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How to Trade on Support and Resistance ReversalsHow to Trade on Support and Resistance Reversals Trading in the financial markets can be a complex endeavour, but it may become more manageable when traders have a solid grasp of support and resistance levels. Recognising support and resistance reversals is a crucial skill that may enhance one's trading performance. In this FXOpen article, we will learn the types of support and resistance and consider some trading strategies based on market reversals. Recognising Support and Resistance Reversals It’s unlikely you will need to ask, “What are support and resistance lines?” Still, let’s refresh your memory. A support line is a level at which an asset's price tends to find buying interest, preventing it from falling further. In other words, it's where demand for the asset is strong enough to counteract selling pressure. Traders often identify support as a potential point when going long or a take-profit target when selling. It can be formed at various price points on a chart and can be horizontal and diagonal (trendlines). A resistance line is a level at which an asset's price tends to encounter selling pressure, preventing it from rising further. It represents a point where supply exceeds demand, leading to potential reversals or pullbacks. Traders often identify resistance as a potential point when going short or a take-profit target when buying. Like support, resistance levels can also be horizontal, diagonal, or coincide with round numbers. Support and Resistance: Types There are various types of support and resistance, including trendlines, round numbers, Fibonacci retracements and extensions, pivot points, and dynamic lines. Trendlines Trendlines are one of the most fundamental tools in technical analysis. They are lines drawn on a price chart to connect consecutive lows and consecutive highs to identify the direction of the market. Trendlines act as support and resistance, helping traders identify potential reversal points and trend continuations. The intersection of price movements with trendlines often signifies significant market sentiment shifts. There are three fundamental types of trendlines: - Uptrend Lines: Uptrend lines connect a series of higher lows and function as support levels on a price chart. These lines are indicative of bullish market conditions, signifying a consistent upward trajectory in asset value. Traders often use uptrend lines to identify potential entry points for long positions. - Downtrend Lines: Downtrend lines link lower highs and act as resistance in technical analysis. They reflect bearish market conditions, suggesting a persistent downward trend in asset value. Downtrend lines are valuable for traders looking to establish potential entry points for short positions. - Sideways or Range-Bound Lines: Sideways or range-bound lines connect comparable highs and lows, illustrating a market in a state of consolidation or trading within a defined range. These lines indicate the lack of strong trends in either direction and are essential for traders to recognise when markets are moving sideways. Closest Swing Points Traders can draw support and resistance through the most recent swing point. - Support: To find a support level based on the closest swing point, traders identify a recent swing low. This low point is where buying interest emerged previously. - Resistance: To determine a resistance level based on the closest swing point, traders look for the recent swing high. This high point is where selling pressure halted a previous uptrend. Round Numbers Round numbers are psychological levels that often serve as support or resistance. They tend to attract the attention of traders and investors due to their simplicity and significance. For example, in a currency pair like EUR/USD, a round number might be 1.2000. These levels can act as barriers where traders make decisions to buy or sell, making them essential reference points in technical analysis. Fibonacci Retracements and Extensions Fibonacci retracement and extension levels are based on the Fibonacci sequence and are used to identify potential support and resistance zones. The most commonly used Fibonacci retracements are 23.6%, 38.2%, 50%, and 61.8%. Traders apply these levels to charts to determine where price reversals or corrections may occur. Fibonacci extensions are key tools in technical analysis used to project potential price targets beyond the original trend. The most commonly used levels are 161.8%, 261.8%, and 423.6%. Pivot Points Pivot points are calculated levels that help traders identify critical support and resistance points. They are used to determine potential price reversals or breakouts. Traders often look at multiple pivot point levels, including support 1 (S1), support 2 (S2), resistance 1 (R1), and resistance 2 (R2), to gauge the market's sentiment and make trading decisions accordingly. Dynamic Lines Dynamic support and resistance are not fixed on the chart but change with market conditions. Common examples include moving averages and Bollinger Bands. Moving averages can act as dynamic support or resistance depending on their positioning relative to the current price: if the price is above the MA, the moving average serves as a support, while if the price is below the MA, the moving average can be used as a resistance. Bollinger Bands consist of a middle band (the moving average) and upper and lower bands that represent dynamic support and resistance zones based on price volatility. Trading Strategies for Support and Resistance Reversals Below, you will find two of the most straightforward strategies you can apply to various markets and timeframes. Bounce Trading Strategy Objective: To capitalise on confirmed support or resistance by entering positions when the price bounces off these levels. Entry Point: - Long Trade (Support Bounce): Traders may wait for the market to approach a strong support level. They always look for a confirmation signal, including a bullish candlestick pattern, such as a hammer or engulfing pattern, or a technical indicator. You may enter the trade at the opening of the next candle after the bullish confirmation signal. - Short Trade (Resistance Bounce): The trader may wait for the market to approach a robust resistance level. They always look for confirmation with a bearish candlestick pattern, such as a shooting star or bearish engulfing pattern, near the resistance level or a technical indicator. You may enter the trade at the opening of the next candle after the bearish confirmation signal. Exit Point: - Take Profit: Traders might set a take-profit order at a reasonable distance from their entry point, aiming for a risk-reward ratio of at least 1:2. - Stop-Loss: One common practice you may consider is to place a stop-loss order just below (for long trades) or above (for short trades) the support or resistance level you are trading. This may help protect against significant losses if the market moves against your trade. Look at the chart above. A trader could initiate two trades on the support level. In the first one, they could get confirmation from consecutive candles with small or non-existing lower shadows and rising bullish volumes. In the second trade, they may get confirmation from the Bollinger Bands as the lower band is aligned with the support level. Pullback and Retest Strategy Objective: To enter trades on pullbacks to previously broken support or resistance levels, which may now act as new support or resistance. Entry Point: - Long Trade (Resistance Turned Support): Traders wait for the price to break significant resistance and retrace to retest it as new support. To confirm a successful retest, you may look for reduced volume and bullish candlestick patterns. To enter a trade, you may wait for the next candle after the retest confirmation to open. - Short Trade (Support Turned Resistance): Traders wait for the price to break substantial support and retrace to retest it as new resistance. You may ask, “If the price is dancing above the support zone but hasn't broken below it, what should we do?” To make the strategy work, you will need to wait for a breakout and confirm the retest. To get a confirmation signal, you may look for reduced volume and bearish candlestick patterns. An entry point may be initiated when the next candle after the retest confirmation opens. Exit Point: - Take Profit: You may set a take-profit order based on your desired risk-reward ratio, considering the potential price target based on the recent significant swing point. - Stop-Loss: Traders usually place a stop-loss order just below (for long trades) or above (for short trades) the retested support or resistance level to manage risk. In the chart above, a trader could enter a trade on a retest of a broken resistance level that turned into support. Rising bullish volumes on a support point could serve as a confirmation signal. Common Pitfalls to Avoid Trading on support and resistance reversals may be a rewarding strategy, but it's essential to steer clear of common pitfalls that may lead to losses. Here are three significant pitfalls to avoid: - Overtrading. As the support and resistance reversal strategies are straightforward and conditions for them can be found on almost any market and any timeframe, traders may fall into an overtrading trap. Overtrading occurs when traders execute an excessive number of trades, often driven by the fear of missing out or the desire for quick profits. - Ignoring Fundamental Analysis. While technical analysis plays a crucial role in trading support and resistance reversals, ignoring fundamental analysis can be a significant pitfall. Economic data releases, geopolitical events, or company news can lead to unexpected market moves. - Neglecting Risk Management. Neglecting risk management is a critical mistake that traders should avoid, regardless of their strategies. Failing to implement proper risk management can result in substantial losses that outweigh gains. Final Thoughts Understanding the various types of support and resistance, including trendlines, round numbers, Fibonacci retracements and extensions, pivot points, and dynamic levels, is essential for traders and analysts to make informed decisions in the financial markets. These tools offer valuable insights into potential market reversals and overall market sentiment. Support vs resistance trading strategies are straightforward and may be applied to almost any market. If you want to test them, open an FXOpen account and enjoy trading in over 600 markets on the TickTrader platform! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
8
TURN BY TURN: IS XRP A BITCOIN HEDGE?XRP, the digital currency created by Ripple Labs, is often discussed in the context of its potential as a hedge against Bitcoin ( BITSTAMP:BTCUSD ). Here’s a brief analysis of whether XRP can serve as an effective hedge. What is XRP? XRP is designed to facilitate fast, low-cost cross-border transactions. Unlike Bitcoin, which is primarily viewed as a store of value or digital gold, XRP focuses on enabling efficient payments and transfers between different currencies. Correlation with Bitcoin Market Trends: Historically, XRP has shown a significant correlation with Bitcoin and other major cryptocurrencies. This means that when Bitcoin's price rises or falls, XRP often follows suit. This high correlation reduces its effectiveness as a hedge against Bitcoin price movements. Volatility: Both Bitcoin and XRP are subject to high volatility. For a cryptocurrency to act as a hedge, it should ideally exhibit lower volatility or inverse price movements compared to Bitcoin. XRP's volatility is often comparable to or even exceeds that of Bitcoin, which further undermines its potential as a hedge. Use Case Differentiation Payment Systems: XRP’s primary use case is in the realm of cross-border payments and financial institution settlements, which differs significantly from Bitcoin's use as a store of value. This fundamental difference in use cases could, in theory, provide some level of diversification for investors. Regulatory Factors: XRP's price is also influenced by regulatory developments specific to Ripple Labs and its ongoing legal issues with the SEC. These factors can lead to price movements in XRP that are independent of Bitcoin’s price dynamics, offering a potential, albeit limited, hedge. Market Sentiment Investor Behavior: Market sentiment plays a crucial role in the price movements of both Bitcoin and XRP. During periods of high market optimism or pessimism, both cryptocurrencies often move in tandem due to overall market sentiment affecting the crypto space. Conclusion While XRP and Bitcoin serve different purposes within the cryptocurrency ecosystem, the high correlation and similar volatility patterns between the two mean that XRP is not an ideal hedge against Bitcoin. However, its unique use case in cross-border payments and the influence of specific regulatory developments on its price could offer some level of diversification for investors. For those looking for a hedge against Bitcoin, other assets such as stablecoins or traditional financial instruments might be more suitable.
SAXO:BTCUSD
by moneymagnateash
17
Developing Emotional Resilience: Bouncing Back from LossesOkay, fellow TradingViewers, it’s time we tackle a topic that may make you a bit uncomfortable. But, rest assured — it’s for your own good! Today, we explore the realm of emotional resilience and, more precisely, how to bounce back from losses. Losses are inevitable. Ask anyone — even the big dogs in the industry have gone through painful losses (as you’ll see at the end of this write-up). Drawdowns so severe that they’ve nearly put hedge funds out of business (just ask Ray Dalio). And yet, bouncing back from losses is what has helped these one-time losers to develop emotional resilience and make the best out of the experience. Acknowledge the loss, but don’t overblow it Accept that losses happen and they’re a natural part of the trading journey. No matter how skilled or successful you are, you will have losing positions every once in a while. First, make sure you find out what went wrong. And second, don’t dwell on the losses too much and don’t let them cloud your prospects of becoming a better trader. Size your positions according to risk tolerance Never let a single position wipe out your entire account if it turned against you. We know how attractive it is to bet big on currencies swings spanning European countries . But keep in mind that, in such case, the old market adage "You're as good as your last trade" will hold true and it may not be pretty. There are two main ways to prevent the wipeout of your account with a single trade — don’t bet too big (or use too much leverage). If you do bet big, make sure you have a tight stop loss that won’t let your balance get washed out and drawn underwater. Always think about defense before you think about offense. Let your strategy take care of your trading You won’t have to be emotional if you let your strategy take care of your trading. Having the right trading plan will eliminate the need to react on the spot and make rushed decisions out of emotion. A solid strategy can empower you to withstand even the harshest market conditions with your chin up and trading account unscathed. Embrace the power of habit and routine In trading, consistency is key. Create for yourself a nice and easy-to-follow trading routine. This may include making your cup of coffee before you sit to do some chart reading. Or get a workout in before you read the daily news. Whatever will help you stay disciplined and emotionally balanced — do more of that. Invest in yourself and then trade the markets Your most valuable asset isn’t your trading account — it’s you. Invest time in learning, reading, watching interviews of successful traders and financiers. Read books on finance and trading, study the economic calendar , or sign up for a paper-trading account to test your trading skills risk-free. The more knowledge and practice you soak up, the more resilient and prepared you will become. Know when to step back and get a break Sometimes, the best thing to do after a loss is do nothing at all. It’s understandable if you feel emotionally unstable, off-kilter and overwhelmed when the markets gives you a slap in the face. Especially if you’re just starting out in the volatile trading space. What to do then? Unplug, unwind, recharge. The market will still be there tomorrow — go touch grass and come back with a refreshed perspective. Celebrate the wins — no matter how small Trading has to be about more than just coping with losses. Give yourself a nice pat on the back for every little victory. Made a successful trade? Or even got out at breakeven thanks to your stop loss? Perfect. Recognize and celebrate these moments. They’re little milestones to remind you that you’re on the right path to success. Loss advice from the big dogs in trading Let’s wrap up some with loss advice from the world’s best traders and see how they dealt with the blows of Mr. Market. Paul Tudor Jones , hedge fund manager: “Losses are not your problem. It's how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account.” Ray Dalio , founder of the world’s largest hedge fund Bridgewater, on how he viewed a near-bankruptcy experience: “I needed to balance my aggressiveness and shift my mindset from thinking ‘I’m right’ to asking myself, ‘How do I know I’m right?’ It was very, very painful, yet it changed my way of thinking. It was one of the best things that ever happened to me.” George Soros , pioneer of the hedge fund industry: “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.” Let’s hear from you How do you usually deal with a trading loss? What’s the best thing a loss has taught you? Comment below and let’s spin up a nice discussion!
Education
by TradingView
7
Applying a Champions Mindset to TradingWith the Wimbledon tennis championships starting this week, it seems only appropriate that we take inspiration from tennis GOAT Roger Federer, whose wisdom extends far beyond the court. It’s Only a Point In a recent speech at Dartmouth College in the US, Roger Federer, a 20-time major winner, shared insights from his tennis career that resonate deeply with those pursuing success in day trading: “In the 1,526 singles matches I played in my career, I won almost 80% of those matches. Now, I have a question for you, what percentage of points do you think I won in those matches? Only 54%. In other words, only top-ranked tennis players win barely half of the points they play.” These words, while referring to tennis, hold a mirror to the experience of highly successful day traders, who can finish profitable on 80% of trading days but manage win/loss ratios hovering around 50%. Losing frequently is a reality they manage with resilience and strategy. “When you lose every second point on average, you learn not to dwell on every shot… When you play a point, it has to be the most important thing in the world, but when it’s behind you, it’s behind you. This mindset is crucial because it frees you to fully commit to the next point and the next point after that with intensity, clarity, and focus.” The Psychology of Champions Elements of Federer’s tennis speech touches the core of elite trading psychology. Mastering each trade with intensity, clarity, and focus, while maintaining detachment from individual outcomes, forms a clear pathway to success. “You want to become a master at overcoming hard moments… The best in the world are not the best because they win every point; it’s because they know they will lose again and again and have learned how to deal with it.” Practical Applications of Federer’s Mentality Here are practical tips on applying a champion’s mindset to your trading: • Focus on Process Over Outcome: Emphasise executing your trading plan flawlessly rather than fixating on individual trade results. This approach aims to cultivate discipline and consistency, enabling you to make decisions based on logic and strategy rather than emotions. • Learn from Losses: Traders applying this mindset can look to use losses as opportunities to refine their strategy and improve decision-making. • Maintain Emotional Balance: Try to avoid letting wins or losses dictate your emotional state. Developing techniques such as mindfulness or journaling can help to manage stress and keep your emotions in check. • Commit to Continuous Improvement: Just as Federer constantly evolved his tennis game, traders could embrace continuous learning and adaptation in trading. • Resilience in Hard Times: Developing mental toughness to navigate challenges takes time. Traders could look to build a support system, whether through mentors, trading communities, or personal networks, to help you stay motivated and resilient. Conclusion While the parallels between trading and tennis can only go so far, the psychological insights of a true champion should not be underestimated. By adopting a mindset that prioritises process, resilience, and continual improvement, traders are better placed to navigate the complexities of the market with confidence and clarity. As Wimbledon unfolds, let Federer’s wisdom inspire you to approach your trading with the same intensity, focus, and strategic clarity that defines a champion. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Education
by Capitalcom
4
10-Year T-Note vs. 10-Year Yield Futures: Which One To Trade?Introduction: The 10-Year T-Note Futures and 10-Year Yield Futures are two prominent instruments in the financial markets, offering traders unique opportunities to capitalize on interest rate movements. This video compares these two products, focusing on their key characteristics, liquidity, and the differences in point and tick values, ultimately helping you decide which one to trade. Key Characteristics: 10-Year T-Note Futures represent a contract based on the value of U.S. Treasury notes with a 10-year maturity, while 10-Year Yield Futures are based on the yield of these notes. The T-Note Futures contract size is $100,000, while the 10-Year Yield Futures contract size is based on $1,000 per index point, reflecting a $10 DV01 (dollar value of a one basis point move). Liquidity Comparison: Both 10-Year T-Note Futures and 10-Year Yield Futures are highly liquid, with substantial daily trading volumes and open interest. This high liquidity ensures tight spreads and efficient trade execution, providing traders with confidence in entering and exiting positions in both markets. Point and Tick Values: Understanding the point and tick values is crucial for effective trading. For 10-Year T-Note Futures, each tick is 1/32nd of a point, worth $31.25 per contract. The 10-Year Yield Futures have a tick value of 0.001 percent, worth $1.00 per contract. These values influence trading costs and profit potential differently and are essential for precise strategy formulation. Margin Information: The initial margin requirement for 10-Year T-Note Futures typically ranges around $1,500 per contract, while the maintenance margin is slightly lower. For 10-Year Yield Futures, the initial margin is approximately $500 per contract, reflecting its lower notional value and DV01. Maintenance margins for yield futures are also marginally lower, providing traders with flexible capital management options. Trade Execution: We demonstrate planning and placing a bracket order for both products. Using TradingView charts, we set up entry and exit points, showcasing how the different tick values and liquidity levels impact trade execution and potential outcomes. Risk Management: Effective risk management is vital when trading futures. Utilizing stop-loss orders and hedging techniques can mitigate potential losses. Avoiding undefined risk exposure and ensuring precise entries and exits help maintain a balanced risk-reward ratio, which is essential for long-term trading success. Conclusion: Both 10-Year T-Note Futures and 10-Year Yield Futures offer unique advantages. The choice depends on your trading strategy, risk tolerance, and market outlook. Watch the full video for a detailed analysis and insights on leveraging these products in your trading endeavors. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CBOT_MINI:10Y1!Education
by traddictiv
4
FULL ANALYSIS GUIDE - (Using ICT's Concepts)Hey guys, In this video I will show you my process for performing analysis. Yes, it takes some work, but generally once you get into the swing of it, it doesn't take long, and the higher timeframes only require analysis once in awhile. It allows me to have a higher win-rate and be more on side with how the market is predisposed to move. Whilst it is not required in order to be profitable, my personality and system requires me to make more frequent wins. I hope you find this video insightful. - R2F
by Road_2_Funded
10
The TradingView Show: Breakout Charts with TradeStationWatch our latest episode of The TradingView Show and dive deep into the markets with TradeStation and their Head of Strategy. We examine breakout charts, significant money movements, and invaluable educational insights for traders of all levels. For daily charts and research, visit the TradeStation profile on TradingView, where they share scripts and engaging charts. They're also a connected broker allowing for instant connectivity between TradeStation and TradingView. See the official TradeStation broker profile here: www.tradingview.com The TradingView Show occurs monthly, focusing exclusively on market education and welcoming traders of all backgrounds. Each episode dives into a variety of topics, including equities, AI, crypto, gold, forex, and more, offering a comprehensive roundup of market trends and developments that are capturing traders' attention. Please note, the TradingView Show is dedicated solely to education, offering valuable insights and lessons for traders at every stage of their journey. It is important to emphasize that the show does not provide financial advice or recommendations; its primary goal is to enhance trader knowledge and understanding through educational content, including TradingView tips, scripts, charting techniques, and social networking. For more, please check out the compliance and disclaimers links below: 1. Important information: www.tradestation.com 2. Disclosure options: www.theocc.com 3. ETF prospectus page: www.tradestation.com Thanks for watching! We'll see you at our next show.
NASDAQ:NVDA
by TradingView
5
Bitcoin: Double Bottom Long To 64K.Bitcoin has confirmed a double bottom within the 60K major support area. The scenario that I outlined in my previous analysis is STILL in play (see illustration on chart). An inside bar is also present on this time frame along with a break of the high of that candle. As a result of all of this, a new buy signal is in effect which can result in a test of the 64K resistance over the coming week or two. A good question is: what is the risk associated with this long setup? Risk can be measured in a number of ways. One simple and more conservative way is to note the most recent low which is around the 59K area. A long taken now or from the low 61Ks puts the associated risk around 2K points on THIS time frame. In contrast to the potential reward around 64K, the R:R ratio is about 2:1 which makes this opportunity attractive for swing traders and investors. Before you go nuts and start buying though, it is important to understand that just because a buy signal appears (my criteria being met) does NOT guarantee a positive outcome. I believe there is a greater probability based on my experience. Probability MEANS there is also potential for the market is go the other way as well. This is why RISK management is the key to effective management and decision making NOT "high win rates" etc. As I remind my followers regularly so unexpected news can come out and Bitcoin can be pushing 56K in a matter of hours. Another things to watch out for is all the rocket ship talk. The "it's going to 100K by tomorrow and you are going to miss it!" nonsense. If you follow people that proliferate fear of missing out messages, stop following. Bitcoin has been in a consolidation since the March peak which has resulted in NUMEROUS opportunities on both sides of the market. There is NO reason to feel like you are missing anything, ESPECIALLY when you have a tool that helps you easily identify opportunities, clarify RISK and measure profit potential (like my Trade Scanner Pro). Without a rational decision making framework, you become vulnerable to your own emotions of greed and fear. And this is what leads to being exploited by "experts" that you identify with and trust, along with making irrational, high risk decisions like buying when a market looks its best (aka the top). As I remind my followers regularly, before you even assume risk, you must have a specific idea as to how you intend to exploit an opportunity in the market. Just trying to "make money" is not an enough of a reason. The market is NOT your personal ATM. It is a mechanism to transfer wealth from those who have material knowledge from those who "think" they have material knowledge. If your results over the previous year or more appear to be stagnant or random, which side do you think you're on? Thank you for considering my analysis and perspective.
BITSTAMP:BTCUSDLong
by MarcPMarkets
45
Navigating Frothy US Equities with S&P SpreadsNavigating frothiness in US equities requires both caution and tact. With the S&P 500 nearing its all-time high amid flashing recession signals, investors must be vigilant with volatility during upcoming earnings season, driven by outsized expectations. This paper explores the persistent recession indicators and forces at play during upcoming earnings. The paper posits a spread trade using CME’s Micro E-Mini futures (Long S&P 500 and Short Russell 2000) to maintain upside potential with reduced downside risk. RECESSION RISKS PERSIST AS RATES REMAIN HIGH On Friday, the PCE Price Index (Fed’s preferred gauge) showed inflation cooling to 2.6% in May, in line with expectations. Price pressures are slowly abating. Numbers aside, the broader economic landscape presents a complex picture. Signals from the job market point to unemployment claimants at a record high for the past two and a half year with job openings shrinking drastically. Personal earnings were higher than anticipated in May (0.5% vs 0.4%), but spending was below expectations. Consumers are being more cautious. Mint Finance covered these nuances in a previous paper . Housing is flashing weakness as new housing starts hit a four-year low in May. Soaring prices and steep mortgage rates are weighing on demand. The Fed’s policy path remains unconfirmed. However, consensus point to a rate cut as early as September. Even if that happens, rates are expected to decline gradually. Source: CME FedWatch Despite risk of recession, the S&P 500 has had an exemplary showing this year, trading near their all-time high. YTD performance of 15% in 2024 has been far higher than the 74-year average of 4%. Yet, the performance has been increasingly top-heavy. Nvidia, Apple, and the rest of the tech titans have contributed much of the gains in the broad S&P500 index as it is market cap weighted. The index is heavily reliant on and sensitive to the performance of these mega-caps. The equal-weighted S&P 500 index is up only by 4% in sharp contrast. The spread between the S&P 500 and its equal-weighted counterpart is near its highest point since 2008. The spreads between the S&P 500 and both the Russell 2000 and S&P Midcap indexes have reached multi-decade highs. Outperformance was re-affirmed after the recent earnings season. Mega-caps crushed EPS and revenue expectations and reported phenomenal guidance while other stocks, especially utility and energy sector reported revenue and EPS figures below estimates according to FactSet report . Rallies in mega-cap stocks are being driven by idiosyncratic tailwinds, such as advancements in AI. Meanwhile, slowing consumer spending in the US is raising concerns for the broader market. RISK OF SHARP CORRECTION WARRANTS SPREAD POSITION According to FactSet , Q1 earnings season was positive. Only 19% of firms reported earnings below expectations. Actual average EPS YoY growth for the index was 5.9% (above 3.4% expected as of March 31). Frothiness in the equity market is palpable. Consistent outperformance by mega caps is baked into investor expectations. Strong earnings are already factored into prices, as evidenced by the S&P 500's P/E ratio of 28.38x (far higher than the 10-year average of 20x translating to a 42% above average earnings expectations). Average P/E ratio in the best performing tech sector is even higher at 37.47x. Even minor shortfalls in guidance or revenue/earnings can lead to significant corrections in such a climate. The FactSet reports that 31.8% of firms which beat earnings EPS estimates by up to +5% saw average price decline of -0.9%. Source: FactSet Research In fact, overall, positive earnings only drove a 0.9% increase in price (1% 10Y historical average) while a negative earnings report led to 2.8% drop (-2.3% 10Y historical average). Source: FactSet Research Market frothiness elevates risk of a sharp price correction in single names during Q2 earnings. Analysts are concerned as expectations for Q2 EPS YoY growth have been lowered from 9% on 31/March to 8.8% as of 22/June. Despite this, mega-caps remain in solid position. Robust demand for AI, buoyant advertising revenue, globalized revenue streams, and substantial market dominance have positioned them to continue growing at a disproportionate rate. In case the upcoming Q2 results pan out similarly to Q1 in favor of mega-caps, the S&P 500 will continue to outperform the broader market indices. HYPOTHETICAL TRADE SETUP The S&P 500, with its high concentration of mega-cap stocks, is likely to perform better than broader market indices in the coming earnings season. However, recession signals are also flashing. The S&P 500 does not perform well during recessions. Over the last four recessions, it has declined an average of -14%. Comparatively the spread between S&P 500/Russell 2000 spread has increased 1.7%. The S&P 500/Russell 2000 spread has also outperformed during the six-month preceding recessions. Given the S&P 500-Russell 2000 spread's historical outperformance during recessions, a spread position presents less downside risk compared to an outright long position in the S&P 500. This strategy also maintains a bullish outlook on the top-heavy S&P 500's potential to outperform in the upcoming season. Moreover, the spread trade preserves the upside potential in the ongoing rally, as its performance has been comparable to an outright long position in the S&P 500. A view on the spread between the S&P 500 and Russell 2000 can be expressed using CME Micro E-Mini Equity futures. At 1/10th the size of the full-size E-mini futures, the Micro contracts allow for smaller trades with more granular exposure. A long position in the Micro E-Mini S&P 500 futures expiring in September (MESU2024) can be offset by a short position on 2 x Micro E-Mini Russell 2000 futures expiring in September (M2KU24). This position is highly margin-efficient as CME offers margin credit for this spread. Hypothetical trade set up in summary requires entry at 2.69x, with a target at 2.78x coupled with stop loss at 2.6x. The simulated payoffs are described below. MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME_MINI:MESU2024Long
by mintdotfinance
4
Amazon at $2 Trillion: What’s Driving the Stock to Record Highs?Tripled profits, a bet on AI, and a strategy to take on rising rivals from the East have propelled the ecommerce and cloud computing giant to the lofty price tag. Innovation on Amazon’s Mind Amazon (ticker: AMZN ) hit $2 trillion in market value just before the year clocked out for the first half. In the final week of June, the Jeff Bezos-founded online retailer soared past the formidable milestone, becoming the fifth company to ever breathe the rarefied air beyond $2 trillion. What’s been driving Amazon stock to line up right after Alphabet (ticker: GOOGL ), Nvidia (ticker: NVDA ), Apple (ticker: AAPL ) and Microsoft (ticker: MSFT )? It’s a mix of fortunate and timely events, and all can be summed up with one word: innovation. Amazon raked in sky-high profits of $15 billion for the most recent quarter. The figure was up three times from the same quarter last year. More importantly, the company, now under the stewardship of Andy Jassy as chief exec, is pivoting more resources to meet the growing demand for artificial intelligence. Shifting Focus to Artificial Intelligence Amazon Web Services (AWS) is the firm’s cloud computing business and also the world’s biggest one. It’s largely the cash cow at Amazon with profit margins as wide as 38%. Now, it’s getting a boost from businesses looking to inject AI into their products and services. The fast-growing AI-focused unit is growing at a “$100 billion annual revenue run rate,” according to Jassy. For the quarter ended March 31, AWS sales rose 17% to $25 billion, beating forecasts for $24.5 billion and also coming ahead of the previous quarter’s 13% growth pace. It seems that the AI hype is sweeping across the Amazon halls and conference rooms. Generative AI got praised by Amazon’s chief financial officer Brian Olsavsky as “a multibillion-dollar revenue run rate business for us.” Looking for a meaningful edge doesn’t stop with artificial intelligence. Pitted Against Temu and Shein Rising ecommerce competition from the East is forcing the $2 trillion giant to embrace a new line of business — ultra-low-cost goods shipped directly from China. A new discount section is in the works for Amazon.com after smaller rivals Temu and Shein have threatened to slurp up a significant market share. The new section, according to reports, will be added to the homepage of the retailer’s app. It will be targeting American customers willing to wait nine to 11 days for goods shipped from China warehouses, as opposed to the regular one or two-day delivery time for goods delivered from within the US. Also, each item will get a price tag of no more than 20 bucks. Temu, owned by PDD Holdings, and China-founded Shein have flooded the internet with cheap stuff and massive discounts thanks to splurging billions of dollars in advertising campaigns. Amazon, a mainstay in the FAANG stocks list , is among the few companies to be of gargantuan size yet nimble enough to stay relevant in the changing landscape of its industry. Will the pivot to cheap goods succeed in stamping out the aggressive competition from China? Or will the corporate giant be outperformed by the brilliant maneuvering of low-caliber foreign retailers? Share your thoughts in the comments!
NASDAQ:AMZN
by TradingView
5
NIKE - Dead or a Cheap Opportunity? Nike has been on a rough patch recently & this past week didn't help as it saw it's worst day in over 20 years. Now the question is, is Nike dead in the water or has price gotten so cheap that it makes for a good investment opportunity? Now, I'm not here to tell you that you should or shouldn't buy Nike, rather if you were considering it, where you may want to look to do so at & what you need to be aware of if you do. I'd love for you guys to continue the discussion by sharing your opinions below! And as always I wish you a fantastic week of trading and investing. Akil
NYSE:NKELong
by Akil_Stokes
48
Price Action Fluency As A Second LanguageThis is the most important educational video I have shared. Reading price action is akin to acquiring a second or foreign language. Just as fluency in a new language provides fluency and articulation, mastering price action offers traders a nuanced understanding of market dynamics. One would not expect to learn a new language in a short amount of time. It often takes years while keeping up the practice for the rest of ones life. Price action is no different. There are literally hundreds of subtleties revealing their secrets to the ones who 𓁼 . Indicators obstructing the view of plain truth is most often a useless distraction. It's not just about recognizing patterns; it's about developing a foundational understanding that allows for intuitive and informed trading decisions. Building this skill set enables traders to interpret market 'sentiments' and react more adeptly to volatility, much like a fluent speaker picks up on subtle nuances in conversation. Thus, learning to 'speak' the language of price action is essential for anyone serious about trading, as it equips them with the tools to navigate and succeed in the complex world of financial markets.
KRAKEN:BTCUSDEducation
by EsotericTrading
34
How to Read the MACD Indicator and Use It in Your TradingTechnical analysis is a vast field with thousands of indicators, which may be confusing to those among us who are just starting out. In this Idea, we look at one of the most popular indicators and also one of the easiest ones to fire up and start using from Day 1. MACD (Moving Average Convergence Divergence) MACD is arguably the most widely used indicator that can get slapped on virtually every chart out there. The indicator’s full name is Moving Average Convergence Divergence, but you don’t need to remember that. If you need to take away one thing, it’s this: MACD is easy to read. Here’s how to do it. Technical Side of Things Add the MACD in your chart of choice — any chart, any time frame. You’ll see three default numbers used to set it up — 12, 26, 9. The 12 is the moving average of the previous 12 bars (also called faster moving average). The 26 is the moving average of the previous 26 bars (also called slower moving average). The 9 is the moving average of the difference between the two averages in play. Next, you see that there are two lines that move up and down and cross each other occasionally. The two lines are: The MACD line: the difference between the two moving averages and the “faster line”. The Signal line: the moving average of the MACD line and the “slower line”. Because the two lines measure price changes at different speeds, the faster one (MACD) will always run ahead and react before the slower one (Signal) catches up. How to Trade with MACD If all that sounds a bit complex, here’s the gist of it: Faster line leads, slower line follows. Faster line crosses slower line to the downside — a downward trend may be forming. Faster line crosses slower line to the upside — an upward trend may be forming. Technically, whenever a new trend is shaping up, the slower line should confirm it by following the faster line. And that happens when the two cross over. The way to potentially spot new trading opportunities is to look for the crossover. This, in a nutshell, is how to read the MACD indicator and use it to help you become a more profitable trader. There's a whole plethora of MACD examples in action — dive right in ! Let us know your thoughts and experience with the MACD in the comments below!
Education
by TradingView
7
EBS Base Breakout SetupHey everybody got my camera working for this trade idea. Here we have the ebs stock setting up for a breakout in an uptrend and we're hoping for a bullish continuation here. I describe my entry points my stop loss and my profit target one and the logic behind them and how to position your share count so you can manage your risk and prepare to lose as much or as little money that you want if the trade goes against you every decision in this trade has meaning and logic to it that pertains to the particular stock and the setup therefore you know why you are doing everything that you're doing when trading. Let me know if you have any questions or if this is new to you or if you need help setting it up or calculating how much money you should win or lose. The only issue with this stock is that it's not in the technology sector and it's not in the communication sector so it is not in the most high performing sector right now although the healthcare sector is performing pretty decently with financials as well.
NYSE:EBSEducation
by PappyTrading
4
Trade the TREND with 4 Trend Indicators4 Trend Indicators you can use to identify the current MACRO Trend. It's always important to know where your market is currently trading. Is it bullish, bearish, or range trading? If you have established the trend, you can trade with the trend instead of against it. Trading against the trend ( for example shorting during a bullish cycle ) adds unnecessary risk to an already risky trade (leverage). 1) Bollinger Bands 2) Logarithmic View 3) Super Trend 4) Moving Averages + RSI Let me know how YOU determine the macro trend! _________________________ BINANCE:DOGEUSDT MEXC:ETHUSDT KRAKEN:BTCUSD COINBASE:SOLUSD
Education
by CryptoCheck-
4
Is It Possible to Define the Probability of an Effective Trade?Is It Possible to Define the Probability of an Effective Trade? Traders are constantly trying to figure out the secret of effective trading. However, the inherent unpredictability of markets minimises the ability to accurately determine the probability of an effective trade. This FXOpen article focuses on the many variables that contribute to the dynamism and uncertainty of financial markets. Let’s consider why it is impossible to estimate the chance of lucky trade and what can be done instead. Why Is Defining Trading Outcomes Difficult? Trading involves a multitude of variables, which make it challenging to define the probability of an effective trade. Economic indicators, earnings reports, news releases, and geopolitical events all contribute to trading results. Economic indicators that reflect the state of the economy are subject to revisions and unexpected changes. Geopolitical events, from political tensions to trade agreements, can quickly change the market trajectory. Market sentiment, influenced by news, social media, and psychological factors, introduces a human element that cannot be accurately quantified. That’s why it’s a challenge to define probability in trading. Factors Influencing Trading Outcomes Trading the odds is not an effective approach. This implies an attempt to determine market movements intuitively and believing in the best. However, by relying solely on the illusion of predicting the odds, traders gain a false sense of security and overlook other influential factors. Still, there are several factors that surely influence the results of trading, including market conditions, risk management, and trader psychology. For instance, volatility and liquidity significantly impact trading. Then, building a risk management strategy and using stop-loss orders may help mitigate potential losses. Lastly, understanding trader psychology, including emotional regulation and discipline, plays a vital role in making objective and consistent decisions. The Role of Market Analysis It’s unlikely that someone will be able to fully explain how lucky trades work. But it’s definitely possible to identify how trades built on analysis work and why they’re smarter. Market analysis, such as technical, fundamental, and sentiment analysis, provides insights into market movements. Technical analysis examines historical price patterns and indicators, while fundamental analysis delves into economic factors. Sentiment analysis gauges the mood of market participants through various indicators, such as social media trends. Trades based on an understanding of charts, fundamentals, and reasons for price movements are much more reliable and more likely to be effective than guessing. However, traders should not forget about the complexity of defining trading outcomes. Even using advanced indicators, one cannot analyse future price movements with 100% precision. Markets are not static entities, and adaptability and risk management are key. Risk-Reward Ratio and Win Rate The risk-reward ratio is a critical tool for improving trading performance. The R/R ratio is a mathematical calculation used to measure the expected gains for every unit of risk undertaken. However, it’s important to note that this is a risk management tool rather than a measure of probability. Traders often fall into the trap of solely focusing on historical high win rates, believing this guarantees success in the future. However, the efficacy of a trade doesn’t solely hinge on the win rate. A high win rate may be effective when paired with favourable risk-reward ratios, potentially creating a sustainable trading strategy. Historical Performance Historical performance analysis involves scrutinising past market data, price movements, and trading patterns to identify trends, correlations, and potential signals. Traders use this analysis to make informed decisions about future market movements based on the belief that historical patterns can repeat themselves. Analysing historical performance gives traders a valuable perspective on potential future movements. Chart patterns, support and resistance levels, and key technical indicators become tools for analysing market behaviour based on past events. However, retrieving information from past market behaviour comes with limitations. Relying on historical data without considering current market dynamics may lead to misguided conclusions. Additionally, the occurrence of black swan events can disrupt established patterns. The Influence of Trader Skill Trader skill — a combination of experience and knowledge — plays a key role in overcoming uncertainty in trading. Experienced traders can interpret market signals with higher precision. Through exposure to diverse market conditions, traders develop a nuanced understanding of when to adhere to strategies and when to adapt. However, even the most seasoned traders are not immune to market unpredictability. While trader skill empowers individuals to make informed decisions, it does not ensure infallibility. Final Thoughts Ultimately, no one can determine the lucky trade chance. But while there are no guarantees, managing risk and maintaining a long-term perspective are crucial elements for traders. Analysing charts that can be found on the TickTrader trading platform, relying on indicators, adaptation, and getting as much practice as possible may improve performance in the market. In any case, one should not rely on luck alone. To continue gaining experience, you can open an FXOpen account and enjoy the exciting trading conditions available in the market. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
6
Why you need to have rules in your trading careerHello, The importance of rules cannot be underestimated in any business. This must not be different in trading/investing since it must be viewed at all times as a business. Below are my rules as a wave trader. Wave trading is a trading strategy that combines technical analysis with Elliott Wave Theory to identify and predict future market movements. This approach involves analyzing market price patterns to understand the cyclical nature of market trends and capitalize on these patterns for trading opportunities. Below is an example of how markets move in waves Rules are very important (Our trading rules) Identify Impulse & Correction The first step in trading is to identify the impulse and correction phases in the market. An impulse phase is characterized by strong, directional price movement, indicating a clear trend. Corrections, on the other hand, are smaller, counter-trend movements that typically follow an impulse. By recognizing these phases, you can better understand the market's structure and prepare for potential trading opportunities. Below is an example of impulses & corrections identified Identify the Pattern Formations Once you have identified the impulse and correction, the next step is to look for specific pattern formations. These patterns, such as head and shoulders, double tops, or triangles, provide clues about future price movements. Understanding and recognizing these formations can significantly enhance your ability to predict market direction and make informed trading decisions. Below are patterns identified that can be tradeable Most of these patterns can nowadays be identified for you using Tradingview under indicators, metrics & strategies. Identify Entry Points After identifying the patterns, the next crucial step is to pinpoint entry points. This involves determining the optimal moment to enter a trade based on your analysis of the market. Entry points should be chosen carefully to maximize potential gains while minimizing risk. Look for confirmations, such as breakouts from patterns or specific technical indicators, to ensure a higher probability of success. Below is an example with a risk free entry We shall be looking in another post on different types of entries. Look for Targets Setting targets is essential for effective trading. Targets help you establish your profit goals for each trade and ensure that you remain disciplined in your approach. These targets can be based on various factors, such as previous support and resistance levels, Fibonacci extensions, or measured moves from the identified patterns. Clear targets allow you to exit trades strategically and lock in profits. Below is our clear target for the entry we made with a clear stop loss as well Look for Exits in Case the Trade Doesn't Go Your Way Not all trades will go as planned, so it's vital to have exit strategies in place for unfavorable scenarios. This involves setting stop-loss levels to limit potential losses and protect your capital. By defining these exits beforehand, you can remove emotional decision-making from your trading process and adhere to a systematic approach, ensuring long-term success and sustainability in your trading business. I trust that these rules can help you in your trading journey. You can think of having them written somewhere. That way you can look at them & follow them for each trade you make. All the best
NYSE:BACEducation
by thesharkke
10
GOLDTrend Analysis Downward Trend Line: There is a red downward trend line indicating that gold has been in a downtrend. This line acts as a resistance level. Support Zone: There is a green support zone around the $2,318.00 level. This indicates that there is buying interest around this price, and it has historically acted as a support level. Resistance Levels First Resistance: Around $2,325.66. Second Resistance: Around $2,332.00. These resistance levels indicate where selling pressure has previously been strong enough to halt upward price movement. Fair Value Gap (FVG) A Fair Value Gap is highlighted in a beige rectangle from approximately $2,340.00 to $2,354.60. This gap suggests an area where the price might move quickly if it enters this zone, potentially due to a lack of liquidity or previous rapid price movement. Price Action Current Price: As of the latest data on the chart, gold is trading at $2,319.26. Recent Movement: The price recently bounced off the support zone but faced resistance near $2,332.00, aligning with the downward trend line. Potential Scenarios Bullish Scenario: If the price can break above the resistance at $2,325.66 and subsequently the downward trend line, it may target the next resistance level at $2,332.00. A break above this level could lead to a move towards the Fair Value Gap, potentially reaching the upper boundary around $2,354.60. Bearish Scenario: If the price fails to hold the support level at $2,318.00, it might move lower, with the next significant support level potentially being around $2,312.00. Further bearish movement could target levels below $2,310.00. Key Levels to Watch Support: $2,318.00, $2,312.00. Resistance: $2,325.66, $2,332.00, $2,354.60 (FVG zone).
TVC:GOLDLong
by Tdawly_Official
58
Ichimoku Watch: Nvidia Eyeing Ichimoku Cloud Support In three successive days of selling, triggered after a bearish outside reversal formed on Thursday last week from all-time highs of $140.76, Nvidia (ticker: NVDA) has shed approximately -15.0% from the peak. The company’s market value dropped more than US$500 billion to US$2.91 trillion, consequently pulling the chipmaker back to third place after briefly becoming the most valuable company in the world and surpassing Microsoft (ticker: MSFT) and Apple (ticker: AAPL). Behind the sell-off is a combination of the CEO, Jensen Huang, selling almost US$100 million worth of shares a handful of days before (and after) it became the world’s most valuable company, along with worries about the company’s effect on the broader stock market indexes, and profit-taking after what has been a meteoric rise. Ichimoku Cloud Support As can be seen from Nvidia's daily chart, the stock’s recent movement has easily crossed below the Conversion Line (blue at $129.40) and is fast approaching the Base Line (red at $116.28), which could deliver support. However, should further downside develop, the Ichimoku Cloud support (made up of the Leading Span A at $122.95 and the Leading Span B at $108.23) could be seen as a logical downside target for sellers in this market at the moment. You will also see that the chart offers support at $96.77 around the Ichimoku support zone. Price Direction? While it is unlikely that the party is over for Nvidia, the current correction will likely be viewed as an opportunity to get in at cheaper prices. Dip buyers, therefore, may seek suitable support levels to enter this market long. The combination of support just below $100.00 at $96.77 and the Ichimoku Cloud support area could be worthy of the watchlist.
NASDAQ:NVDALong
by FPMarkets
9
Nvidia - Massive rejection soon!NASDAQ:NVDA is clearly overextended after the +1.000% rally and ready for a correction. Trees simply do not grow to the sky. And neither do stocks, especially Nvidia. I know that a lot of people are calling price targets of $250 and beyond, but we still have to respect gravity and the nature of fear and greed. Nvidia is simply overextended a retesting a 6 year resistance trendline. I do expect a correction between -20% and -30%, but also -60% is definitely possible. Levels to watch: $120, $50 Keep your long term vision, Philip - BasicTrading
NASDAQ:NVDAShort
by basictradingtv
50