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The Gold Standard and the Global Monetary SystemI. Introduction The history of international monetary systems has been a story of constant evolution. Of the many systems that have been used over the centuries, the Gold Standard stands out for its longevity and its critical role in shaping the world's economic landscape. This essay will first discuss the Gold Standard, then delve into President Richard Nixon's monumental decision to sever the tie between the U.S. dollar and gold, known as the 'Nixon Shock.' This discussion will segue into the subsequent transformation of the global monetary system, culminating in an analysis of our present-day monetary era. II. The Gold Standard Era The Gold Standard, which flourished between the late 19th century and the early 20th century, was a monetary system where the value of a country's currency was directly linked to gold. Each country promised to convert its currency into a fixed amount of gold upon demand. This system provided a stability that fostered international trade and investment, as it offered predictability of exchange rates and a constraint on inflation. However, it also meant that national monetary policies were subordinated to the need to maintain gold parity, thereby constraining a government's ability to respond to domestic economic conditions. III. Nixon's Depreciation and the End of the Gold Standard In 1971, amidst growing economic pressures, President Richard Nixon declared that the United States would no longer exchange gold for U.S. dollars held in foreign reserves, effectively ending the Gold Standard. This move was initially designed as a temporary measure to protect U.S. gold reserves, which were dwindling due to persistent trade deficits. However, the 'Nixon Shock' proved to be a permanent shift in international monetary policy. Nixon's move unshackled the U.S. dollar (and other global currencies) from the constraints of gold, allowing for more flexible monetary policies. This change allowed governments to respond more efficiently to economic downturns by manipulating the money supply. Yet, it also introduced a new era of exchange rate volatility and inflation risk, challenges that economies continue to grapple with today. IV. The Transformation of the Global Monetary System The end of the Gold Standard marked the transition to the era of fiat money—currency that is backed by the full faith and trust in the government that issues it, rather than a physical commodity like gold. Fiat money systems have provided governments with greater flexibility to manage economic conditions through monetary policy, as they can adjust the money supply to influence interest rates, manage inflation, stimulate growth, or address economic crises. However, the reliance on faith and trust in the government has also led to episodes of hyperinflation and economic crises in countries where that faith was misplaced or abused. V. The Present-day Monetary Era In the current monetary era, central banks, like the Federal Reserve in the U.S., use open market operations and other monetary policy tools to control the money supply and influence economic conditions. Decoupling from gold has also facilitated the rise of digital currencies and novel monetary ideas like cryptocurrency, reshaping our understanding of money and value. However, this freedom has its downsides; the absence of a physical constraint like gold can lead to fears about runaway inflation, especially in times of significant increases in the money supply, such as the response to the COVID-19 pandemic. VI. Conclusion The Gold Standard, Nixon's Shock, and the transformation of the global monetary system offer key insights into the strengths and weaknesses of different monetary systems. While the Gold Standard provided a stability that fostered international trade, it limited the ability of governments to respond to domestic economic conditions. The Nixon Shock and the transition to a fiat money system have provided greater flexibility, but also introduced new challenges in terms of inflation risk and exchange rate volatility. As we navigate our present-day monetary era, it is essential to remember the lessons of the past while staying open to new innovations and ideas in our ongoing quest to develop a monetary system that best serves the needs of society.
FX_IDC:XAUUSDEducation
by financialflagship
Understanding Market Corrections:Definition & Key ConsiderationsInvesting in the stock market has the potential to generate substantial wealth over the long term, although it comes with inherent risks. One notable obstacle that investors frequently encounter involves safeguarding their capital during periods of declining stock prices. When the market undergoes a downturn, the inclination to panic and sell off investments to evade additional losses can be strong. However, this reactive approach often results in even greater financial setbacks and hinders the ability to capitalize on future market rebounds. In this comprehensive article, we will delve into the concept of a market correction and delve into various strategies that can assist investors in preserving their capital amidst market downturns, enabling them to emerge stronger when the market inevitably recovers. Market Correction: A Comprehensive Explanation In the realm of financial markets, a market correction is a notable event characterized by a substantial decline in the value of a financial instrument. This decline typically ranges between 10% to 20% and can encompass individual stocks of a specific company or even extend to encompass entire market indices comprising a vast array of companies. The duration of a correction can vary significantly, ranging from as short as a single day to as long as a year, with the average duration spanning approximately four months. Market corrections can be triggered by a myriad of factors, each with its own unique catalyst. These factors can range from a company's disappointing financial performance and weak earnings report to more extensive global geopolitical conflicts. In some instances, corrections may occur seemingly without any discernible external cause. It is worth noting that market corrections are not exclusive to stocks alone. They can manifest in various other financial instruments such as commodities like oil, platinum, and grain, as well as currencies, funds, specific industry sectors, or even the entire market as a whole. This exemplifies the widespread impact that a correction can have across diverse segments of the financial landscape. To illustrate the significance of a market correction, let's consider an example from recent history. In the year 2018, the prices of over 500 companies experienced a decline of 10% or more. This widespread correction exemplifies how fluctuations in market conditions can influence a substantial number of companies simultaneously, affecting their valuation and investor sentiment. In conclusion, a market correction denotes a notable decline in the value of financial instruments, with the range typically falling between 10% to 20%. The causes behind these corrections can be diverse and encompass factors ranging from company-specific issues to broader global conflicts. Moreover, corrections can impact various financial instruments and market segments, underscoring their potential for wide-reaching consequences within the financial landscape. Example : AMZN stocks Daily chart showing a correction in 2018 - 2020 Market corrections are not uncommon events within the realm of financial markets. On average, a decline of 10-20% in the stock market transpires approximately once a year. These corrections, characterized by a significant decrease in stock prices, serve as reminders of the inherent volatility and fluctuations present in the market. While corrections of 10-20% occur relatively frequently, more profound market declines exceeding 20% are less frequent, transpiring approximately once every six years. These substantial corrections are often referred to as market collapses, signifying a more severe and prolonged downturn. One illustrative example of a market collapse occurred in response to the global pandemic outbreak in March 2020. The COVID-19 pandemic triggered a swift and severe decline in stock markets worldwide, leading to a precipitous drop of approximately 38% within a matter of days. This extreme correction exemplifies the impact of unforeseen events and external factors on market stability and investor sentiment. It is important to recognize that market corrections and collapses are not solely confined to a particular asset class or geographic region. They can have a broad-ranging effect, transcending national boundaries and impacting various financial instruments, indices, and markets worldwide. In summary, market corrections, defined by significant declines in stock prices, are regular occurrences, transpiring approximately once a year with a magnitude of 10-20%. Market collapses, on the other hand, encompass more profound declines exceeding 20% and typically transpire once every six years. These events serve as reminders of the dynamic nature of financial markets and their vulnerability to various factors, such as the recent pandemic-induced collapse in 2020, which had a profound impact on global markets. Example : SPX500 / US500 stocks Daily chart showing a correction in 2020 Investors who adopt a long-term investment strategy tend to navigate corrections with relative ease, primarily due to their extended investment horizon. By committing their funds for a substantial period, typically ranging from 5 to 10 years, these investors are less likely to be perturbed by temporary price declines. On the other hand, individuals who rely on leverage or engage in short-term trading bear the brunt of corrections, experiencing greater challenges and losses. The impact of a correction can be readily observed by examining the chart depicting the historical performance of any given company. By selecting the annual or five-year chart display, one can identify specific time periods when the asset's value experienced temporary declines. Additionally, it is crucial to consider the decrease in stock price subsequent to the ex-dividend date, commonly referred to as the dividend gap. It is essential to note that the dividend gap phenomenon is distinct from a correction and should be treated as such. What Causes A Correction? A correction in the stock market can be triggered by a multitude of factors and events that impact stock prices. These events can range from speeches given by company executives, investor reports, pandemics, regulatory changes, economic sanctions, natural disasters like hurricanes and floods, man-made disasters, to high-level meetings of world leaders. Even the most stable companies can experience declines in their stock prices due to these events. It is important to recognize that human behavior also plays a significant role in causing market corrections. The stock market is inherently driven by human participation and investor sentiment, which can sometimes lead to corrective actions. For instance, if a popular figure like Elon Musk garners significant attention and support, investors may pour money into his company beyond its actual earnings. Eventually, the overvaluation of such a "hyped" company may result in a decline in its stock price. Furthermore, investors often attempt to follow trends in the market. When a particular stock shows an upward trajectory, more people tend to invest in it, thus increasing its demand and subsequently driving up its price. However, as the price reaches a certain peak, some investors choose to sell their holdings to realize profits. This selling pressure can initiate a correction, causing those who entered the market later to incur losses. Therefore, blindly chasing market trends without careful analysis may prove detrimental. Additionally, corrections can exhibit seasonal patterns. For example, during the summer months, prior to holidays or extended weekends, investor participation in trading may decrease. This reduced trading activity leads to lower liquidity in stocks, creating an opportunity for speculators to exploit the situation. Such periods often witness sharp price fluctuations, potentially resulting in stock prices declining by 10-20%. It is crucial to understand that corrections are a natural part of the market cycle, and it is neither productive nor feasible to fear them indefinitely. The market cannot sustain perpetual growth, and corrections serve as necessary adjustments. By acknowledging their inevitability, investors can adopt strategies that are mindful of market dynamics and position themselves accordingly. How Long Do Corrections Last? Between the years 1980 and 2018, the US markets experienced a total of 37 corrections, characterized by an average drawdown of 15.7%. These corrections typically lasted for approximately four months before the market began to recover. Consider the following scenario: an investor commits $15,000 in January, experiences a loss of $2,355 during the correction, and by May, witnesses their portfolio rebounding to $15,999, based on statistical data. However, it is important to note that outcomes may deviate from this pattern. It is worth noting that the magnitude of a stock's decline directly impacts the duration of its recovery. As an illustration, during the financial crisis of 2008, US stocks tumbled by approximately 50%. The subsequent recovery of the stock market extended over a period of 17 months, primarily attributed to the active support provided by the US government and the Federal Reserve. This underscores the notion that severe market downturns necessitate more prolonged periods for recuperation, even with significant intervention from regulatory bodies. Dow Jones Industrial Average index drop in 2008 The timing of a market correction is often challenging for financiers and experts to predict with certainty. In retrospect, it becomes clear when a correction started, but identifying the precise moment beforehand is a complex task. Taking the aforementioned example of the market collapse in October 2007, it was not officially acknowledged until June 2008. This highlights the inherent difficulty in pinpointing the onset of a correction in real-time. Following a correction, the market's recovery period can vary significantly. In some instances, the market may swiftly regain stability and resume an upward trajectory. However, in other cases, it may take several years for the market to fully recover from a correction. The duration of the recovery depends on a multitude of factors, including the severity of the correction, underlying economic conditions, government interventions, and investor sentiment. Hence, it is crucial to recognize that financiers and market participants can only definitively determine the start and extent of a correction in hindsight. The future behavior of the market after a correction remains uncertain, and it is possible for the market to swiftly recover or take a considerable amount of time to regain stability. How To Predict A Correction Predicting the precise timing, duration, and magnitude of a market correction is inherently unreliable and challenging. There is no foolproof method to accurately forecast when a correction will occur, when it will conclude, or the extent to which asset prices will change. Some economists and analysts attempt to predict market trends by employing various theories. For instance, Ralph Elliott formulated the Elliott Wave Theory, which posits that markets move in repetitive waves. By determining the current phase of the market—whether it is in an upward or downward wave—one could potentially profit. However, if such theories consistently yielded accurate predictions, financial losses during corrections would be virtually nonexistent. It is crucial to acknowledge that market corrections are an inherent and inevitable part of market cycles. While attempting to predict corrections may be enticing, it is important to remember that they will inevitably occur, regardless of how long it has been since the previous one. Relying solely on the absence of a correction for an extended period as a basis for investment decisions warrants careful consideration and analysis rather than being treated as a definitive indicator. Advantages And Disadvantages Of Market Correction Advantages and disadvantages of market corrections can be summarized as follows: Advantages of a market correction: 1) Buying opportunities: Market corrections often present favorable buying opportunities for investors. Lower stock prices allow investors to acquire shares at discounted prices, potentially leading to long-term gains when the market recovers. 2) Rebalancing opportunities: Corrections can prompt investors to rebalance their portfolios. Selling overvalued assets and reinvesting in undervalued ones can help optimize investment returns and maintain a diversified portfolio. 3) Expectation adjustment: Market corrections can serve as a reality check, helping investors reassess their expectations and risk tolerance. This can lead to more informed investment goals and strategies. Disadvantages of a market correction: 1) Financial losses: Market corrections can result in substantial losses, particularly for investors who panic and sell their investments at lower prices. Reacting emotionally to market downturns may amplify the negative impact on portfolios. 2) Economic implications: Market corrections can have broader economic repercussions. They may lead to job losses, reduced consumer spending, and slower economic growth, potentially affecting industries and sectors beyond the financial markets. 3) Psychological impact: Market corrections can trigger fear, uncertainty, and anxiety among investors. These emotions may drive impulsive decision-making, such as selling investments hastily or hesitating to re-enter the market when conditions improve. It is important for investors to carefully evaluate the potential advantages and disadvantages of market corrections and consider their own risk tolerance, investment goals, and long-term strategies when navigating such market events. What Should You Do During A Correction? Correction can make an investor richer or poorer or have no effect at all. The impact of a market correction on an investor's wealth depends on their actions and decisions during that period. It is impossible to predict with certainty the duration or direction of asset value changes during a correction. However, there are general tips that can help investors navigate through a correction and potentially safeguard their finances: 1) Maintain a calm and rational mindset: During a correction, it is crucial to approach investment decisions with a cool head. Instead of making impulsive moves, take the time to understand the underlying causes of the correction and consider expert opinions and news. 2) Avoid excessive borrowing: It is advisable not to use borrowed money for investments, especially during a correction. This reduces the risk of incurring debts and potential losses. For beginners, it is often recommended to limit investments to the funds available in their brokerage accounts, particularly during a correction. 3) Assess company fundamentals: Evaluate the fundamental strength of a company by analyzing key metrics and ratios. Comparing a company's value with others in the same industry can provide insights. If a company is not overvalued, it may indicate that there is no fundamental reason for a correction, and its value may likely recover in due course. 4) View the correction as a buying opportunity: Prominent investors like Warren Buffett and Nathan Rothschild have emphasized that corrections present excellent opportunities for investment. If a stock's price has fallen, consider purchasing it based on the company's performance rather than solely focusing on the size of the discount. Maintaining some savings in cash allows for timely investments in undervalued assets. 5) Acknowledge the normalcy of corrections: It is important to recognize that corrections are a regular part of market cycles and serve as tests of an investor's composure. Following an investment strategy that includes provisions for investing during periods of 10-20% lower stock prices can help protect savings and optimize long-term returns. By adhering to these general tips and maintaining a disciplined investment strategy, investors can better navigate market corrections and potentially preserve and enhance their financial well-being. Conclusion In summary, market corrections are an intrinsic aspect of the stock market's ebb and flow, and it is essential for investors to anticipate and navigate them effectively. During such periods, the inclination to succumb to panic and hastily sell investments can be strong. However, maintaining composure and adhering to prudent strategies that safeguard capital are crucial for weathering corrections and emerging stronger when the market inevitably rebounds. While corrections present challenges, they also offer advantageous opportunities, such as the ability to acquire stocks at discounted prices. Conversely, the potential for substantial losses exists, emphasizing the importance of a measured approach. A long-term investment strategy, rooted in sound analysis rather than reactionary emotions, serves as a vital compass for surviving corrections. By focusing on the broader picture and resisting the temptation of short-term market fluctuations, investors can position themselves for long-term success amidst the natural ebb and flow of the market.
NASDAQ:TSLAEducation
by FOREXN1
12
Bitcoin - Using the Logarithmic ChartHi Traders, Investors and Speculators of Charts 📈📉 A logarithmic chart, also known as a log chart, is a type of chart that represents data using logarithmic scaling on one or both axes. It is commonly used in financial and stock market analysis to visualize price movements and identify trends. The main difference between a logarithmic chart and a linear chart is how the price scale is displayed. You can change your display when you rightclick on the righthand scale-pane where the prices are displayed, there you will find an option saying "logarithmic". Using a logarithmic chart is particularly useful when analyzing the weekly timeframe view. The weekly timeframe provides a broader perspective and allows traders and investors to assess long-term trends and make more informed decisions. When combined with a logarithmic scale, the weekly timeframe on a logarithmic chart can provide a clearer picture of exponential growth or decline patterns over an extended period. This weekly timeframe smooths out short-term noise and focuses on the overall price movement. The logarithmic scale helps accurately represent the percentage changes in price over the weeks, rather than emphasizing absolute price changes. This is important because it allows traders to identify trends and patterns that might not be as evident on a linear chart. As seen on the chart, the log indicator (I'm using Bitcoin LFG Model By ARUDD) even shows a forecast and all of the values are indicated in color on the righthand scale. The logarithmic chart helps traders spot long-term trends and key support zone and resistance zone more easily. By analyzing this chart over a macro perspective( in other words looking at yearly views), traders can identify significant price levels, trendlines, or moving averages that have historically acted as strong areas of support or resistance. These levels become more reliable when observed over a longer timeframe, and the logarithmic scale ensures that percentage changes are given equal weight, making trendlines and support/resistance levels more accurate and meaningful. Furthermore, using a weekly logarithmic chart can assist traders in understanding the magnitude and duration of trends. It helps visualize sustained periods of price growth or decline, enabling traders to assess the strength and potential continuation of a trend. This information is valuable for making longer-term trading decisions and managing risk appropriately. In a linear chart, each unit of movement is represented by an equal distance on the price scale. For example, if BTC price moves from 10000 dollars to 20000 dollars, the distance on the chart is the same as the distance from 50k to 60k. However, in a logarithmic chart, the distance between each price level is proportional to the percentage change rather than the absolute price change. This means that equal percentage changes are represented by equal distances on the chart. This is how you can utilize the Log Chart for your trading: Trend Identification: Logarithmic charts can help identify long-term trends more accurately, especially when there are significant price increases or decreases over time. By using a logarithmic scale, the chart can better represent the percentage change in price, making it easier to spot trends that might be obscured on a linear chart. Trade Setups: Logarithmic charts can be useful for identifying trade setups, such as breakouts or reversals. On a logarithmic chart, these levels may appear as trendlines or horizontal zones that have held significance in the past. Traders often look for increased volume or other technical indicators to confirm a breakout or reversal signal. Key Trading Zones: Logarithmic charts can help identify key zones of support and resistance. These zones represent price levels where the asset has historically found buying or selling pressure. On a logarithmic chart, these zones can be identified as areas where the price has touched or bounced off trendlines. Traders may use these zones to make decisions about buying or selling a stock. Long-Term Perspective: Logarithmic charts are particularly useful for long-term analysis because they can provide a better perspective on the overall price movement. They can reveal exponential growth or decline patterns that might be missed on a linear chart. This can be valuable for investors looking to make long-term investment decisions based on the stock's historical price behavior. ________________________________ BITSTAMP:BTCUSD COINBASE:BTCUSD INDEX:BTCUSD BINANCE:BTCUSD CRYPTO:BTCUSD CRYPTOCAP:BTC BINANCE:BTCUSDT KUCOIN:BTCUSDT OKX:BTCUSDT BYBIT:BTCUSDT COINBASE:BTCUSDT _______________________ 📢Follow us here on TradingView for daily updates and trade ideas on crypto , stocks and commodities 💎Hit like & Follow 👍 We appreciate your support ! CryptoCheck
INDEX:BTCUSD
by CryptoCheck-
25
Can You Trade The Cycle?Hi folks, We're going to talk about trade cycles today. I hope you love learning! The strongest power is knowledge! We'll be stronger together! In economics, a trade cycle is a pattern of economic activity that repeats itself over time. It is often characterized by periods of expansion, followed by periods of contraction. The trade cycle can be caused by a variety of factors, including changes in government policy, technological innovation, and consumer demand. The trade cycle is also known as the business cycle or economic cycle. It is a recurring but not periodic fluctuation found in a nation's aggregate economic activity- a cycle that consists of expansions occurring at about the same time in many economic activities, followed by similarly general contractions (recessions). There are a number of different types of trade cycles, each with its own characteristics. Some of the most common types of trade cycles include: Kitchin cycle : The Kitchin cycle is a 4- to 5-year cycle of economic activity. It is named after Joseph Kitchin, an English economist who first described it in the 1920s. The Kitchin cycle is typically characterized by a period of rising prices, followed by a period of falling prices, followed by a period of rising prices again. Juglar cycle : The Juglar cycle is a 10- to 15-year cycle of economic activity. It is named after Clement Juglar, a French economist who first described it in the 19th century. The Juglar cycle is typically characterized by a period of expansion, a period of contraction, a period of recovery, and another period of expansion. Kondratiev cycle : The Kondratieff cycle is a 50- to 60-year cycle of economic activity. It is named after Nikolai Kondratieff, a Russian economist who first described it in the 1920s. The Kondratieff cycle is typically characterized by four phases: prosperity, recession, depression, and recovery. Now, we know what cycles are in the shape of context. There is a million dollars question. Can we trade the cycles? As a trader or an investor, we definitely can trade the cycles. However, we need to learn what the cycle is, and how can it start or end. There are a number of ways that a trader can trade the cycle. Some popular methods include: 1- Using fundamental analysis . Fundamental analysis can be used to assess the underlying value of a security. This information can be used to identify potential undervalued or overvalued securities. 2- Using cycle analysis. Cycle analysis is a more specialized form of technical analysis that focuses on identifying cycles in market prices. This information can be used to identify potential entry and exit points for trades, as well as to forecast future price movements. 3- Using technical analysis. Technical analysis can be used to identify key support and resistance levels, as well as trendlines and patterns. This information can be used to identify potential entry and exit points for trades. It is important to note that there is no one-size-fits-all approach to trading the cycle. The best approach will vary depending on the individual trader's risk tolerance, trading style, and investment goals . Final Tips: 📍 Use a stop-loss order . A stop-loss order is a type of order that automatically closes a trade if the price of a security reaches a certain level. This can help to protect your profits and limit your losses. 📍 Use a trailing stop-loss order . A trailing stop-loss order is a type of order that automatically moves with the price of a security. This can help to lock in profits and protect your gains. 📍 Be patient . Trading the cycle can be a patient game. It is important to be patient and wait for the right opportunities to trade. 📍 Don't overtrade . It is important to avoid overtrading. Overtrading can lead to losses and can also increase your risk. Bonus Chart : US10Y A task for you! Look at the bonus chart and leave your thoughts considering the correlation between US10Y and SP500 or ONS.
SP:SPXEducation
by Bullfighterr
6
Price BreakoutsHello traders 📊 On this picture here you can see 3 types of breakouts. On the left side you can see breakout examples in an downtrend and on the right side, you can see examples in an uptrend. Breakouts occur when price breaks a certain zone (support or resistance) and in many cases breakouts represent very important moment. This is usually good time to look for opportunity to trade. First type of breakout is "strong breakout". They occur once the price breaks certain zone with a strong candle and continue to move without pullback. Second type of breakout is "retest". Retests are very common and extremely useful. Some of the best trading opportunities are when retest occurs. This means that price went back to test previously broken zone and this is usually good place to buy or sell. Third type of breakout is "fake-out". This is the worst scenario as price quickly goes back after a breakout. Traders usually enter after a breakout, but once fake-out occurs, traders lose as price goes back quickly to hit stop loss. We can not know exactly when fake-out will occur, but the best way to protect your account from this is to wait for the candle to close and to avoid to trade when big news are about to release. Have a great day!
FOREXCOM:XAUUSDEducation
by SanShone
10
The Struggle of Consistency: Navigating DCA in Crypto InvestingHello dear @TradingView community! Today let’s focus on what is Dollar Cost Averaging ? Determining the optimal moment to buy cryptocurrency is often a challenging task due to the high volatility of crypto assets. Prices can fluctuate unpredictably at any given time, leading traders to experience the fear of missing out (FOMO). This fear is commonly felt when the price of a cryptocurrency, such as Bitcoin (BTC), suddenly surges or plunges. During price drops, individuals tend to panic and sell their holdings in a frantic attempt to avoid further losses. Conversely, when prices rise, panic ensues as people worry they don't possess enough coins to sell. As evident, making decisions to buy or sell cryptocurrencies is no easy feat. However, if you seek long-term financial gains from cryptocurrencies without succumbing to the anxiety caused by every price spike, it would be wise to consider the Dollar Cost Averaging (DCA) strategy. Let's delve deeper into what DCA entails and how it functions in the realm of cryptocurrencies. What is Dollar Cost Averaging? Dollar cost averaging is an investment strategy where fixed amounts are regularly invested at consistent intervals, in contrast to a one-time lump sum investment. This approach involves executing transactions regardless of the asset's current price or market fluctuations. It is highly favored by investors and management funds seeking long-term profits from various assets like ETFs, commodities, cryptocurrencies, stocks, and more. How does DCA work? To employ the DCA strategy, you first determine the amount of cryptocurrency you wish to invest. In conventional investing, one would typically invest the entire designated sum in a specific asset. However, with DCA, you invest fixed amounts of USD into Bitcoin or any other asset over a designated period. For instance, you may choose to purchase $100 worth of BTC every month for a 10 year period. When utilizing DCA, the selection of the cryptocurrency becomes crucial. With around 22,904 cryptocurrencies available today, you must pick a coin you believe will appreciate in value and yield profitable returns. You can even choose an ETF which follows the trend (up or down) for any specific asset or basket of assets. To comprehend how DCA operates, consider the following example: Let's assume it is June of 2014, and Katie decides to allocate $10,000 in BTC. In June of 2014, the price of Bitcoin stood at approximately $560 per coin. Instead of investing the entire sum at once, Katie opts for dollar cost averaging throughout the 9 years. From June 2014 to May 2022, Katie spent $100 each month on BTC, disregarding market price fluctuations. After 8 years, she spends almost $9,600 and her earnings reflect the following: The green line in the chart represents Katie’s total investment amount, while the orange line depicts the fluctuation of portfolio size value over the 9-year period. When Katie initiated his investments, both the cost of BTC and his investments were approximately $100. However, as time progressed, the price of Bitcoin underwent changes. By May of 2022, Katie's $9,600 investment had grown to $287,518 worth of BTC, showcasing a growth rate of 2,895%. With maximum gain of $631,540 at bitcoin ATH. Online DCA tools are also available to estimate the earnings from purchasing bitcoins over several months. For example, platforms like dcaBTC enable users to customize their DCA strategy according to their preferences, specifying the amount to purchase, investment frequency, and duration. To successfully implement dollar-cost averaging (DCA) in Bitcoin investing, several key steps need to be followed. These steps involve setting a budget, choosing a reputable cryptocurrency exchange, establishing recurring purchases or utilizing recurring purchases and automated investment platforms (such as Binance, Coinbase, Kraken, Crypto.com or even at Vestinda), and monitoring and adjusting the strategy as necessary. Pros and Cons of Dollar Cost Averaging Let's commence with the pros of dollar cost averaging. By making regular and consistent purchases over time, you mitigate the risk associated with poorly timed lump sum investments. Additionally, since you make regular purchases, you alleviate the fear of missing out and impulsive decision-making prompted by price fluctuations. Cryptocurrency exchanges and platforms charge transaction fees for every trade. While one might assume that DCA would result in higher commission fees, it is essential to remember that this is a long-term strategy. The commission costs are negligible compared to the potential profits that can be realized over several years. Moreover, DCA does not necessitate substantial investments. This strategy involves smaller and consistent purchases, eliminating the need to determine how best to deploy a large sum in one go. Furthermore, if prices suddenly drop at the time of purchase, you can acquire the cryptocurrency at a lower price. However, it is important to note that if the cryptocurrency's price is bullish, you may end up buying at a higher price. This is particularly relevant when dealing with BTC or any chosen cryptocurrency. Many crypto enthusiasts and investors prefer to purchase a significant amount at once, fearing a subsequent price surge in the hours, days, weeks, or months to come. As previously mentioned, with the DCA strategy, you purchase small amounts at regular intervals, regardless of market stability. Should you utilize the DCA Strategy? DCA facilitates maximizing profits with relatively low risk. Although this approach is not devoid of drawbacks, it offers numerous advantages that can be leveraged to your benefit. Hence, is DCA worth your time and money? As always, we recommend thoroughly studying all available information before making any decisions. Save this article to your browser bookmarks for easy reference in the future. Happy trading!
Education
by Vestinda
11
10 MOST important bar patterns to profit trade Bar patterns are elegant tools for every trader who trades on Price Action signals. I present to you 10 bar patterns that you must know! These patterns are easily found on charts and allow for easy placement of stop loss and take profit. Reversal Bar Patterns 1. Reversal Bar 2. Key Reversal Bar 3. Exhaustion Bar 4. Pin Bar 5. Two-Bar Reversal 6. Three-Bar Reversal 7. Three Bar Pullback Volatility Bar Patterns 8. Inside Bar 9. Outside Bar 10. NR7 1. Reversal Bar The low of a bullish reversal bar is below the low of the previous bar, and the close is above the close of the previous bar. The high of a bearish reversal bar is above the high of the previous bar, and the close is below the close of the previous bar. Buy above a bullish reversal bar in an uptrend. Sell below a bearish reversal bar in a downtrend. 2. Key Reversal Bar A bullish key reversal bar opens below the low of the previous bar and closes above its high. A bearish key reversal bar opens above the high of the previous bar and closes below its low. By definition, key reversal bars open with a price gap. Since gaps on intra-day timeframes are rare, most key reversal bars are found on daily timeframes and higher. Buy above a bullish key reversal bar (if you are not sure, wait until the price closes above it, and only then buy). Sell below a bearish key reversal bar (if you are not sure, wait until the price closes below it, and only then sell). 3. Exhaustion Bar A bullish exhaustion bar opens with a downward gap. The price then moves up, and the bar closes near its high. A bearish exhaustion bar opens with an upward gap. The price then moves down, and the bar closes near its low. In both cases, the gap remains unfilled. Additionally, the exhaustion bar should form on high volume. Buy above a bullish exhaustion bar. Sell below a bearish exhaustion bar. 4. Pin Bar It has a long and distinct tail. In bullish pin bars, the lower tail occupies most of the bar. In bearish pin bars, the upper tail dominates. Buy above a bullish pin bar that bounces off a support level. Sell below a bearish pin bar that bounces off a resistance level. 5. Two-Bar Reversal The two-bar reversal pattern consists of two strong bars closing in opposite directions. The bullish version consists of a strong bearish bar followed by a strong bullish bar. The bearish version consists of a strong bullish bar followed by a strong bearish bar. In bullish reversals, buy above the highest point of the two-bar pattern. In bearish reversals, sell below the lowest point of the two-bar pattern. 6. Three-Bar Reversal The bullish pattern consists of the following three bars: 1. A bearish bar 2. A bar with a lower high and a lower low 3. A bullish bar with a higher low and a close above the high of the second bar The bearish pattern consists of the following three bars: 1. A bullish bar 2. A bar with a higher high and a lower low 3. A bearish bar with a lower high and a close below the low of the second bar Buy above the high of the last bar in a bullish pattern. Sell below the low of the last bar in a bearish pattern. 7. Three Bar Pullback Three consecutive bearish bars form a bullish three-bar pullback pattern, and three consecutive bullish bars form a bearish three-bar pullback pattern. In a bullish trend, wait for three consecutive bearish bars to form. Then buy above the next bullish bar. In a bearish trend, wait for three consecutive bullish bars to form. Then sell below the next bearish bar. 8. Inside Bar The inside bar must be completely within the range of the previous bar. In other words, the second bar must have a lower high and a higher low. Place bracket orders around this pattern to trade its breakout in either direction. (A buy order above its high and a sell order below its low. Once one order is filled, cancel the other.) Place only one order (either a buy or a sell) in accordance with the market trend. Wait for the breakout of the inside bar and trade its lack of follow-through. 9. Outside Bar The outside bar is the complete opposite of the inside bar. Its range must exceed the range of the previous bar, i.e. it has a higher high and a lower low. Wait for the breakout of the outside bar and open a position against the market movement. (Especially if the outside bars look like dojis or go against the trend.) Trade its breakout, especially when the outside bar closes near its top or bottom. 10. NR7 This pattern requires the presence of seven bars. If the last bar has the smallest range in the sequence of bars, then this is an NR7 pattern. As a reminder, the range of a bar is the difference between its high and low. Buy on the breakout of the high of the last bar, if the trend is upward. Sell on the breakout of the low of the last bar, if the trend is downward.
Education
by Hellena_Trade
Why You Should Never Hold on to Your Positions Beyond a Certain Good day, traders. I'd like to use this opportunity to advise both new and experienced traders alike that holding (hodling) your position is not recommended beyond a certain point. According to percentage calculations, the return required to recover to break-even increases at a considerably faster pace when losses grow in size (due to compound interest). It goes downward after a loss of 10% because a gain of 11% is required to make up for it.When the loss is 20%, it takes a 25% gain to make up the difference and return to break-even. To recoup from a 50% loss, a 100% gain is needed, and to reach the initial investment value after an 80% loss, a 400% gain is needed. Investors who experience a bear market must understand that it will take some time to recover, but compounding returns will aid in the process. Think about a bear market where the value drops by 30% and the stock portfolio is only worth 70% of what it was. The portfolio increases by 10% to reach 77%. The subsequent 10% increases to 84.7%. The portfolio reached its pre-drop value of 102.5 percent after two further years of 10 percent gains. Consequently, a 30 percent decline requires a 42 percent recovery, but a four-year compounding rate of 10 percent returns the account to profitability.I will be doing a second part to this post on the idea of "DOLLAR COST AVERAGING" (DCA). The math behind stock market losses clearly demonstrates the need for investors to take precautions against significant losses, as depicted in the graphic above. Stop-loss orders to sell stocks or cryptocurrencies that are mental or limit-based exist for a reason. If the market is headed towards a bear market, it will start to pay off once a particular loss threshold is reached. Investors occasionally struggle to sell stocks they enjoy at a loss, but if they can repurchase the stock or cryptocurrency at a lesser cost, they will like it. Never stop learning I would also love to know your charts and views in the comment section. Thank you
FX:XAUUSDEducation
by CRYPTOMOJO_TA
2
BIASES THAT EXPLAIN WHY TRADERS LOSE MONEYHello traders, today we will talk about WHY TRADERS LOSE MONEY BIAS WHAT IT MEANS… HOW IT INFLUENCES TRADERS Availability People estimate the likelihood of an event based on how easily it can be recalled. Traders put too much emphasis on their most recent trades and let recent results interfere with their trading decisions. After a loss, traders often get scared or try to get back to break even. Both mental states lead to bad trading quickly. After a win, many traders get over-confident and trade loosely. You must be aware of how you react to recent results and trade with a high level of awareness. Dilution effect Irrelevant data weakens other more relevant data. Using too many tools and trading concepts to analyze price could weaken the importance of the core decision drivers. I wrote about redundant signals and how to combine the right tools here: click here Gambler’s fallacy People believe that probabilities have to even each other out in the short term. Traders misinterpret randomness and believe that after three losing trades, a winning trade is more likely. The probabilities don’t change based on past results. Even after 10 losses in a row, the next trade does not have a higher chance of being a winner. Anchoring Overestimating the importance of the first available piece of information. Upon entering a trade, people set their whole chart and analysis in reference to their entry price and don’t see the whole picture objectively anymore. You must always have a plan BEFORE you enter a trade. Insensitivity to sample size Underestimating the variance for large and small sample sizes. Traders too often make assumptions about the accuracy of their system based on just a few trades, or even change parameters after only a few losers. A decent sample size is 30 – 50 trades. Do not alter anything about your approach before you have reached this number. And make sure that you follow the same rules to get an accurate picture of your trading within the sample size. Contagion heuristic Avoiding contact with objects people see as “contaminated” by previous contact. Traders avoid markets/instruments after having a large loss in that instrument, even when the loss was the fault of the trader. Hindsight We see things that have already occurred as more probable than they were before they took place. Looking back on your trades and fishing for explanations why the trade has failed, even though those signals weren’t obvious at the time. Do not change your indicator or setting after a loss to come up with explanations or excuses. Accept that losses are normal and always follow your plan. Hot-hand fallacy After a successful outcome on a random event, another success is more likely. Traders believe that once they are in a winning streak, things become easier and they can “feel” what the market is going to do next. I wrote about the hot-dand-fallacy in trading before: click here Peak–end rule People judge an event based on how they felt at the peak of the event. Traders look at a losing trade and only see how much they were in profit at the maximum, but don’t look at what went wrong afterwards. Do not change your reference point when in a trade and have a plan for your trade management and when to exit before entering a trade. Simulation heuristic People feel more regret if they miss an event only by a little. Price that missed your target only by a little bit, or a trade where you got stopped out just by a few points can be more painful than other trades. The outcome is out of your control and you cannot influence the price movements. The only thing you can do is manage your trade within your rules. Social proof If unsure what to do, people look for what other people did. Traders too often ask for advice from other traders when they are not sure what to do – even when other traders have a completely different trading strategy. You must take responsibility for your actions and results. And not rely on someone else. Framing People make decisions based on how it is presented; a gain is more valuable than a loss and a sure gain is more valuable than a probabilistic greater gain. Traders close profitable trades too early because they value current profits more than a potentially larger profit in the future. Cutting winners too soon is a huge problem. If this is an issue for you, reducing screen time can be helpful. Do not watch your trades tick by tick. Sunk cost We will invest in something just because we have already invested in it. before Adding to losing trades because you are already invested, even though no objective reason to add exists. You must define your stop loss in advance and then execute it without hesitation when it has been reached. Confirmation Only looking for information that confirms your beliefs, ideas and actions. Blanking out reasons and signals that don’t support your trade and just looking for confirmation. Especially when traders are in a loss, they only look for supportive information. Stay objective! Overconfidence People have a higher confidence than what their level of skill actually suggests. Traders misjudge their level of expertise and skill. Consistently losing traders don’t see that it’s their fault. Analyze your results objectively and get a trading journal to add even more accountability. Selective perception Forgetting those things that caused discomfort. Traders forget easily that their own mistakes and wrong trading decisions caused the majority of their losses. Do not blame the marjets, unfair circumnstances, your broker or any other outside event. You are the one who is responsible for making it work. It’s totally up to you and blaming others won’t help you make progress. Which bias is the one that is causing you the greatest troubles? What are you workin on right now? Let me know in the comments below and I will answer with tips and ideas on how to overcome your struggles. This chart is just for information Never stop learning I would also love to know your charts and views in the comment section. Thank you
NASDAQ:AAPLEducation
by CRYPTOMOJO_TA
4
The ABCD Pattern: from A to DHello dear @TradingView community! Are you familiar with the ABCD pattern? The ABCD pattern is a highly effective tool utilized in trading to identify potential opportunities across diverse markets, including forex, stocks, cryptocurrencies, and futures. This pattern takes the form of a visual and geometric arrangement, characterized by three consecutive price swings or trends. When observed on a price chart, the ABCD pattern exhibits a striking resemblance to a lightning bolt or a distinctive zig-zag pattern. Importance of the ABCD Pattern The significance of the ABCD pattern lies in its ability to identify trading opportunities across different markets, timeframes, and market conditions. Whether the market is bullish, bearish, or range-bound, the ABCD pattern remains a reliable tool. By recognizing the completion of the pattern at point D, you can get a perspective trade entries. Furthermore, the ABCD pattern helps you determine the risk-to-reward ratio before initiating a trade. When multiple patterns converge within the same timeframe or across different timeframes, it strengthens the trade signal and increases the likelihood of a profitable outcome. Finding an ABCD Pattern The ABCD pattern has both a bullish and bearish version. Bullish patterns indicate higher probability opportunities to buy or go long, while bearish patterns suggest opportunities to sell or go short. To identify an ABCD pattern, it is essential to locate significant highs or lows on a price chart, represented by points A, B, C, and D. These points define the three consecutive price swings or legs of the pattern: the AB leg, the BC leg, and the CD leg. Trading is not an exact science, so traders often employ Fibonacci ratios to determine the relationship between the AB and CD legs in terms of both time and price. This approximation assists in locating the potential completion of the ABCD pattern. When patterns converge, it increases the probability of successful trades and enables you to make more accurate decisions regarding entries and exits. Types of ABCD Patterns There are three types of ABCD patterns, each having both a bullish and bearish version. To validate an ABCD pattern, specific criteria and characteristics must be met. Here are the characteristics of the bullish and bearish ABCD patterns: 📈 Bullish ABCD Pattern Characteristics (buy at point D): To effectively trade the bullish ABCD pattern, you might consider the following characteristics: 1. Find AB: Identify point A as a significant high and point B as a significant low. During the move from A to B, ensure that there are no highs above point A and no lows below point B. 2. After AB, then find BC: Point C should be lower than point A. In the move from B up to C, there should be no lows below point B and no highs above point C. Ideally, point C will be around 61.8% or 78.6% of the length of AB. However, in strongly trending markets, BC may only be 38.2% or 50% of AB. 3. After BC, then draw CD: Point D, which marks the completion of the pattern, must be lower than point B, indicating that the market has successfully achieved a new low. During the move from C down to D, there should be no highs above point C. 4.1 Determine where D may complete (price): To determine the price level at which point D may complete, Fibonacci and ABCD tools can be utilized. CD may equal AB in price, or it may be 127.2% or 161.8% of AB in price. Alternatively, CD can be 127.2% or 161.8% of BC in price. 4.2 Determine when point D may complete (time) for additional confirmation: For additional confirmation, you can analyze the time aspect of the pattern. CD may equal AB in time, or it may be around 61.8% or 78.6% of the time it took for AB to form. Additionally, CD can be 127.2% or 161.8% of the time it took for AB to form. 5. Look for Fibonacci, pattern, trend convergence: Convergence of Fibonacci levels, pattern formations, and overall trend can strengthen the trade signal. Therefore, you should look for instances where these elements align. 6. Watch for price gaps and/or wide-ranging candles in the CD leg: As the market approaches point D, it is important to monitor for any price gaps or wide-ranging candles in the CD leg. These may indicate a potential strongly trending market, and you might expect to see price extensions of 127.2% or 161.8%. 📉 Bearish ABCD Pattern Characteristics (sell at point D): To effectively trade the bearish ABCD pattern, you might consider the following characteristics: 1. Find AB: Identify point A as a significant low and point B as a significant high. During the move from A up to B, ensure that there are no lows below point A and no highs above point B. 2. After AB, then find BC: Point C should be higher than point A. In the move from B down to C, there should be no highs above point B and no lows below point C. Ideally, point C will be around 61.8% or 78.6% of the length of AB. However, in strongly trending markets, BC may only be 38.2% or 50% of AB. 3. After BC, then draw CD: Point D, which marks the completion of the pattern, must be higher than point B, indicating that the market has successfully achieved a new high. During the move from C up to D, there should be no lows below point C and no highs above point D. 4.1 Determine where D may complete (price): To determine the price level at which point D may complete, Fibonacci and ABCD tools can be utilized. CD may equal AB in price, or it may be 127.2% or 161.8% of AB in price. Alternatively, CD can be 127.2% or 161.8% of BC in price. 4.2 Determine when point D may complete (time) for additional confirmation: For additional confirmation, you can analyze the time aspect of the pattern. CD may equal AB in time, or it may be around 61.8% or 78.6% of the time it took for AB to form. Additionally, CD can be 127.2% or 161.8% of the time it took for AB to form. 5. Look for Fibonacci, pattern, trend convergence: Convergence of Fibonacci levels, pattern formations, and overall trend can strengthen the trade signal. Therefore, you should look for instances where these elements align. 6. Watch for price gaps and/or wide-ranging bars/candles in the CD leg: As the market approaches point D, it is important to monitor for any price gaps or wide-ranging bars/candles in the CD leg. These may indicate a potential strongly trending market, and you might expect to see price extensions of 127.2% or 161.8%. 💜 We would love to hear your feedback! Did you find the article on the ABCD pattern helpful? We strive to provide valuable and informative content for traders like you. Your feedback is important to us as it helps us improve our articles and better serve our readers. Please take a moment to share your thoughts and suggestions. Did the article cover the topic comprehensively? Were the explanations clear and easy to understand? Is there anything you would like us to add or elaborate on? We appreciate your time and input. Thank you for being a valued reader, and we look forward to hearing your feedback!
Education
by Vestinda
11
WORLD'S TRADING TITANS: The Top 10 Traders Who Ruled the Market.This article is about the world of iconic traders. They've left a profound mark on the world of trading, inspiring countless traders with their strategies and insights. Jesse Livermore Jesse Livermore, often referred to as the "Great Bear of Wall Street," was a self-taught trader who started his journey at the age of 14 and became one of the most influential traders of his time. He made (and lost) several fortunes betting against the market during the 1907 Panic and the 1929 Crash. Livermore's trading strategy was heavily based on price movements and market psychology, rather than intrinsic value of companies. He was known for his supreme discipline, focusing on timing, price patterns and his well-known adage: “The big money is not in the individual fluctuations but in sizing up the entire market and its trend.” One of Livermore's core principles was the importance of letting the market, rather than emotions, dictate when to buy and sell. He believed in following the big market trend, also known as trend following. His rules around cutting losses quickly, letting profits run, and adding to winning positions are still religiously followed by many traders. Lastly, Livermore emphasized the importance of patience in trading. He famously said, "It was never my thinking that made the big money for me. It always was my sitting...Men who can both be right and sit tight are uncommon." This highlights the importance of waiting for the right opportunities and not overtrading, a lesson that remains relevant for traders today. Livermore's life serves as both an inspiration and a cautionary tale for traders, reminding us of the potential rewards and risks that come with trading. George Soros George Soros is a legendary trader known as "The Man Who Broke the Bank of England." In 1992, he bet against the British Pound, believing that it was overvalued relative to other currencies, notably the Deutsche Mark. His bet paid off, earning his fund an estimated $1 billion in a single day. Soros' trading style falls under a global macro strategy, which involves making large bets on economic trends in various asset classes like currencies, bonds, and commodities across the globe. His ability to detect significant changes in economic conditions and market sentiment, combined with an aggressive risk tolerance, contributed to his extraordinary profits. Central to Soros' approach is the concept of reflexivity, a theory he developed. Reflexivity posits that market perceptions can shape the underlying economic fundamentals, which in turn influence market perceptions, creating a feedback loop. According to Soros, markets are not always in equilibrium or accurately reflecting fundamentals, and these discrepancies can create lucrative trading opportunities. Soros has been a prominent figure not just in trading, but also in philanthropy and politics. His trading career serves as a testament to the potential of a global macro strategy and the importance of understanding both market sentiment and macroeconomic fundamentals when making trading decisions. Despite his success, Soros' strategy involves a high level of risk and requires deep knowledge of global economics, and thus may not be suitable for all traders. Paul Tudor Jones Paul Tudor Jones is one of the most successful traders in the world, known for his ability to navigate and profit from volatile markets. He gained fame after predicting and profiting handsomely from the 1987 stock market crash, a feat which earned him a legendary status in the trading world. Jones' trading style is predominantly macro, meaning he makes bets based on economic trends and events around the world. He trades in a variety of markets, including equities, commodities, currencies, and bonds, and is known for his versatility and adaptability. An avid user of technical analysis, Jones employs chart patterns, price movements and other analytical tools to identify trading opportunities. He combines this with a deep understanding of market fundamentals to create a comprehensive trading strategy. One of Jones' most well-known tenets is his focus on risk management. He is often quoted saying, "If you have a losing position that is making you uncomfortable, the solution is simple: Get out." This reflects his belief that protecting capital and managing losses is more important than chasing profits, a strategy that has served him well throughout his career. Jones is also known for his philanthropic efforts. He founded the Robin Hood Foundation, a charity that combats poverty in New York City. His story reminds traders of the importance of risk management, adaptability, and giving back to the community. Richard Dennis Richard Dennis, a commodities trader from Chicago, is a trading legend who rose to fame in the 1970s and 80s. Starting with a small loan, he quickly amassed a fortune, earning him the moniker "Prince of the Pit." But Dennis is perhaps best known for his role in a unique trading experiment that sought to answer an age-old question: Are traders born or made? Dennis' personal strategy centered on trend following - buying when prices increase and selling when they decrease, essentially riding the market's momentum. He believed that price, and how it changes over time, is the most crucial piece of information for a trader. To settle the debate on whether trading could be taught, Dennis and his partner William Eckhardt conducted the "Turtle Traders" experiment in the 1980s. They selected a group of individuals with no trading experience, trained them for two weeks using a simple set of rules based on trend following, and then provided them with money to trade. The experiment's results were astounding. Over the next four years, the Turtles earned an average annual compound rate of return of over 80%. This proved Dennis' theory that anyone could learn to trade, given the right system and discipline to follow it. Dennis' story is a powerful reminder that successful trading is not just about inherent talent but also about discipline, a well-defined strategy, and the ability to follow that strategy consistently. Stanley Druckenmiller Stanley Druckenmiller is a highly respected figure in the world of trading, known for his impressive track record and his role in some of the most legendary trades in history. As a fund manager for George Soros, Druckenmiller was instrumental in the trade that "broke the Bank of England," earning a profit of $1 billion. Druckenmiller's approach to trading is top-down, which means he first considers macroeconomic factors and themes, and then identifies the best investments within that context. He is not averse to placing large, concentrated bets when his confidence in a trade is high. This approach requires a deep understanding of economics, keen intuition, and a high tolerance for risk. Risk management is an essential aspect of Druckenmiller's strategy. He is known to go all in when he's confident in a trade, but he is also quick to exit a position when he realizes he's made a mistake. As he often says, "The first thing I heard when I got in the business...is bulls make money, bears make money, and pigs get slaughtered. I'm here to tell you I was a pig." Druckenmiller has an impressive ability to make bold and accurate market predictions. For instance, he successfully predicted and profited from the dot-com bubble's burst in 2000, and later, the financial crisis of 2008. While his aggressive style and remarkable intuition might not be replicable by every trader, Druckenmiller's story underscores the importance of understanding macroeconomic themes, being confident in your convictions, and the crucial role of risk management in trading. Ray Dalio Ray Dalio, the founder of Bridgewater Associates, one of the world's largest and most successful hedge funds, has left an indelible mark on the world of finance with his innovative approach to investing and risk management. Dalio pioneered the risk parity strategy, which aims to balance the allocation of risk, rather than the allocation of capital, in a portfolio. His "All Weather" portfolio, designed to perform well across various economic environments, is a prime example of this strategy. It is diversified across different asset classes such as stocks, long-term and intermediate-term bonds, and commodities, designed to balance risks of inflation, deflation, and economic growth. Dalio believes that economic events and market behavior are cyclical, a concept he outlines in his book "Principles." Understanding these cycles, according to Dalio, is key to making successful investment decisions. He combines these economic principles with a fundamental and quantitative analysis to make his investment decisions. Dalio also champions the idea of radical transparency in the workplace, arguing that open and honest communication leads to better decision-making and helps avoid persistent problems. He applies this philosophy to his own investment process, using a systematic, rules-based approach to decision-making that reduces the role of emotions and subjective judgment. Dalio's approach underscores the importance of diversification, understanding macroeconomic principles, and systematic, rules-based decision-making in investing. While Dalio's strategies might require a high level of understanding and are not suitable for all investors, his principles and methodology offer valuable lessons for investors of all levels. Ed Seykota Ed Seykota is a trading legend and pioneer of systematic trading who used computerized systems to follow price trends long before such practices were commonplace. Notably, he turned $5,000 into $15 million over 12 years, proving the potential of trend-following strategies. Seykota's trading methodology is deeply rooted in the principles of trend following. He believes in going with the flow of the market, buying when prices are increasing, and selling when prices are decreasing. Seykota’s approach was to identify long-term trends and then take positions in those directions, riding them for as long as they remained intact. Seykota is also known for his emphasis on psychology and personal discipline in trading. He often stresses the importance of understanding one's emotional responses to gain and loss, and managing those feelings effectively to make rational trading decisions. Seykota famously said, "Win or lose, everybody gets what they want out of the market." Moreover, Seykota is a strong advocate of risk management. He believes that managing risk is a key element of long-term success in trading. He often talks about setting stop-loss levels and adjusting them according to market movements to protect his portfolio from significant losses. Seykota's story offers key lessons in the power of trend-following strategies, the importance of psychological discipline, and the crucial role of risk management in trading. Despite the sophistication of his methods, the core principles behind Seykota's success can provide valuable guidance for traders of all levels. Linda Bradford Raschke Linda Bradford Raschke, a prominent figure in the trading world, is known for her technical and fundamental analysis of the futures and equities markets. With a trading career spanning over three decades, Raschke's success underscores the importance of consistency, discipline, and a thorough understanding of market dynamics. Raschke's approach to trading is methodical and rule-based. She uses a mix of chart patterns, indicators, and market cycles to guide her trading decisions. One of her best-known strategies is the "Holy Grail" setup, which combines a moving average with the ADX indicator to identify potential breakouts in the market. In addition to technical analysis, Raschke pays close attention to market fundamentals. She believes that while patterns and indicators can signal trading opportunities, understanding the underlying factors driving market movements is crucial to making informed decisions. Raschke also emphasizes the importance of discipline and risk management. She believes that sticking to a well-defined trading plan, and not letting emotions influence trading decisions, are key to successful trading. As she often says, "Discipline is the ability to sit and wait." Raschke's experience reminds us that successful trading requires a mix of technical knowledge, a deep understanding of market dynamics, and a strong sense of discipline. Whether you're a novice trader or a seasoned veteran, Raschke's approach offers valuable insights. Michael Steinhardt Michael Steinhardt, the founder of Steinhardt, Fine, Berkowitz & Co., is one of Wall Street's most successful hedge fund managers, known for producing remarkable annual returns over a 30-year career. His aggressive, contrarian approach to trading has left a lasting impact on the industry. Steinhardt's approach is characterized by a philosophy he calls "variant perception." He believes in making investments that are contrary to prevailing market views, often taking high-risk positions that other investors shy away from. His ability to spot opportunities where others see none, backed by deep analysis, has been a crucial part of his success. Steinhardt's investment decisions are informed by a comprehensive understanding of macroeconomic factors, as well as a thorough analysis of individual companies and sectors. He holds both long and short positions in a variety of asset classes, demonstrating a remarkable ability to navigate a wide range of market conditions. Risk management is also central to Steinhardt's approach. He is known for taking large positions in his high-conviction ideas, but he also keeps a keen eye on the potential downside and is swift to cut losses when a trade doesn't go as planned. Steinhardt's story underscores the importance of deep research, conviction, and risk management in trading. It also highlights the potential of contrarian investing strategies for those willing to buck the trend and take on higher levels of risk. Remember, however, that such strategies require deep market understanding and are not suitable for all traders. Jim Simons Jim Simons, the founder of Renaissance Technologies, is a unique figure in the world of trading. With a background in mathematics and a deep understanding of code-breaking from his time as a code breaker during the Vietnam War, Simons has pioneered the use of quantitative trading strategies, achieving extraordinary success. Simons' approach to trading is fundamentally different from many of his peers. Instead of relying on traditional methods of analysis or macroeconomic insights, Simons employs complex mathematical models to uncover patterns in price data that are invisible to the human eye. His fund, the Medallion Fund, is famous for its consistent high-performance, with an average annual return of 35% after fees since 1988. Quantitative trading, or "quant trading," relies on powerful computers to process massive amounts of data and execute trades. This approach requires deep knowledge of mathematics, statistics, and computer science, and it stands as a testament to the potential of using technology in trading. At the heart of Simons' strategy is the belief that markets have more in common with the chaotic, unpredictable world of natural phenomena than they do with the logical, rational models of traditional economics. This realization led him to apply mathematical concepts to financial markets, with remarkable success. Jim Simons’ approach, while highly complex and require significant expertise, shows us the power of mathematics and technology in understanding and capitalizing on financial markets. His story also highlights the potential for innovative, unconventional thinking in trading. That wraps up our highlight of the top 10 traders who've revolutionized the trading world with their strategies, innovation, and sheer tenacity. But trading is ever-evolving and there are countless talented individuals out there. Who do you think should be on this list and why? Share your thoughts, let's spark a conversation. Stay tuned for more educational content and subscribe to our page if you enjoy our educational materials.
CBOE:VIXEducation
by financialflagship
TYPES OF CURRENCY PAIRSWhen trading Forex, it is essential to know about the different types of currency pairs, as some pairs are much riskier to trade than others, especially for those with minimal trading experience. Major Currency Pairs Before we discuss major currency pairs, we should first list the major currencies individually. The eight major currencies are: US dollar (USD) Euro (EUR) British pound (GBP) Japanese yen (JPY) Swiss franc (CHF) Canadian dollar (CAD) Australian dollar (AUD) New Zealand dollar (NZD) As listed above, there are eight major currencies but there are only seven major pairs because a major pair includes the U.S. dollar. Major pairs are the most traded currency pairs on the forex market. They account for the highest average trade volume and have the most liquid markets, as well as the lowest risks and spreads offered by brokers. The seven major currency pairs are: EUR/USD – Euro / US dollar GBP/USD – British Pound / US dollar USD/JPY – US dollar / Japanese yen AUD/USD – Australian dollar / US dollar USD/CHF – US dollar / Swiss franc USD/CAD – US dollar / Canadian dollar NZD/USD – New Zealand dollar / US dollar Note that AUD/USD and USD/CAD are sometimes also referred to as commodity currencies. Minor Currency Pairs Minor currency pairs (also known as cross pairs or crosses) always include two major currencies but not the U.S. dollar. Crosses are not as popular and as highly traded as the major pairs. This means they can be riskier than a major pair and will attract wider spreads from brokers. Their liquidity can also be low at times, presenting a challenge for inexperienced traders in a thin volume environment. Here are a few examples of minor currency pairs: EUR/GBP – Euro / British pound EUR/JPY – Euro / Japanese yen GBP/JPY – British pound / Japanese yen AUD/NZD – Australian dollar / New Zealand dollar NZD/JPY – New Zealand dollar / Japanese yen GBP/CAD – British pound / Canadian dollar Exotic Currency Pairs Exotic currency pairs consist of a major currency paired with a currency from a developing and emerging nations as well as certain developed nations. These currency pairs trade in a far less liquid market compared to the majors and minors as they are traded less frequently. This causes their spreads to be much higher than those of the major and minor pairs. Here are a few examples of exotic currency pairs: EUR/TRY – Euro / Turkish lira USD/ZAR – US dollar / South African rand AUD/MXN – Australian dollar / Mexican peso USD/HKD – US dollar / Hong Kong dollar NZD/THB – New Zealand dollar / Thai baht CAD/NGN – Canadian dollar / Nigerian naira Risks and Spreads Major currency pairs have the most liquidity and as a result, attract lower spreads, whilst minor and exotic pairs are much riskier and attract wider spreads. Liquidity & Volatility Due to high liquidity in the major currency pairs market, they are consistent and predictable, whilst minor and exotic pairs can be volatile and extremely unpredictable at times. Please also see images below for visual examples of the difference in price behaviour of the different pair types. MAJOR PAIR & CROSS PAIR MAJOR PAIR & EXOTIC PAIR CROSS PAIR & EXOTIC PAIR Which is the best currency type to trade for new traders? We will be a posting an educational article on this in the future delving into details regarding this question. Trade safely and responsibly. BluetonaFX
Education
by BluetonaFX
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