commodities (like gold, oil) or futures contracts (which are like agreements to buy or sell something at a specific price in the future) AND of COURSE BITCOIN. The COT report is released by official organizations, and it's based on data collected from traders who are required to report their positions in these markets. Why does this matter? revert back to bigger players in the market coming for Bitcoin... just like in a game, knowing which team has more players or which roles are in demand can give you a clue about the game's overall strategy. When we look at the COT report, we can see if there are more traders buying or if more are selling it. This information helps understand the market sentiment. If a lot of traders are buying, it might mean they have a positive outlook, and the price of the asset could go up. On the other hand, if many traders are selling, it might mean they are not so optimistic, and the price could go down. In COT terms, there are two major players I look for in the reports. Asset Managers COT Asset Managers are like assistants for the big investors, like hedge funds or investment firms. These big investors have a lot of money to invest in different things, like stocks, commodities, or other financial assets including Bitcoin. It is the Asset Managers' job to take care of these investments and make sure they are managed well. It's like they are the guardians of the funds. So Asset Managers view of Bitcoin currently seems to be positive. Now for the second player I look at in the COT report. Leveraged Funds Imagine you a bank that allows you to borrow money. You then use that money to invest... Leveraged Funds are a bit like that. They are investment funds that use borrowed money, or leverage, to try to make bigger profits. These funds can invest in different things but in this case their investing in Bitcoin. Here's how it works: Regular Investment: Let's say you have $10, and you decide to put it in a normal bank. Over time, your money might grow a little with interest, and you'll have more than $10. Leveraged Investment: Now, let's imagine you have another bank called a leveraged fund. Your bank give you an extra $10 as a loan, so you have a total of $20 to put into this leveraged bank account. This means you can invest twice as much as you originally had! However, there's also a risk with leveraged funds. If the investments don't do well, you might lose more money than you initially had. For example, if your $20 goes down to $15, you still need to repay the $10 you borrowed, so you'll end up with only $5 of your own money left. The summary here is that larger investors use leveraged funds, so unlike Asset Managers who have a very long outlook. The Leveraged Funds element of the COT report is smaller timeframes but still a lot of volume. So, what is their current view? Whilst we have a positive long term outlook. COT would suggest we are not completely ready to shoot off to the moon just yet. I have really tried to over simplify the post here for the sake of education. There's a lot more to each individual section, but knowing these basics will set you off on the right path. Bitcoin becoming institutional is a great opportunity if you know where to look. These moves are far from random as you can see in this post below. Anyways! take it easy and good luck out there! 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.
COINBASE:BTCUSDEducation
by Mayfair_Ventures
26
Short Dated Options to Deftly Manage Oil Market Shocks"Volatility gets you in the gut. When prices are jumping around, you feel different from when they are stable" quipped Peter L Bernstein, an American financial historian, investor, economist, and an educator. Crude oil prices are influenced by a variety of macro drivers. Oil market shocks are not rare events. They appear to recur at a tight frequency. From negative prices to sharp spikes in volatility, crude oil market participants "enjoy" daily free roller-coaster rides. Precisely for this reason, crude oil derivatives are among the most liquid and sophisticated markets globally. This paper delves specifically into weekly CME Crude Oil Weekly Options and is set out in three parts. First, what’s unique about short-dated options? Second, tools enabling investors to better navigate crude oil market dynamics. Third, a case study illustrating the usage of weekly crude oil options. PART 1: WHAT’S UNIQUE ABOUT CME CRUDE OIL WEEKLY OPTIONS? Macro announcements such as US CPI, China CPI, Fed rate decisions, Oil inventory changes and OPEC meetings drive oil price volatility. Sharp price movements can lead to premature stop-loss triggers. When prices gap up or gap down at open, stop orders perform poorly leading to substantial margin calls. Weekly options enable hedging against these risks with limited downside and substantial upside. Closer to expiration, options prices are sensitive to changes in the prices of the underlying. Small underlying price moves can have outsized value creation through short-dated options. Hedging with weekly options allows investors to enjoy large upside potential. Short duration vastly reduces the options premium burden. This high risk-reward ratio has made short-dated options popular among both buyers and sellers. The daily traded notional value of Zero-DTE options (Zero Days-To-Expiry, 0DTE) have grown to USD 1 Trillion. Among S&P 500 options, 0DTE options comprise 53% of the average daily volume (ADV), up from 19% a year ago. In 2020, CME launched Weekly WTI options with Friday expiry (LO1-5), offering robust, round-the-clock liquidity and enabling precise event exposure management at minimal cost. These weekly options are now the fastest growing energy products at CME with ADV growing 69% YoY with June 2023 ADV up 136% YoY. Building on rising demand, CME added weekly options expiring Monday and Wednesday. At any time, the four nearest weeks of each option are available for trading. Weekly options settle to the latest benchmark CL contract and like other CME WTI products, they are physically deliverable ensuring price integrity. Each weekly WTI options contract provides exposure to 1,000 barrels. Every USD 0.01 change per barrel change in WTI represents a P&L change of USD 10 in premium per contract. PART 2: EIGHT TOOLS TO BETTER NAVIGATE CRUDE OIL MARKET DYNAMICS Highlighted below are eight critical tools across TradingView and CME enabling investors to better navigate oil market dynamics. 1. OPEC+ Watch OPEC+ Watch charts the probability of different outcomes from OPEC+ meetings. Probabilities are derived from actual market data & represent a condensed consensus market view of forthcoming meetings. 2. News Flow TradingView’s News section collates the key market developments impacting crude oil. 3. Forward Curve TradingView maps crude oil prices across the forward curve exhibiting oil’s term structure. Augmenting the forward curve chart is a table CL contracts across various expiries with technical signals embedded in them enabling investors to spot calendar spread trading opportunities. 4. TradingView Scripts Supported by a vibrant community of script creators, TradingView has curated scripts catering to the specific needs of crude oil traders. OIL WTI/Brent Spread by MarcoValente: Shows the spread between WTI and Brent crude. This spread is growing in importance with growth in US oil exports. Seasonality Indicator by tradeforopp: Presents seasonal price trends along with key pivot points to guide traders. 5. Economic Calendars TradingView’s economic calendar highlights upcoming economic events segmented by dates and with countdown timers to help traders better manage their portfolios. Augmenting, TradingView’s calendar is CME’s Economic Events Analyzer which lists key events specifically impacting energy markets and highlights the relevant weekly options contract. 6. Options Expiration Calendar CME’s Options Expiration Calendar is a comprehensive yet condensed view of upcoming expiration dates of WTI options, even those that are not listed yet. 7. Daily/Weekly Options Report CME’s Daily/Weekly Options Report profiles volumes and OI by strike price for weekly options supplying key stats such as Put/Call ratio and key strike levels at a glance. 8. Strategy Simulator CME’s strategy simulator allows investors to simulate diverse options strategies. Selecting the relevant instruments and adding each component of the overall position automatically calculates the payoff while still allowing modification of key statistics such as volatility based on user inputs. The below shows the payoff of an ATM straddle position for the upcoming Monday weekly option. It also allows simulating various market conditions. Selecting price trends such as up fast, up slow, flat, down slow, down fast can simulate the changes in P&L. PART 3: ILLUSTRATING USAGE OF WEEKLY CRUDE OIL OPTIONS Why does CME list weekly options expiring on Monday, Wednesday, and Friday? Each of these address specific macro events. OPEC meeting outcomes are typically announced over the weekend leading to gaps in prices on Monday. EIA weekly crude oil inventory data are released on Wednesdays. Key US economic data such as CPI and Non-farm payrolls are released on Fridays. Use Case for Options expiring on Monday These can be used to hedge against downside risk associated with weekend events. For instance, in April, OPEC+ announced major supply cuts at their meeting on Sunday. This led to WTI price spiking 4% at market open. This can lead to “gap risk.” Gap risk refers to the risk that markets may open sharply above or below their previous close. Since, price never passes the levels in between, stop loss orders fail to trigger at set levels resulting in more-than-anticipated realised losses. Such gap risks from weekend news can be managed through Monday weekly options which provides a predictable and resilient payoff with limited downside risk. Use Case for Options expiring on Wednesday Oil inventory reports by EIA (U.S. Energy Information Administration) and API (American Petroleum Institute) are released every week on Tuesday and Wednesday respectively. Major misses/beats against expectations for these releases can result in large price moves. Wednesday options come in handy to better manage volatility stemming from these shocks or surprises. Weekly options provide superior ROI on small moves when compared to futures. Favourable price moves deliver larger payoffs from position in weekly options than futures and shorter expiries allow for much lower premium than monthly options. Illustrating with Back tested Results On June 14th, Crude price fell by 1.7% (USD 1.2) to USD 68.7/barrel upon release of inventory data that showed a larger than expected inventory build-up. In the lead up to this data release, a crude oil participant could either (a) Short Crude Oil Futures, or (b) Long Weekly Crude Oil Put Option. Summary outcomes from these two strategies are tabulated and charted below. The results speak for themselves. Short dated long put option is capital efficient, prudent, and credible as a risk management tool. That said, participants must evaluate the risk return profile taking into consideration market liquidity and volatility levels, among others, when choosing between instruments. KEY TAKEAWAYS In summary, 1) Weekly Options can be cleverly deployed to hedge against shocks in oil markets. 2) TradingView & CME provide a rich suite of tools to deftly navigate the oil market dynamics. 3) Weekly options expiring on (a) Monday helps manoeuvre developments over the weekend, (b) Wednesday helps to manage inventory data linked shocks, and (c) Friday enables investors to trade and hedge around key US economic data. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
NYMEX:CL1!Education
by mintdotfinance
6