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Top traders' methods: A scenario-based view of the markets The best traders think in scenarios of market events. They know from experience that the market can do "anything," so it is better to be prepared for any eventuality. This approach is part of mental flexibility. It can take several forms. Flexibility in approaching the market reduces stress Flexibility in our approach to the market reduces stress - if we are prepared for different scenarios of events it is certainly hard to surprise us isn't it? A lot of stress comes from the fact that we like to attach ourselves to our analysis and our rationale, and we feel annoyed when the market acts differently. If you take several options for the development of events and prepare for each of them - you are already taking into account that, for example, one or even several orders will go to cost. With this approach, you are already prepared for the matter. You also don't succumb to the illusion of your own infallibility and need to be right. Experienced traders know that being right is useless and even harmful, what matters is making money, not being right. Flexibility can promote better profits. Flexibility can promote better profits when you think through several possible scenarios and prepare to... make money on each of them. - If the market falls, I'll do this, enter here and the TP will be here, and if it rises I'll enter at that place and set the TP like this. You prepare your psyche to act according to what the market will do - just like a hunter waits for the game to come out in one place or another. The market's subsequent denial of being "right" can take a toll on your self-esteem, and as you already know, this is an unfavorable phenomenon. Therefore, think in open-ended terms - that the market can rise or fall in different scenarios. Think how you will make money on each of them, and don't be attached to any direction, any behavior and any "right." Think how you will make money on possible ups and possible downs, and don't be tied to any direction, any behavior and any "rationale." Flexibility over the long term In the long run, you can simulate for yourself many different profit and loss scenarios. Especially simulating, recalculating a series of losses works positively. It is sobering. If you are prepared for the worst that can happen, and you are able to survive it and come out on top - you are on your way to professionalism. Be prepared for a series of battles and for the fact that even though you will lose some of them, in the end you must win the war. Tip: When preparing to enter the market, think about where you will enter, where you will put SL and where you will put TP. Think about the different ways you can manage an open order: what are your choices? Exit because the system gives a signal in the opposite direction? Exit because the market froze instead of moving in your direction? Exit because the indications of the indicators are changing? Think through the different possibilities of market behavior. Together with them, think through your reactions and your decisions. If you prepare in advance - the management of the order itself will no longer require thinking, but only the execution of the strategy adopted earlier. Such a situation is more advantageous, because the decision-making process in conditions when there is no pressure is better. If you think through your reactions and decisions earlier order management will no longer require thinking, but the execution of the strategy adopted earlier. Such a situation is more advantageous because the decision-making process in conditions when there is no mental pressure is better. Also think about what can knock you out, pull you away from your plan? What kind of distractions? Pets at home, family, phones? Think about how to eliminate these distractions or how to prepare for them when they occur. Traits of master traders Trading, systems, psyche is something unique. That is, every trader is different. At a certain level, traders participate in competitions, struggles with other traders. At the next level they are left alone, especially the best. And the best of the best start struggling with themselves. They are themselves yesterday's benchmark for what they want to achieve today. Thus, they enter the struggle with themselves, with this most important opponent. Therefore, think about it and imitate them. Be better today than who you were yesterday. And tomorrow be better than who you are today. Your new goal, which will lead you to the level of Master: "I will be the best trader I can be."

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Fibonacci: The Fundamentals Applying Nature's Harmony to Financial Markets From flower petals to far away galaxies, the Fibonacci pattern is found across the natural world. Fibonacci patterns are derived from the Fibonacci number sequence where each number is the sum of the two preceding ones: 0, 1, 1, 2, 3, 5, 8, 13, and so forth. Some traders believe the Fibonacci sequence and its derived ratios, like 38.2%, 50% and 61.8% occur in the price movements of financial markets. These ratios are used to predict levels at which assets might retrace or extend their trends. I. Fibonacci Retracements: Add Precision When Timing Pullbacks Fibonacci retracements are based on the idea that after a significant price movement, an asset often retraces a portion of that move before continuing its original trend. The retracement is simply a pullback against the impulsive trending move. Identifying the impulsive trending move is pivotal to drawing Fibonacci retracements. This trending move is known as the ‘impulse leg’ and is labelled X-A on our charts (below). The Fibonacci retracement tool can be overlayed on top of any impulse leg to provide a series of retracement levels generated from the Fibonacci number sequence. Fibonacci Retracement Levels: Past performance is not a reliable indicator of future results 38.2%: This level indicates a moderate retracement. It's often seen as an area where traders might anticipate a reversal or a continuation of the trend. 50%: A key level, suggesting a potential halfway point for the retracement. Traders closely watch this level for potential shifts in market sentiment. 61.8%: Known as the "golden ratio," this level holds perhaps the most significance in the world of Fibonacci – it is the ratio described by Leonardo da Vinci as representing divinely inspired simplicity and orderliness. 78.6%: While not as commonly used as the others, some traders like the 78.6% retracement as it is perceived to offer the greatest potential reward relative to X (the inception of the trending move). However, the deeper the retracement the weaker the trend. Fibonacci Retracements in Uptrends: Past performance is not a reliable indicator of future results Fibonacci Retracements in Downtrends: Past performance is not a reliable indicator of future results Uses of Fibonacci Retracements: Identifying Support and Resistance: These retracement levels often act as potential areas where price movements may pause or reverse. Planning Entry and Exit Points: You can use Fibonacci retracements to plan entry points for trades during a trend and set exit points to take profits or minimise losses. Confirmation Tool: When Fibonacci levels align with other technical indicators or chart patterns, they can provide confirmation for trade setups, adding confidence to trading decisions. II. Fibonacci Extensions: Projecting Price Targets and Beyond Fibonacci extensions are used to project potential future levels beyond the initial trend. They help traders anticipate where price movements might extend. Like Fibonacci retracements, the impulse leg (labelled X-A) is key. The Fibonacci trend extension tool can be overlayed onto your impulse leg to generate Fibonacci-based levels to which the impulse leg may extend. Common Extension Levels: Some commonly used levels are 138.2%, 161.8%, and 261.8%. Fibonacci Extension Levels Past performance is not a reliable indicator of future results Fibonacci Extensions in Uptrends Past performance is not a reliable indicator of future results Fibonacci Extensions in Downtrends Past performance is not a reliable indicator of future results Uses of Fibonacci Extensions: Setting Profit Targets: You can use extensions to establish potential price targets, aiding in setting profit-taking levels for their trades. Predicting Price Reversals or Extensions: These extension levels can signal where a trend might exhaust or where it could extend further, assisting traders in adjusting their strategies accordingly. Conclusion: While debates surround the impact of Fibonacci in markets, the core principles—identifying strong impulse legs, timing pullbacks precisely, and projecting targets—form the cornerstone of price action trading. Next week, we'll explore the synergy of retracements and extensions, delving deeper into the captivating realm of advanced Fibonacci patterns. 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. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Social media channels are not relevant for UK residents

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ADX Trend-Based Strategies The Average Directional Index is a highly-respected tool in many traders’ arsenals, capable of measuring the strength of market trends. This article delves into two ADX-based strategies, exploring how to combine this tool with other popular indicators like RSI and EMA for a well-rounded trading system. Understanding the ADX Trend Indicator The Average Directional Index (ADX) is a trend strength indicator commonly used in technical analysis. It helps traders identify the strength of market trends, thereby serving as a key component in crafting an effective trend trading strategy. Originally developed by Welles Wilder, the ADX oscillates between 0 and 100, providing a quantitative measure of trend strength. When its value is below 25, the trend is typically weak or non-existent. Conversely, readings above 25 signify a stronger trend, with values over 50 suggesting a very strong trend. Traders often use these numerical benchmarks to assess whether to enter or exit a trade based on the prevailing trend conditions. Importantly, this tool does not indicate the direction of the trend; rather, it measures the trend's intensity. Therefore, it is often used in conjunction with other indicators to provide a complete picture of market conditions. This makes the ADX a versatile and valuable indicator for any trader aiming to build a robust trend trading strategy. Basic Parameters for ADX The ADX usually comes with a default setting of a 14-period lookback. This means the indicator evaluates the trend strength based on the last 14 bars, whether you're using a daily, hourly, or any other time frame. In most trading platforms, including FXOpen’s own TickTrader platform, setting up the ADX involves selecting it from the platform's list and then choosing the period parameter. Some traders tweak the period to fit their trading style, although caution is advised when straying from the standard settings. Interpreting ADX signals is straightforward: a rising value suggests an intensifying trend, while a falling value indicates a weakening trend. This makes it easier for traders to gauge market conditions and determine their trend-following strategy. ADX and RSI Strategy The Relative Strength Index (RSI) is often dubbed one of the best trend indicators when used in combination with ADX. When employed together, they form a powerful duo to identify trend strength and market momentum. For this strategy, both indicators are used at their default settings: a 14-period lookback for both ADX and RSI. Horizontal lines are drawn at 45 and 55 on the RSI window and at 25 on the ADX window to serve as reference points. Entry When the RSI rises above 55 or falls below 45, traders wait for the ADX to cross above the 25 level to enter. It's discretionary for traders to decide whether to enter when the RSI is in overbought (above 70) or oversold (below 30) territories. While these conditions may offer trading opportunities, they can also be riskier as the trend could easily continue. Stop Loss Traders often position a stop loss above or below a nearby swing point to protect their trades. Take Profit Profits may be taken when the ADX falls below 25, signalling a weakening trend. Alternatively, traders can opt to exit the trade at a predetermined support or resistance level. ADX and EMA Strategy The Exponential Moving Average (EMA) is a type of moving average that responds quickly to price changes and new trends. For this setup, the EMA is configured to a 28-period lookback, while the ADX retains its default 14-period setting. The EMA is essentially another trend filter, acting as a useful baseline for trend direction. Entry Traders look for entry opportunities when the price is either above or below the 28-period EMA, indicating the direction of the trend. Once the ADX crosses above 25, confirming trend strength, traders wait for the price to retrace back to the EMA line to enter the trade. Stop Loss A stop loss may be positioned just beyond the EMA. Alternatively, placing the stop loss at a nearby swing point offers another way to mitigate risk. Take Profit Profits might be taken when the ADX falls below the 25 level, suggesting that the trend may be losing momentum. As another option, traders may choose to exit at a predetermined support or resistance level. Benefits and Risks of ADX Trend Trading Strategies Understanding the benefits and risks associated with ADX-based strategies is crucial for traders aiming for consistent returns. Here's a breakdown: Benefits Objective Trend Strength: ADX quantifies trend strength, removing subjective guesswork. Versatility: ADX can be combined with various other indicators like RSI and EMA to create multi-dimensional strategies. Clear Signals: Thresholds like ADX 25 provide clear, easy-to-understand entry and exit signals. Risks Lagging Indicator: Being a trend-following tool, ADX can lag, potentially causing late entries or exits. False Signals: Market volatility can lead to false ADX signals, especially in lower time frames. The Bottom Line In essence, mastering the ADX indicator can equip traders with the ability to discern even stock trend patterns effectively. Its versatility and simplicity mean it’s a great inclusion for trend-following strategies. The strategies given here offer a foundation to work with, but it’s well worth experimenting for yourself and seeing how the ADX works in practice. If you’re looking to put these trading techniques into practice, you can consider opening an FXOpen account. You’ll gain access to the advanced TickTrader platform, hundreds of markets to choose from, and competitive trading fees. Good luck! 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.

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Financial Crisis Impact on Different Asset Classes A financial crisis is a severe disruption in the financial markets and banking system of a country or even the entire world. It typically involves a sudden and widespread loss of confidence in the financial system, leading to a range of negative economic consequences. In this article, we provide a comprehensive overview of how different asset classes tend to behave during turbulent times of financial and economic crises. Some prominent historical examples uncover the dynamic interplay within these markets. Impact of Financial Crisis on Equities Shareholder investments depend heavily on company-specific factors; however, general economic conditions and market sentiment play a decisive role as well. Equity markets typically plummet during financial crises. During a financial crisis, investor sentiment turns bearish as confidence in the stability of the financial system wanes, causing a domino effect through massive sell-offs on equity markets. Increased risk aversion imposes a higher risk premium to borrowing costs, and businesses may encounter significant challenges in securing loans for expansion or even daily operations. This difficulty in accessing capital negatively impacts corporate earnings, further eroding investor confidence in equities. Higher volatility is common in such conditions as well, and traders could turn the situation into an opportunity for short-term shorting profits. Economic Crisis Examples Causing Stock Market Crashes The Dot-Com Crash unfolded in the early 2000s, following a period of excessive overvaluation of internet-related and technology stocks. Having no earnings or clear path to profitability but going public on overhyped expectations, these companies enjoyed skyrocketing stock prices. The bubble burst when major technology companies initiated large sell orders for their own shares, confirming the extreme overvaluation and triggering a wave of panic selling. The Nasdaq Composite Index lost over 76% of its value, while the shock wave reached retirement accounts, investment portfolios, and mutual funds. The housing market collapse in 2008 and the subsequent banking crisis also resulted in a severe stock market downturn. Major stock indices, such as the S&P 500, plummeted in early 2009, causing substantial losses for investors. Financial Crisis Affects Fixed-Income Asset Classes by Risk At times of financial crises, investors often seek safety in government bonds from stable countries, leading to increased demand and higher prices. Therefore, government bonds are widely used as safe-haven asset classes for investments. On the flip side, concerns about creditworthiness during financial turmoil can cause bond prices from corporate issuers to decline. The scenario is different for corporate bonds. Negative sentiment causes panic selling and declining corporate bond prices, while positive sentiment, often due to government interventions or stimulus measures, can boost corporate bond prices. Central banks also respond to crises by adjusting interest rates, affecting bond prices: lower rates can make existing bonds with higher coupon rates more attractive, driving up their prices, while raising rates can lead to falling bond prices. Global Financial Crisis: The 2008 Mortgage Collapse The global financial crisis of 2008 triggered diverse reactions in the bond market. As the crisis unfolded, the huge demand for government bonds caused yields to drop to historically low levels, driving prices up in early 2009. In contrast, bonds tied to the housing and mortgage markets, such as mortgage-backed securities and collateralised debt obligations, experienced significant declines in prices due to heightened credit risk and concerns about mortgage defaults. A liquidity squeeze in the market exacerbated the pricing volatility, making it more challenging for investors to buy or sell bonds at desired prices. Central banks responded with measures like interest rate cuts and bond purchases to stabilise financial markets, influencing bond prices further. Financial Crisis Impact on Asset Classes Like Commodities The effects of financial crises on commodities are complex, with both safe-haven and risk-off assets experiencing fluctuations as investors seek to adapt to evolving market conditions. Financial crises impact supply and demand dynamics in commodity markets. Traders can profit from significant fluctuations, taking long or short positions in different commodity types. Precious metals like gold and silver are considered safe-haven assets by investors seeking refuge from volatile equities and currencies, which can drive their prices up. Conversely, industrial commodities, such as oil and base metals, may face declining prices due to reduced demand resulting from economic slowdowns and decreased industrial activity. Additionally, fluctuations in exchange rates due to monetary policies in response to the crisis can influence commodity prices. Impact of the Global Financial Crisis: Examples The 1997 Asian financial crisis caused severe economic contractions and currency devaluations. Key players like South Korea and Indonesia faced significant downturns in manufacturing and construction activity, leading to diminished consumption of copper and aluminium and a sharp decline in their prices. In Russia, the devaluation of the ruble in 1998 made it more profitable for Russian oil companies to export their crude, leading to an increase in oil production. Thus, a surge in supply combined with the reduced demand in Asia the year before resulted in a global oversupply of oil. Consequently, oil prices experienced a sharp decline. A more recent oil price decline in 2018 and 2019 was also triggered by oversupply concerns, primarily due to the rapid growth in oil production. Trade tensions, the global economic slowdown, and uncertainty in the face of slowing economies were also contributing factors. A Financial Crisis Is a Pivotal Moment for Currency Markets A complex interplay of forces can create substantial volatility in the forex market during a financial crisis, reshaping exchange rates. Heightened uncertainty and risk aversion among investors drive a flight to safety found in stable currencies, causing their values to appreciate. On the other hand, currencies of countries affected by the crisis, like emerging markets, often face depreciation due to economic uncertainty. Monetary policy adjustments by central banks, like interest rate cuts or quantitative easing, influence currency values further. The European Debt Crisis In 2010-2012, the depreciation of the euro significantly impacted currency markets. Concerns about the fiscal stability of several Eurozone countries led to investors seeking refuge in other major currencies like the US dollar and the Swiss franc. The European Central Bank's policy interventions played a critical role in managing the crisis's effects, highlighting the intricate relationship between regional economic and political developments and their impact on the global currency market. Alternative Asset Classes: Cryptocurrencies* Major cryptocurrencies* like Bitcoin and Ethereum can be seen as a hedge against crises in the traditional markets. Despite their different characteristics, purposes, and risk profiles, many major players see them as alternative investments because of an observed negative correlation at times. In the early stages of a financial crisis, cryptocurrencies* have sometimes been seen as "digital gold" or a safe-haven asset by some investors. This perception can lead to an initial increase in demand and higher prices for them. However, while some investors see cryptocurrencies* as a hedge against traditional financial system risks, others view them as speculative assets. This duality can result in varying responses during crises, with some investors flocking to cryptocurrencies* and others selling off to raise cash or reduce risk exposure. Bitcoin: The “Digital Gold” At the end of 2020, the COVID-19 pandemic accelerated the narrative of Bitcoin being a digital safe-haven asset. Extensive monetary stimulus during the pandemic raised extreme inflation concerns, while fear of worldwide economic recession kept stocks from rising, making many investors see Bitcoin as a superior store of value. Additionally, the pandemic fueled the rise of decentralised finance (DeFi) and digital payment solutions, boosting cryptocurrency* adoption. If you are willing to explore how various assets react to changing market conditions and hedge risks by diversifying your portfolio, you can visit FXOpen’s free trading TickTrader platform. Conclusion Financial crises bring to light the diverse behaviour of various asset classes. Stocks tend to collapse, bonds respond to interest rates and credit concerns, and commodities and currencies get volatile to reflect global dynamics. Amidst these, cryptocurrencies* emerge as an alternative store of value. Ready to extend your trading experience? You can open an FXOpen account and explore the opportunities. *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. 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.

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TRADING BASICS: TRENDLINES Trend lines are the simplest and most basic concept of technical analysis. It is also, paradoxically, one of the most effective tools. Since almost all price patterns require the use of trend lines, the latter are the basic element of both pattern definition and its use. Now we will discuss what trend lines are, how to work with them and how to determine whether they are working. A trendline is a straight line that connects descending lows in a rising market or highs in a falling market. Lines that connect lows are called rising trend lines, and those that connect highs are called falling trend lines. To make a falling trend line, we connect the first high to the subsequent highs. When the price breaks the trend line, it is a hint that the trend may change. Similarly, for a rising line. How to draw a trend line? ✔️ For a trend line to be real, it must connect the previous highs or lows. Otherwise, there is no sense in such a line at all. This is called the major trend line. It is where the first low of a bearish trend connects to the first intermediate low. In the example below, the trend line is not particularly steep (it is at a low angle, and angles are important in a trend). Unfortunately, price then accelerates sharply after the next low. In a situation like this, it's best to simply redraw the trendline as price moves further away. This is called a new line in the picture and it reflects the changed trend much better. This line will be a secondary trend line. Well, the downtrend lines are drawn in the same way, but in reverse. Since the trend can go sideways, it is quite possible to guess that trend lines can be drawn horizontally. This is often the case when we find price patterns like the "neck" in the Head and Shoulders pattern, or the upper and lower borders of triangles. In such patterns, if the trend line is crossed, it is an indication that the trend is changing. The same is true for rising and falling trends. It is also important to realize that drawing a trend line is a matter of using common sense, not a set of very strict rules. A trendline breakout could indicate a reversal or consolidation The completion of a price pattern can indicate: 1. reversal of the previous trend, aka reversal pattern; 2. continuation of the previous trend, aka consolidation or continuation pattern. Similarly, a trend line breakout indicates either a reversal of the trend or a continuation of the trend. An example demonstrates this concept for a downtrend. In this case, the trend line connecting one high after another is broken in a downtrend. The fourth high will be the highest point of the bearish trend, so an upward breakout of the trend line in this case indicates the beginning of a bullish trend. In the picture above we see again a rising trend and a trend line breakout, but this signal has a completely different outcome. The reason is that the break of the trend line caused the trend to continue, but at a much slower pace. The third scenario is when the price goes into consolidation (aka sideways) instead of reversing, which is shown in picture. Accordingly, when a trendline is broken, it is a strong indication of a trend reversal. A changed trend can eventually reverse or go sideways after rising or falling. Unfortunately, in most cases we can't tell accurately what will follow a trendline breakdown. However, there can be some pretty good clues, such as the angle of the trendline. Since trends that run at an acute angle are less stable, their breakout more often leads to sideways rather than reversals. Useful hints can be hidden in the general state of the technical structure of the market. In addition, a trend line breakout often occurs at the successful completion of a reversal price pattern or shortly before. Extended trend lines ✔️ Many beginners, when they see that a trend line is broken, automatically conclude that the trend is about to change and immediately forget about the line. After all, an extended trend line can be as important as the fact of its breakdown. For example, if a rising trend line is broken, the price very often returns to the same line, but later. This is called a throwback. Significance of trend lines ✔️ So, we have it all figured out - a trend line breakout leads to either a trend reversal or a trend slowdown. Of course, it is not always possible to say what exactly happens there, but we need to understand how effective a trend line breakout is in general, which we are going to do now. In general, the significance of this event depends on three factors: The length of the line; The number of touches; The angle of inclination or rise. 1. Trend line length ✔️ A trend line is used to measure a trend. The longer the line, the longer the trend and the more such a line will become important to us. If descending lows come one after another for 3-4 weeks, such a trendline is less relevant. If the trend line lasts 1-3 years, its breakout is extremely important to us. The breakout of an old trend line is very important, it is a powerful signal. The breakout of a fresh (relatively) trend line is a less important signal. 2. Number of touches or approaches to the trend line ✔️ The more touches or interactions with the trend line, the more important it is, there is a direct correlation. Why is this so? Because the trend line represents a dynamic zone of support or resistance. Each successful touch of the line strengthens it, reinforces its importance as a support or resistance zone. Thus, the trend line's role as a guide for the trend as such is also strengthened. Approaching the trend line is no less important than touching it, because this is how the zone is actualized. If the trend line has become strong due to the touches, its continuation will be no less strong, but from the other side. After all, in an extended trend line, support often becomes resistance and vice versa. 3. Angle of slope ✔️ A very steep trend is usually unstable and easily broken, even by a short sideways movement. All trends break sooner or later, this is a fact. However, steep trends break much faster. The breakout of a steep trend is less significant than the breakout of a smooth and gradual trend. It sounds paradoxical, but the point is this - the break of a steep trend usually causes a short correction, sideways price movement, after which the trend resumes, but much less strong and smoother. Accordingly, the breakout of a steep trend line is a confirming pattern, not a reversal pattern at all. To summarize Trend lines are an easy tool to understand, but they must be used correctly and thoughtfully. A trend line breakout indicates a temporary interruption of the trend or a reversal of the main trend. The significance of a trend line consists of its length, the number of touches/approaches to it and the slope angle. A good trend line always reflects the underlying trend and forms significant support and resistance areas. Extended trend lines change former support/resistance in places, which should be paid special attention to. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment

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4 Types of Gap You MUST Know in Trading Hey traders, In this article, we will discuss a very common pattern that is called gap. In technical analysis, the gap is the difference between the closing price of the previous candlestick and the opening price of the next candlestick. 📈Gap up represents a situation when the price bounces up sharply at the moment of a transition from one candlestick to another. The price gap that appears between them is called gap up. 📉Gap down represents a situation when the price drops sharply at the moment of a transition from one candlestick to another, the price gap between the closing price of the previous candle and the opening price of the next candle is called a gap down. From my experience, I realized that with a high probability the gap tends to be filled. For that reason, once you see a gap, consider trading opportunities around that. Depending on the market conditions where the gap appears, there are several types of a gap to know: 1️⃣Common gap appears in a weak, calm market. When the trading volumes are low and the market participants are waiting for some trigger, or the asset reached a fair value price. Above, there is a perfect example of a common gap that was formed on Dollar Index on an hourly time frame. 2️⃣Breakaway gap appears in a situation when the price suddenly breaks a structure (support or resistance) in a form of a gap. Such a gap usually confirms a structure breakout. I spotted a perfect breakaway gap on Dollar Index. The market violated a solid horizontal support with that. 3️⃣Runaway gap usually appears when the market is growing or falling sharply. It signifies the dominance of buyers/sellers and highly probable continuation. Usually such gaps are not filled. Runaway was a perfect indicator of a strength of buyers on US30 Index. 4️⃣Exhaustion gap is, in contrast, appears around major key levels and signifies a highly probable reversal. The exhaustion gap is usually confirmed by a consequent strong opposite movement that fills the gap. US100 formed an exhaustion gap, trading in a strong bullish wave. After that the gap was filled and the market started to fall rapidly, forming a breakaway gap. Learn to recognize gaps on a chart and learn to interpret them. It will increase the accuracy of your technical analysis. Hey traders, let me know what subject do you want to dive in in the next post?

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by VasilyTrader

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Ichimoku Cloud: How To Guide Have you ever considered using the Ichimoku Cloud, a powerful and versatile technical analysis tool that goes beyond traditional chart analysis? 💜 If you appreciate our guides, support us with boost button 💜 Discover the Ichimoku Cloud, technical analysis tool developed by Japanese journalist Goichi Hosoda in the late 1960s. This method visually represents support and resistance levels, providing crucial insights into trend direction and momentum. Let's delve into the key aspects of the Ichimoku Cloud, providing you with insights and skills to take another step up in your trading game. 1. Understanding Ichimoku Cloud Components of the Cloud: The Ichimoku Cloud comprises five key elements — Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and the Kumo (cloud). Grasping the role of each component is fundamental to interpreting the cloud's signals. - Kijun Sen (red line): The standard line or base line, calculated by averaging the highest high and the lowest low for the past 26 periods. - Tenkan Sen (blue line): The turning line, derived by averaging the highest high and the lowest low for the past nine periods. - Chikou Span (green line): The lagging line, representing today’s closing price plotted 26 periods behind. - Senkou Span (red/green line): The first Senkou line is calculated by averaging the Tenkan Sen and the Kijun Sen and plotted 26 periods ahead. The second Senkou line is determined by averaging the highest high and the lowest low for the past 52 periods and plotted 26 periods ahead. It’s not necessary to memorize the computations; understanding their interpretation is key. 2. Trading Strategies with Ichimoku Kumo Twists and Turns: The twists and turns of the Kumo offer valuable signals. A bullish twist occurs when Senkou Span A crosses above Span B, while a bearish twist is signaled by the reverse. These crossovers present entry and exit points. The Power of Kijun-sen and Tenkan-sen: The relationship between the faster Tenkan-sen and the slower Kijun-sen offers additional insights. A bullish crossover suggests a potential uptrend, while a bearish crossover may indicate a trend reversal. Utilizing the Lagging Span: The Lagging Span (Chikou) acts as a momentum indicator. Confirming its position relative to the price and cloud provides a powerful confirmation tool for trend strength. 3. Practical Tips for Ichimoku Trading Timeframe Considerations: Adapt your approach based on the timeframe. Longer timeframes offer a broader market perspective, while shorter timeframes can reveal short-term trends. Risk Management: Like any trading strategy, risk management is paramount. Set stop-loss orders, and ensure risk-reward ratios are carefully considered before executing a trade. Backtesting and Practice: Before going live, engage in extensive backtesting and paper trading. This will hone your understanding of Ichimoku signals and enhance your ability to interpret them in real-time. 4. How to Interpret Ichimoku Lines Senkou Span: - If the price is above the Senkou span, the top line serves as the first support level while the bottom line serves as the second support level. - If the price is below the Senkou span, the bottom line forms the first resistance level while the top line is the second resistance level. Kijun Sen: - Acts as an indicator of future price movement. - If the price is higher than the blue line, it could continue to climb higher. If below, it could keep dropping. Tenkan Sen: - An indicator of the market trend. - If the red line is moving up or down, it indicates a trending market. If it moves horizontally, it signals a ranging market. Chikou Span: - A buy signal if the green line crosses the price from bottom-up. - A sell signal if the green line crosses the price from top-down. As a trend-following indicator, Ichimoku can be applied across various markets and timeframes. Emphasizing trading in the direction of the trend, it helps avoid entering the wrong side of the market. With its combination of support and resistance levels, crossovers, oscillators, and trend indicators, Ichimoku simplifies complex analysis, making it an invaluable tool for traders seeking a comprehensive approach to technical analysis. Dive into the charts, explore the strategies, happy trading!

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Why Invest in Tradingview?As we approach the final stretch of Tradingview's Black Friday sales, I thought I would outline some reasons why you should invest in Tradingview, or more specifically, a paid membership. Its the time of year where expenses start piling up. Christmas on the horizon. If you are a licensed professional, then you have to start renewing your license and insurance (I have two licenses to maintain sadly, which are extremely expensive). And if you live in the North Eastern United States or Canada (with the exception of you East Coasters out there), you're also looking at the heating costs and the dreaded winter tire expenses. So I get why having another expense added can be all so dreadful, especially if you are starting out as a trader and not quite profitable yet. But here are some reasons why I think it makes sense and why I think you should support Tradingview (and yourself) through a paid membership: 1. Its tax deductible. Yup. It is. If you are a trader and relying on Tradingview in the conducting of your business, it is indeed tax deductible. Your laws and regulations may vary slightly depending on state and country, but in Canada, if you are a day trader and unincorporated, you are considered a Sole Proprietor and can write off the expense as a "business expense". 2. It provides more enhanced access to data . Not only can you use more indicators and all that fun stuff, but you can actually get more data, further back in history. As a premium member, I can pull data on the SPX from the 1800s, when people were trotting down to their local broker's office (maybe? Not sure if that was a thing but probably) in horse and carriage to sign for and purchase their very own shares in such things as the Mackintosh company.... No, not the computer company, but the very stylish raincoat manufacturer of the 1800s. Look it up. 3. Integration of brokerages: Tradingview allows you to integrate your brokerage into a more chic and functional chart platform. As I am Canadian, the brokers we have available here are pretty god awful in the functionality they permit you to do. Tradingview allows you to do far more tailored things to your charts and also provides you the ability to trade directly from your Tradingview chart! (If you are Canadian, currently only IB is the big one supported here). 4. Pinescript. I know I shill Pinescript a lot, but if you are a quantitative trader, or a trader who likes to use code and scripts in a meaningful way to help you trade, for the most part Pinescript and Tradingview are hands down the best and happy medium. While Pinescript cannot execute trades for you at this time, Pinescript, by default, has real time and direct access to exchange data, all compressed on a relatively easy to learn platform that will have you writing useful code that can really help you with a little bit of effort. I rely on Pinescript every day (see my post on Why you Should Learn Pinescript if you are interested in how it changed my trading for the better). If you want to use another platform, such as Python, your only alternative is yFinance, which has delayed data. For real time data, you would have to go to a provider such as Polygon who charges you, on average, 80$ per month to get the live data that Pinescript already has access to and is built into its native platform. And while you don't need a paid membership to use Pinescript, you need a paid membership to optimize pinescript to use more advanced or bigger codes that may take a bit longer to execute. As well, having a paid memebership grants Pinescript more access to more data (point 2 of this post). 5. Its a supportive community. Everyone on here all is doing the same thing and all has, generally, the same sense of how trading goes. We know that you win some, you lose some, you have hard days, you have bad days and your mood fluctuates with the market. No other community is as in-tuned with these nuances of the market as the Tradingview community. Trolling can and does happen sometimes on here, but not to the same extent as I have observed on other platforms, which can pretty hostile and.. let's say, unsupportive. 6. Tradingview supports all equally. Unlike Youtube or Insta or TikTok (I think? I'm Millennial so, boomer by TikTok standards) who reward you for your following, Tradingview doesn't. Having recently started their Editors Pick monetary rewards, they pick all types of people, with all types of ideas, who trade all types of instruments, regardless of their following numbers or preferred instruments. They support you and sharing your ideas, so it may be nice to return the favour to them. The same goes for Pinecoders. There have been editor's pick codes who were first time coders who just posted their first indicator. Its not the person themselves that matters to Tradingview, its the person's idea and passion and I think that's important in this type of community. 7. The vast access to tickers and exchanges! Tradingview offers you access to multiple tickers and indices and exchanges in multiple different countries. More access than any single broker does (at least, again, for us Canadians haha). In a matter of seconds, you can be checking out China's stock exchange, Germany's, Frances, London's, Canada's, Russia's, the list goes on! 8. And I forgot to add, they are constantly making improvements to their platform ! Introducing new things, like interviewing traders in livestreams, providing more functionality to Pinescript, providing more functionality for chartists, the list goes on! As we all try to improve as traders, Tradingview continually improves as a helpful platform! Anyway, those are my thoughts. On that note, you have approximately 1 day left to get the awesome discounts, so chop to it if you want! And if you are interested, I am not sure if it counts if you already have a Tradingview account, but you can use the referral code here, I want to say, to get 15$ if you are switching to a paid from unpaid or new account creator (hopefully I understood correctly): www.tradingview.com Use it, don't use it, doesn't really matter. The point I want to make is, its worth it if you are really passionate and interested and serious about trading! That's it! Safe trades everyone and take care!

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by Steversteves

Create No Code Auto Trading Bot with Tradingview and OKX Hello Everyone, In this tutorial, we learn about how to create simple auto trading bot using tradingview alerts and OKX exchange built in integration mechanism. Few exchanges have come up with this kind of direct integration from tradingview alerts to exchanges and as part of this tutorial, we are exploring the interface provided by OKX. In this session, we have discussed 🎲 Preparation Steps Preparing tradingview account Webhooks are only available for essential plans and plus. Enable 2FA in your tradingview account. Preparing your OKX account Create OKX account, and we prefer you do the initial tests under demo account before moving to active trading account. Bots created in demo account will not appear in the active trading account. Hence, when switching to active account, you need to create all the setup again. 🎲 OKX Tradingview Interface Features What is supported Auto trading based on strategy signal Custom signals - Enter Long, Exit Long, Enter Short, Exit Short What is not supported: Stop/Limit orders Bracket orders/ Complex execution templates 🎲 Weighing Pros and Cons of Using Direct Interface rather than Third party integration tools Pros Latency is minimal as per our observation Easy Integration with Tradingview and Pinescript Strategy Framework and no coding required You save cost on third parties and also avoid one hop. More secure as your data is shared between less number of parties. Cons No native support for Stop/Limit orders

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15:56

Mean Reversion Trading Strategies and Indicators Mean reversion is an important concept in financial markets, offering traders the opportunity to capitalise on price fluctuations around a long-term average. This article unpacks mean reversion and explores three key trading strategies augmented by specific indicators to fine-tune entry and exit points. Understanding Mean Reversion Mean reversion is a theory suggesting that asset prices and historical returns eventually revert to their long-term mean or average level. This concept is widely used in the equity markets, commodities, and forex trading. The idea is that an asset that has deviated significantly from its historical average is likely to revert back. Traders often use mean reversion trading systems to take advantage of these deviations. Mean reversion in forex is particularly fascinating. Currency pairs tend to oscillate around a central point over time, offering plenty of trading opportunities. The concept relies on two core assumptions: that the market is stable over the long term and that temporary disruptions will self-correct. However, it's essential to remember that mean reversion is not foolproof. Market conditions change, and an asset can maintain its deviated state longer than one might expect. Exploring Mean Reversion Trading Strategies Now that we've established a foundational understanding of mean reversion, let's delve into three distinct reversion to the mean trading strategies. If you’d like to follow along, head over to FXOpen’s free TickTrader platform to access the tools discussed here. 10-Period RSI Mean Reversion The 10-period RSI Mean Reversion trading strategy involves the Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements. For this strategy, traders typically set the RSI to a 10-period setting and establish overbought and oversold limits at 80 and 20, respectively. By focusing on shorter intervals, this strategy aims to capture quick reversals in price. Entry Traders may look for the RSI to reach or exceed 80 (overbought) or drop to 20 or lower (oversold). After reaching these levels, they often wait for the RSI to move back below 80 or above 20 before entering a trade. Stop Loss A common approach is to set the stop loss just beyond the entry point to minimise potential losses. Take Profit The trade is generally closed when the RSI reaches the midpoint of 50. This often indicates that the asset has reverted to its mean, fulfilling the primary objective of the strategy. Fibonacci Retracement and Value Area Reversion This strategy combines Fibonacci Retracement levels with a Fixed Range Volume Profile (FRVP) to identify potent entry and exit points. Fibonacci Retracement is a tool that identifies potential levels where price may reverse during a pullback. Here, traders focus on three key retracement levels: 38.2%, 50%, and 61.8%. The Fixed Range Volume Profile, on the other hand, reveals where the highest volume of trades occurred within a specific range, indicating a value area. Traders look at the largest node as an area of value, often serving as a strong support or resistance level. Entry Traders often look for an established trend, typically entering positions in the same direction. After a breakout, they commonly wait for a pullback to a Fibonacci level that aligns with the value area determined by FRVP. Stop Loss Stop losses are usually placed just beyond the next closest Fibonacci retracement level to safeguard against unforeseen reversals. Take Profit Profits are often taken at the most recent significant high or low, generally, the one that initiated a reversal. VWAP and MACD Reversion: A Day Trading Mean Reversion Strategy In this strategy, the Volume Weighted Average Price (VWAP) is used alongside the Moving Average Convergence Divergence (MACD). VWAP serves as a benchmark, calculating the average price based on volume at each price level. This indicator is often employed for intraday trading due to its responsiveness to immediate price and volume changes. MACD, on the other hand, is a trend-following momentum indicator that helps signify potential price reversals. Due to the intraday nature of the VWAP, this strategy is particularly well-suited for day trading, enabling traders to capitalise on fairly quick, mean-reverting price movements. Entry Traders often monitor for situations where the price appears visually overextended from the VWAP, either above or below it. A MACD crossover serves as the cue for possible entry, indicating that the price may revert toward the VWAP. Stop Loss Typically, stop losses are set just beyond the most recent swing point to mitigate risk. Take Profit The position is commonly closed when the price reaches the VWAP. In the event that the price doesn’t touch the VWAP before the trading day ends, trades can be closed just before the day finishes when the VWAP is reset. Additional Mean Reversion Indicators While the strategies outlined above are popular among traders, there are other indicators worth considering in the realm of mean reversion. Bollinger Bands: These are volatility bands that expand and contract around a moving average. When the price reaches the upper or lower band, a mean-reverting move could be imminent. Moving Averages: Simple moving averages (SMAs) and exponential moving averages (EMAs) are often used in mean reversion and algorithmic trading. They help identify the 'mean' price level around which an asset is expected to fluctuate. Stochastic Oscillator: This momentum indicator compares an asset's closing price to its price range over a specific period. An overbought or oversold reading suggests that a mean reversion may be likely. CCI (Commodity Channel Index): This indicator measures the deviation of an asset’s price from its average price over a specific time period. CCI can be used to detect overbought or oversold markets. MFI (Money Flow Index): This is a volume-weighted RSI, indicating overbought and oversold conditions. When used in conjunction with other indicators, it can provide additional validation for mean reversion trades. The Bottom Line In sum, mean reversion trading strategies offer intriguing avenues for traders to exploit price movements that deviate from long-term averages. While the strategies discussed are robust, they are by no means exhaustive. To delve deeper into these and other trading strategies, consider opening an FXOpen account, where you’ll gain access to a host of advanced tools and analytics to aid in your trading endeavours. Good luck! 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.

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Economic Lessons From 2023 We entered 2023 with a pessimistic consensus outlook for U.S. economic performance and for how rapidly inflation might recede. As it happened, there was no recession, and personal consumption posted sustained strength. Inflation, except shelter, declined dramatically from its 2022 peak. The big economic driver in 2023 was job growth. Jobs had recovered all their pandemic losses by mid-2022 and continued to post strong growth in 2023, partly due to many people returning to the labor force. When the economy is adding jobs, people are willing to spend money. The key for real GDP in 2023 was the strong job growth that led to robust personal consumption spending. For 2024, labor force growth and job growth are anticipated by many to slow down from the unexpectedly strong pace of 2023, leading to slower real GDP growth in 2024. And there is still plenty of debate about whether a slowdown in 2024 could turn into a recession. Followers of the inverted yield curve will point out that it was only in Q4 2023 that the yield curve decisively inverted (meaning short-term rates are higher than long-term yields). It is often cited that it takes 12 to 18 months after a yield curve inversion for a recession to commence. Using that math, Q2 2024 would be the time for economic weakness to appear based on this theory. Only time will tell. The rapid pace of inflation receding in the first half of 2023 was a very pleasant surprise. Indeed, inflation is coming under control by virtually every measure except one: shelter. The calculation of shelter inflation is highly controversial for its use of owners’ equivalent rent, which assumes the homeowner rents his house to himself and receives the income. This is an economic fiction that many argue dramatically distorts headline CPI, given that owners’ equivalent rent is 25% of the price index. Once one removes owners’ equivalent rent from the inflation calculation, inflation is only 2%, and one can better appreciate why the Federal Reserve has chosen to pause its rate hikes, even as it keeps its options open to raise rates if inflation were to unexpectedly rise again. The bottom line is that monetary policy reached a restrictive stance in late 2022 and was tightened a little more in 2023. For a data dependent Fed, inflation and jobs data for 2024 will guide us as to what might happen next. Good numbers on inflation or a recession might mean rate cuts. Otherwise, the Fed might just keep rates higher for longer. 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 By Bluford Putnam, Managing Director & Chief Economist, CME Group *Various CME Group affiliates are regulated entities with corresponding obligations and rights pursuant to financial services regulations in a number of jurisdictions. Further details of CME Group's regulatory status and full disclaimer of liability in accordance with applicable law are available below. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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How did the price of gold change from 1970 to 2023?Hello everyone How did the price of gold change from 1970 to 2023? And the events that affected him The price of gold has continued to rise over the past five decades, from an average of $36 in 1970 to $2,080 in 2023. Despite gold's status as a long-term investment commodity, its value has declined several times. The periods of highs and lows coincided with difficult political and economic developments - investors' demand for gold as a safe haven rises when there are problems in the global economy, and weakens when things are going well. What can we learn from the past to be able to make predictions for the future? Gold is priced on a standard scale per ounce. 1 ounce = 31.1 grams 1970 - The average price of an ounce of gold is $36 In August 1971 - US President Richard Nixon abolished the dollar's peg to gold. The dollar was no longer converted into gold at a fixed value, $35 per ounce, and gold could be traded at fluctuating market prices In December 1974 - For the first time in 40 years, American citizens were allowed to keep gold bullion and coins. In June 1980 - Gold rose to a record high of $850 per ounce, as investors turned to the precious metal amid rising inflation due to strong oil prices, Soviet intervention in Afghanistan, and the impact of the Iranian Revolution. From 1982 to 1988 - Fluctuations in global currency exchange rates, increasing concern about the US trade deficit and banking problems, and debt in Third World countries factor into gold fluctuations between $300 and $490. From 1989 to 1991 - this period witnessed conflict in the Arabian Gulf, the collapse of the Soviet Union, a decline in the role of gold as a safe haven, and weak economic growth in general throughout the world. From 1992 to 1996 - Gold remained relatively stable. In August 1999 - The price of gold fell to its lowest level at $251.70 when central banks began reducing their gold reserves and mining companies sold gold in the futures markets to protect them from the decline. In February 2003 - The price of gold rose after it was considered a safe haven in the period leading up to the war in Iraq. December 2003 – Gold surpassed $400, reaching levels at which it was last traded in 1988. Gold was increasingly purchased by investors as a hedging tool for their investment portfolios. November 2005 – Spot gold trading exceeded $500 for the first time since December 1987, when it reached $502.97. May 12, 2006 - Gold prices rose to $730 per ounce as investors turned to commodities as a result of the weak dollar, stable oil prices, and political tensions over Iran's nuclear ambitions. On June 2, 2008 - Spot gold exceeded $850. March 13, 2008 – Trading in the benchmark gold contract exceeds $1000 for the first time in the US futures market. On March 17, 2008 - the price of spot gold reached its highest level at 1030.80 per ounce. On September 17, 2008 - the price of spot gold jumped nearly $90 per ounce - a single-day record, as investors sought a safe haven amid turmoil in the stock market. February 20, 2009 – Gold once again rose above $1,000 per ounce to reach $1,005.40 during the financial crisis. December 1, 2009 – Gold exceeds $1,200 per ounce for the first time as the dollar declines. On May 11, 2010 - Gold recorded a new high, exceeding $1,230 per ounce after investors resorted to gold as a safer investment haven with continued concerns about debt contagion in the Eurozone. September 17, 2010 – Gold reached a new record high exceeding 1,282 per ounce, driven by a weak dollar and economic uncertainty. September 2011 – The Eurozone debt crisis prompts investors to shift money into gold, causing its price to rise to 1,923 per ounce. From 2012 to 2015 - Gold continued to decline as fears of a full-blown banking crisis eased after 2011, with gold reaching $1,094 in August 2015. In June 2016 - Brexit and its unknown consequences fuel a gold rush. Gold rose to its highest level in two years at $1,358. June 2017 – Gold reaches a year-high of $1,294 before falling back to an average of $1,200. On August 3, 2020, gold rose to the highest level in its history at 2,075 per ounce, as concerns about the economic repercussions of the coronavirus outbreak prompted investors to rush towards safe havens. Gold prices witnessed a record high with the start of the Russian invasion of Ukraine, exceeding the threshold of $2,070 per ounce. Over the course of five days in March 2023, three small-to-mid-size U.S. banks failed, triggering a sharp decline in global bank stock prices and a swift response by regulators to prevent potential global contagion. Silicon Valley Bank (SVB) failed when a bank run was triggered after it sold its Treasury bond portfolio at a large loss, causing depositor concerns about the bank's liquidity. Silvergate Bank and Signature Bank, both with significant exposure to cryptocurrency, failed in the midst of turbulence in that market. The escalation in Gaza directly affected gold, with prices rising by about $2007 per ounce, which reflects investors’ demand for safe havens. I hope you got some knowledge from this! if you have any questions let me know... Thanks

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Updated

trading movies and what they can teach about financial markets these incredible films bridge a gap between entertainment and education, providing insight about the global markets and what often goes by in the background and yet help keeping the boredom away. 1.THE WOLF OF WALL STREET - dir: Michael Scorsese. Dec 25, 2013 (crime/comedy) this movie follows and reflects on the life of Jordan Belfort and his rise to wealth as a stockbroker selling penny stocks and blue chip stocks living his best life to his epic downfall caused by financial fraud, drugs. This film can teach traders how to sell any product and the importance of confidence in the trading/investing world. 2.THE BIG SHORT - dir: Adam Mckay. Dec 11, 2015 (comedy/drama) this film is based on the true-life events of the 2008 financial crash which began with cheap and lax lending standards that fueled a housing bubble. The film follows 3 stories of Michael Burry(hedge fund manager), Jared Venett(trader) and Geller and Shipley(investors) who made a fortune from the housing market decline. This movie teaches traders/investors that unpredictable events take place in the financial markets and the psychological pressures that investors experience and understanding the complexity of various financial instruments and importance of risk management. 3.WALL STREET - dir: Oliver Stone. Dec 11, 1987 crime/drama this crime film follows a junior stockbroker Bud Fox who enters a different league in the trading game getting involved in stock manipulation and insider trading while trying not to get caught doing all this to impress his supervisor Gordon Gekko. this movie teaches traders that greed is not always bad as MR.Gekko says himself 4.INSIDE JOB - dir: Charles Ferguson. Oct 8, 2010 documentary/drama this is a similiar film as "the big short" but this one is distinctive as its a 5 part series bases on the 2008 financial crisis shows traders also on corruption and more in-depth look on how everything started, the bubble, the actual crisis and all that resulted after. 5.BOILER ROOM - dir: Ben Younger. Feb 18, 2000 thriller/drama this film follows a student who drops out of college and also runs an illegal casino, with pressure to make tons of wealth a appease his father, he gets to work for a CEO of an investment company which is known for its shady dealings of pump and dump of unprofitable stocks with encounters from the feds using him to get to the big fish of the operation. This movie teaches traders about the importance of confidence and to increase it is to want, do and be more. 6.TOO BIG TO FAIL - dir: Curtis Hanson. May 23, 2011 drama this is another film about the 2008 financial crisis based on a book of the same title by Andrew Ross. As the title says the movie focuses on the 'too big to fail" corporations and how their shortcomings can criple the global financial system. It gives an inside look on how Washington and Wall street try to tackle this and save the financial system. This film teaches traders the significance of stability and balance. 7.ENRON: THE SMARTEST GUYS IN THE ROOM - dir: Alex Gibney. April 22, 2005 his is one of the best scam/fraud movies of all time following the fall of Enron corporation showing the cracks on the wall of most modern big corporation scams. the movie shows how top executives of the firm's collapse through illegal activities like increasing stock prices and selling the at very high prices causing a crash in the market. This film however teaches traders/investors that greed has no honor and that a plan is needed for any kind of longevity and success to happen. 8.FLOORED - dir: James Allen Smith. Sep 1, 2009 documentary/indie film this is documentary film that shines light on Chicago based traders trading on the Chicago Board Of Operations exchange floor. This documentary focuses on the trill and excitement and high energy paced work force of a trading floor. it gives retail traders an inside look on the kind of emotions traders on a floor go trough and how the rise of computer based trading has affected the livelihood of traders working in trading floors. please do comment on your favorite trading/investing movies put together by : Pako Phutietsile (@currencynerd)

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by currencynerd

Updated

Why You should Trade With Your Spouse Permission Let's talk about John, who loves to make quick stock market choices. He used to decide alone and felt good about it. But after marrying Emma, who likes to think things through, they started making these choices together. This change brought something unexpected – John started doing better in his trades. Understanding the Effect of Asking Your Spouse Before Trading: A study by experts Terry Odean and Brad Barber looked at how asking your spouse before trading affects how well you do. papers.ssrn.com Table: How Well People Trade with or without Spouse's Permission This table shows us something interesting. When men checked with their wives before trading, they were more careful and made better choices. But single men, who traded a lot and didn’t ask anyone, didn’t do as well. For women, it was different. Those who had to ask their husbands didn't do as well as women who made choices on their own. This might mean that when husbands get involved, they could add pressure or confusion, affecting women’s trading in a not-so-good way. This study makes us think differently about trading alone. It shows that talking things over, especially in marriages, can actually lead to smarter choices in the stock market. It also reminds us that sometimes, sharing decisions can be better than going at it alone. So men, if you just had a series of bad trades, you might do better by consulting with your spouse. And for single men who had bad trades you might need to get yourself a woman.

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How To Build A Trading Journal That Helps You Make Money Hey everyone! In this video, we discuss why trading journals are important, talk about how to avoid common pitfalls in using them, and go over the keys to implementing one successfully in your own trading. Over time, a well-crafted trading journal can actually help you make money, while building out the most important skill you can acquire as a trader: pattern recognition. We also cover three main principles that you can use if you already have a journal set up that isn't working as you'd like. Be sure to: 1.) Keep it simple. 2.) Track the right things. 3.) Follow up regularly. Do these, and it's impossible you won't get significantly better over the next 6 months - year. Cheers! Looking for more high-quality trade ideas? Follow us below. ⬇️⬇️

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18:20

Trading Breakouts and Pullbacks: Trading Strategies Navigating the volatile world of trading requires sharp instincts and well-strategised techniques. Breakouts and pullbacks are key concepts in trading, and understanding these principles can enhance trading outcomes. This article delves into four strategies, offering practical entry and exit criteria, and provides valuable insights for trading range breakouts and pullbacks. To test these strategies out for yourself, head over to FXOpen’s free TickTrader platform. There, you’ll find a wide range of markets to practise on. What Is a Breakout? A breakout refers to a price movement beyond an established trading range or technical pattern. This can be either above a resistance level or below a support level. In the world of trading, a breakout signifies a potential shift in market sentiment. When prices breach a previously defined boundary, it often indicates a potential continuation or reversal of the current trend. Breakouts can be triggered by various factors, including fundamental news, economic data releases, or increased trading volume. For traders, learning how to get involved in genuine breakouts instead of mistakenly trading false breakouts can provide valuable trading opportunities. What Is a Pullback? A pullback is a temporary reversal in the direction of an asset's prevailing trend, typically seen as a short-term decline during an uptrend or a brief rally in a downtrend. It's akin to a market "taking a breather" before resuming its primary trajectory. Pullbacks can be the result of profit-taking, market corrections, or other short-lived changes in traders' sentiments. For traders, pullbacks are critical because they often present prime buying (in an uptrend) or selling (in a downtrend) opportunities. A Basic Breakout Strategy Breakouts suggest a change in market sentiment and can offer compelling trading opportunities. A common strategy traders employ is to look for breakouts beyond a certain range, especially when accompanied by high volume. The high volume provides additional confirmation of the strength of the breakout. This strategy can offer clear entry and exit criteria: Entry/Exit Criteria Entry Bullish Breakout: When the price closes above the established range on high volume, traders may consider going long. Bearish Breakout: If the price closes below the range on high volume, a short position may be feasible. Stop Losses Bullish Breakout: Traders may set a stop loss just below a key swing point or beyond the lower side of the range. Bearish Breakout: You can consider placing a stop loss slightly above a pivotal swing point or beyond the upper boundary of the range. Take Profits Traders can opt to take profits when the price hits a significant resistance (for bullish breakouts) or support level (for bearish breakouts). Another approach is to exit the position when there's evidence of the trend slowing or reversing. A Breakout Retest Strategy While the breakout strategy captures the initial price movement beyond a defined range, the breakout retest strategy involves waiting for the price to come back, or "retest", the breached level. This retest confirms the validity of the initial breakout and offers traders a secondary entry point. It capitalises on the principle that a previously established resistance may act as a new support in an uptrend and vice versa in a downtrend. Entry/Exit Criteria Entry Bullish Retest: After an upward breakout, traders look for a buying opportunity when the price retraces to the previously broken resistance, now acting as support. Bearish Retest: Post a downward breakout, a short position may be considered when the price revisits the old support, now transformed into resistance. Stop Losses Bullish Retest: One could set a stop loss slightly below the new support level (previously resistance). Bearish Retest: Traders might consider placing a stop loss just above the new resistance level (former support). Take Profits Profits might be taken based on upcoming resistance (for bullish retests) or support levels (for bearish retests), or when other technical indicators suggest a possible trend change. A Pullback to 50% The pullback to the 50% strategy is a nuanced approach that takes advantage of the natural ebb and flow of market movements. After a range is broken, instead of immediately capitalising on a retest, traders employing this strategy patiently await a deeper pullback, specifically to the midpoint between the range's high and low. To find the 50% level, traders use the Fibonacci Retracement tool from the high to the low of the range they are targeting. Entry/Exit Criteria Entry Bullish Pullback: In an uptrend, traders can look for long entry opportunities when the price retraces to the 50% level between the range's low and high. Bearish Pullback: In a downtrend, shorting possibilities arise when the price moves up to the halfway point between the range's high and low. Stop Losses Bullish Pullback: You can consider setting a stop loss just beyond the low of the original range. Bearish Pullback: Traders can place a stop loss slightly above the high of the initial range. Take Profits Profits might be taken when the price approaches significant resistance (for bullish pullbacks) or support levels (for bearish pullbacks), or as informed by other technical factors. A Pullback to a Moving Average The pullback to moving average strategy marries the concept of a range breakout with the dynamic support or resistance levels provided by moving averages. While there are numerous moving averages traders might employ, the Exponential Moving Average (EMA) is a favourite among many due to its sensitivity to recent price movements. Typically, for this strategy, longer-term periods like the 50-period or 200-period EMAs are preferred, offering a smoother and more reliable representation of the market's direction. Entry/Exit Criteria Entry Bullish Pullback: After an upward breakout, traders can seek long entry opportunities when the price touches or approaches a significant EMA, acting as a dynamic support. Bearish Pullback: Following a downward breakout, short entry opportunities become evident when the price meets or nears a vital EMA, serving as a dynamic resistance. Stop Losses Bullish Pullback: A stop loss might be set just below the chosen EMA level. Bearish Pullback: You can consider positioning a stop loss slightly above the relevant EMA level. Take Profits Profits might be taken as the price nears notable resistance (for bullish pullbacks) or support zones (for bearish pullbacks) or based on other technical signals. Steps for Trading Range Breakouts and Pullbacks When trading breakouts in forex, stocks, commodities, or crypto*, there are a few universal steps that may help: Volume Confirmation: When trading consolidation breakouts and pullbacks, a spike in trading volume can bolster the validity of a move. A high volume during a breakout indicates strong market participation, while a decreasing volume during a pullback suggests it's a temporary move. Multiple Indicators: Don't rely solely on one technique or indicator. Combining strategies, like using RSI or MACD alongside pullback methods, can provide a clearer trading signal. Chasing: If a breakout or pullback has already progressed significantly, it may be prudent to wait for another opportunity. Late entries can compromise potential returns and increase risk. False Breakouts: Not all breakouts sustain. Traders use stops and are always prepared to reassess if the breakout reverses quickly. The Bottom Line Harnessing the power of breakouts and pullbacks can elevate your trading, offering a strategic edge in ever-changing markets. These four strategies are a great place to start, regardless of your preferred market. To put these insights into action, you can consider opening an FXOpen account. Once you do, you’ll gain access to a broad range of markets, competitive trading costs, and lightning-fast execution speeds. Good luck! *At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. 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.

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Learn What is PULLBACK and WHY It is Important For TRADING In the today's post, we will discuss the essential element of price action trading - a pullback. There are two types of a price action leg of a move: impulse leg and pullback. Impulse leg is a strong bullish/bearish movement that determines the market sentiment and trend. While a pullback is the movement WITHIN the impulse. The impulse leg has the level of its high and the level of its low. If the impulse leg is bearish, a pullback initiates from its low and should complete strictly BELOW its high. If the impulse leg is bullish, a pullback movement starts from its high and should end ABOVE its low. Simply put, a pullback is a correctional movement within the impulse. It occurs when the market becomes overbought/oversold after a strong movement in a bullish/bearish trend. Here is the example of pullback on EURJPY pair. The market is trading in a strong bullish trend. After a completion of each bullish impulse, the market retraces and completes the correctional movements strictly within the ranges of the impulses. Here are 3 main reasons why pullbacks are important: 1. Trend confirmation If the price keeps forming pullbacks after bullish impulses, it confirms that the market is in a bullish bearish trend. While, a formation of pullbacks after bearish legs confirms that the market is trading in a downtrend. Here is the example how bearish impulses and pullbacks confirm a healthy bearish trend on WTI Crude Oil. 2. Entry points Pullbacks provide safe entry points for perfect trend-following opportunities. Traders can look for pullbacks to key support/resistances, trend lines, moving averages or fibonacci levels, etc. for shorting/buying the market. Take a look how a simple rising trend line could be applied for trend-following trading on EURNZD. 3. Risk management By waiting for a pullback, traders can get better reward to risk ratio for their trades as they can set tighter stop loss and bigger take profit. Take a look at these 2 trades on Bitcoin. On the left, a trader took a trade immediately after a breakout, while on the right, one opened a trade on a pullback. Patience gave a pullback trader much better reward to risk ration with the same target and take profit level as a breakout trader. Pullback is a temporary correction that often occurs after a significant movement. Remember that pullbacks do not guarantee the trend continuation and can easily turn into reversal moves. However, a combination of pullback and other technical tools and techniques can provide great trading opportunities. Please, let me know if you have any questions! Also, please, support this post with like and comment! Thank you for reading!

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by VasilyTrader

Updated

The CORRECT way to trade MAs Most people have traded with moving averages. They end up being frustrated and losing money. That’s because they’re not using them correctly. I’m going to show you how to use moving averages the right way. Where it works and where it doesn’t To get good trades using moving averages, there’s just 1 thing to do. The thing you need to do is move to a higher timeframe. Stick to 1H, 4H and Daily charts. Sounds simple, right? It is simple but extremely effective. When this strategy is used on higher timeframes, it works amazingly. But on lower timeframes, you end up getting a lot of false signals. Also, use this strategy for potential reversals and trend continuation entries. Avoid using them in a sideways market. (I’ll talk about how to avoid a sideways market) Remember, the higher the time frame is, the better and more reliable the signal is. MA pairings These are the best MA pairings you can use: - 13 EMA & 21 SMA - 5 & 20 SMA - 10 & 50 SMA The big secret Now, after using the moving averages to trade, you will still get fake outs. You will still get caught in sideways markets. But there is a way to make the signals extremely reliable and filter out false signals. You can use the Death cross and the Golden cross. A Death cross is used for a sell. It happens when the longer period MA is ALREADY sloping downward and the shorter period MA crosses below it. Example: A Golden cross is used for a buy. It happens when the longer period MA is ALREADY sloping upward and the shorter period MA crosses above it. Example: These are used to avoid sideways markets. Summary This strategy is supposed to be used on high timeframes like the 4H and Daily chart. Rules for a buy: - The shorter period MA crosses above the longer period MA - The longer period MA should be either flat or already be sloping up (this is important) - Never take a buy if the longer period MA is sloping downward Rules for a sell: - The shorter period MA crosses below the longer period MA - The longer period MA should be either flat or already be sloping down (this is important) - Never take a sell if the longer period MA is sloping upward Please do not use this on lower timeframes like 1M, 5M, 15M and 1H. I hope you got value from this!

Education

Updated

Slippery Slope: What is Slippage? With the unfortunate demise of the prop firm My Forex Funds, the issue of slippage has recently become a hot topic. This educational post takes a look at the slippery issue of slippage, beginning with the basics all the way to addressing popular theories and speculations about slippage. Something to remember is that every trader, regardless of expertise, will encounter slippage during their trading activity. What exactly is slippage? Slippage is the term used in the forex market to describe the difference between the requested price at which you expect to fill your order and the actual price that you end up paying. Slippage most often occurs during periods of high market volatility, when market conditions are very thin due to low volumes traded or when the market gaps; all of these scenarios then lead to market conditions being such that orders cannot be executed at the price quoted. Therefore, when this happens, your order will be filled at the next available price, which may be either higher or lower than you had anticipated. Understanding how forex slippage occurs can enable a trader to minimise negative slippage while potentially maximising positive slippage. Market Gap High Market Volatility Slippage is part of trading and cannot be avoided. This is due to forex market volatility and execution speeds. When a market experiences high volatility, it generally means there’s low liquidity. The reason for this is that during this time, market prices fluctuate very quickly. Where this affects forex traders is when there’s not enough FX liquidity to fill an order at the requested price. When this happens, the liquidity provider will complete the trade at the next best available price. Another cause of slippage is execution speed. This is how fast your Electronic Communication Network (ECN) can complete a trade at your requested price. With market prices changing in fractions of a second, having faster execution times can make a difference, especially on large trades. What is the difference between positive slippage, no slippage, and negative slippage? When slippage occurs, it is usually negative, meaning you paid more for the asset than you wanted to, though at some times it can also be positive. When slippage is positive, it means you paid less for the trade than you expected and therefore got a better price. To get a better understanding of this, let's see the image below. How do you calculate slippage? Let's assume that the price of the EUR/USD is 1.05000. After doing your research and analysing the market, you speculate that it’s on an upward trend and long a one-standard lot trade at the current price of EUR/USD 1.05100, expecting to execute at the same price of 1.05100. The market follows the trend; however, it goes past your execution price and up to 1.05105 very quickly—quicker than a second. Because your expected price of 1.05100 is not available in the market, you’re offered the next best available price. For the sake of the example, let's assume that the best next price is 1.05105. In this case, you would experience negative slippage (positive for the broker), as you got in at a worse price than you wanted: 1.05100 – 1.05105 = -0.00005, or -0.5 pips. On the other hand, let’s say your trade was executed at 1.05095. You would then experience positive slippage (negative for the broker), as you got in at a cheaper price than you wanted: 1.05100 – 1.05095 = +0.00005, or +0.5 pips. Negative Slippage Example Is slippage a technical glitch in a broker’s software, or is it built and designed to bring in extra revenue? There are popular beliefs that slippage is a software glitch or that it is made just to give brokers and liquidity providers extra revenue. This is not true, as slippage is something that is unavoidable. There are times when the markets are extremely volatile and price movements are too quick due to a lack of liquidity. Slippage does bring in extra revenue for brokers and liquidity providers, but you need to remember that slippage goes both ways; while brokers and liquidity providers will generate profits from negative slippage, they will also generate losses from positive slippage. Though there are times when brokers (very rare) use price manipulation on their clients to generate additional revenue (more on this later). How can a trader avoid or minimise slippage? While slippage is impossible to fully avoid, there are a few things you can do to minimise the impact of slippage and protect yourself as much as possible in the markets, including using stop-loss orders to limit their exposure and placing orders during less volatile times. Stop-loss orders are instructions to your broker to immediately exit a trade if it reaches a certain price. By using stop-loss orders, you can limit your losses if the market moves against you. High liquid markets such as Forex enable you to take advantage of market swings to enter and exit trades rapidly, limiting your exposure to the market but also increasing the risk that your stop-loss order may not be executed at the price you expect if the market moves quickly against you. Additionally, there are some brokers that offer traders guaranteed stop-loss orders called 'Guaranteed Stop Orders' (GSOs), meaning that the stop-loss price is guaranteed, which makes the trader unaffected by slippage when getting stopped out. Another way to reduce the impact of slippage is to trade during less volatile times. The forex market is open 24 hours a day, but not all hours are equal. There are times when there are hardly any trading volumes being generated, and you want to avoid trading during this time at all costs as trading spreads will be wider and you will most likely get slipped due to the lack of liquidity in the markets. The best times to trade are usually when the market is most active, which is typically during specific trading sessions such as the Eurpoean or US trading sessions. To summarise, to minimise slippage, you should: What is slippage tolerance, and how should you factor that into account with regard to your stop-loss and risk-to-reward calculations? Some brokers will enable a feature called the 'Market Order Deviation Range' where the trader can adjust the slippage's maximum deviation. This is done so a trader can estimate his or her tolerance to slippage. For example, if you set the maximum deviation to 3 pips, the order will be filled as long as the slippage equals 3 or below. If the price slips beyond the set maximum, the order won't be filled. This is an effective way of managing your risk-to-reward calculations because if you have a strict risk-to-reward set-up and do not have much leeway to give in terms of slippage, you can adjust the slippage tolerance setting so that if the trade comes with more slippage than your trade can afford, it will not enter you in the trade. How can a trader tell if his or her broker is being predatory with regard to slippage? Although rare and illegal now that regulators are prevalent in the industry, in some cases, brokers may manipulate prices to cause slippage. This usually happens during times of high volatility when there are a lot of market orders. By creating a large amount of slippage, brokers can increase their profits. Forex brokers that are not regulated by the major governing bodies are more likely to do this. For a broker to gain the regulation of a major governing body, they must adhere to very strict guidelines set out by the regulating authority. Firstly, if you suspect that your broker is manipulating prices, you should immediately look for another broker. If you have evidence of your broker manipulating prices, you should report that broker to the financial authorities. A good way to gauge if a broker is potentially manipulating prices is by requesting a trade journal from them. A good and reputable broker usually offers trade journals to their clients. Trade journals show execution times of trades and will have a comment on the journal if the trade was slipped. On a standard trade journal, slippage comments should not appear there often (unless you are trading at times when the market is volatile, thin, or trading outside liquid hours). A broker that manipulates prices to their clients is usually hesitant to offer trade journals to their clients because it shows this on the trade journals. So if your broker is not willing to share the trade journals with you, you might want to think twice about continuing to trade with them. To add to that, you can also check if your broker is either a market maker or directly connected to the interbank market, as they will handle slippage differently. To recap, slippage is a part of forex, and no trader is immune to getting it. It occurs most often during periods of high market volatility. Though slippage is almost impossible to avoid and can impact your profit and losses, there are a few things you can do to minimise slippage and its impact. This includes the use of limit and stop-loss orders, placing orders outside of volatile market times, avoiding major economic and news events, and only using brokers that are regulated by the major governing bodies. BluetonaFX

Education

Strategy Smarts Part 1: Opening Range Breakout Welcome to our four-part Strategy Smarts series designed to give you some practical trading templates which build on the concepts outlined in our Day Traders Toolbox and Power Patterns series. We’re kicking this series off with the Opening Range Breakout strategy because it is fundamental to the process of intra-day price discovery. Strategy Overview: At first glance, the Opening Range Breakout may appear as a straightforward range breakout trading setup. However, when executed with precision, it can become a potent instrument for harnessing the inherent dynamics of intra-day price action. The initial minutes of a trading session are marked by frenzied activity, as overnight and pre-opening news gets rapidly factored into prices, and orders are executed. During this phase of early price discovery, a trading range often takes form, aptly termed the opening range. The Opening Range Breakout strategy comes into play when the market establishes a well-defined range within the first hour of trading. Here’s a simple 3-step process which can be used as a framework for trading the Opening Range Breakout: Step 1: Define the Opening Range The initial and critical step in this strategy is defining the opening range. The method for determining the opening range may vary for different assets, such as stocks and indices or the forex market. For Stocks & Indices: Stocks and cash indices with set opening and closing times make defining the opening range relatively straightforward. We are looking for a range to develop within the first hour of trading – the more obvious the range the better. NOTE: It's important to acknowledge that a range may not always form within the first hour of trading. In such cases, the Opening Range Breakout strategy would not usually be applied by traders using this strategy. Example: AAPL 5min Candle Chart Past performance is not a reliable indicator of future results For Forex: Forex is the market that never sleeps, this means the New York close rolls straight into the Asian open – making defining the opening range much more subjective. For most major forex pairs, volume will be lower during the Asian session, increase in early European trading, before away during late morning and increasing again during U.S. trading hours. There are many interpretations and definitions of the opening range breakout strategy for forex pairs, but perhaps the cleanest method is using the lower volume Asian session as a window in which a range can form. Example: EUR/USD 5min Candle Chart Past performance is not a reliable indicator of future results Step 2: Check Range Location If you've read our Day Traders Toolbox Part 1 on Previous Day High and Low (PDH/PDL), you understand the significance of these levels in shaping day trading strategies. The location of the opening range concerning PDH/PDL plays a pivotal role in shaping the expectations and management of the Opening Range Breakout strategy. Assuming PDH represents resistance and PDL signifies support, the relative distance between the opening range and PDH/PDL dictates whether long or short positions are more appealing. Should an opening range form above the PDH, this strategy suggests longs will be more attractive as the market is consolidating in a position of strength. The opposite applies to when an opening range forms below the prior days low – the market is consolidating in a position of weakness and therefore shorts might look more attractive. Example Part 1: SPX 5min Candle Chart Past performance is not a reliable indicator of future results Example Part 2: SPX 5min Candle Chart Past performance is not a reliable indicator of future results Step 3: Trade the Breakout Once a clear range has emerged within your defined opening window, and you've assessed the range's location relative to PDH/PDL, it's a matter of waiting for and executing a breakout when it occurs. A breakout can occur either to the upside or the downside. Consider placing price alerts on both sides of the range to ensure you capture the breakout. Be aware that breakouts from opening ranges may not always be clean. Noise and false breakouts can occur. Therefore, one of the best entry techniques for trading the opening range breakout is the 'Break & Retest' method, as outlined in our Power Patterns series. This approach waits for the breakout to occur and enters during the first pullback. Stop Placement: You may want to consider positioning your stop within the opening range to account for potential market noise. Advanced traders may consider employing the Average True Range (ATR) for more precise stop placement, as discussed in our Day Traders Toolbox: Part 3 on ATR. Profit Target: A sound starting point for determining profit targets in the Opening Range Breakout strategy is using the PDH/PDL and daily ATR. If the breakout happens within the prior day's range, set PDH/PDL as initial targets. If the breakout extends beyond the prior day's range, consider using 1 x Daily ATR as your initial target. Worked Example 1: Tesla Long Opening Range Breakout Tesla establishes an opening range during the first hour of trading above the PDH, indicating strength. The range is broken to the upside, and the market retests the upper boundary, offering an entry opportunity. A stop is placed within the opening range, and an initial target of 1 x ATR is reached as the price climbs. TSLA 5min Candle Chart: Past performance is not a reliable indicator of future results Worked Example 2: Tesla Short Opening Range Breakout Tesla forms an opening range just above the PDL. A break and retest of the opening range triggers the entry. A stop is positioned above PDL and within the opening range to accommodate market noise. The initial target of 1 x ATR is achieved as the price descends. TSLA 5min Candle Chart: Past performance is not a reliable indicator of future results 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.

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Arbitrage, Co-Integration & Pairs If you are interested in quantitative trading (“quant” trading) or even if you’re only interested in investing, chances are you may have heard of arbitrage, co-integration and pairs trading. But chances are equally likely you have no idea what these truly mean and how to assess/measure and exploit these different concepts in your trading life and investment life. And it makes sense, these are really complex concepts and generally utilized by quantitative traders in institutional trading. But, why let them have all the fun. So I’m going to try to simplify these concepts and give you a working idea of: a) What these things mean; b) Why they are imported for traders and investors; and c) How to start applying these concepts to your trading and/or investment portfolio. First, let’s get started with the pesky definition details. Arbitrage: Isn’t that a big bird?! In finance, arbitrage generally refers to any short to mid term trading strategies that revolve around mean reversion models and the exploitation of pricing inefficiencies. Despite the fact that the “ Efficient market Hypothesis ” postulates that markets are efficient and thus unpredictable, I am going to show you that they are in fact very inefficient and all it takes is a little math to reveal these inefficiencies. And Co-Integration? Co-integration is kind of like co-habitation, perhaps more copulation. If two tickers were going to have a child together, it would be a co-integration. Essentially, co-integration refers to what a ticker would look like while integrated into another ticker. The official explanation of cointegration is essentially when two or more nonstationary time series move together in such a way that their linear combination results in a stationary time series. Now this is the involves modelling one ticker after another, so that you can essentially predict one ticker’s price or behaviour, from another. It may help to show you some examples of co-integration via charts. So let’s take a look at some examples below, using the SPTS indicator to perform linear regression assessments: In the chart above, I have placed a co-integration model of GOOG and MSFT through linear regression. Essentially, we use GOOG’s close price to calculate the respective fair value of MSFT. From this, we can see when MSFT is over-valued from GOOG and vice versa, and we can see when the two are fully integrated (a regression to the mean). Now cointegration isn’t a natural order. Not everything can co-integrate. Sometimes, there just isn’t a significant relationship. For this, we must apply some statistical tests. There are many that can be used, such as the Engle Granger Test, but the most popular is the Dickey Fuller test or Augmented Dickey Fuller test. We will talk more about this later. Pairs Trading Pairs trading refers to trading both arbitrage and co-integration. Remember our GOOG/MSFT example above? Well, pairs trading involves assessing, modelling and trading this co-integrated relationship. Let me explain through charts: In the chart above we can see both MSFT and GOOG are in an uptrend. However, MSFT is lagging below GOOG and GOOG is holding slightly above MSFT. Now, because they are both in an uptrend, you don’t want to short, but if you wanted to maximize your profits, you are going to long the stock that is under-performing its benchmark or “cointegrated” pair, i.e. GOOG. We can see this translated into about a 6.18% gain on MSFT vs only a 4.75% gain had you longed GOOG. Now, traditional pairs trading generally involves finding two stocks that are highly correlated but have extremely diverged, shorting the one that is overvalued and longing the one that is undervalued. But I can tell you, that is almost IMPOSSIBLE to find in the real world! So I settle for this as a pseudo-pairs trading fill in! Here is an intra-day example between SPY and QQQ from Tuesday October 31st: Do you notice anything in this chart? During the morning sell down, SPY lagged QQQ and QQQ sold more starkly. SPY held higher above QQQ, which we can see from our co-integration model. So what would have made more sense, to long SPY or QQQ for the bounce? If you said QQQ, you are correct: From its lowest to highest point, SPY bounced 0.57%. From its lowest to highest point, QQQ bounced 0.85%. And we were able to see that QQQ had more upside room than SPY by looking at the co-integration model overlaid on the chart. Now do you remember when I talked about arbitrage and how I said the market isn’t so efficient when you pull in these pesky math equations? This is why. There is arbitrage everywhere, everyday, on every stock. These small inconsistencies in pricing that can be exploited for profit. Now, as retail traders, we likely don’t have the computing and modelling power/setup necessary to scan millions of tickers, creating multiple co-integration models to look for these pricing anomalies and capitalize on them, but we can absolutely have our own co-integration model built on stocks that we trade frequently, or that we like to invest in. But before we get into the how, let’s look at some different examples of co-integration and mean reversion. First, let’s look at an example of a “perfect integration” i.e. the same stock with SPY and SPX: You can see that the blue lines align perfectly with the candles. But watch what happens when we overlay SPY and ES1! (the futures version): Do you notice something.. strange ? Despite ES1! And SPY being pretty identical, we can notice a few “drifts” or inconsistencies in the pricing. This is likely attributable to the extended trading time of ES1! Vs SPY which is limited in its trading times, but it does highlight how these inconsistencies can “pop up” on tickers/futures that are trading almost identical underlying assets (in this case, the S&P 500). What about investments? How is this useful for investments? This is actually a really great question and.. well friends… I’m going to show you how your investments can thrive with a little bit of quantitative love! Let’s use a very straight forward example, SPY and QQQ. They are pretty similar, tend to follow each other. Over the past 75 days, SPY and QQQ have a Pearson Correlation of 0.94. That is a pretty substantial relationship! If we look at what SPY looks like overlaid with QQQ, here we are: In the chart above, you can see there are areas where SPY outperforms QQQ and QQQ outperforms SPY. If we were to export SPY and QQQ trading data since July 2020 into Excel and create a investment model based on the modelled relationship between SPY and QQQ, it would look something like this: Column B has our SPY close Price, C our QQQ close price, E through G are how we calculate the Dickey Fuller statistic, H and I are our SPY and QQQ Returns respectively, and J is our investment of $100. Now, if we create a SPY trading algorithm off this model and tell it to long and hold SPY as long as it is undervalued in comparison to QQQ, sell when its over-valued and re-buy when its undervalued, assuming an initial investment of 100$, between July 22nd, 2020 and October 31st, 2023, you would have made exactly $36.40 or 36%. Had you just held SPY for that time and not sold when SPY became over-valued against QQQ, you would have made $27.95, or around 28%. The difference seems marginal maybe, but it is quite a stark percent difference. And if you change that 100 to, say, 10,000, the difference starts to add up. So … How can do you do it? So now for the technical stuff. I am going to try to keep this as easy and straight forward as possible. In a nutshell, the steps involved in developing a co-integration model include the following: a) Finding a rational basis for the integration: It is insufficient to think that one stock should relate to the other. You need a rationale basis as to why these stocks are similar, which can later be confirmed by some tests. b) Reference a correlation table or matrix to compare the stocks of interest and identify the highest correlated stock pairs. c) Once you have identified the highest correlated stock pairs, you can use an indicator such as SPTS to create a regression model, or you can use Excel to create a regression model (for simplicity, I am going to show you how to do it on the SPTS indicator). d) Create your co-integration model in Excel by exporting your two stocks of interest and plotting in your linear regression formula. e) Perform the Dickey Fuller test to ensure stationarity. f) You’re done! Now, let’s walk through the steps, using NVDA and SMH as our two basis. Determine rationality: NVDA is a subsector of chips, which is tracked by SMH. Check Correlation: We can see on this correlation matrix, NVDA has a 0.82 correlation to SMH. It is the strongest, even stronger than QQQ which has a 0.74 correlation. In general, you want a correlation >= 0.8. So SMH has passed the first and second step! Create a Regression Model For simplicity, let’s use SPTS. Launching SPTS, it is going to ask us to set a start and end time. I am going to start from the beginning of 2018 till current (approx. 5 years). Then, in the settings, I am going to select “Linear Regression” SPTS is going to output a linear regression model (green arrow): We are going to take a look at the Significance or P value, which is 0.9, even better than our correlation matrix result! And our R squared which is 0.8. This is an excellent R2 reading! We generally will accept R2 of 0.5 or greater, so 0.8 is perfect! We can also see our Error is 138.59, which means the variance present between NVDA and SMH is around $138.59 in both directions. The meat of our model is the equation y = 2.7994x + -114.15. We need this formula for the next step. Export the data into Excel We are going to click the dropdown menu in the top right hand corner by our chart title and click “ Export chart data ”: We are going to do this for both our tickers. Once we have the data, we are going to just leave the Time and the Close price for NVDA and copy over the close price for SMH so that our Excel file looks like this: Now, we are going to create a column in D called “Co-Integration”. In this column, we are going to use our model equation that was generated by SPTS like so: Remember, we are converting SMH to NVDA, so we take the SMH close price and substitute for X in the equation. Once that is done, we can drag and drop the data to calculate the expected close for NVDA: If we want to use Excel to calculate the equation, we can select an empty cell and use the formula =SLOPE(known ys (NVDA), Known_xs (SMH)): Then, in another column, we use =INTERCEPT(known_ys (NVDA), known_xs (SMH)): Perform Dickey Fuller Test So now we have our data, we have to ensure there is stationarity. Stationarity refers to the principle that the statistical processes of a stock will remain the same. Stationarity is required for any time series analysis, without stationarity, time series would not work in the way we need it to for this. Now don’t get confused by the term. Stationarity doesn’t mean that the stock price can’t change, just that its statistical attributes will remain the same. For example, say NVDA and SMH both gain 4% in one day, then following day they lose 2%. Now, say in two months, both gain 4.2% and lose 2.2% the next day. This is a simplistic example of stationarity. The statistical processes that are driving these two tickers remain constant, despite the price increase or decrease. So to perform a stationarity analysis, we need to first do what is called “Differencing”. All this means, is we need to subtract NVDA from our Co-integration formula like so: Then we drag down. (Notice we assigned this column X. This is for simplicity). One thing you will notice is the value of X is negative. This implies that NVDA is actually OVERVALUED in comparison to SMH. We are going to be seeing a lot of negatives ;). Now that we have created our X column, we can go ahead and calculate what is called delta x or x change. This is the difference between the second and first x value, calculated as such: We simply subtracted the proceeding value from the previous value. Once we put in the formula once we can just drag and drop it: Now the last thing we need to do is created a lagged value of X. This is because the Dickey Fuller test requires lagged values to assess stationarity. So we simply carry down the previous X like so: Then… what do you think?..... we drag and drop :p. So now we are ready to calculate the Dickey Fuller result. And this is actually really easy! All we do is use the formula =LINEST(known_ys, known_xs). Our known Y’s are going to be the delta x and our known x’s are going to be the lagged x. But before we use this function, we are going to highlight 2 rows like so: The top called coefficient and the bottom error. This will give us the regression coefficient (the same thing we multiplied our SMH value by), as well as the standard error. Once we have our two boxes highlighted, we will put in our command like so: NOW BEFORE YOU PRESS ENTER! You need to force the LINEST function to only print the two values we want, so to do this, after we put in our known Ys and Known Xs, we are going to use the comma “,” and put 0 then comma “,” and put “1”. This is going to tell Excel we want a negative coefficient (for the DF test) and to print our standard Error: Then, we are going to press ctrl + shift + enter. Or command + shift + enter on a mac. This is going to force Excel to only print the two variables of interesting: And there are our results! Now, to calculate the DF test, all we do is divide the coefficient by the error like so: And here is the result: So what does it mean? Well, there are 3 critical values on Dickey Fuller T Critical at 10% confidence = -1.75 T Critical at 5% = - 1.616 T Critical at 1% = -2.567 To be significant, the t-statistic needs to be below a critical value. As a vague rule of thumb, in general, the more negative a value is, the more confident we are to reject the null hypothesis, that the data is NOT stationary. Here, we fail to have a very negative value and we fail to come in lower than any of the critical values. As such, we have to accept the null hypothesis and the fact that this data is non-stationary. If we take, by comparison, the t-statistic of SPY and QQQ since 2020, it is a value of -2.048 within a normal distribution. Thus, we can say that the data is stationary up until a confidence level of 5%. However it is not significant within a 1% confidence level. A side note on distribution: While the distribution type does not technically affect the DF results, we should pay attention to whether we are operating with a normal distribution or an abnormal distribution. So we need to check the distribution, which we can do with SPTS: So should we accept NVDA and SMH as stationary? No. Unfortunately, it is not a stationary dataset and we cannot use SMH to determine the fair market value of NVDA. I wanted to use this example to show you that stationarity is not a rule and it can be a challenge ascertain it in your models. But if you are big into the indices, generally you will find stationarity if you are looking between 3 to 4 years back max. To recap, stationarity depends on a) The distribution type (a normal distribution should be ABOVE the critical values and a non-normal distribution should be below the critical values). b) In both cases, the more negative a value is, the stronger we can reject the null hypothesis. For example, if we returned a value of -4 on a normal distribution, this would indicate strong evidence of stationarity and would create an extremely reliable model. c) If the data distribution is non-normal, we need the value to fall below the critical values. So, for -1.75, we would need the value to be less that -1.75 for 10% confidence, less than -1.61 for 5%, etc. That said, I went ahead and applied the algo despite nonstationary data, to see how it would have faired using SMH as its anchor point. The initial investment was $200 at the start of 2018 and it would only buy NVDA when the value of NVDA fell below the FMV based on SMH. The result? Our $200 would be $734.85 as of today, assuming we bought when NVDA was below FMV and sold when it crossover the FMV according to SMH, for a total return of around 267%. What about if we bought NVDA and just held it from 2018 till now? Our investment would be up to $1636.52 for a total of around 718%. This is why stationarity matters , because it will affect how our investment does! You see it worked well on SPY and QQQ because there was stationarity to ensure consistency, but NVDA does not have it, too erratic. So what about if you have stationarity? If you have stationarity, then good! The principle is, you want to long the stock when your X value is positive (indicating it is undervalued by comparison to your co-integrated pair) and get out and/or short the opposite stock when your x value is negative. As an investment strategy, I generally recommend not shorting, but just getting out when the x value turns negative (i.e. is over-valued), or simply setting a stop-loss to maintain the bulk of your gains and letting it do what it do. You can also apply this on the shorter timeframes, like the 1 hour or 2 hour or 4 hour, like the examples I showed above. Concluding remarks So that concludes my very lengthy post. I really hope you learned something from this, took something away. These are really complex topics and there are not a lot of good resources out there on how to do them properly. Even just finding resources on the Dickey Fuller test, which is predominately only used in economics, was difficult. So I wanted to provide some information on these more complex strategies and principles that I think most traders and investors should have some idea about. Hope you enjoyed and safe trades to all! Thanks for reading!

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Understanding The Golden MA Cross I am currently involved in a trade idea that involves the Golden MA Cross which consists of the 50,100 and 200 moving average crossover. When all three of these MA's cross a big move usually follows. Watch to see more of what I mean in regards to this concept.

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