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Interaction of trendsIt is interesting to study trends and how they interact because the price level of any security is influenced simultaneously by different trends. Hence, why we need to note some application of trend classifications as it applies to trend interactions. 1. When we see any specific price pattern, our first question should be: Which type of trend is being reversed? If it is a short-term trend that is being reversed, then we would not be expecting much price movement when compared to an intermediate or primary trend being reversed. 2. Since intermediate and primary trends dominate price action, traders who deal with short-term trends should pay attention to these trends. They can help them in making good trading decisions. 3. When a trade is positioned in a countercyclical position to the main trend, trading losses usually happen. I do not say that trading with countercyclical positions to the main trend do not succeed, but they have a higher probability of resulting in failures. I trade countercyclical positions sometimes, but I am careful. I usually want to see the patterns having high volatility or being well pronounced. Below is an EURGBP chart showing a two bar reversal that did not move much because it was countercyclical to the main trend which was a downtrend.
Education
by Emekadavid
Classification of trendsIn an earlier note, we defined a trend as a period in which price moves in an irregular but persistent direction. It could also be a time measurement of the direction in price levels. The three common classifications of trends are: primary, intermediate and short-term trends. Primary trends: This trend revolves around the business cycle which lasts for 3.6 years from one bottom to the next bottom or from one top to the next top. Bull and bear trends respectively last for 1 to 2 years, though the magnitude and duration may be significantly different at various times. Reversal price patterns in primary trends usually take longer than three months to complete. You can find primary trends on the higher time frames like the monthly time frame. This is a EURUSD chart on the monthly time frame of a bull trend illustrating how long a primary trend on the bull side or bear side can last. Intermediate trends: When primary uptrends and downtrends are interrupted by countercyclical corrections along the way, they give rise to intermediate trends. These last from 6 weeks to 9 months, and could last even longer, or could even be shorter than 6 weeks in some occasions. Reversal price patterns in intermediate trends could take from 3 to 6 weeks to form and its duration depends on the duration and magnitude of the intermediate trend preceding it. Intermediate trends are usually found on the weekly time frame. Short-term trends: These trends are countercyclical corrections in intermediate trends, and sometimes they align with the intermediate trend. They typically last 3 to 4 weeks and could sometimes be shorter or longer. They are usually influenced by random news events and could be difficult to identify. Price patterns in short-term trends can take 1 to 2 weeks to develop. These trends can be spotted on the weekly, daily, and 4 hours time frames. Below is a EURUSD chart showing countercyclical trends on the daily when compared to the intermediate trend, the weekly, which was in a downtrend. Next we will discuss how understanding trends and their categories has consequences on understanding how price patterns will probably turn out.
Education
by Emekadavid
Time frames in trading price patternsBecause human psychology is more or less constant, that means the principles of technical analysis can be applied to any time frame be it 5 minutes to daily or monthly time frames. The only difference between time frames is that the battle between buyers and sellers is much larger and pronounced on the higher time frames than on the intraday time frames. Therefore, in generalizing, trend reversal signals are more significant on the longer time frames. When trading price patterns, any time frame can be used. What matters most is the character of the pattern. This is a pin bar that was profitable on the 15 min time frame of AUDNZD. I prefer to take trades on the longer time frames like the daily, 12 hours, 8 hours, 6 hours, and 4 hours time frames. I noticed that they contain less noise from the market and suits my temperament. You can choose yours. Notice how smooth this inside bar is on the 4 hours time frame of GBPJPY chart. Compare the same signal on the 5 min chart. You can see that on the 5 min chart you have to deal with a whole lot more bars and you have to spend lots of time on the screen when you can get the same pips spending lesser time on the 4 hours timeframe. That doesn't mean lesser time frames are inferior. Each person has to choose what suits his personality and is convenient.
Education
by Emekadavid
The psychology of price patternsWe have said before that changing attitudes determine price and price moves in trends that tend to perpetuate. So, how can a trend be defined? Simply, it is the movement of price in an irregular but persistent direction. When you zoom out your chart and watch price movement, whatever is obvious is the trend. The USDZAR chart below illustrates some trends you will encounter. For those that are familiar with watching charts, then we can say price moves in either of 3 ways: upwards, downwards, or sideways. When it is moving upwards or downwards, people say either the buyers are greater than the sellers, or the sellers are greater than the buyers. But thinking this way has errors. They are saying that the market is not in equilibrium. The correct interpretation of such upwards or downwards movement is that the buyers are either more aggressive or enthusiastic than sellers for uptrends, or the sellers are more aggressive or enthusiastic than buyers for downtrends. For the third case, the sideways movement, we can say that this is a transitional period, a period where the aggression of buyers and sellers are evenly matched. It is at these periods that price patterns develop. This is a period of consolidation between both sides of the market and it is of two types: a. Consolidation or continuation patterns: this is where the preceding trend before the consolidation is seen continues after the consolidation. That is uptrend to consolidation to uptrend vice versa. The chart below shows an example. b. Reversal pattern: this is where the opposing trend to the preceding trend before the consolidation is achieved. This pattern separates an uptrend from a downtrend, and a downtrend from an uptrend. These patterns are the bread and butter of the setups we trade in price action. These patterns sometimes don’t work in line with the fundamental news such that they might appear unbelievable. That is what makes them powerful. I have seen so many traders who saw a reversal pattern in an asset but who read that the fundamental news says the trend will continue. Because they chose to follow the crowd, rather than listen to price, they placed a trade in line with the fundamental news only to lose money in the process. This is why in my trading I don’t follow the fundamental news or what the crowd is saying. I listen to the crowd but don’t follow them. I follow price and the patterns that price gives. This is because every news in the market is already factored in the price. Therefore, it is better to follow price.
Education
by Emekadavid
Technical analysis definedTechnical analysis has been defined as the art of identifying a trend reversal at a relatively early stage and riding on that trend until the weight of evidence shows or proves that the trend has reversed. This definition has influenced my choice of strategies and why I chose price patterns to trade the forex market. Here is how I do it according to the definition above: a. The art of identifying a trend reversal: I use trendline breaks to do this. I used to rely on swing points. For uptrends, I would be waiting for when the last swing low is broken, and for downtrends, when the last swing high is breached. But now, I use the break of trendlines. On the GBPUSD daily chart, you could see how the trendline break and using the 123 pattern could help one to identify and enter the trend early. b. Riding on the trend: I use trailing stops to ride a trend when I have hopped into the trend so as to lock in my profits before the trend reverses. I place the trailing stop at logical levels in the price movement. For downtrends, at swing highs and for uptrends, at swing lows, because if price comes back to this levels, the trend has reversed. c. Until weight of evidence proves price has reversed: I would ride a trend until the trendline gets broken or I get stopped when price hits the trailing stop loss. The two charts below contrasts and compares the use of trailing stops and trendlines to ride the trend and exit when trend has reversed. The first, using trailing stops, would give you a net pip profit of 5393.8 pips. The second, using a trendline, would have given you better profits. The choice is yours. Both methods are good. As I said in another article, I don’t trade price action in isolation. I look for other signs like momentum, volatility, and the story the price action tells before deciding on a course to take. Some traders trading forex would use volumes which I have considered in the past, but I think that volumes are unreliable because the forex market is decentralized and different forex brokers would give different output for volumes. Just my POV though.
Education
by Emekadavid
Why Price patterns work. Price patterns are patterns that were made by price based on the relationship between time and the movement of price on a price chart. They could be based on a single bar or candlestick, two or more, or even several bars or candlesticks. For now, I would be using just bars. They could be just for one session based on the timeframe or several sessions or days. The charts below illustrate some bars Single bars Multiple bars Some of the reasons why price patterns work are: 1. Prices are determined solely by people’s changing attitudes towards the emerging fundamentals. That means, prices are determined by psychology. Garfield Drew is quoted as saying that: “Stocks don’t sell for what they worth, but for what people think they are worth.” One recent example of people’s changing attitude is the recent selloff in gold that was experienced at the heart of the Covid-19 pandemic. People thought gold being a safe haven could rise rapidly in prices, but for two weeks between March 9 and March 19, the price of gold fell by 14%. 2. Market prices are not random events. People’s changing attitudes towards the value of an asset moves in trends and trends tend to perpetuate. An uptrend is expected to keep going up until the market psychology changes and the same for a downtrend. The shifts in these attitudes are usually captured by price patterns. GBPUSD chart below showing how a shift in trend due to market sentiment is captured by the 123 pattern and trendline very perfectly. A huge rally ensued. Notes on my observations: 1. Price patterns should not be used in isolation. When I trade price pattern I use confluence of the price pattern with support and resistance levels such as horizontal support and resistance, diagonal support and resistance from trendlines, and Fibonacci levels. 2. Also, you should take note of the underlying psychology that gave rise to the development of the price pattern. I generally trade pullbacks and reversal patterns because these give price actions that conform with the underlying psychology of the market in trends.
Education
by Emekadavid
Support And Resistance – The House! EICHERMOTOR.----------------------------------Support And Resistance – The House!---------------------------------- Support and Resistance explanation: Imagine that you are looking at a vertical cross-section of an "Old fashioned dolls house " which is shown in the schematic. Now you can see all the floors and ceilings in the house, and as you can see here we have a ground floor, first floor, second floor, and roof. The market then moves lower, having reversed, back to the floor, where it consolidates. The concept of Support and resistance is important for a number of reasons. --> First, as we have already seen, a breakout from a consolidation phase can be validated with volume , and if confirmed, provides excellent trading opportunities . The so-called breakout trade s. It is a WIN/WIN. You have the comfort of knowing that once the market has broken through a ceiling of price resistance, not only does this become a floor of price support, it has also become a barrier of price protection in the event of any short term re-test of this area. Any stop loss, for example, could then be placed in the lower regions of the price congestion. This is why breakout trading is so popular.
NSE:EICHERMOTEducation
by Trade-Technique
71
Lessons from an Experienced Trader #3Lesson 7 Trade Outcome is Random The outcome of any given trade is random, no matter how strong your edge is. It is impossible to predict whether a trade will result in a loss, decent profit, or a windfall profit. Contrary to what most Price Action traders and price analysts believe, you cannot and will never be able to predict the market. Most amateur traders fail to recognize this fact, or deny this reality altogether. They believe eventually, they will be able to avoid losing trades and pick winners. They do not understand the outcome of any given trade is random, and therefore impossible to know before hand. Consider weather prediction as an example. Meteorologists have highly sophisticated weather models and algorithms to predict weather behavior, just like traders and institutions in the market. Yet the weathermen cannot accurately predict what will occur. They can say "There is a 60% chance of rain today if you live in X." But they cannot say exactly when or where rain will fall. It is the same in the market. You may have a good idea of what may occur, and even be right! However, there is still a reasonable chance (usually around 40%) that you are wrong, and the exact opposite will occur. The market is always right. It does not matter what you think or believe should or will happen. All that matters is what is happening. Just because a trade looks good or an edge is strong, does not mean it will result in a profit. There is still an opposing probability that it will fail. The point is that you will never know beyond a reasonable doubt what the market will do next. You may have a hunch, or a strong edge, but that will only get you so far. Therefore the only thing to do is to always take your edge, because you never know if this will be the windfall profit you are looking for, a small profit, or a loss. And quite frankly, it does not matter! Lesson 8 Market Outcome Does Not Matter The outcome of any single trade does not matter. It is very common for traders to become attached to the outcome of this individual trade. This is what leads to emotions, anger and frustration with trading and the market. We get stuck in the mindset that we have to win X amount of profit like 2X risk on this trade, or have to make money every day to be a profitable trader. This is not the case at all. In fact you only have to win one 1 or 2 really good trades out of 10 to maintain a consistent performance. Any single trade is irrelevant to a trading system or strategy. It is the cumulative result over a series of trades that results in a profit. This is why it is so important to know and only trade your edge, otherwise you introduce randomness into your performance, and are unable to produce consistency. *If you find this analysis helpful please like! Feel free to comment or ask questions.
AEducation
by tradersmentality
2
Lessons from an Experienced Trader #3Lesson 7 Trade Outcome is Random The outcome of any given trade is random, no matter how strong your edge is. It is impossible to predict whether a trade will result in a loss, decent profit, or a windfall profit. Contrary to what most Price Action traders and price analysts believe, you cannot and will never be able to predict the market. Most amateur traders fail to recognize this fact, or deny this reality altogether. They believe eventually, they will be able to avoid losing trades and pick winners. They do not understand the outcome of any given trade is random, and therefore impossible to know before hand. Consider weather prediction as an example. Meteorologists have highly sophisticated weather models and algorithms to predict weather behavior, just like traders and institutions in the market. Yet the weathermen cannot accurately predict what will occur. They can say "There is a 60% chance of rain today if you live in X." But they cannot say exactly when or where rain will fall. It is the same in the market. You may have a good idea of what may occur, and even be right! However, there is still a reasonable chance (usually around 40%) that you are wrong, and the exact opposite will occur. The market is always right. It does not matter what you think or believe should or will happen. All that matters is what is happening. Just because a trade looks good or an edge is strong, does not mean it will result in a profit. There is still an opposing probability that it will fail. The point is that you will never know beyond a reasonable doubt what the market will do next. You may have a hunch, or a strong edge, but that will only get you so far. Therefore the only thing to do is to always take your edge, because you never know if this will be the windfall profit you are looking for, a small profit, or a loss. And quite frankly, it does not matter! Lesson 8 Market Outcome Does Not Matter The outcome of any single trade does not matter. It is very common for traders to become attached to the outcome of this individual trade. This is what leads to emotions, anger and frustration with trading and the market. We get stuck in the mindset that we have to win X amount of profit like 2X risk on this trade, or have to make money every day to be a profitable trader. This is not the case at all. In fact you only have to win one 1 or 2 really good trades out of 10 to maintain a consistent performance. Any single trade is irrelevant to a trading system or strategy. It is the cumulative result over a series of trades that results in a profit. This is why it is so important to know and only trade your edge, otherwise you introduce randomness into your performance, and are unable to produce consistency. *If you find this analysis helpful please like! Feel free to comment or ask questions.
Education
by tradersmentality
Bitcoin Judas SwingThe Judas swing term was named by ICT, he dubbed this swing concept and utilizes it upon the London Open. The idea is, the market makers will rally or sell price, normally just above or below the Asian session high or low (depending on institutional order flow bias) tricking buyers or sellers into the market to follow its direction. As the Judas swing high or low is formed, price is quickly reversed either taking out stops and or leaving traders out of the game. Judas swings can be seen on high and low time frames, though if you are an intra day trader, once higher time frame objective levels are in place and you have your directional bias in tow, you will be looking for the Judas swing to occur on a 15 minute chart time frame. You can also see the Judas swing develop on a 1 hour chart, though the 15 minute chart will show its intension a bit more clearly, when you know what you are looking for.
BITMEX:BTCUSD.PEducation
by transitory
How to Trade Using Volume ProperlyWeakness = Up moves on decreasing volume & Down moves on increasing volume Strength = Up moves on increasing volume & Down moves on decreasing volume I usually try to take a look at the general background and get a feel on how weak or strong the currency pair is. When I have determined strength or weakness I will try to mark up confluent zones where sellers (if short) and buyers (if long) are going to jump in. When price reaches my confluent level, I will look at the 5M chart to pinpoint entry. Example will be given below, however, not on this chart as this is to old for me to find 5M data but I will give an example that is close enough. I have not marked any green areas (strength) on this chart after our short entry point.
Education
by naviafra
1
Trading Psychology 4 "Now Moment"Trading the "Now moment" Most of the time, prices do what they have been doing or normally do based on the current context. But what about when they dont, or instead do the opposite? For instance a strong bear breakout of a bull channel. Five minutes ago prices were rallying higher and higher, with no end in sight. Now prices are falling dramatically, what is a trader to do? Is he going to continue trading as a bull channel or trading range? Or does he exit his longs with a loss and sell at the market? Unless he accepts the reality that in a market truly anything can happen and anything is possible, he will more likely be unable to let go of the past and not willing to recognize the opportunity being presented right now. In this scenario he would probably fail to take the later action, and instead continue to fight the strong bear breakout because his mind is convinced prices are still in some form of bull trend or bull flag trading range. Until a trader truly accepts this fundamental point of market reality, it is easy to get caught up in what should happen and the true opportunity continues to elude him. The reality of the market is; every moment in the market is unique, and every opportunity has a different set of risk, reward, and probability. What worked today, may or may not work tomorrow. Most beginners fail to appreciate or even realize this is the case, as they attempt to apply rigid rules to a constantly changing environment. This prevents a clear, objective view of what prices are likely and not likely to do. As a result, this does not allow the trader to correctly identify the opportunity being presented "right now." Awareness A major obstacle to trading the "now moment" is where a traders awareness lies at any given time. Is he thinking about what happened an hour ago, or what may happen by the end of the day, or is he intently focused on what is transpiring in this very moment? Identifying and becoming aware of what is occuring internally while trading is helpful in this situtation. The idea is not to fight or prevent emotions from occuring, but rather acknowledge they are present and inturn may lead to a poor trading decision. Most trading errors are due to an emotional outburst or the traders awareness being somewhere else other than the market. Beathing exercises such as focusing on the breath and taking slow, deep breaths, can help ease the internal tension and return focus back to the market. This is a form of awareness training (mindfulness), which can help a trader with concentration and placing his awareness on the trading task at hand. It is also beneficial to practice some form of mindfulness outside of trading to become more intune with yourself, and ultimately the market. Trading along side stress / emotions What makes the difference between an amateur and professional trader is not the lack of thoughts, emotions, or stress. Professional traders too have these characterstics as we are all human, although they may be less obvious to the observer. However, a professional does not act on these feelings, and instead does what is necessary based on the market structure, not how he feels or what he thinks. He may find himself distracted with thoughts or an emotion, but then brings his awareness back to the trading task at hand. Amateurs do the opposite by allowing these feelings and emotions to lead to actions in the market, which more often than not are trading errors. Amateurs get stuck so to speak in the stress or emotion rather than the correct trade action. Moving past this is not easy, but returning awareness to the market rather than internally is the first step. An easy way of accomplishing this is to periodically throughout the day ask yourself "Where is my awareness?" or "Where is my mind?" The next question is, "What is the opportunity being presented right now?” or “What is the market telling me to do right now?” Continued...
Education
by tradersmentality
Price Action Reading Exercise This is a post focus in reading the price action in terms of how is the dynamic of the buyers and sellers, and how an appropriate reading of the overall context (in this case the up trend channel) in conjuction with price signals like fail break outs and price structure (In this case Higher Lows) can provide an idea of potential trading areas where the trader can take "cheap" trades (Low risk entries) in comparisson to the potential reward ...
TVC:NDQEducation
by JaimePantoja
Why 90% of Retail Traders Fail - "Fear of Missing Out!"There are so many reasons why 90% of retail traders fail. One of the main reasons is because retail traders over trade. They fear missing an opportunity and because of this they think there is always an opportunity when in reality there isn't. As traders, it is our job to find high probable setups. Probable setups are limited though... so you need to have patience to wait for them to unfold. All too often I see traders here chasing price , and this EURUSD today is a perfect example of this. I can't even imagine how many traders got short on the break out of this short term up trend line. Many probably waited for the hourly candle to close to enter, but what happened? Immediately after they entered price reversed sharply and is on the way to stopping those traders out who most likely have their stop loss just above the high around 1.047. If we look at the price action over the month of December on this pair, we can clearly see the 1.05-1.052 area have been strong support where buyers continuously stepped in every time price approached it. Once that support was broken you can see that the role of the level reversed and it became resistance. Sellers came in on the back side of the level, however only intraday did it retest the level. It is likely that there will be an official retest of the figure and another major attempt to the downside, even if it is just to the previous low. IF price comes back to a major area that was support it will VERY LIKELY become resistance. A setup like this is a high probable setup, but it takes a while to unfold. It has been 6 days so far since the level has been broken. Maybe it will hit the level today... maybe not. Maybe it will hit the level tomorrow... maybe not. Maybe it will hit the level next week. Maybe it will NEVER come back to the level... Who knows... but as traders we must be patient if we want to get the most probable setups. It is better to miss a trade than to take a poor trade! If you want to get setups that have low odds of working out, that is fine. You do you, but if this resonates with even one trader and helps them trade better than my job here is done.
Education
by UnknownUnicorn261897
11
Learn How to Follow the Overall Trend and You WILL Succeed!Hi traders, here at Unique4xPro we are firm believers that price action trading is the way to go in these markets and for that reason we do not use any indicators. We base our trades solely on price action and we only trade in the direction of the overall trend to ensure that all of our trades are backed by the banks and institutions that are backing the direction of the trend with huge amounts of money. We hope you find this useful and please comment if you have any questions... We will be happy to answer! You can also learn a lot from our YouTube live streams which we do at 7 P.M. E.S.T. every Monday, Wednesday, and Thursday. All of our streams are automatically uploaded to our channel so that they can be watched back: www.youtube.com
Education
by UnknownUnicorn261897
15