Understanding Volume in Trading: An Intro to Trading with VolumeVolume is a crucial component in the world of trading, as it can provide valuable insights into market dynamics and trader sentiment. In this blog post, we will explore the importance of volume in trading, how it can be used to confirm trends and reversals, and the various tools and indicators available to help traders incorporate volume into their analysis.
What is Volume in Trading?
Volume refers to the number of shares or contracts traded in a security or market during a given period. It is commonly reported as the total number of shares traded during a particular time frame, such as a day or an hour. Volume is a key indicator of market activity and liquidity, providing traders with insights into the strength of a price movement and the potential for future price changes.
Why is Volume Important in Trading?
Volume plays a significant role in trading because it helps traders gauge the intensity of market participation and the conviction of market participants. A high volume often indicates strong interest in a security, while low volume suggests a lack of interest or liquidity. By analyzing volume patterns, traders can gain valuable insights into the supply and demand dynamics driving price movements and make more informed trading decisions.
Using Volume to Confirm Trends
One of the primary uses of volume in trading is to confirm the strength of a trend. When a security is experiencing a strong uptrend or downtrend, volume should generally increase as the trend progresses. This is because increased market participation often accompanies strong price movements, indicating that a large number of traders are buying or selling the security.
To use volume to confirm a trend, traders should look for the following patterns:
1. Rising volume during an uptrend: If a security is in an uptrend and the volume is steadily increasing, it suggests that the trend is strong and likely to continue.
2. Declining volume during a downtrend: In a downtrend, declining volume can confirm the strength of the trend, as it indicates that sellers are in control and there is little buying interest to push prices higher.
Identifying Reversals with Volume
Volume can also be used to identify potential trend reversals. When a security's price starts to reverse direction, it is often accompanied by changes in volume. By analyzing these volume patterns, traders can identify early warning signs of a trend reversal and adjust their trading strategies accordingly.
To identify potential reversals, traders should look for the following volume patterns:
1. Climactic volume: A sudden, sharp increase in volume after a prolonged trend can signal a potential reversal. This is known as climactic volume and often indicates that market participants are taking profits or closing positions, leading to a change in trend direction.
2. Volume divergence: If a security's price is making new highs or lows, but the volume is not following suit, it can be a sign of a potential reversal. This is known as volume divergence and suggests that the conviction of market participants is waning, possibly leading to a change in trend direction.
Volume Indicators and Tools
There are several tools and indicators available to help traders incorporate volume into their analysis. Some popular volume-based indicators include:
1. Volume bars: Volume bars are a simple way to visualize the volume of a security over a given time period. They are typically displayed as vertical bars below a price chart and can be color-coded to represent buying (green) and selling (red) pressure.
2. On-balance volume (OBV): OBV is a cumulative volume indicator that adds volume on up days and subtracts volume on down days. It can help traders identify trends and potential reversals by comparing the OBV line to the price movement of a security.
3. Volume-weighted average price (VWAP): VWAP is a trading benchmark that calculates the average price of a security weighted by volume. It is often used by institutional traders to assess the performance of their trades and can provide valuable insights into the liquidity and fair value of a security.
Conclusion
In conclusion, understanding and incorporating volume into trading analysis can provide traders with valuable insights into market dynamics and trader sentiment. By using volume to confirm trends and identify potential reversals, traders can increase the probability of successful trades and make more informed decisions in the market. However, it is crucial to remember that volume should be used in conjunction with other technical analysis tools to achieve the most accurate and comprehensive understanding of the market.
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Economic Cycles
RSI vs. Stochastic OscillatorRecently, I was asked to write an article about the differences between two popular technical indicators, the Relative Strength Index (RSI) and the Stochastic Oscillator. As someone who has utilized both indicators in my trading journey, I was excited to share my insights and help others better understand these powerful tools. In this article, we will delve into the purposes, advantages, and disadvantages of the RSI and Stochastic Oscillator, as well as explore their effectiveness on different instruments and how they can be combined with other indicators for optimal trading results. Let's dive in!
1. Calculation method:
a. RSI: The RSI is calculated using the average gain and average loss over a specified period (usually 14). The formula is RSI = 100 - (100 / (1 + (Average Gain / Average Loss))). The RSI ranges from 0 to 100, with 30 and 70 as common thresholds for oversold and overbought levels, respectively.
b. Stochastic Oscillator: The Stochastic Oscillator compares the current closing price to the price range over a specified period (usually 14). It consists of two lines, %K and %D, with %K representing the raw Stochastic value and %D being a moving average of %K. The formula for %K is: %K = (Current Close - Lowest Low) / (Highest High - Lowest Low) x 100. The Stochastic Oscillator also ranges from 0 to 100, with 20 and 80 as common thresholds for oversold and overbought levels, respectively.
2. Sensitivity:
a. RSI: The RSI is generally less sensitive to price fluctuations, which can result in fewer false signals. However, it may not react as quickly to price changes as the Stochastic Oscillator.
b. Stochastic Oscillator: The Stochastic Oscillator is more sensitive to price fluctuations, which can provide earlier signals but also result in more false signals. Traders often use additional filtering techniques to reduce false signals, such as waiting for %D line crossovers or using other indicators for confirmation.
3. Performance in different market conditions:
a. RSI: The RSI works well in trending markets, as it can help identify potential trend reversals. However, it may produce false signals in range-bound markets or during strong trends.
b. Stochastic Oscillator: The Stochastic Oscillator performs well in both trending and range-bound markets, as it considers the price range in its calculation. This makes it more adaptable to different market conditions, although it may require additional confirmation from other indicators due to its sensitivity.
4. Application in trading strategies:
a. RSI: Traders often use the RSI as a standalone indicator or in combination with other indicators such as moving averages, Bollinger Bands, or MACD. The RSI can also be used to spot divergence, where the price makes new highs or lows, but the RSI fails to confirm them, signaling a potential trend reversal.
b. Stochastic Oscillator: The Stochastic Oscillator is often used with other indicators such as moving averages, MACD, or ADX to provide confirmation of trade signals. In addition, it can be used to spot divergence, similar to the RSI, as well as identify potential trend reversals through crossovers of the %K and %D lines.
In summary, while both the RSI and Stochastic Oscillator are used to identify overbought and oversold conditions, they differ in terms of calculation, sensitivity, performance in different market conditions, and application in trading strategies. Understanding these differences can help traders choose the most suitable indicator for their specific trading style and market conditions.
What is Higher High, Higher Low, Lower Low, Lower High
In this educational article, we will discuss the foundation of price action analysis: the concepts of highs and lows.
In order to grasp that concept, you should learn to perceive the price chart as the sequence of zigzags.
Depending on the direction of the market and the shape of these zigzags, its peaks will be called differently. There are 6 types of them that you should learn to recognize.
1️⃣ Equal Highs (EH).
The peaks of bullish moves will be called equal highs, if they perfectly respect the same level (resistance), retracing from that and not managing to break above.
2️⃣ Equal Lows (EL).
The peaks of bearish moves will be called equal lows, if they perfectly respect the same level (support), bouncing from that and not managing to break below.
3️⃣ Higher High (HH).
The peak of a bullish move will be called Higher High, if the price manages to violate the previous high after a retracement.
4️⃣ Lower Low (LL).
The peak of a bearish move will be called Lower Low, if the price manages to violate the previous low after a pullback.
5️⃣ Higher Low (HL).
The peak of a bearish move will be called Higher Low if, after a retracement from the high, the price manages to set a low that is higher than the previous low.
6️⃣ Lower High (LH).
The peak of a bullish movement will be called Lower High if, after a pullback from the low, the price sets a high that is lower than the previous high.
Why these terms are so important?
Because, firstly, you can apply them to objectively identify the market trend.
Secondly, all the price action patterns are based on a combination of these highs and lows.
You should learn these terms by heart, and you should learn to perceive the price chart as the sequence of zigzags, with a strict designation of each peak.
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Mastering the VIX on TradingViewThe VIX, also known as the CBOE Volatility Index, is a widely-used financial instrument used to measure market volatility and investor sentiment. In this article, we will explore how to use the VIX on TradingView to improve your trading strategies.
Before we dive into how to use the VIX, let's first understand what it is and how it works. The VIX is based on the S&P 500 index options, and measures the implied volatility of those options over the next 30 days. Essentially, the VIX provides a gauge of how much the market is expected to move over the next month.
Now, let's discuss how to use the VIX on TradingView. To begin, open up the TradingView platform and search for the VIX symbol, which is typically denoted as VIX. Once you have located the VIX, add it to your watchlist and open up the chart.
On the chart, you will notice that the VIX moves inversely to the S&P 500. When the S&P 500 goes down, the VIX goes up, indicating that market volatility is increasing. Conversely, when the S&P 500 goes up, the VIX goes down, indicating that market volatility is decreasing.
So how can we use the VIX to improve our trading strategies? One strategy is to use the VIX as a hedging tool. For example, if you have a portfolio of stocks and are concerned about a potential market downturn, you could buy the VIX to protect yourself against losses. This is because the VIX tends to increase in value when the market is experiencing volatility.
Another way to use the VIX is as a contrarian indicator. When the VIX is at a very low level, it may indicate that investors are overly complacent and that the market may be due for a correction. On the other hand, when the VIX is at a very high level, it may indicate that investors are overly fearful and that the market may be due for a rebound.
In conclusion, the VIX is a powerful tool that can be used to measure market volatility and investor sentiment. By understanding how the VIX works and using it in conjunction with other technical indicators, you can improve your trading strategies and better navigate the unpredictable world of finance. Remember, always do your own research and consult with a financial advisor before making any investment decisions.
Hunting Breakouts with Bollinger Bands and OBVThanks to zAngus for the idea, here is a simple trading strategy that uses two tools: Bollinger Bands and OBV to find moments when an asset's prices can increase or decrease.
First and foremost, please note that this explanation is simplified and only covers the basics. Each individual can develop their own settings and adjustments according to their own preferences.
Imagine that you are looking at a price chart of an asset. This chart shows how prices have changed over time. Sometimes prices go up and sometimes they go down.
The trading strategy we are going to show you can help you find moments when prices are about to change direction.
- Bollinger Bands are lines that show a zone where prices of an asset are likely to stay.
These lines have two parts: a middle line that shows an average of prices and two other lines that show the zone where prices should be.
The lines widen and narrow based on the volatility of prices.
- OBV (On-Balance Volume) is another tool that measures whether more people are buying or selling an asset.
If more people are buying an asset, OBV increases, and if more people are selling an asset, OBV decreases.
Now, here is how we use these two tools to find moments when an asset's prices can increase or decrease:
1. First, we wait for prices to stabilize for a certain amount of time. This means that prices don't go up or down much during a given period.
2. Next, we look at the Bollinger Bands to see if prices have reached the upper or lower limit. If prices exceed the upper limit, it may mean that prices will increase.
If prices fall below the lower limit, it may mean that prices will decrease.
3. To confirm what we have seen in the Bollinger Bands, we look at the OBV.
If OBV increases or decreases at the same time as prices exceed the upper or lower limit of the Bollinger Bands, it means that more people are buying or selling the asset, and this reinforces our idea that prices will increase or decrease.
4. We enter the market by buying or selling the asset based on whether we think prices will increase or decrease.
5. We exit the market when prices reach the opposite upper or lower limit of the Bollinger Bands or an important resistance zone.
This is a simple strategy, but it can help find moments when an asset's prices can increase or decrease.
Remember that you must always use good risk management to avoid losing too much money if the market doesn't follow your forecast.
Please note that this Bollinger Bands and OBV breakout trading strategy involves risk and is intended for educational purposes only. Any investments made using this strategy are done at your own risk, and you should always do your own research and seek professional advice before making any investment decisions.
Get ahead of the Game of Crypto with Dow TheoryWelcome to @TradingView , this is @Vestinda! We're excited to share with you our insights on the Dow Jones Theory and how it can benefit cryptocurrency traders.
Dow Theory, also known as Dow Jones Theory, is a trading strategy developed by Charles Dow in the late 1800s.
Charles Dow did not write any books during his lifetime, but he did co-found The Wall Street Journal and the Dow Jones & Company. He also wrote many editorials for The Wall Street Journal. Here is a quote from one of his editorials that is particularly insightful:
"The successful investor is usually an individual who is inherently interested in business problems."
Dow theory continues to dominate and is regarded as one of the most sophisticated contemporary studies on technical analysis even after 100 years.
What exactly is Dow Theory?
Charles H. Dow compared the stock market to the tides of the ocean in the Wall Street Journal on January 31, 1901.
"A person watching the tide come in and wanting to know the exact location of the high tide places a stick in the sand at the points reached by the incoming waves until the stick reaches a position where the waves do not come up to it and finally recedes enough to show that the tide has turned." This method is effective for observing and predicting the flood tide of the stock market."
Dow believed that the current state of the stock market could be used to analyse the current state of the economy.
The stock market can provide valuable measures for understanding the reasons for high and low trends in the economy or individual stocks.
How Does the Dow Theory Work?
The Dow Theory is based on several fundamental tenets, which are outlined below:
1. The Averages Reflect Everything:
The market price takes into account every known or unknown factor that may impact both supply and demand. According to this observation, the market reflects all available information, even information that is not in the public domain. However, natural disasters such as droughts, cyclones, floods, or earthquakes cannot be considered.
Major Geopolitical Events are Already Priced In:
All significant geopolitical events, trade wars, domestic policies, elections, GDP growth, changes in interest rates, earning projections, or expectations are already priced in the market.
Unexpected Events Affect Short-Term Trends:
While unexpected events may occur, they usually only affect short-term trends, and the primary trend remains unaffected.
Overall, the Dow Theory emphasises the importance of analysing the primary trend of the market and understanding that all available information is already reflected in the market price.
2. The Market Has Three Trends:
The primary trend:
It can be as long as one year to several years and is the ‘main movement’ of the market. These movements are typically referred to as bull and bear markets. This primary uptrend is called as bullish on the other hand primary downtrend can be considered as bearish trends.
The reality of the situation is that nobody knows where and when the primary uptrend or downtrend will end.
As you can see in the image above when a stock is moving in primary uptrend it makes new high followed by few lows not lower than the previous lows.
Similarly the same patterns follows when it is in primary downtrend.
The objective of Dow Theory is to utilize what we do know, not to make chaotic guess about what we don’t know. Through a set of guidelines from Dow Theory one can measure to identify the primary trend and stay with it.
The intermediate trend or secondary trend:
This trend can last between 3 weeks to several months. Secondary movements are reactionary in nature, think of them as corrections during bull market, or rallies & recoveries in the bear market.
In a bull market, a secondary trend is considered a correction. In a bear market, secondary trend are called reaction rallies.
So suppose if a stock during its primary uptrend made a high, it will retrace back to some points to make a low (known as intermediate trend or correction).
Likewise during an primary downtrend, a stock can make a high after falling for several months or years(known as bear market rallies).
The minor trend or daily fluctuations:
This trend is least reliable which can be lasting from several days to few hours. Dow theory suggests not to put much attention to these trends. As a Long-term investor it is just the part of corrections in secondary uptrend or downtrend rally.
This are just daily fluctuations happening in market on day to day basis. It constitutes of noise in market and perhaps be subject to manipulation.
Out of the three trends mentioned only primary and secondary trends are trustworthy. However, the study of daily price action can add valuable insight, if you look in context of the larger picture.
So when you are looking for daily price action of several days, or weeks try to evaluate bigger structure getting formed. By putting enough attention one can certainly benefit in short term rallies.
A few pieces of a structure are meaningless, yet at the same time, they are essential to complete the entire picture.
3.Major Trends Have Three Phases:
Dow significantly paid attention to the primary trends (major) in which he spotted three phases. These are Accumulation phase, Public participation phase and Distribution phase.
These phases are cyclic in nature and repeats over the time.
A) Accumulation phase:
This phase occurs when the market is in bearish trend, sentiments are negative with no hope for any upcoming uptrend. For example as we saw in Indian share market a steep low in mid cap stocks, making new lows every other day.
Most of the investors see them stay in this trend for unknown time period. However, this is the time when big investors, huge fund houses, institutional investors start accumulating them gradually.
This is known as smart money keeping their view for long term investment. Although you would see sellers in market still selling, they find the buyers easily.
B) Public participation phase:
At this phase the market have already absorbed the negativity with ‘smart money’ getting invested. This is the second stage of a primary bull market and is usually sees the largest advance in prices.
During this phase majority of public(retailers) also thinks to join in as the price is rapidly advancing. However most of them are left behind due to speed in rallies as well as the averages start heading higher.
If you are also a trader or investor you might have this experience and a regret of not able to participate with rally. It is a period followed by improved business conditions and increased valuations in stocks.
C) Distribution phase:
The third stage is the excess phase which eventually be turned to distribution phase. During the third and final stage, the public (retailers) gets fully involved in the market, as they get mesmerized by the bull market rally.
Some of them who felt left will still try to look for valuations and want to be part of the rally.
But this is the time when ‘smart money’ starts liquidating shares on every high. Whereas public will try to buy at this level absorbing all liquidating (sell-off) volumes made by big investors.
On contrary in the distribution phase, whenever the prices attempt to go higher, the smart money off loads their holdings.
This is the beginning of bear market, where sentiments will start turning negative, you will see more and more companies filing bankruptcy, change in economic growth etc.
During bear market the level of frustration rises among retail investors as they start loosing all hopes.
4.The Averages Must Confirm Each Other:
Dow used to say that unless both Industrial and Rail(transportation) Averages exceed a previous peak, there is no confirmation or continuation of a bull market.
Both the averages did not have to move simultaneously, but the quicker one followed another – the stronger the confirmation.
To put it differently, observe the image above, as you can see both the averages are in bull market, trending upward from Point A to C.
5. Volume Must Confirm the Trend:
Volume is a tool to know how many shares have been bought and sold in a given period of time. It helps in analysing the trends and patterns.
Now according to Dow theory, a stock must be in uptrend with high volume and low in corrections.
Volumes may not be an attractive piece of information but you should try to combine the volume data with resistance and support levels to get a clear picture.
6. Trend Is expected to Be Continued Until Definite Signals of Its Reversal:
Quite similar to Newton’s first law of motion which states that an object will remain at rest or in uniform motion in a straight line unless acted upon by an external force.
In simple words an object will remain in their state of motion unless a external force acts to change the motion.
Likewise, the market will continue to move in a primary direction until a force, such as a change in business conditions, is strong enough to change the direction of this primary move. You can also see the signals for reversals when a trend is about to change.
7.Signals and Identification of Trends:
One of the major challenges faced while implementing Dow theory is the accurate identification of trend reversals. Remember, if you are following the dow theory one should be not only looking for overall market direction, but also the definite reversal signals.
One of the main skill used to identify trend reversals in Dow theory is peak and trough or high and low analysis. A peak is defined as the highest price of a market movement, while a trough is seen as the lowest price of a market movement.
Dow theory suggests that the market doesn’t move in a straight line but from highs (peaks) to lows (troughs), with the overall moves of the market trending in a direction.
An upward trend in Dow theory is a series of successively higher peaks and higher troughs. A downward trend is a series of successively lower peaks and lower troughs.
8. Manipulation In the Market:
According to Charles dow the manipulation of the primary trend is not possible. where as Intraday, or day to day trading and perhaps even the secondary movements could be vulnerable to manipulation.
These short movements, from a few hours to a few weeks, could be subject to manipulation by large institutions, speculators, breaking news or rumors.
There is possibility that speculators, specialists or anyone else involved in the markets could manipulate the prices in short run.
Individual shares could be manipulated for example the security rise up and then falls back and continues the primary trend. With this in mind one need to be aware of the situations while trading and investing.
However, it would be next to impossible to manipulate the market as a whole. The market is simply too big for any kind of manipulation to occur.
Why Dow Theory Is Not Infallible?
Dow Theory is not a sure-fire means of beating the market hence it is not something which is infallible or fault-less. Some of the criticism received about Dow Theory is that it is really not a theory.
Charles Dow's principles and theories, while developed for the stock market, can still be applied to crypto investing.
Here are a few ways his knowledge can be used:
Follow the trend: Dow's first principle is that the market moves in trends. In crypto investing, you can identify trends by looking at price charts and technical analysis. If the price of a particular cryptocurrency is in an uptrend, it may be a good time to consider buying. If it's in a downtrend, you may want to consider selling or waiting for a better entry point.
Consider market breadth: Dow's second principle is that the market's movements should be confirmed by market breadth. This means looking beyond just the price of one cryptocurrency and examining the overall health of the market. For example, if a particular cryptocurrency is in an uptrend but the majority of other cryptocurrencies are in a downtrend, it may not be a sustainable trend.
Use volume as a confirmation: Dow's third principle is that volume should confirm the trend. In crypto investing, volume can provide insight into the strength of a trend. For example, if the price of a cryptocurrency is increasing with high volume, it may indicate a strong uptrend. On the other hand, if the price is increasing with low volume, it may not be a sustainable trend.
Be aware of market cycles: Dow's fourth principle is that the market moves in cycles. This means that there will be periods of growth and periods of decline. In crypto investing, it's important to be aware of these cycles and adjust your strategy accordingly. For example, during a bull market, you may want to focus on buying and holding, while during a bear market, you may want to consider shorting or staying on the sidelines.
Overall, while the crypto market is different from the stock market, many of Dow's principles can still be applied to crypto investing to help you make more informed decisions.
In conclusion, Dow Theory, developed by Charles Dow in the late 1800s, remains one of the most respected theories in financial market history.
The theory's primary tenets are based on the idea that the stock market reflects all available information, and there are three trends in the market: primary, intermediate, and minor.
The primary trend is the most important and can last several years, while the intermediate trend and minor trend are reactionary in nature.
Dow Theory provides an excellent framework for traders and investors to evaluate the current state of the economy, and it has remained relevant even after 100 years. Whether you are an intraday trader, a short-term trader, or a long-term investor, the knowledge of Dow Theory will undoubtedly help you develop various strategies for your investments.
So, in conclusion, Dow Theory is a respectful theory that has stood the test of time and continues to be an essential tool for anyone who trades or invests in the financial and crypto market.
Unleash Your Inner Trader — Read Story About Bulls and Bears That Will Change Your Mindset!
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BITCOIN : CYCLES Mysterious Forces " CYCLES ,
The Mysterious Forces
That Trigger Events"
.
This is the name of the important book by Edward R.Dewey , which was first published in 1971. He discovered and theorized time cycles in macro trends.
And 50 years later, the power of cycles is still mysterious to us.
#BITCOIN is just a new small sample of cycles mysterious power in 21th century.
Apple. World largest stock looking for new “host?” 4/Jan/23AAPL, apple as world largest market cap stock in the world benefiting from “low rate” for past 40 years. Howard Marks have “ warned” the end of 40...Probably capitalist might take few years ( consolidation in most equities market) looking for “new boss”.?
THE IMPACT OF INTEREST RATES ON FOREX MARKETHello again! Interest rates can have a significant impact on the forex market , as they can affect the demand for and supply of different currencies. In general, higher interest rates tend to attract foreign investment and increase the demand for a currency, as investors can earn a higher return on their investments. This can lead to an appreciation of the currency in the foreign exchange market.
On the other hand, lower interest rates may discourage foreign investment and reduce the demand for a currency, leading to a depreciation of the currency in the forex market.
Interest rates can also affect the attractiveness of a country's assets, such as stocks and bonds, which can in turn affect the demand for its currency. For example, if a country has high interest rates, its assets may be more attractive to foreign investors, leading to an increase in demand for the country's currency.
In addition to the interest rate level, the direction and pace of change in interest rates can also affect the forex market. If a central bank is expected to increase interest rates in the near future, it may lead to an appreciation of the currency, as investors anticipate higher returns on their investments. On the other hand, if a central bank is expected to lower interest rates, it may lead to a depreciation of the currency.
Overall, the relationship between interest rates and the forex market is complex and can be influenced by a variety of factors, including economic conditions, inflation expectations, and global market conditions.
SP500 Fib Modeling IIn physics, when charged particles are fired at double slit, chances are they will leave 2 marks as they would go through 2 slits. Those waves of uncertainty crash into each other and interfere, merging and canceling each other out just like any other waves. Then, when an electron's wave hits the back screen, the particle finally has to decide where to land. Slowly, electron by electron, the wave pattern builds up. Our expectations can be evaluated by checking the results. But results can change by simply witnessing the process closeup. An intervention of consciousness can alter reality. Particle as we know started behaving like wave as if they were aware of being watched. So each time particle is fired, it becomes a wave of potential as it approaches the slits and through the quantum world of infinite possibilities finds its final destination. As a result we get interference pattern , the mark that commonly shared by targets of particles after going through such chaotic journey. The electron can go through both slits as wave of potential, then it collides back forming particle hitting the layer! Act of additional measuring by repeating experiment can make the particle act normal again with two stripes pattern. From this I'd outline the sharp changes in behavior as well as shift in entity itself. The collapse of wave function caused by particle's awareness of ongoing surveillance can in some way mean that matter is a derivative from consciousness. And these are the building blocks of universe, where things can simply appear and vanish without evident reason.
Removed irrelevant fibs:
Fibonacci Ratios found in regular Retracement as well as TimeFibs fit the parameters of Wave Function. The overlap of Golden Ratio with real life example of interference pattern formed by two slits using regular white light as a source.
I was pleased to acknowledge that Fibonacci numbers with its known features are also applicable in Quantum Mechanics, when we're dealing with the odds, probabilities and forecasting. This observation actually adds more credibility to FIBS and explains my long fascination over price behaving differently near fibs in one way or the other.
Wave-particle duality is an example of superposition. That is a quantum object existing in multiple states at once. An electron, for example, is both ‘here’ and ‘there’ simultaneously. It’s only once we do an experiment to find out where it is that it settles down into one or the other.
Today we know that this ‘quantum entanglement’ is real, but we still don’t fully understand what’s going on. Let’s say that we bring two particles together in such a way that their quantum states are inexorably bound, or entangled. One is in state A, and the other in state B.
The Pauli exclusion principle says that they can’t both be in the same state. If we change one, the other instantly changes to compensate. This happens even if we separate the two particles from each other on opposite sides of the universe. It’s as if information about the change we’ve made has traveled between them faster than the speed of light.
This makes quantum physics all about probabilities. We can only say which state an object is most likely to be in once we look. These odds are encapsulated into a mathematical entity called the wave function. Making an observation is said to ‘collapse’ the wave function, destroying the superposition and forcing the object into just one of its many possible states.
Arranging the fractal by phases with fibonacci on both price and time scales is an alternative approach to the known quantum mechanical solutions to finance, thus relying on a postulate that quantum mechanics applies to finance unchanged. For market prices, it is important to note that nowadays we are looking at a lot of noise when handling them. In financial markets we are dealing with infinite possibilities emerging patterns which also creates chaotic process just like in subatomic levels. On molecular scale, we know that elements don't just react without a reason. It can bond with other elements if it shares corresponding properties of valence. When it matches the electron configuration, it bonds into new compound generating geometric shapes like hexagon of new chemical structure, like shapes of puzzles unite to resemble a bigger picture.
Similarly, as market makes a move, it determines next candle's dimensions. If previous candle hypothetically had different properties, then the current candle wouldn't be the same it's forming right now. I'd say even the slightest change can significantly delay or change targets and outcomes. Price action also rhymes with time cycles. Sometimes these cycles of different wavelengths overlap resulting in breakout with short-term rapid growth rate.
To get an approximate idea of where price is heading to, we must carry out a thought process. Let's assume market is heading up. We know that chances of a rapid pump to establish new ATH in one day is very low. We assume it's rather going to start with gradual growth when breaking from cyclic entangled side trend. Imagine the candles are made out of metal string so you could touch it and play with it according to all laws of physics just like with a regular piece of metal wire in real life. Now imagine just grabbing the right end of it and pulling upwards to simulate shape unfolding into direction of your target... Nevertheless, various fragments of final structure would still carry its systematic shapes which were originally determined by the market.
In both cases these is a psychological effect, almost convincing me, that the market path is predetermined by trajectories of EMA with intermediate arguments rather than by short-term direction of a wave a spike and collapses. And it's not about the overall performance of the economy or any other factors, market simply derives the path on the go like in multi-universe concept.
The fact that >90% of people are losing is a result of sticking to the current market information noise and news. chances are market simply would have already reacted to the narrative even long before entries were placed. That's how fast things are happening. This happens when market is correcting to other "upcoming" more dominant arising fundamentals whether they are positive or negative. The curve of information distribution speed is vital concept which contributes to ignoring the naive need for information backup behind price moves. Many serious participants of the market are deaf to news. Whatever we receive, we must acknowledge that by the time we receive the news, millions of people already digested those them provided by some media company with their own angle in it. News trading is a very hysterical thing to do, unless you are among the first wave of investors possessing the information from real insiders. The lots and billions of entries in favor for the narrative are already locked in and they are waiting for the last remaining crowd to jump in to be kill them at 5th wave. Considering an accumulation should be after completing a fall. We must feel comfortable at places where the rest still feel fear in order to be able to beat them off due to averaging trades without blind faith.
Modern approaches to stock pricing in quantitative finance are typically founded on the Black-Scholes model and the underlying random walk hypothesis. Empirical data indicate that this hypothesis works well in stable situations but, in abrupt transitions such as during an economical crisis, the random walk model fails and alternative descriptions are needed. For this reason, several proposals have been recently forwarded which are based on the formalism of quantum mechanics. In this paper we apply the SCoP formalism, elaborated to provide an operational foundation of quantum mechanics, to the stock market. We argue that a stock market is an intrinsically contextual system where agents' decisions globally influence the market system and stocks prices, determining a nonclassical behavior. More specifically, we maintain that a given stock does not generally have a definite value, e.g., a price, but its value is actualized as a consequence of the contextual interactions in the trading process. This contextual influence is responsible of the non-Kolmogorovian quantum-like behavior of the market at a statistical level. Then, we propose a sphere model within our hidden measurement formalism that describes a buying/selling process of a stock and shows that it is intuitively reasonable to assume that the stock has not a definite price until it is traded. This result is relevant in my opinion since it provides a theoretical support to the use of quantum models in finance. Fibonacci ratios are another way of exposing the probability of future prices in respect to timing.
Even when overwhelming majority of people expect growth after good news with obvious positive factors, price can fall and expectations of millions can easily be shattered by market in an action. Identifying patterns is a part of making sense of out of randomness. There is a logical parallel: If an observer can collapse wave function, same way the collective consciousness of market crashed the wave function of uptrend. This happens and quite often.
Some people incorporate prime numbers to their trading systems. But of course I'd stick with fibonacci, because golden ratio governs chaos behind price swings as well as its time cycles derived from coordinates of fractal peaks and bottoms. I put tremendous amount of accent on raw data of candles. It doesn't just stop where it does, it is predestined to do it due to chain of cause and effect loop. New formed candles of particular metrics is a direct result of nearest historic candles and mathematical relationship shared between all of them. The way things are curved in nature and space, even exponential growth can be perfectly simulated with fibonacci sequence. Fib ratios are credible as they share and fit into concepts from fractal geometry and chaos theory as well as describing behavior of complex processes. A line simple line can be used to link of some recent buildup of systematic patterns to similar historic fractal echoing back into present.
A properly observed shape can tell more words than any news article, as it passes through the phases of cycle. By documenting nature of short-term swings we can evaluate how market is determining the most efficient price having continuous stream of information, different opinions, events and other factors on the background can directly or indirectly shape the value of an asset. Patterns can tell whether collective psyche of the market feels distrust or approval of ongoing narrative and world trends are unfolding.
It's quite easy to say "buy the dip" or "buy at the finishing stage of falling". It sure takes a good combination of decisiveness, discipline and being able to stick to your plan. But how can we be so sure that price will follow the direction after entry. To answer that question, I'd monitor the security with BSP - "Buying & Selling Pressure".
During selloff SP is obviously over BP. We wait till SP loses momentum and declines while BP begins grow. This way we got ourselves interested.
Then we examine the hypothetical entry by chain of logical confirmations.
We actually need to wait for Buying Pressure to cross over Selling Pressure.
IF bpma > spma is true, confirm with:
volume > ta.ema(volume, 20) or ta.atr(10) > ta.atr(10)
ta.ema(ohlc4, 13) >= ta.ema(ohlc4, 13) and ta.ema(ohlc4, 5) >= ta.ema(ohlc4, 8) and ta.ema(ohlc4, 5) < ta.ema(ohlc4, 8)
bpma > bpma and ta.crossover(close, ta.vwma(close, 13))
stoploss = close - average(bpma, spma)
If all of the conditions are met in a row, wait for correction to complete, see the Selling Pressure falling and enter with the next green candle. Meeting just 1 of these conditions would technically push me into placing a long order. However, I wouldn't do it without fabric of PriceTime scales interconnected with candle data by fibonacci ratios. Refracted EMA can also be a tool of choice to determine the levels support and resistance. Personally I'd go with fibonacci, because they are based on raw chart data instead of averaging with MA's and its derivatives.
Cycles Exchange giants FTT (FTX, Alameda Research)+BNB (Binance)Comparative analysis. The main trend of the two exchange coins BNB and Alameda Research, and yes the exchange FTX. The time interval is one month. Logarithm.
Coins of two liquid exchanges: Binance and FTX .
Coinmarketcap: FTX Token
Coinmarketcap: BNB
Here's what it looks like on a line chart of the price.
Is Sam Bankman-Fried a young potential "grandpa" Warren Buffett or a fintech criminal with a life sentence?
Could Alameda replicate the success of Binance, led by future PR wunderkind Sam Bankman-Fried, i.e. a young Warren Buffett? A joke? Ta, no... That's his role after his grandfather died. Or is it? Think about it...
Do you think the pseudo-asset market, the various cryptocurrency scams, can be compared to the tokenized stock market ? Can you smell XRP?)
Right now, in 2022, Binance is a mastodon in terms of cryptocurrency trading. Just like Poloniex in 2017).
Think about who is behind companies like Alameda Research ? Why are they allowed to do what others are not? Why can some liquidate, ostensibly for their own benefit, entire projects with billions of dollars in capitalization and a community of millions of people with impunity, while others can't even breathe a breath?
Who has the right to pardon or punish? Who can claim such a huge piece of the fat pie as the tokenization of stocks or the materialization of money from nothing (stabelcoins) but the state?
Exchanges. Hype and liquidity. Changing market leaders.
Therefore, for conservative traders and investors, it is more rational to pay attention to the non-random mastodons of the crypto market. But, keep in mind that they tend to gain or lose fat over time. I didn't write about Poloniex as an example for nothing. It's an example of hype and decline from previous times of popularity. In 2017 there was such an influx of traffic to the exchange that it was impossible to trade. Five years later, things have changed. Liquidity flowed to the new mastodon of hype, Binance.
Market cycles of cryptocurrency market spikes/declines .
In the price chart, I have shown the time cycles of the cryptocurrency market. This is probably the most important thing everyone wants to know. Most market participants want to scroll through money and increase the amount available "here and now in the moment" - emptying their pockets. Typically, the market of such "burps up" before the next peak in the cycle. Don't be that kind of person.
Very few people draw conclusions from their previous mistakes. They admit their mistakes and look for ways to solve them, rather than cite randomness. There is no randomness in non-accidental actions.
Notice how the "crypto hamster traffic" has decreased in the market nowadays. I may be writing crudely, but it's understandable. Local reversals occur at times like this.
Major FTT trend
FTT/USD (FTX, Alameda Research). Main Trend.
This is what this zone looks like on the line price chart on a larger scale.
Pay attention to what zone the price is in now and at what values of profit. Take this into account in your trading.
Main trend of BNB .
Sector Rotation Model in TradingviewI have decoded the following model in Tradingview
This is the sector rotation model where different sectors are stronger at different points in the economic cycle.
Here my results in Tradingview by creating this ad-hoc layout
I compare relative strengths of sectors at different points in the economic cycle with sectors which are stronger at previous economic cycle.
- dark red zone = Full Recession
- light green zone = Early Recovery
- dark green zone = Full Recovery
- light red zone = Early Recession
Example: Industrial sectors is seen strong during the early recovery. I want to see it stronger than Tech sector (which is strong during full recession, the previous economic cycle ) for confirmation of the actual early recovery cycle actually priced by investors.
Adding 200-periods and 50-periods simple moving averages (SMA) for better defining the trend.
- chart above SMA50 and SMA200 = bullish = confirmation of the economic cycle
- chart under SMA50 and SMA200 = bearish = not a confirmation of the economic cycle
- chart under SMA50 or SMA200 = neutral = uncertainty, not a confirmation of the economic cycle.
What actually Mr. Market is pricing now?
How you can see in the figure above, we have more confirmations (V symbols) at recovery cycle . No confirmation at Full Recession and one only confirmation at the early recession.
Mr. Market does not want the recession yet…
Daily Session Windows background highlight indicatorIn intraday studies of stock indexes and Forex I have this weird habit of highlighting premarket, core session, lunch break and extended session with different backgrounds. If done by hand, this is tedious work that has to be repeated daily.
I think this feature should be built-in in TradingView. But it isn't.
For a few months now, I have been using this tiny indicator that does precisely that job. It saved me literally hours of focus time and mistakes. I have decided to revamp it and release it. I'm sure it can be useful to others.
Get it here .
AMPLEFORTH : built-in certainty over price objectiveHello traders,
Today I'm sharing two applications of my strategy on AMPL-PERP.
AMPL is designed to algorithmically revert to a pre-determined price. The protocol achieves this by rebasing supply at 2AM UTC each day.
It goes without saying, much kudos is due to the innovative team behind the protocol, which of course you can read about on their website.
The price reversion mechanism forms the basis of this trading strategy by effectively giving the trader an edge in enhanced certainty of price objective.
On the chart we note the price target and the expansion and contraction levels, plus the rebase times.
We use a comparison pair such as ETH-PERP as the driver of price swings.
Then we trade the price swings around the price target level enjoying the benefit of the added certainty over the range limits and median reversion level.
We may also employ a market making grid strategy using the daily timeframe for low maintenance worry free automated trading.
Cheers
The Psychology of The Market Cycle Explained
The market cycles can be explained from the psychology side of the average investor.
Throughout the various stages that develop in the market, the investor's emotions are also cyclical according to the "mood" of the market.
Market movements are explained by the investor when often hope and fear motivate his thoughts and actions and can predict his future actions.
Throughout the various stages that develop in the market, the investor's emotions are also cyclical according to the "mood" of the market.
The range of emotions ranges from despair to euphoria, and investors usually drive the wrong actions.
Awareness of the psychological side of the masses helps to avoid the effects of negative or positive sentiment and remain feckless on the market. In addition, we can also identify a stage or strengthen our position on the state of the market, explaining investors' feelings.
Once you understand this chart, you can control your emotions and deal without your hurt and with only your mind.
As this market cycle chart is repeating all the time, if you understand where you are located in the graph at any moment, you can take a cold decision of buy or sell a particular asset to maximize gains.
Market Structure: The analysis we use to skip (and we shouldn't)Hi traders, today we want to explain why market structure analysis is as important as a good entry signal strategy.
Note: For this article, we differentiate the entry signal from the market structure analysis. In some cases, the entry signal considers also the market structure but in these cases, we could easily split the set of rules into rules to define the market structure, and the rules to enter the market (entry signal). So we will consider it as two steps or phases.
One of the most common mistakes (which I did a lot in my trading early years) is that traders tend to focus on finding the best entry signal, the SL level, and the target, which is great but is only half of the work.
Only with this part and with proper risk management, you can be profitable. However, this is only the mechanical part of the trading strategy which, in most cases and especially if the entry signal is based on indicators, could perfectly be automated as these are only a set of rules (based on indicators or other technical analysis tools) that trigger the entry signal.
What it is as important as the SET (Stop, Entry & Target) is the analysis of the market structure of each asset. By that we mean that we should know:
- What is the current cycle of the asset? Where did the cycle start?
- Is it bullish or bearish?
- Is it impulsive or corrective?
- When and at what level this cycle is expected to end?
- Which structure this cycle has?
- and so on…
This is the part that was tougher for me to learn, and it is the part that requires more time and experience. Detect the subtle difference that very similar market structures can have and differentiating them will take you time. Do not misunderstand me, it is not rocket science, but it can be tricky.
The market does not use to move on perfect defined structures we can easily identify, most of the time it can be difficult to detect these structures.
We use the Elliot Wave principle mainly (but not only) to help us “find” the right market structure of each asset.
How we see the Elliott Wave principle (EWP) in one sentence would be:
It is a set of rules that help us to divide the market in impulse and corrections to know where and when each of these cycles has started and also to forecast when AND WHERE it is expected the cycle will end. It can sound not too much but believe me it is a lot.
Even though the Elliot Wave principle (EWP) rules are perfectly defined, to apply them on the chart would be not 100% objective and, therefore, the same rules can be applied differently by each trader on the chart. This is why it takes more time to identify the right way to interpret and apply the EWP rules to the chart and this is the reason why it is the part that used to take more time for the trader to be proficient in.
We see and use the EWP as a guideline or a map structure of the asset we are analyzing, (VERY IMPORTANT) we do not use EWP alone to enter the trade. We use it to know the structure of the asset and to infer the most probable direction that the price will take in the future. With EWP as the base of our trading strategy, we will use other analysis tools like the correlation between the different asset groups or the market dynamics to refine the assets that give us the maximum options of having a winning trade (after applying the entry signal strategy).
Another very important point we want to make clear from the beginning is that we should be flexible in our predictions. We do have a clear view of the structure that we think the market is having at this moment for each asset. However, we need to be prepared to be wrong, by that we mean that we need to know and be aware of what are (if any) the other potential structure the cycle we are analyzing can have. This is why we will not enter a trade based on the wave count only and we need the other tools we mentioned before.
Therefore, and to wrap it up for this lesson, EWP gives us a lot of crucial information that is the base of all our trading strategies. To summarize it and make clear how we use the EWP, we use EWP to:
- Know the Right side of the market for each asset (Long or Short)
- Detect whether the asset is in an impulsive or on a corrective cycle and its internal structure
- Project the zone where the asset is expected to end the correction (to apply there the entry signal strategy)
- Project the level where the impulse wave is expected to end (which would be different depending on the wave we are in) (Target)
All these will help us to find zones where we can apply our S.E.T. (Stop-Entry-Target) rules to maximize the overall return of our strategy as it will increase a lot our Winning percentage.
Have an amazing and successful trading day
TRS team
Historical SPY Crashes and Recessions v2The chart might have errors, but generally outlines the notable economic bear markets in US
Source Credit: www.history.com
Historical SPY Crashes and RecessionsThe chart might have errors, but generally outlines the notable economic bear markets in US
PMI > Recession > Interest Rate RelationshipsHope this explainer is helpful for any AltReports Newsletter readers who are not familiar with PMI.
I'm not an economist and I'm not providing financial advice and I'm always ready to be wrong.
And I'm sure you'll tell me in the comments if I am 😆!
Dominance's relationship with Bitcoin and other currenciesHello traders
. In this post, I have explained the relationship between Domains and Bitcoin and other currencies
.According to this table, you can make the right decisions in trading
.🙌Please do not forget the ' like' button & Share it with your friends
.✍ I will be glad to see your ideas in this post
.🧲Follow me to see more analysis
Eur/Cad Monthly Timeframe (Sad or Happy Smiley Face Indicator). From the past seven years (7 years) of monthly Euro/Canadian Dollar pair, the following happen:
5 years- monthly ended up Green (Blue Candle) Happy smiley face (buyers won)
and
2 years- monthly ended up Red (Red Candle) Sad smiley face (sellers won)
That is around a 70% buyers winning the month of August vs 30% sellers losing the month of August= for the last 7 years.
If you are playing the odds and or trading Forex with probabilities in mind, you would put more buying trades on for the rest of August because of the cycler nature of Forex. Always look at how low the RSI scale right now, which measures movement of pair (its down very low now).
I would continue buying when this pair is at the right price, during right session and at the right time of day, in my opinion the Eur/Cad pair will end up at 1.32000 by end of this month. That is around 150 pips to bullish side, from PA now. Always, use right risk management for your account size, 2% is mine.
Martingale Strategy
Martingale Strategy
1. The Martingale Strategy is a strategy of investing or betting introduced by French mathematician Paul Pierre Levy.
2. It is considered a risky method of investing.
3. It is based on the theory of increasing the amount allocated for investments, even if its value is falling, in expectation of a future increase.
4. When the Martingale Strategy is used in trading, the trader must double the position size when faced with a loss.
5. The Martingale system is a methodology to amplify the chance of recovering from losing streaks.
6. The amount spent on trading can reach huge proportions after just a few transactions.
7. If the trader runs out of funds and exits the trade while using the strategy, the losses faced can be disastrous.
8. The risk-to-reward ratio of the Martingale Strategy is not reasonable.
Calculating the Breakeven Point (BEP)
1. Current Total Investment = (1*BTC@49348.17) + (2*BTC@39342.32) + (4*BTC@21117.39) = 212502.25
2. Breakeven Point = Current Total Investment / (Total Number of BTC) = 212502.25 / 7 = 30357.48
50 Day Moving Average Strategy
TRADE ENTRY
1. To enter a 50-day moving average trade, you should wait for a breakout.
2. Whenever the price breaks the 50-day SMA, you should open a trade in the direction of the breakout.
3. In most cases, the price action will continue in the direction of the breakout.
STOP LOSS
1. If the price breaks the 50 SMA upwards, we need to go long, placing a stop below a bottom prior to the breakout. The opposite is true for bearish trades.
2. If the price breaks the 50 SMA downwards, we need to short the stock placing a stop below the bottom prior to the breakout.
PROFIT TARGETS
1. Hold your trades until the price action breaks your 50-day moving average in the direction opposite to your trade.
2. If you are long, you close the trade when the price breaks the 50-day SMA downwards.
3. If you are short, you close the trade when the price breaks the 50-day SMA upwards.
CONCLUSION
1. Stock price above the 50-day moving average is usually considered bullish.
2. Stock price below the 50-day moving average is usually considered bearish.
3. If the price meets the 50 day SMA as support and bounces upwards, consider a long entry.
4. Stock price meets the 50-day SMA as resistance and bounces downwards, consider a short entry.
5. If the price breaks the 50-day SMA downwards, you should switch your opinion to bearish.
6. If the price breaks the 50-day SMA upward, you should switch your opinion to bullish.
