REN/USD Main trend. Accumulation 637. Distribution 637.Logarithm. Time frame 1 week. The main trend.
The psychology of accumulation and distribution zones.
The graph shows and describes the logic of work in the accumulation and distribution zones of large and small market participants (fuel). Coin as an example. It's always the same. But, always those who are “market fuel” are sure: "This time it will be different. But, no miracle happens. It's always the same. “Market fuel” changes cycle after cycle.
Most people's memories are short. Many people think they're special, or the timing is wrong... but it's always the same. In distribution, they willingly buy expensive. In the accumulation on the contrary, afraid, waiting lower, lower and so on...
Project and News
Ren is an open protocol that allows value to move between blockchains.
RIP-000-018: Financing Ren 2.0 and the Ren Foundation
Early last year, Alameda acquired Ren in partnership with Ren's previous management to provide long-term development funding.
Also, after the story with Alameda (scam, trial) in the network REN 1 will be shut down (waiting for the right moment according to the general market trend), the new network REN 2 will be launched. Read more on the project website itself (read between the lines).
ICO price 02 2018
ICO: 17200 REN = 1 ETH.
Now the price of ETH is about $ 1200, therefore, the price of the ICO in conversion to USD will be REN 0.069, which is slightly lower than the current price of 0.063
Linear graph
Secondary trend. Time Frame, 3 days.
The secondary trend is distinctly downward. A downward wedge is forming.
From the peak, the price decreased by -95% at the moment. This is very much, but if you consider the inadequate pumping of +11,000%, it is normal.
Think about it, the distribution has been 1.76 years. Many people got used to the “stable” price for such a long time and over time were no longer afraid to buy “cheap” because from the support of the distribution pumped by a significant % repeatedly. Also note that the accumulation and distribution over time of duration are identical.
I showed the maximum local pumping from the key support zones when the wedge is broken, i.e. the exit from the downtrend. Let me remind you that at the moment the trend has a pronounced downtrend.
You can work positional trading from the average buy/sell price of the medium/long term, or you can wait for the price to exit a downtrend, that is, to exit a wedge with significant buyer volume.
In order to understand further work, and the potential, figure out what manipulation REN1 - REN2 coin holders want to do.
Tutorial
SUPPLY AND DEMAND LEVELS How do we determine the levels of supply and demand on a chart?
To find supply, we will look at the highs of price movements, and to find demand, we will look at the lows. We need to note highs and lows with fast and strong price movements. Fast rises for demand and troughs for supply. The less the price stays at a level the better for us. The first thing we need to do, just like when marking support and resistance levels, is to look at the highs and lows on the charts. Note that the closest area to the current price has been tested on the chart below. And the lower one has not been tested yet. It has only been touched by price once, so this area is stronger than the one that has already been tested.
At the marked levels, we observe that the price was at them for a short time. It reversed almost immediately and went down with large candles. The important factor here is the time that the price "did not stay" at the level. The less time the price was on the level, the more significant this level is. And it is worth keeping in mind the size of the candles. The bigger these candles are, the stronger the reaction.
In addition, supply and demand levels become mirrored. Just like support and resistance. If we pay attention to the highlighted area on the UKOIL chart below, we can see that there was first supply and then a strong breakout. The price overcame the supply, took its remain orders and went higher. And now this area has become a demand area:
As you can see, there was a quick bounce from it here. Our goal is to determine the demand at the low levels and the supply at the peaks. We find strong and fast price movements on the chart. A rise for demand and a fall for supply. These should be big candles and the price should not crowd in one place for a very long time. There should not be a long retracement. The less the price spends on the level, the better.
In addition, pay attention to round levels. Such as 1,100; 1,500; 1,300 and so on....
Do not go back too far on the chart, because what happened on it earlier is not so important for the methodology of supply and demand levels. These are not support and resistance levels after all. And once again I want to repeat to you that the most important thing is that these levels should be visible not only to you, but also to other players. In order for them to work them out.
What happens at these levels and why do they work?
At these demand levels, large players place limit buy orders, and at supply levels they place sell orders. Why does this happen? Because at these levels it is easier for the large players to execute the order by collecting the positions of smaller players. Every time the price reaches the supply area, we have sell orders executed by the big players. They take the buy orders that other players open and use them to execute their sell orders. When the buy orders run out, the price falls again. When it rises to the same level again, many sell orders of the big players are executed again with the help of stops and buy orders of smaller traders. When the opposite orders run out, the price falls again.
The point is that a large position cannot be opened simply without a significant change in price. That is why big players, banks, market makers have to play around and set some kind of traps for other traders in order to open larger positions at their expense. Now let's look at this area of the supply:
It was a supply level, but on two occasions many sell orders of big players were executed on it. On the third time, as you can see, there were no big players left, so the price decided to break this level and went higher. From this we conclude that supply tends to run out, just like demand. Once it is over, there is nothing to stop the price from breaking this level and going higher.
Therefore, it is considered that for profitable trading the supply and demand levels are suitable only for the first time, when the price has just touched the level. Then we can sell or buy on the retest of the level. But when the price comes back to it again (for the third time), we should not enter the trade it, as the breakout is very likely.
I should note that a higher candlestick maximum does not always mean that a new supply area has been created. And a lower low does not mean that a new area of demand has been created. It can be just a spike, a trace from the execution of a large number of orders.
In this trade, it is worth paying attention to higher time frames. If you trade on H4, look at daily and weekly charts. So that your buying on H4 does not fall into the supply area on the weekly charts. Use multiple timeframes in your trading and don't forget to look at the level on the higher timeframes.
WHAT IS EXPECTATION IN TRADING✴️ What is expectation in trading?
Every trader should be familiar with the concept of mathematical expectation, we will briefly discuss this aspect again. Take a look at the figure above. In the end, the total net profit (or loss) comes from both the frequency of profitable and losing positions (however many there are) and their average size. The goal of any market analysis, any strategy, is to try to have more profitable trades (and therefore fewer losing trades). And while entry point analysis can have its advantages, at the end of the day, we can't predict the future.
The average size of profitable and losing positions, on the other hand, gives us much more information and, in fact, a very large degree of control. For if we take a risk in our position of, say, three percent, our average loss will not exceed minus three percent. And the only thing we have to do for that is to close positions when the risk gets to three percent or less. No forecasting or analysis is needed at all. Similarly, we can also increase the average size of our profitable positions by simply holding them (i.e., not closing them) and adding to them (i.e., opening more positions in that direction) as they bring us large profits. So, in the end, it's all about minimizing losses and maximizing profits. Going back to the figure above, this means we should focus on the mass of weights.
Being profitable in trading over the long term, comes down to minimizing losses and allowing profits to grow. It's not about whether you act right or wrong - it's about how you manage your profits and losses.
✴️ Problems with mathematical expectation
Mathematical expectation isn't hard to understand. And to help understand it, very simple analogies are often used, such as gambling: dice, roulette, or even the lottery. Thanks to expectation, it is easy to prove that all such games are ultimately losers if played for quite a long time.
And here we come to the heart of the problem. The concept, or you could say the myth of "expectation of one's system". A more popular term for traders is "edge". Legend has it that you should have positive expectations of your trading system. But this is a futile endeavor because, unlike gambling, the system may not have, and probably does not have, a consistent percentage of profitable positions. After all, markets do not move randomly. Thus, in financial markets, we only know our historical frequency of profitable and losing positions, unlike in a dice game where we also know the upcoming expectation.
The myth that we need to have positive expectations of our system before trusting it with our money has dire consequences. It feeds the belief that you need to have an edge (in terms of math expectation) to be profitable in the long run. It also feeds the unhelpful need for backtesting. Any system that has negative expectations and is naturally backed up by backtesting is discarded. Good systems are criticized because they may be out of sync with the markets for a while, i.e. not profitable for a while. And it comes down to adjusting the yield curve on historical data, i.e. over-optimization.
What do traders do in search of a system with positive expectations? The same thing: they do not take into account the probability distribution in the measurement domain. And if Nassim Nicholas Taleb's Black Swan has taught us anything, it's that we simply can't do that.
We can't apply measurements beyond the interval in which those measurements were made. And we certainly have to realize that we have to look at expectations as a whole. It is precisely not the probabilities that are killing us, it is the outcomes. And once again, even probabilities (and perhaps similar distributions) are not stable in financial markets. Markets are chaotic, fractal in nature, with exponentially changing behavior (and not always).
✴️ What can we do to improve our mathematical expectation?
The good news is that when a trader starts thinking with his head instead of relying on expectations, he/she doesn't have to do anything to his "system". Trading expectations (as opposed to expectations of one's system) is simply using the knowledge that we have much more control over the size of our profit/loss (average size of profitable and losing positions) than we have over probability (frequency of profitable and losing positions). And, because we don't focus on historical expectations, trading expectations can work for us. By keeping losses small and increasing our profits (and adding to profitable positions), we gain true advantages.
The following experiment was conducted: the simulator opened random positions, from which the expectation and net profit were calculated. This model averaged several million sets of 30 long positions during a bear market. The average net loss was -12 percent; only about one-third of all positions were profitable. Now, by simply opening the same positions, cutting the losses to minus three percent (using a stop loss) and at the same time adding to the profitable positions, we achieved an average net result for the same positions of 1.8 percent profit (on average in a falling market). So, by using expectations in our favor, we actually changed the values of expectations! Traders who believed that initially negative expectations were useless would never have been able to do this because they had abandoned the system from the start.
This doesn't mean that losses can be turned into profits exactly, but in the long run expectation works by closing out losing positions and adding to profitable positions. But when looking at the possible history of trades on the chart in the past, traders are often fooling themselves. Thus, none of the trading systems are either profitable or unprofitable, they look that way only in relation to the method of position size management and money management applied.
✴️ Conclusion
To summarize, it is one thing to see how a forex strategy has behaved in history, but to expect it to behave the same way in the future is another. Traders should focus less on testing on history and more on the current situation: to cut losses and even more on maximizing their profits and adding to profitable positions. Follow this rule long enough and you will experience the true power of mathematical expectation in Forex trading.
Signal Providers: Red Flags to Watch Out ForSignal providers are becoming increasingly popular among traders, offering automated trading recommendations or strategies to take advantage of forex. However, it is important to be aware of potential red flags that may indicate that a signal provider is not trustworthy. In this post, we will look at some of the most common "red flags" that signal providers can exhibit and how to recognize them. We'll discuss when to be suspicious, what to look out for, and how to avoid being scammed by signal providers.
Unrealistic returns
One of the most common red flags to look out for when researching signal providers is unrealistic claims about future returns. If they promise huge returns with no risk and little investment, it could be a sign that they are not being honest and realistic about the strategies they offer. Always do your own research to ensure that the results claimed by the signal provider are accurate and that you are getting a fair deal. These can be third party marketplaces that help verify trades.
Hidden charges
Be aware of any hidden costs or fees that the provider may charge. Many providers may advertise low rates or free services, but they may hide additional costs or fees that will be charged after a period of time. Be sure to read the terms and conditions carefully to understand what fees may be associated with the service. You should also contact customer service to see if there are any additional costs or fees that you have not considered.
Competing interests
Be wary of signal providers that have potential conflicts of interest, such as those that receive commissions from the trades they recommend. This can lead to biased recommendations and put your money at risk. Only use providers that have no conflict of interest and are unbiased.
Inadequate customer service
Signal providers with poor customer service should also be avoided. If a provider is unresponsive or unwilling to answer your questions, it could be a sign that they cannot be trusted. In addition, signal providers that do not provide adequate support to their customers can be a red flag. If you are being ignored for a long time, there is a high probability that you have been scammed for money.
Lack of personalization
If a signal provider does not offer any customization options for their strategies, it could be a sign that they do not provide personalized services. Always go for those providers who are willing to customize their strategies to suit your individual needs.
Insistent demand to deposit your money
Finally, look out for those providers who are pressuring you to fund your account immediately. These are big hints of unclean services. If they use aggressive sales tactics or make unrealistic promises, it could be a sign that they are not trustworthy. Always do your own research and make sure you understand all the risks and benefits of different investment options before depositing money. For example, you buy a subscription signal provider after a few days you are charged extra money for 100% utilization of the service.
By understanding the red flags that signal providers may show, you can be sure to protect yourself from potential scams and fraud. If you have any doubts or concerns, be sure to do your own research and only use providers that you trust. Be sure to watch out for warning signs that may indicate a possible fraud or scam. These include, but are not limited to: if the provider asks for your banking information, if the provider asks for your social security or credit card numbers, if the provider asks for your personal information or money in an unusual or too random way. Run away from such signal providers.
📈Mastering Forex Trading: Your Ultimate Trade Checklist📉
✅Entering the forex market can be an exciting and potentially profitable endeavor. However, it requires careful planning and diligent decision-making to succeed. One essential tool to streamline your trading process is a trade checklist. In this article, we will guide you through the creation and effective use of a trade checklist, providing practical examples along the way.
📌Preparing for a Trade:
Before you pull the trigger on any trade, it's crucial to conduct thorough analysis and set clear objectives. Ensure your trade checklist includes the following elements:
▪️Identify the Market Trend: Determine the overall direction of the currency pair you wish to trade. Consider using various technical indicators, such as moving averages or trend lines, to confirm the trend.
▪️Define Entry and Exit Criteria: Set precise entry and exit points to minimize emotion-driven decisions. Identify key levels of support and resistance, and determine the minimum risk-to-reward ratio you deem acceptable.
📌 Risk Management:
A robust risk management strategy is fundamental to long-term success in forex trading. Incorporate the following risk management elements into your trade checklist:
▪️Determine Position Size: Calculate the appropriate position size based on your risk tolerance and account balance. Consider using tools such as position calculators or risk/reward ratio formulas.
▪️Set Stop Loss and Take Profit Levels: Define stop loss points to protect your capital from excessive losses and specify take profit levels to lock in profits once your target is reached.
📌Trade Execution:
Executing a trade swiftly and accurately is vital. Include the following checklist items to ensure consistent and disciplined execution:
▪️Double-check Parameters: Before placing a trade, review all the crucial parameters, including currency pairs, position size, entry and exit levels, and stop loss/take profit points.
▪️Timing Considerations: Be aware of upcoming economic releases, news events, or major market sessions that may impact your chosen currency pair, and adjust your trade execution timing accordingly.
💹Conclusion:
By incorporating a trade checklist into your forex trading routine, you can significantly enhance your decision-making process and overall trading performance. Remember to adapt your checklist to align with your personal trading style and preferences, continually evaluate its effectiveness, and make necessary improvements. Successful trading is a result of thorough planning, disciplined execution, and a continuous desire to learn and optimize your approach.
☺️I hope this post was helpful to some of our beginner traders😊
Dear followers, let me know, what topic interests you for new educational posts?
Mastering Elliott Wave: The importance of channelingI wanted to share my thoughts on the significance of using channeling technique in Elliott Wave theory when analyzing charts.
To begin, we draw what we call a "base channel," starting from the beginning of wave 1 and extending it to the end of wave 2. This initial channel provides us with a foundation for analysis.
The following occurrence of an impulsive breakout beyond this channel signals the initiation of wave 3. At this point, we create a new "Acceleration Channel" to track the movement of wave 3. If this newly drawn channel is breached to the downside, it suggests the possibility of a correction for wave 3 underway.
As seen in the picture, the original base channel we drew earlier now acts as a support level for wave 4, accompanied by consolidation around Fibonacci levels. This observation has been witnessed numerous times in the past.
When the corrective channel experiences a breakout with above-average volume, it serves as a signal indicating the completion of wave 4. This event provides an opportunity for us to establish Fibonacci targets for profit-taking.
In this particular example, I have chosen to draw the corrective channel only on the final leg of the ABC correction, enabling us to catch the breakout at an earlier stage. A more conservative approach, however, would involve waiting for the breakout to occur after wave B has been surpassed.
Hope this was helpful for those wanting to learn more about channeling and Elliott Wave.
THE J-CURVE EFFECTHello traders. In today's post, we will look at such a concept as the J-curve. This curve is found in various fields and can visually represent various phenomena. However, today we will look at the J-curve as a phenomenon of trading. In the post, you will learn what a J-curve is and what its essence is.
According to Investopedia , the J-curve is a trendline that illustrates a sharp gain after an initial decline. This pattern of movement looks like a capital "J" on a chart. The J-curve is useful for displaying an event or action's impact over a certain amount of time. Frankly, it demonstrates that problems will worsen before they get better.
Let's remember how we started our journey into trading. We used to open trades with enthusiasm. The psychology of trading, oddly enough, was close to perfect. You start to get “good” at it. Sometimes the luck goes your way and you make money on a particularly good week. Things keep going. Until you blow your capital. And then another. And then another one. What seemed to be working somehow stops working. You decide to be smarter and win back by doubling the lot size each time. Or you open two trades, one up and one down. Sometimes it works, but at the end of the month your losses drained your account, and you lost substantial amount of money. The descent down the curve has begun.
Then you decide to find a "more profitable strategy" for trading and at this point you are at a drawdown. Maybe you have spent months on this, or maybe a week was enough to realize that it's not that simple. It seems that there is no way to do without studying. And if you want to make money on it steadily, and not to make money on gambling to immediately lose it again, you need to study something.
After several lost accounts, you never really got anywhere in the end. You are depressed. All that information, indicators, candlesticks, bars, patterns, books, courses, webinars, paid and free advice, trader chat rooms and YouTube channels, all this only led to the fact that you, a year later, lost even more money.
You often experience fear. You are scared to open the chart, scared to look at how the price is going, whether the prediction will come true or not. It is so scary that after opening a trade you sometimes close the browser or terminal window just to avoid looking at it. In some moments of despair absolutely you do not understand anything. All of this is some kind of mess, complete nonsense.
According to statistics, more than 60% of traders give up in the first 3 months and leave with an enormous hole in their wallet. After a year, another 30% will give up. Only 5-10% remain in the market after a year, and not all of them will get a stable profit in the following years.
This is the bottom of the J curve and at this point you are in crisis, which for most will be catastrophic. But still, something keeps you from giving up. You continue to waste time and money trying to learn. You lose a couple more accounts. It's a big hole in your pocket. But gradually the losses diminish until they stop completely. You are tired of losing money by haste, in a blind game with the market.
You learn to work with drawdowns. You know, it's because of trying to get back money that there were so many impulsive trades. So many trying to see a trend where there is no trend. You have too often gone into a trend time after time in the belief that it will continue. You constantly bet on a reversal of the price, and it never thought to turn.
You try hard to build your strategy and gradually come to a system consisting of several elements, which shows better results than other options. It still constantly gives unsuccessful trades, but you no longer want to break the monitor with your fist. Suddenly it becomes clear it's all about trader discipline and time management. It's about stability and consistency. The fact that you know how to behave not only in case of profit, but also in case of loss. You learn how to psychologically cope with failures. You realize that it is the uncontrollable desire to recover the numbers on the balance that most often led to disaster.
You have already bounced off the bottom of the J curve and are slowly climbing up. You are not a consistently profitable trader yet, but you are making much effort to become one. Sometimes there is nothing interesting on the chart for a week. Sometimes you work cautiously for a month or more, spending 90% of your time waiting for the right market conditions. The account is still standing still. Sometimes for months. You're increasing it, then you're back to the original amount. You realize things are going pretty well. You haven't lost any money at all in the past month. You at break even point on the J-curve.
At some point, you are surprised to notice that you are increasingly successful in profitable trades despite regular failures. Time is going by. The account begins to increase steadily. The first month was a small profit. Second. Third. You are at the highest point of the J-curve. Exponential growth.
So, what brings traders success? Trading is a business, and like any business or startup, things don't go smoothly at the beginning. That's why you have to survive before you thrive. The number-one key element is effort—trying to improve every day. Backtesting the strategy to make it suitable for you. Journaling your trades and emotions and all of these, of course, takes time. The more time you put into it, the faster you will get to the break-even point. You need to invest money in your trading education. Maybe it's a course or book. Or backtesting tool that will accelerate learning curve and improve your trading skills. The combination of these three elements creates success ( TIME + EFFORT + MONEY = SUCCESS ). If you take one of these out of the equation, the learning process may slow down. Some traders become profitable after 5–10 years, some after 12–18 months. All depend on balancing the equation.
How To Add Drawings To Your ChartIn this Tradingview basics video I'm going to show you how to add drawings to your chart using the options available on the left-side rail.
We'll look at not only what the options are, but the benefits of using "stay in drawing mode" as well as how labeling specific tools as "favorites" can save you time when marking up the charts.
If you have any question, comments, or subjects for future "Tradingview Basics" videos please leave them below.
Until next time, "Plan Your Trade, Trade Your Plan"
Akil
PRICE ACTION: ENGULFING PATTERNIn this post we will analyze the Price Action engulfing pattern, one of the main candlestick patterns, which traders appreciate for its reliability and high percentage of success rate. Confirmed by other factors (key levels, indicator signals, fundamental preconditions), the engulfing pattern can become an effective tool for gaining profit.
✴️ What Does This Pattern Tell Us?
The engulfing pattern (outside bar) is mostly a reversal pattern (although in most cases it can also indicate a trend continuation). It looks like two candles, the first of which is small in size, and the second is a large candle with a body larger than the entire previous candle and directed in the opposite direction.
From the point of view of the crowd movement, this pattern means that the strength of the current trend is running out (as evidenced by the small size of the first candle being engulfed). The crowd does not know in what direction to move and, figuratively speaking, is treading on the spot. The appearance of a powerful candle, which absorbed the previous one and closed in the opposite direction, marks the beginning of a new, strong trend.
The example above shows that the bears, having failed to find support, stopped the downward movement, after which the bulls, having organized an impulse in the price growth, collected stop losses of traders who opened positions on the downside, when the price was still moving downward by inertia at the beginning of the reversal candle formation. After the reversal and knocking these traders out of the market, the bulls finally strengthen and a powerful uptrend is formed.
There are several mandatory conditions that a pattern must meet in order for its signal to provide the maximum probability of working out:
1. There must be a downtrend or uptrend in the market before the pattern itself. The movement can be small, but its presence is necessary.
2. The body of the second candle must be of a different color and direction (bearish after bullish and bullish after bearish). Shadows may not be engulfed, but then the signal is considered weaker.
3. The body of the second candle should have a contrasting color to the body of the first candle. The exception is when the body of the first candle is very small (doji).
In addition to the basic rules of determining the pattern of the outside bar, there are other important nuances, taking into account which traders are more likely to increase the efficiency of their trading. It is worth avoiding trading in flat conditions. In a sideways movement, engulfing patterns are quite common, and if you trade each of them, you can get a lot of losing trades. A reversal pattern implies the presence of a trend. If you open a position on the signal of the outside bar only after a clear movement, the number of false entries into the market will be significantly reduced, respectively, the overall percentage of profitability of trading will increase. It is necessary to take into consideration the overall market situation before opening a trade, it is necessary to evaluate what happened to the price of the asset earlier.
✴️ Trading Engulfing Pattern
If all conditions are met and the signal is strong enough, you can enter the market. Let's consider how exactly trading on the outside bar is conducted. It is better to enter a trade on the engulfing pattern by a pending stop order. It is placed a few points above the maximum of the bullish signal candle, or a few points below the minimum of the bearish candle. The breakout of the signal candle will confirm the market reversal and the validity of the open position.
✴️ Setting Stop Loss
There are two ways of placing stop losses when trading the pattern. At the extreme of the signal candle (a few pips above the high of a bearish candle or below the low of a bullish candle). On the ATR indicator (the indicator value is multiplied by 2 and the stop loss is placed on the received number of points from the pending order). Setting a stop on the ATR is considered optimal, although it often coincides with the extremum of the signal candle.
✴️ Take Profit
There are also several variants of take profit setting:
By the ratio of 3:1 or more to the stop loss;
By key levels. The ratio of 3:1 provides a positive mathematical expectation, but this method has no connection to the real market situation, and therefore is less effective. Taking a take profits at levels is optimal, because in this case the probability of price reaching the target and profit fixation increases. When placing a TP on a key level, a take/stop ratio of less than 3:1, but not less than 1:1 is acceptable.
✴️ Examples of Trading by Engulfing Pattern
For an example, let's consider a trade on the 4-hourly chart of USDCHF. After a bullish trend, engulfing pattern was formed at the confluence level: a bullish candle engulfed the last small bearish candle, and the signal bar itself was larger than the previous ones. On this signal a buy stop order was placed to buy above the maximum of the engulfing candle. Stop Loss was set by ATR indicator (parameter 0.0010) at 20 pips from the order, TP was set near the key level at 30 pips from the order (the R:R ratio is almost 2:1). The pending order was activated by the next candle, and the price went up. A few hours later the trade was closed at take profit.
The next trade was opened to buy EURUSD, also on 4-hourly. All conditions were met: we had bullish trend, a powerful full-body bullish candle that engulfed and closed above previous candles. A pending buy stop order was placed couple of pips above the candles high. Stop Loss was set the candle low, take profit at the nearest psychological level. The R:R ratio turned out to be 2:1, which is good.
✴️ Conclusions
There are several factors to consider when trading Price Action. Candlestick patterns provide a guide to action, but the main trend and price levels should not be overlooked. The pattern itself should always have a support point. Such a comprehensive assessment will help to avoid knowingly false entries, and the habit of a calculated approach is only for the better.
HOW TO EFFECTIVELY BACKTEST TRADING STRATEGYWhy Backtest Trading Strategies?
The idea of strategy backtesting is to view the performance of a trading strategy in past circumstances. This is an important point in building a profitable trading system. There are various techniques to change the performance of a strategy that affects the final results. A backtest shows the overall profitability of a trading method and compares different trading parameters to find out what may work better than others.
Backtesting on historical data increases trader's confidence and reduces emotional trading, because the series of losing and profitable trades is already known. If a trader has not backtested a strategy, he or she cannot know if the strategy is really profitable. It may be that the strategy used by the trader does not work in the new market conditions, thus destroying the trading psychology. Therefore, if the backtest gives unprofitable results, it is necessary to either change the settings or abandon the strategy.
Steps of Manual Backtesting:
1. Identify Your Trading Strategy: Clearly define the rules and conditions of your strategy as well as entry and exit points.
2. Historical Data: Collect as much data as possible for the asset you plan to trade. This must include direction, price, open and close times, stop losses, market conditions, etc.
3. Set Up Your Backtesting Tool: Once you have the data, you will need to set up the backtesting tool. Use simulation tools to backtest your strategy, like replay on the TradingView or any other tool.
4. Evaluate strategy performance. Evaluate your collected data. What is overall performance? What is an average drawdown? Maximum losing streak? Worst day of the week to trade? What session bring most profit or loss?
5. Optimize and tune up. Analyze the results of the backtest. You can now see what can be adjusted in your strategy. For example, it could be certain hours of the day that bring the most losses, and once you eliminate these hours, your strategy's performance will significantly improve.
6. Do it again. Keep backtesting until you find the optimal entry condition, time, and risk/reward ratio.
Tips For Testing Strategies
Be realistic, don't look only for profitable trades. On the contrary, look for as many bad trades as possible to get the reason for losses and to avoid them in the future.
Evaluate the result, taking into account a large number of trades.
The minimum number of trades is 100, or 5 years of data. What comes first.
Test your strategy under different market conditions. In trending market and a flat market.
Don't forget that after the backtest, you should switch to the forward test.
Conclusion
Backtesting is a key moment in trading. It is almost one of the main tools that helps traders with trading psychology. Most traders open impulsive trades that lead to capital loss because they do not know when and where to open trades. If you have a trading plan but it does not include a backtested strategy, this plan is basically worthless. In fact, most successful traders spend more time backtesting than trading the real markets. Once you have a backtested strategy, you can now build rules around it and create a solid trading plan. And you are one step closer to being a consistently profitable trader.
📊The Ten Commandments of Forex Trading: A Beginner's Guide📊
1️⃣ Thou shalt have a trading plan:
Having a trading plan is crucial to my success in forex trading. By setting clear entry and exit points, as well as defining my risk tolerance, I am able to trade with discipline and avoid impulsive decisions.
2️⃣Thou shalt not risk more than you can afford to lose:
I understand the importance of capital preservation. I never risk more than 2% of my trading account on a single trade. This ensures that I can withstand potential losses without jeopardizing my overall financial stability.
3️⃣Thou shalt analyze before executing a trade:
Before entering any trade, I conduct thorough technical and fundamental analysis. By examining price charts, economic indicators, and market sentiment, I can make informed decisions based on sound analysis rather than relying on instincts.
4️⃣Thou shalt not overtrade:
I resist the temptation to overtrade and remain patient for favorable opportunities. I understand that trading excessively can lead to emotional decision-making and ultimately result in losses.
5️⃣Thou shalt not chase losses:
When a trade goes against me, I avoid the temptation to chase losses. I accept the loss, learn from it, and move on. Chasing losses would only lead to irrational decisions and potentially larger losses.
6️⃣Thou shalt not rely solely on indicators:
While technical indicators are helpful, I do not rely on them alone. I consider various factors such as geopolitical events, news releases, and market sentiment to get a holistic understanding of market dynamics.
7️⃣Thou shalt use appropriate leverage:
I use leverage responsibly, understanding its potential benefits and risks. I never exceed a leverage ratio that could expose my account to excessive risk. I am aware of the importance of managing leverage effectively.
8️⃣Thou shalt continuously educate thyself:
I understand the importance of ongoing education in forex trading. I regularly read books, attend webinars, and consult reliable sources to stay updated on new strategies, market trends, and economic factors.
9️⃣Thou shalt keep a trading journal:
I diligently maintain a trading journal to track my trades, strategies, and emotions. By reviewing past trades, I gain insights into my strengths and weaknesses, enabling me to refine my approach.
🔟Thou shalt not let emotions drive trading decisions:
I maintain emotional discipline when trading forex. Fear and greed can cloud judgment and lead to poor decisions. By staying rational and following my trading plan, I avoid emotional biases.
⏩Remember, forex trading requires patience, discipline, and a commitment to ongoing learning. By following these ten commandments, you can lay a strong foundation for a successful forex trading journey.
😸Thank you for reading buddy, hope you learned something new today😸
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TRADING RULES FROM REAL MARKET GURUSAll beginner traders, having received their first losses in the market, start to scramble in search of "golden rules" of trading or proven solutions from recognized gurus of financial markets. Basically, having received basic knowledge of trading and having traded for a few days on a demo account, they open a real account and deposit, sometimes, quite large sums of money into it. In most cases, the money is either partially or completely lost in a short period of time. It should be understood that trading is a serious work. It requires not only desire, but also free time and emotional expenditures.
As in any job, young specialists turn to the experience of their professional colleagues, studying their experience and various effective techniques. Trading is no exception, where there are also plenty of professionals and real gurus whose experience should be studied. We will look at rules from world-famous traders.
Rule #1 from Warren Buffett
"The market is a device for transferring money from the impatient to the patient"
Great words, aren't they? In the market with profit remains the one who knows how to wait patiently. Before you open a trade, you need to do a thorough analysis. Study all the factors that influence the trading instrument at the current moment of time, what will influence in the short and medium term. Calculate the support and resistance levels, etc. Only after that, start searching for the most promising point of entry into a trade. Do not rush to open a trade if there is no signal to open a trade. Patience is also necessary when fixing profits. "Let profits grow" thee say.
Wait until the dynamics of movement does not begin to decrease, and the strategy does not begin to signal a change of trend. Only in this way you will be able to earn the maximum on each price movement. After making a profitable trade, take a break for rest. Those who rush in the market, sooner or later lose their capital.
Rule #2 from Larry Connors
"I get real, real concerned when I see trading strategies with too many rules"
Everything brilliant is simple! Each of us is probably familiar with this expression. It is also applicable to trading on financial markets. If, again, we pay attention to trading gurus, we can see an interesting fact - all of them mostly use very simple trading systems (TS). Some of them use their own author's TS, some of them use existing ones that have been tested for years. Take Alexander Elder, who is the author of the "Three Screens" strategy. His system is as simple as possible and uses several standard technical indicators built into any trading platform. Anyone can master Alexander Elder's system, and due to its effectiveness, the TS is used by tens of thousands of traders around the world.
Do not try to find or independently develop a mega-complex trading system. The more "elements", indicators, etc. in it, the more false signals it will produce. It will be quite difficult to find the only true signal among them. Your system should produce one or more signals, when they coincide, you open a trade. It is very important, as we pointed out in the first rule, to be patient and wait.
Rule #3 from Peter Lynch
“In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”
Peter Lynch, a world-famous American investor, was also a follower of simple trading and market analysis techniques. What did the guru wanted to emphasize in his statement? First of all, a large number of beginner traders stay in a delusion for a long time. They think that it is possible to achieve such a level of analysis that will allow them to make 100% forecasts all the time. The market is volatile. Sometimes there are trading situations when the market goes against technical and fundamental analysis. It is impossible to predict such market behavior. Secondly, because of this misconception newbies try to achieve only profitable trades on the market. So that there was not a single losing one in their account history. As a result, they try different strategies, read tons of books on market analysis, but still lose money. As a result, someone "gets an idea" and starts to understand what Lynch was talking about, and someone just quits the market.
Rule #4 from Henrique M. Simoes
"In trading, the impossible happens about twice a year"
In the fourth rule, we will focus on market volatility. These market "impossible" situations do occur periodically. For example, a trading instrument has been growing for a long time, and analyses signal us about the trend reversal. However, the instrument is still growing, breaking all levels. It happens that even some fundamental event, which 100% should lead to a trend reversal, on the contrary, accelerates the current trend even more. There are also more unpredictable situations, when the currency can rise in price twice within a few seconds.
An example is the situation with the Swiss franc, which at the beginning of 2015 strengthened against the U.S. dollar by almost 3000 points. On that day, not only a large number of traders around the world went bankrupt, but also several large Western brokers. Yes, such situations are very rare, once in 5-10 years, but they happen. How to protect against them? If we consider the example with the Swiss franc, a stop-loss would not have saved you, because the price changed at once. The only thing that could really help is to open trades with a small volume that can withstand such a strong movement.
Rule #5 from Jesse Livermore
“There is time to go long, time to go short and time to go fishing”
If you don't enjoy fishing, play a sport or make a field trip outdoors. You should definitely take a break from the market. Especially if you have a series of losing trades. Beginners are not ready for such psychological pressure, so regular breaks should be mandatory. The market will not go anywhere and will not run away, you can always return to it and continue trading. Large and experienced investors are well aware of this, so they do not forget to allocate enough time for rest. The situation is completely different for beginner traders. These two categories of traders mainly trade intraday or use scalping, so they have to constantly monitor the market sitting behind the monitor. As a result, psychological fatigue accumulates, the trader's eye gets tired and he starts to make mistakes that lead to losses. Be sure to rest, it is a guarantee not only of your health, but also of potential profit in the future.
It is extremely important to study the experience of professional traders who have achieved outstanding success in the financial markets. As you can see, many quotes hide not only the entire trading experience collected in one phrase, but sometimes the entire life of the author.
📈Golden Cross and Death Cross: Decoding Forex Trading Signals📉
✅When it comes to analyzing the Forex market, traders often rely on various indicators and patterns to make informed decisions. Two popular patterns that can provide valuable insights are the golden cross and death cross. In this article, we will explore what these terms mean, how they can be identified, and how traders can use them to their advantage.
✅Golden Cross:
The golden cross is a bullish signal that indicates a potential uptrend in the market. It occurs when the shorter-term moving average, typically the 50-day moving average, crosses above the longer-term moving average, usually the 200-day moving average. This crossover suggests that the price is gaining momentum and that buyers are becoming more active.
Traders often interpret the golden cross as a confirmation of a strong market sentiment, leading them to open long positions or increase their current holdings. It is seen as a positive sign as it suggests that a positive trend is likely to continue.
✅Death Cross:
On the other hand, the death cross is a bearish signal indicating a possible downtrend. It occurs when the shorter-term moving average crosses below the longer-term moving average. Similar to the golden cross, the death cross is typically identified using the 50-day and 200-day moving averages.
The death cross can be interpreted as a confirmation of a negative market sentiment with increased selling pressure. Traders may consider opening short positions or reducing their existing long positions in anticipation of a downward trend.
✅Using Golden Cross and Death Cross in Forex Trading:
While the golden cross and death cross patterns can provide valuable insights, traders should not solely rely on them for making trading decisions. It is important to consider other indicators, fundamental analysis, and overall market conditions.
🟢Confirmation: Traders should look for additional confirmation, such as increased trading volume or other technical indicators aligning with the signal, before entering a trade.
🟢Timeframes: Different timeframes (hourly, daily, weekly, etc.) can produce different crossing signals. Traders should select the timeframe that suits their trading strategy and goals.
🟢False Signals: It is crucial to acknowledge that golden cross and death cross signals are not foolproof. In certain market conditions, they may generate false signals, leading to incorrect trading decisions. Thus, it is advisable to use them in conjunction with other technical analysis tools.
✅The golden cross and death cross are popular patterns used in Forex trading to identify potential bullish and bearish market conditions, respectively. These signals provide traders with valuable information about market sentiment, allowing them to make more informed trading decisions. However, it is important to use these patterns in conjunction with other indicators and analyses to increase the probability of success. Remember, understanding these patterns is just the beginning of the trading journey – continuous learning and adaptation are key to becoming a successful trader.
I hope this post was helpful to some of our beginner traders😊
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🐼Mastering the Art of Forex Trading Strategies🐼
Key words:
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🐼The world of forex trading is as fascinating as it is dynamic. To thrive in this fast-paced market, developing a robust trading strategy is paramount. In this article, we will explore the key points that can help you identify and refine your trading strategy, bringing you closer to success.
🐼Identifying Market Trends:
Understanding market trends is crucial in making informed trading decisions. By analyzing moving averages, trend lines, and price patterns, you can identify the prevailing market direction and potential opportunities.
🐼Implementing Effective Risk Management Strategies:
Mitigating risks is a vital aspect of any trading strategy. Set appropriate stop-loss orders, determine suitable position sizes, and manage leverage wisely to protect your capital and minimize exposure to potential losses.
🐼Incorporating Technical Analysis Tools:
Technical analysis tools provide valuable insights into market behavior. Use oscillators like the Relative Strength Index (RSI) to identify overbought or oversold conditions, Fibonacci retracement levels to pinpoint support and resistance levels, and Bollinger Bands to gauge market volatility.
🐼Staying Informed about Market News and Economic Calendar Events:
Keeping up with the latest news and economic events can provide valuable context for your trading strategy. Monitor economic indicators such as GDP releases, central bank meetings, and geopolitical events to understand potential impacts on currency movements.
🐼Conclusion:
Crafting a successful forex trading strategy requires a comprehensive approach that covers market trend identification, risk management, technical analysis, and staying informed about market news. By incorporating these key points into your strategy, you can enhance your trading skills and increase your chances of long-term success in the forex market. Remember, forex trading is a continuous learning journey, so adapt and evolve your strategy as the market evolves.
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❌Trading Mystery: Why 95% Of You Will Fail❓
🟥The world of forex trading holds immense allure - the promise of financial freedom and the opportunity to make money from the comfort of your own home. However, it is no secret that the path to success in forex trading is treacherous, with estimates suggesting that a staggering 95% of traders fail to achieve their desired outcomes. So, what exactly goes wrong for these aspiring traders? Let us unlock the creative narrative behind this apparent mystery and delve into the reasons that prevent them from cracking the code.
♦️Lack of Proper Education:
Just as successful carpentry requires the right tools, so does forex trading. Many traders dive into the financial ocean without a true understanding of its currents, waves, and hidden dangers. They overlook the importance of acquiring comprehensive knowledge about markets, technical indicators, risk management, and strategies. Without a firm grasp of these essentials, traders unwittingly chart a course for disaster.
♦️Emotional Tempests:
Imagine being a captain of a ship, navigating treacherous waters while being plagued by anxiety and fear. Forex trading is not for the faint of heart. As the markets fluctuate, traders battle their own emotions, succumbing to impulses that lead to impulsive trading decisions. Greed, fear, and overconfidence can cloud judgment, causing traders to buy or sell impulsively rather than relying on calculated analysis. Emotion-driven trading inevitably leaves traders shipwrecked amidst the unforgiving tides of the forex market.
♦️Unforeseen Volatility:
The forex market is a living organism that reacts to an array of factors, from economic data to geopolitical events. These dynamics can send currency values into a frenzy, defying logic and leaving traders bewildered. Sudden fluctuations, unpredictable trends, or unexpected policy decisions can capsize even the most astute trading strategies. By underestimating volatility, traders find themselves drowning rather than riding the waves.
♦️Inadequate Risk Management:
Imagine moving forward without a life jacket while navigating choppy waters. This risky endeavor can lead to dire consequences, just like trading without proper risk management. Successful traders understand the importance of setting stop-loss orders, managing trade sizes, and allocating a portion of their capital to each trade. Those who disregard risk management find themselves sinking beneath the weight of their poor decisions.
♦️Overreliance on Automation:
In recent years, the rise of automated trading systems has piqued the interest of aspiring traders. While these algorithms can streamline processes and enhance efficiency, they are not a guarantee of success. Blindly relying on automation without understanding how it works or constantly monitoring its performance may result in unexpected losses. It is essential to strike a balance between human insight and technological support.
🟥The realm of forex trading is a captivating one, tantalizing traders with elusive riches. However, becoming part of the 5% who succeed requires diligence, perseverance, and a deep understanding of the whimsical nature of the market. One must embark on this journey by arming themselves with knowledge, taming their emotions, embracing volatility, implementing effective risk management, and balancing human intuition with automation. Only then can traders hope to navigate the tempestuous seas and emerge victorious in their pursuit of forex trading success.
😸Thank you for reading buddy, hope you learned something new today😸
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4 BUYING OPPORTUNITIES1. Impulse Move Buying Opportunity
Impulse move buying is a trading strategy that involves buying when the price makes an impulse move from the key level. Price makes a higher high, breaking through the previous high—a break of structure. The market pulls back to 1/3 of the impulse move, and then traders can look for signals. Usually, price action doesn't make a deep pullback after an impulsive movement. A stop-loss may be placed at the 61.8% Fibonacci level.
2. Golden Zone Buying Opportunity
Golden zone buying is a trading strategy that involves buying at a 61.8% Fibonacci level. The price pulls back to the key level and bounces off. Price action breaks the structure by making higher highs and higher closes above the previous high. The market can potentially cause a complex pullback towards the golden zone. The 61.8% golden zone must line up with a significant level, forming a confluence zone. The stop-loss may be placed at the 88.6% Fibonacci level, which is near the key level.
3. Institutional-Level Buying Opportunity
Institutional-level buying occurs when large market participants collect liquidity at the key structure level. The price movement of the institutions may be recognized when prices make large moves like engulfing candles or pinbars. This zone creates supply and demand levels. As a general rule, the market breaks through the structure and pullbacks to the 78.6% discount zone, and at this point we can look for buying opportunities. A stop loss can be placed at the 113% Fibonacci inversion level of the leg that breaks the structure, which is HH-HL.
4. Stop Hunt Level Buying Opportunity
Stop hunting level Buying is a trading strategy that involves buying a security at a price level that is attractive to large traders. This type of buying opportunity is typically used when a price reaches a level that is seen as attractive by large traders. The strategy is often used to capitalize on market inefficiencies and take advantage of the momentum created by large traders. The price action after the breaking structure usually returns to the key level by making a deep pullback. Many traders at this point have closed their positions, thinking the price might continue to move down. However, large institutions that pushed prices out of this zone protected the level, and prices continue to trend in the primary direction. The entry point is usually 88.6% Fibonacci, which gives the best R/R. A Stop loss below the level at the Fibonacci inversion level.
7 Expert Risk Management Techniques for TradingRisk management refers to the techniques used to identify, evaluate, and mitigate the potential risks associated with trading and investing. Whether you are a day trader, swing trader, or scalper, effective risk management can help you minimize losses and protect your hard earned money all while maximizing potential profits.
Let's take a look at the top 7 risk management techniques for trading! 👌
Have a Trading Plan
Many traders jump into the market without a thorough understanding of how it works and what it takes to be successful. You should have a detailed trading plan in place before making any trades. A well-designed trading plan is an essential tool for effective risk management.
A trading plan acts as a roadmap, laying out a set of guidelines/rules that can help traders avoid impulsive decisions. It is crucial because it requires you to think deeply about your approach before you begin risking real money. Having a plan can help you stay calm under stress as your plan will have specific steps to take for anything the market throws at you.
It is essential to clearly define your trading goals and objectives. Are you aiming for short-term gains or long-term wealth generation? Are you focused on a specific asset class or trading strategy? Setting specific and measurable goals helps you stay focused and evaluate your progress.
Another important part is to describe the trading strategy you will employ to enter and exit trades. This includes the types of analysis you will employ (technical, fundamental, or a combination), indicators or patterns you will rely on, and any specific rules for trade execution. Determine your risk tolerance, set appropriate position sizing rules, and establish stop-loss levels to limit potential losses.
The Risk/reward ratio
When you are planning to open a trade, you should analyze beforehand how much money you are risking in that particular trade and what the expected positive outcome is. Here is a useful chart with some examples to understand this concept:
As you can see from the data above, a trader with a higher RR (risk-reward ratio) and a low win rate can still be profitable.
Let’s examine this a little more by looking at a profitable example with a 20% success rate, a RR ratio of 1:5, and capital of $500. In this example, you would have 1 winning trade with a profit of $500. The losses on the other 4 trades would be a total of $400. So the profit would be $100.
An unprofitable RR ratio would be to risk, for example, $500 with a success rate of 20% and a risk/reward ratio of 1:1. That is, only 1 out of 5 trades would be successful. So you would make $100 in 1 winning trade but in the other 4 you would have lost a total of -$400.
As a trader, you need to find the perfect balance between how much money you’re willing to risk, the profits you’ll attempt to make, and the losses you’ll accept. This is not an easy task, but it is the foundation of risk management and the Long & Short Position Tools are essential.
You can use our 'Long Position' and 'Short Position' drawing tools in the Forecasting and measurement tools to determine this ratio.
Stop Loss/Take Profit orders
Stop Loss and Take Profit work differently depending on whether you are a day trader, swing trader or long term trader and the type of asset. The most important thing is not to deviate from your strategy as long as you have a good trading strategy. For example, one of the biggest mistakes here is to change your stop loss thinking that the losses will recover... and often they never do. The same thing happens with take profits, you may see that the asset is "going to the moon" and you decide to modify your take profit, but the thing about markets is that there are moments of overvaluation and then the price moves sharply against the last trend.
There is an alternative strategy to this, which is to use exit partials, that is closing half of your position in order to reduce the risk of your losses, or to take some profits during an outstanding run. Also remember that each asset has a different volatility, so while a stop loss of -3% is normal for a swing trading move in one asset, in other more volatile assets the stop loss would be -10%. You do not want to get caught in the middle of a regular price movement.
Finally, you can use a trailing stop, which essentially secures some profits while still having the potential to capture better performance.
Trade with TP, SL and Trailing Stop
Selection of Assets and Time intervals
Choosing the right assets involves careful consideration of various factors such as accessibility, liquidity, volatility, correlation, and your preference in terms of time zones and expertise. Each asset possesses distinct characteristics and behaviors, and understanding these nuances is vital. It is essential to conduct thorough research and analysis to identify assets that align with your trading strategy and risk appetite.
Equally important is selecting the appropriate time intervals for your trading. Time intervals refer to the duration of your trades, which can span from short-term intraday trades to long-term investments. Each time interval has its own advantages and disadvantages, depending on your trading style and objectives.
Shorter time intervals, such as minutes or hours, are often associated with more frequent trades and higher volatility. Traders who prefer these intervals are typically looking to capitalize on short-term price fluctuations and execute quick trades. Conversely, longer time intervals, such as days, weeks, or months, prove more suitable for investors and swing traders aiming to capture broader market trends and significant price movements.
Take into account factors such as your time availability for trading, risk tolerance, and preferred analysis methods. Technical traders often utilize shorter time intervals, focusing on charts, indicators, and patterns, while fundamental investors may opt for longer intervals to account for macroeconomic trends and company fundamentals.
For example, If you are a swing trader with a low knack for volatility, then you can trade in assets such as stocks or Gold and ditch highly volatile assets such as crypto.
Remember that there is no one-size-fits-all approach, and your choices should align with your trading style, goals, and risk management strategy.
Here is a chart of Tesla from the perspective of a day trader, a swing trader, and an investor:
Backtesting
Backtesting plays a crucial role in risk management by enabling traders to assess the effectiveness of their trading strategies using historical market data. It involves the application of predefined rules and indicators to past price data, allowing traders to simulate how their trading strategies would have performed in the past.
During the backtesting process, traders analyze various performance metrics of their strategies, such as profitability, risk-adjusted returns, drawdowns, and win rates. This analysis helps identify the strengths and weaknesses of the strategies, allowing traders to refine them and make necessary adjustments based on the insights gained from the backtesting results.
The primary objective of backtesting is to evaluate the profitability and feasibility of a trading strategy before implementing it in live market conditions. By utilizing historical data, traders can gain valuable insights into the potential risks and rewards associated with their strategies, enabling them to manage their risk accordingly.
However, it's important to note the limitations of backtesting. While historical data provides valuable information, it cannot guarantee future performance, as market conditions are subject to change. Market dynamics, liquidity, and unforeseen events can significantly impact the actual performance of a strategy.
There are plenty of ways to backtest a strategy. You can run a manual test using Bar Replay to trade historical market events or Paper Trading to trade real examples. Those with coding skills can create a strategy using Pine Script and run automated tests on TradingView.
Here is an example of the Moving Averages Crossover strategy using Pine Script:
Margin allocation
We are not fortune tellers, so we cannot predict how assets will be affected by sudden major events. If the worst happens to us and we have all of our capital in a particular trade, the game is over. There are classic rules such as the maximum allocation percentage of 1% per trade (e.g. in a $20,000 portfolio this means that it cannot be risked +$200 per trade). This can vary depending on your trading strategy, but it will definitely help you manage the risk in your portfolio.
Diversification and hedging
It is very important not to put all your eggs in one basket. Something you learn over the years in the financial markets is that the unexpected can always happen. Yes, you can make +1000% in one particular trade, but then you can lose everything in the next trade. One way to avoid the cold sweats of panic is to diversify and hedge. Some stock traders buy commodities that are negatively correlated with stocks, others have a portfolio of +30 stocks from different sectors with bonds and hedge their stocks during downtrends, others buy an ETF of the S&P 500 and the top 10 market cap cryptos... There are unlimited possible combinations when diversifying your portfolio. At the end of the day, the most important thing to understand is that you need to protect your capital and using the assets available to you a trader can hedge and/or diversify to avoid letting one trade ruin an entire portfolio.
Thank you for reading this idea on risk management! We hope it helps new traders plan and prepare for the long run. If you're an expert trader, we hope this was a reminder about the basics. Join the conversation and leave your comments below with your favorite risk management technique! 🙌
- TradingView Team
Understanding the Elliott Waves The market always moves in waves. It is not surprising that for decades traders have been trying to find special market patterns that would help to predict the development of the wave structure of the market. Various systems were created, where the waves were based on theoretical and practical basis. Perhaps the most popular theory on this subject is called Elliott Waves.
Ralph Nelson Elliott was actually a professional accountant. He obviously had a lot of time to analyze charts for several decades, so he put all his observations in a tiny book "The Wave Principle", which was published in 1938. According to Elliot, everything in human civilization is in some rhythmic order, so this rhythm, these wave amplitudes can be " drawn" into the future, which allows you to predict the financial markets.
Elliot's theory seemed interesting to few people during his lifetime. Elliott passed away in 1948 and was immediately forgotten. His theory was used by just a few stock experts. Only thanks to Chalz Collins these waves were remembered on Wall Street. Then they were popularized by Hamilton Bolton in 1950-1960, publishing a book with a detailed description and practice of use.
Certainly, Robert Prechter also has done the most job here. It was thanks to him, that Elliott waves became universally popular, almost 50 years after the accountant Elliott wrote a book on them. Many technical systems have a similar fate. They are forgotten, the authors are not appreciated during their lifetime, and then suddenly they become popular when they are promoted by a fanatical follower. Preckter is still considered the main expert on Elliott waves, and his site elliottwave.com is the world's main resource on the subject. There are a lot of cool forecasts there, for example, Prekter's experts predicted the 2008 crisis several years before it occurred. In fact, the modern Elliott is Prechter and his school.
Elliott Waves, in their essence, have a fractal basis, and the goal of practice is to break down the waves into understandable elements. It is them that we will try to explore now.
Fractals or Impulse Waves ✳️
The basic principle of Elliott Waves is that any wave consists of 2 parts; impulse and correction. Each of them, in turn, is made up of several elements, which also resemble waves, only smaller in size. Such a property, when a part resembles the whole object as a whole, is called fractality. For example, the ocean is made up of countless drops, and yet each drop is a "mini-ocean" because it repeats its properties and composition. Similarly, all living organisms are made up of cells.
The concept is based on the Elliott Wave Law, according to which market movement can be described by a simple and visual model as shown above. It reflects the main principle of market behavior: the price does not move in a straight line, but in a wave-like manner. An asset starts moving (for example, price growth), after which a correction (downward pullback) is observed. Any wave consists of 2 parts:
Correction is a pullback in the opposite direction. Each wave has an amplitude (difference between the 2 most distant points - upper and lower). At the same time, the impulse amplitude is always larger than the correction amplitude. To put it simply, the impulse is the main movement, while the correction is only a pullback in the opposite direction, which is always smaller in amplitude. That is why it is easy to distinguish them visually.
Both parts make up a cycle, after completion of which the market can go sideways (flat) or go in the opposite direction. The ability to see an organized wave in the "disorderly" movement of the chart allows us to correctly determine the current location and make a correct forecast for the near future. After the correction is over, we can re-enter the market (BUY trade) and profit again on the price increase. Since each moving wave is accompanied by a pullback in the opposite direction, the concept is sometimes also called the Elliott Wave Correction Theory.
Correction ✳️
The Elliott Wave Correction Theory predicts the end of the impulse after the formation of the last (fifth) wave. And after that there are 3 possible alternatives. The trend is reversed (a new fifth wave will follow). There comes a moment of uncertainty in the market, when the price will move in a narrow corridor for a long time (flat). The trend is maintained, but a short-term pullback occurs. This is a smaller in amplitude wave, consisting of 3 sections (so it is also called a triple). Elliott labeled each of them with the letters A, B and C: The A and B-C sections show a counter-trend correction as shown above.
Now, if we combine all the elements into one picture, we can make a simplified wave analysis on the example of an uptrend. So we can see 2 large sections the impulse 1-5 and the correction A-C. The five consists of 5 sections with 3 trend movements and 2 small pullbacks. A 3 consists of 3 plots with 1 trend movement and 2 pullbacks.
Example of Impulse and Correction ✳️
Smart Money Liquidity Grab Or Shift In Market Structure?Look at the Us30, and GBPUSD charts attached to this post, what do you see????
OANDA:GBPUSD
OANDA:US30USD
GBPUSD
Do you see a shift in market structure or Liquidity grab by smart money algorithm?
In financial market trading, one key to determine where the liquidity that the market will run next is located is to ask yourself who are those making money from the current move....
Where are they likely to trail their stops to.
Whatever your answer is, that is the liquidity the algorithm will most likely run first to continue in the intended direction...
In the charts examples attached to this post, market was bullish, then the smart money algorithm drive price lower to break the recent and obvious recent swing low to take out all the sell stops below that low, and induce new traders to go short thinking that the market is now bearish.
But price rebalance in imbalance below the lows and then push higher.
That is a smart money liquidity grab not shift in market structure.
With this understanding, you should now be able to understand that not all structure shift in a bullish or bearish market is a shift in market structure.
The majority are liquidity grabs by smart money algorithm.
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Shift In Market Structure Or Liquidity Grab By Smart Money????Look at the Us30, GBPUSD and EURUSD charts attached to this post, what do you see????
GBPUSD
Do you see a shift in market structure or Liquidity grab by smart money algorithm?
In financial market trading, one key to determine where the liquidity that the market will run next is located is to ask yourself who are those making money from the current move....
Where are they likely to trail their stops to.
Whatever your answer is, that is the liquidity the algorithm will most likely run first to continue in the intended direction...
With this understanding, you should now be able to understand that not all structure shift in a bullish or bearish market is a shift in market structure.
The majority are liquidity grabs by smart money algorithm.
US30
WHAT IS IMBALANCE AND HOW TO USE IT?Imbalance is a market phenomenon that can lead a trader to significant profits or losses. Imbalance (IMB) is a gap in fair value during moments of inefficient pricing. The trading volume is tilted towards the bid or ask side, but too quickly, so there are still unexecuted orders in the market.
Simply put, imbalance occurs when there are many orders of the same type (buy, sell, limit) and a lack of liquidity (counter orders) in the market. For example, if there are many more buyers of a currency or stock than sellers, the balance tilts in favor of buyers. On the chart, imbalance looks like a price gap, within which only a part of the volume has been traded. The flow of new orders can be seen by the directional movement of long candles of the same color.
Imbalance is indicated on a long candlestick as a gap between the wicks of neighboring candlesticks. Very often the gap occurs on the candlestick pattern "Marubozu" candlestick with a long body, without shadows or with short wicks.
The IMB gap between the wicks of neighboring candles acts as a price magnet. It means that as liquidity fills, the price will close the imbalance. The speed of gap filling depends on the market makers, large traders and market factors. Market makers are organizations that maintain market liquidity by buying and selling currencies, securities.
There is partial and full IMB fill in the market. A partial fill of up to 50% means that interested bidders were unable to push the price to fill.
Full IMB fill is a rebalancing to 100%. Full filling indicates that buyers and sellers are ready to trade actively at an effective price.
✴️ Why do market imbalances occur?
The emergence of persistent imbalances after long periods of stable pricing in one direction indicates that institutions are accumulating a position. These institutions can be funds, banks and other financial institutions (so-called "smart money").
The market is influenced not only by institutions, but also by market makers, investors, and traders with large capitals. For example, market makers place many orders and then modify or cancel them to bring the market back to equilibrium. Market makers, smart money and investors can both oppose each other and act in the same direction.
Imbalance in Forex can occur after the release of economic and geopolitical news. Imbalances are seen when some countries run surpluses in their trade accounts while others run large external deficits. Imbalance in a security's exchange rate usually follows a dramatic event or publication. The news changes the market perception of the stock and causes a shift in the equilibrium price. This can be news affecting a single company or the economy as a whole.
• Publication of financial statements. For example, a positive quarterly report can lead to an imbalance toward buyers.
• Corporate announcements of bankruptcy, management changes, takeovers, business purchases, etc.
• Government and regulatory actions. U.S. Federal Reserve rate hike contributes to the fall of indices and securities.
• Geopolitical problems, natural disasters, etc.
As the price moves from the old equilibrium level to the new equilibrium level, order imbalances can occur.
✴️ How to use imbalance to make trading decisions?
Imbalance is a type of trading opportunity for intraday and swing traders. In trading, Imbalance is used to identify zones of interest. The zone from which the imbalance originated is characterized by a higher level of probability. The zone is suitable for analyzing and identifying entry points. Entry points are selected with the help of technical analysis within the selected trading methodology. In this case IMB acts as an additional factor.
Most imbalances represent price inefficiencies. Therefore, there is a high probability that the market will come back to fill the IMB. For example, if a large bidder manipulated the market, a correction occurs afterward. Typically, price tends to mitigate the imbalance or the area from which it originated. Therefore, traders trade in the direction of the imbalance to profit from the price movement. However, sometimes price continues to push back against IMBs that are forming in the market. Here recent example of using imbalance on EURUSD
✴️ Conclusion
Imbalances create "fuel" for trend price movement. However, you should not mindlessly enter a trade in any imbalance zone. It is necessary to monitor the context (economic news, indicators, patterns) and make decisions based on it.
📈 Unleash the Power of the Node Squeeze IndicatorThe Node Squeeze Indicator is a robust tool designed to help traders identify significant market moves in advance. By leveraging a combination of Bollinger Bands, Keltner Channels, and the Squeeze Momentum Indicator (SMI), this indicator effectively highlights periods of low volatility followed by high volatility expansion. In this post, we'll explore the key features of the Node Squeeze Indicator and how it can enhance your trading decisions across various styles and timeframes. #TradingView #NodeSqueezeIndicator #MarketInsights
Identifying Low Volatility and Anticipating Breakouts:
During the consolidation phase, the Node Squeeze Indicator plots a narrow band, indicating reduced price volatility. This period often acts as a precursor to a breakout or a major move in the market. By recognizing these moments of low volatility, traders can position themselves ahead of the crowd and anticipate potential explosive price action. 💥📉📈 #Volatility #Breakouts
Versatility and Customization:
One of the strengths of the Node Squeeze Indicator lies in its versatility and customizable parameters. Traders can tailor the indicator's settings to suit their preferred analysis approach and trading style. Whether you're a swing trader, day trader, or long-term investor, the Node Squeeze Indicator can adapt to your needs and provide valuable insights into market turning points and potential trend reversals. 🔄✏️ #Customization #TradingStyles
Enhancing Trading Decisions:
With its clear visual cues and combination of powerful indicators, the Node Squeeze Indicator equips traders with a comprehensive tool for making informed trading decisions. By using this indicator alongside other technical analysis techniques, you can validate signals and improve the accuracy of your predictions. However, it's important to remember that the Node Squeeze Indicator is not a standalone strategy or financial advice. 📊🔍✅ #TechnicalAnalysis #TradingDecisions
Risk Management and Analysis:
While the Node Squeeze Indicator can offer valuable insights, it's crucial to combine it with other indicators, analysis techniques, and risk management strategies. It's recommended to perform your own analysis and consider other factors, such as fundamental analysis, market sentiment, and economic news, to make well-rounded trading decisions. 📝💼🔒 #RiskManagement #Analysis
The Node Squeeze Indicator is a powerful tool that empowers traders to identify major market moves before they happen. By combining Bollinger Bands, Keltner Channels, and the Squeeze Momentum Indicator (SMI), it effectively highlights periods of low volatility and subsequent high volatility expansion. Regardless of your preferred trading style or timeframe, the Node Squeeze Indicator can enhance your trading decisions and improve overall performance. However, it should always be used in conjunction with other indicators and analysis techniques, and traders must exercise proper risk management. Unlock the power of the Node Squeeze Indicator and stay ahead of the markets with this comprehensive and intuitive trading tool. 🚀💪📈 #TradingTool #NodeSqueeze #MarketPerformance #TradingView
🛎Mastering Key Forex Fundamentals🛎
♦️Navigating the world of forex trading can be both thrilling and challenging. While it may seem overwhelming to keep track of all the complex factors that affect currency movements, some key fundamentals can significantly impact forex markets. In this article, we will discuss three essential forex fundamentals: non-farm payrolls, interest rates, and central bank policies, offering you a straightforward understanding of their significance and effects.
♦️Non-farm Payrolls:
One of the most influential economic indicators in forex trading is the non-farm payrolls (NFP) report. Published monthly by the U.S. Bureau of Labor Statistics, the NFP report reveals the number of jobs added or lost (excluding the farming sector) in the United States during the previous month.
▪️Why it matters:
The NFP report provides traders valuable insights into the strength of the U.S. economy. A higher-than-expected NFP figure indicates an expanding job market, economic growth, and potential currency strength. Conversely, if the NFP data disappoints, it suggests a weaker economy and can lead to currency depreciation.
♦️Interest Rates:
Interest rates play a crucial role in forex trading. They reflect the cost of borrowing in a particular country and influence investor behavior and currency values.
▪️Why it matters:
Changes in interest rates impact currency demand. When a central bank hikes interest rates, it attracts foreign investors seeking higher returns, leading to increased demand for the currency and potentially strengthening its value. Conversely, when rates are lowered, it may spur borrowing and economic growth, but can also result in currency devaluation due to decreased attractiveness for investors.
♦️Central Bank Policies:
Central banks are instrumental in forex markets due to the control they exert over monetary policies.
▪️Why it matters:
By adjusting interest rates, implementing quantitative easing measures, or intervening in currency markets, central banks can directly influence their nation's
currency value. Statements and speeches made by central bank officials can provide insight into their future monetary policy decisions, guiding forex traders' expectations.
♦️To master forex trading, a solid understanding of key fundamentals is essential. Factors such as non-farm payrolls, interest rates, and central bank policies carry significant weight and can lead to substantial currency movements. Familiarize yourself with economic indicators, monitor central bank actions and announcements, and always exercise caution and risk management when trading forex.
♦️Remember, successful trading requires continuous education, practice, and experience. Stay informed, adapt your strategies accordingly, and remain patient as you navigate the dynamic and exciting world of forex trading.
😸Thank you for reading buddy, hope you learned something new today😸
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