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Why Implied Volatility Is A Critical Tool For All TradersTraders and investors use different sets of tools when approaching markets. Some are fundamentalists, pouring through balance sheets, supply and demand data, and other macro and microeconomic information to predict the future prices of assets. Others have a strictly technical approach to markets, following trends and the path of least resistance of prices. Still, others combine the two to look for opportunities where fundamental and technical analysis merge to improve the chances of success. The past is history; the present is all that matters for traders and investors Historical volatility is a map of the past price variance for asset prices Implied volatility is a real-time sentiment indicator The primary variable determining put and call option prices The three critical factors implied volatility reveals Yogi Berra, the hall of fame catcher and armchair philosopher, once said, “The future ain’t what it used to be.” All market participants have the same goal, to increase their nest eggs. Projecting the future is the route to achieve their goal. Implied volatility is a tool that all market participants need to embrace as it is a real-time indicator of market sentiment. The past is history; the present is all that matters for traders and investors History depends on interpretation. When it comes to markets, Napoleon Bonaparte may have said it best, “history is a set of lies agreed upon.” An asset’s price moved higher or lower in the past because of a collection of variables viewed through a prism that leads to a collective conclusion that has broad acceptance but may not be accurate. Taking a risk-based position on an inaccurate conclusion could lead to mistakes and losses. When we consider buying or selling any asset, all that matters is the present. The current price of any asset is always the correct price because it is the level a seller is willing to accept and a buyer is willing to pay in a transparent environment, the market. Historical volatility is a map of the past price variance for asset prices Historical volatility is an objective statistical tool that defines the price variance of the past. Any disclosure document tells us that past performance is no guaranty of future performance. We must view historical volatility precisely the same way, with more than a grain of salt. Historical volatility is a guide, but remember what Yogi said, “the future ain’t what it used to be!” We calculate historical volatility by determining the average deviation from the average price over a given period. When it comes to math, the formulas are: A simple explanation of the complicated formula comes in seven easy steps: 1. Collect the historical prices for the asset 2. Compute the expected price (mean) of the historical prices. 3. Work out the difference between the average price and each price in the series. 4. Square the differences from the previous step. 5. Determine the sum of the squared differences. 6. Divide the differences by the total number of prices (find variance). 7. Compute the square root of the variance computed in the previous step. Implied volatility is a real-time sentiment indicator While we can calculate historical volatility from historical data, implied volatility is a different story. Implied volatility is the expected or projected volatility or price variance of an asset over time. We back into calculating implied volatility using an options pricing model. We can establish an implied volatility reading by entering the option value into the Black-Scholes options pricing formula or other formulas that determine options prices. If we have a put or call options price, we can solve for the implied volatility level. The Black-Scholes formula in mathematical notation is: The primary variable determining put and call option prices There are no option prices without implied volatility as it is the critical variable that determines put and call option values. Yogi also said, “You can observe a lot by watching.” The current implied volatility level is the market’s consensus perception of what volatility or price variance will be during the life of the put or call option. Observing and watching reveals the constant changes in implied volatility levels, which can be highly volatile over time. Option traders call an option’s sensitivity to changes in implied volatility Vega, which measures the change in an option price for a one-point change in implied volatility. Implied volatility is constantly changing. Yogi had another great saying, “If the world were perfect, it wouldn’t be,” which rings true for implied volatility which can change in the blink of an eye. Option traders pay lots of attention to their Vega risk as the volatility of implied volatility can be…highly volatile! How’s that for a tongue twister? The three critical factors implied volatility reveals Implied volatility is a valuable tool for all traders and investors for three significant reasons: It is a real-time indicator of the market’s perception of the future price range of an asset. It can change suddenly, and changes often occur before the price of an asset reacts, making implied volatility a leading indicator. Implied volatility reflects the wisdom of the crowd, and crowds tend to make better decisions than individuals. Moreover, it is reading that reflects the present, not the past, and is a constantly changing measure of consensus forecasts for the future. As traders and investors, we exist in the present. We attempt to increase our wealth with long and short risk positions that either add or subtract from our nest egg in the future. Implied volatility is a critical measure we should understand, utilize, and always keep in our toolbox. Any project requires the right tools. Implied volatility’s value is that it reflects a snapshot of the current market’s consensus. Historical volatility depends on “Deja vu” happening “all over again.” Implied volatility is a measure that understands that the “future ain’t what it used to be.” ----- Register for our Monday Night Call using the link below. You can view this full article (with specific examples) and get early access to future articles for free using the other link below. Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
ICEUS:CT1!Education
by Andy_Hecht
18
MACD: ¿What is it and how does it work?You have surely observed the use of the MACD in several studies, however newbies may find themselves wondering what it is and how it can benefit our operations in the financial markets by appealing to its many ways. ¿What is the MACD? The MACD (Moving average convergence / divergence) is a moving average of convergence / divergence that follows the trend made by Gerald Appel. It is a momentum indicator that captures the trend and shows the interaction between 2 moving averages of costs. The MACD consists of the following elements by default: • MACD cost = (12 period EMA - 26 period EMA) • Signal line = MA 9 from the previous calculation • MACD histogram = (MACD value - signal line) Therefore, this indicator helps us to identify the development as the trend. However, we have the possibility of adjusting it for different terms according to our operations: • Corto plazo: Instant EMA 13 Slow EMA 21 SMA MACD 1 / al cierre • Medium term: instant EMA 34 slow EMA 144 SMA MACD 1 / Use at close • Long term: Immediate EMA 21 Slow EMA 34 SMA MACD 1 / Use at close How do we have the possibility of trading with the MACD? There are 2 practical procedures to operate with this indicator: • When the MACD line crosses above the signal we open positions and once the first crosses below the other we close positions • Once the two lines cross above the zero degree we open the operation and once the two cross below we close our operation Another comfortable style is based on the histogram: In this first procedure, we will base the operations according to the direction of the histogram: • Purchase: the histogram goes from a negative cost to a positive cost to trade in the market • Marketing: the histogram goes from a positive cost to a negative cost to sell in the market operating divergences All the indicators allow us to anticipate a turn in the trend by showing us a direction opposite to which the cost is going. In which case of the MACD we will have the possibility of identifying it by detecting the following: Bullish divergence: 2 lows are formed in a row and the second one is lower. The histogram reaches 2 increasing highs, the second is higher than the previous Bearish divergence: On the contrary, there are 2 bullish highs, the second one higher than the previous one. The histogram reaches 2 descending maximums, the second one lower than the previous one We have asked Luis Francisco Ruiz two questions about this interesting indicator. -Being a momentum indicator, for what type of trading is it more efficient? The indicator can be used for all kinds of trading. It is knowing how to know it and interpret it in the time frame in which we are using it. -There are 3 procedures to operate with it, crossing lines (between the two and together above or below the degree of 0 and histogram). Can it be used to gradually close or open positions or should we focus on one method? The cross between MACD and signal allows us a shorter-term operation with more operations and, as a general rule, in opposition to trend or range. The crossing of the MACD with its neutral band is a more trend operation and with fewer operations. In terms of what is our intention, we will apply one or the other.
Education
by UnknownUnicorn18500526
59
How to Use the Bitcoin Dominance Chart to Maximize ProfitsIn this post, I'll be explaining a simple approach to the cryptocurrency market, and how you can refer to the Bitcoin Dominance Chart (BTC.D) to maximize profits. Disclaimer: This is not investment advice. This is for educational and entertainment purposes only. I am not responsible for the profits or loss generated from your investments. Trade and invest at your own risk. Bitcoin Dominance (BTC.D) - Bitcoin Dominance is simply an indicator that demonstrates the percentage of Bitcoin's market cap relative to the entire market cap. - When Bitcoin dominance is high, it indicates that Bitcoin's market cap is relatively larger compared to that of other altcoins, and vice versa. - So when Bitcoin dominance rises, it could either indicate that: - Bitcoin is rising at a faster pace than altcoins (during an uptrend) - Altcoins are correcting at a faster pace than Bitcoin (during a downtrend). - Vice versa, a drop in Bitcoin dominance could indicate that: - Bitcoin is dropping at a faster pace than altcoins (during a downtrend) - Or that altcoins are rising at a faster pace than Bitcoin (during an uptrend). - Understanding this, you can refer to the Bitcoin dominance chart to rebalance your portfolio according to market situations. Historical Price Action - Above, I've marked Bitcoin's price action (black), relative to that of ETH (blue), which represents the overall altcoin market. - The captions in the chart best explain the logic behind the price action, and how dominance is affected by it. - What's important to understand is that the situation is relative: a high dominance does not necessarily indicate that buying altcoins is a good idea. - It's important to understand the overall market cycle and structure to determine which regions are good entries. Anatomy of a Market Cycle - Above, we have the market cycle explained using Elliott Waves. - The market never moves in straight lines: It goes through phases of impulse waves, and corrective waves. - Elliott Waves also have very strict rules that must be kept. - Or else, the wave count is considered negated. - Here are the rules: - Waves 1,3 and 5 are always with the trend - Waves 2,4 are always against the trend - Wave 2 can never drop below wave 1’s low - Wave 3 can never be the smallest wave - Wave 4 can never drop into the range of wave 2 (unless it is part of a diagonal) - With this in mind, we can now take a look at where Bitcoin is, from the larger wave count. Bitcoin Market Cycle using Elliott Waves - We can start counting the wave from $3.1k, when Bitcoin bottomed out around the end of 2018 - Based on this wave count, it could be said that the move up to $64k was the end of the 3rd impulse wave. - We have recently completed the 4th corrective wave, and are on our way to complete the 5th impulse wave. - As to why I have selected the $200k region and June 2022 as my price and time period target, please refer to my previous analysis below: Conclusion Bitcoin dominance is currently forming a double bottom on the weekly. With Bitcoin's wave count lining up for an impulse move upwards, I expect Bitcoin to rally upwards, outperforming other altcoins in the short-mid term. As Bitcoin paves way for the entire crypto market cap by breaking through all time high levels in Q4, we could see Bitcoin dominance reach resistance around the 60-70% range. At that point, given that the broader market cycle isn't over, it would be a good point adjust your portfolio, and scale profits from Bitcoin into altcoins for maximum returns. If you like this educational post, please make sure to like, and follow for more quality content! If you have any questions or comments, feel free to comment below! :)
CRYPTOCAP:BTC.DEducation
by Michael_Wang_Official
97
When/How to move SL to BE and to profit in a running trade ?Hello everyone: Today I want to discuss a topic in Risk Management, specifically on when and how to move your STOP LOSS to BREAKEVEN or in PROFIT when you have a running profit trade/position. In an impulsive phase of the market, we want to make sure to protect our entry as well as secure profits. In this example of EURUSD, I managed to get 2 entries in, and manage it to my best ability and secure profits Trade close down for +7.9% profit Original Trade Forecast and Analysis: This is a topic that will have various answers across traders, as this is certainly up to each individual trader’s strategy, style, and management approach. So understand there is no right or wrong, “holy grail” kind of decision. It's up to you individually as a trader. I will share my management, and why I choose to go with these types of approaches, and you can certainly use them to your advantage to tweak/modify them to fit your strategy. Few things to keep in minds are: 1. Moving the SL to BE or/and in profit is a way to protect your entry, as well as secure profit. 2. Sometimes moving the SL too early may “choke” the price, and you can get stopped out for BE or small profit. Then watch the price take off in your desired direction, which can create negative emotion. 3. Whereas sometimes if you don't move SL to BE or in profit, you can watch a trade that hits 3:1 RR or more, end up reversing down, passing your entry point and to your actual SL of -1%, which can also create negative emotion. 4. No perfect scenario or management when it comes to the aspect of trading, as every trade is unique, and different outcomes may happen, since the market itself is not perfect, and can do whatever it wants to do. Now, I will explain my own management when it comes to moving SL to BE or/and in profit. Certainly this is NOT the only way, nor it will be the best way, but over the years of backtesting & chartwork have given me reassurance on these types of management ways. I will then show some real live examples on the trades that I closed down, and how I manage them as well. CADJPY - Original Trade Forecast and Analysis: GBPJPY - Original Trade Forecast and Analysis: CHFJPY - Original Trade Forecast and Analysis: NASDAQ - AUDNZD - Original Trade Forecast and Analysis: First, a general rule of thumb for me. IF the price has hit about 1:1 RR or so, and has broken past the previous recent lows, I will move my SL to BE. There is no exception in this rule. Again, I explained earlier that sometimes this will help you to protect your entry when price reverses, and sometimes it will choke the price. In this case, I would rather take a BE first, and re-look for entry again in the same position, as long as the bias and the price action is still valid on both the higher time frame and lower time frame. Second, once the entry is in some profit, say 2:1 or higher, I generally will move the SL up to about +0.5% profit or so. Just want to secure a little profit while not choking the price entirely. Third, once the entry is in 3:1 profit, then I will move my SL to +1% profit. This is where I generally will decide whether I should take full profit here, or hold the trade for a mid-long term if the higher time frame has given me the bias. Fourth, since the trade has already been in 3:1 profit or higher, generally we can expect a continuation correction to form now after the impulse phase. If it's a smaller correction and price isn't reversing up sharply right away, I will move my SL to about +1.5% profit, set my alert above the continuation correction and observe the development of the correction. This is generally a point where I can decide to hold the trade longer, or if it reverses up from the continuation correction, then exit the trade for profit. Fifth, if we start to see a possible reversal development, then I will move down my SL to the recent swing highs/lows, or just above the reversal correctional structure, and will let the trade tag me out for profit if it reverses. Any questions, comments or feedback welcome to let me know :) If you enjoy these contents, and the educational lessons are helpful, please press like, subscribe and follow for more. Jojo
Education
by jojofang0901
89
TA 101: How to Draw Support and Resistance Lines Like a PRO!Support and resistance lines represent a concentration of demand and supply sufficient to halt a price move, at least temporarily. They are risky areas to buy or sell for beginners, but give clues about reversal in conjunction with other indicators. Steps to draw support or resistance line: Find the correct time frame Include 300 - 600 bars Find major and minor support lines: How to identify major support or resistance lines: They connect more than 3 high or lows. Increase with number of times they are tested How far back in time they act as a major support or resistance line The volume of exchange in those levels. How to identify minor support or resistance lines: Minor support/resistance lines include the previous lows and highs. Other factors that are considered as support or resistance levels include: Remember the rule of Round Numbers. Remember the importance of moving averages. Gaps are not always filled, sometimes they work as a support or resistance. Fibonacci levels are also important areas for forming support or resistance lines. General rules: Lines with higher significance break only under higher volumes. Once a line is broken it reverse its role. Support turns into a resistance and vice versa.
Education
by MarkitMaven
57
Broadening Wedges - Advanced AnalysisIn our previous post in this series about chart patterns we described the characteristics, rules, and causes of triangle patterns (if you haven't seen it, see the related idea below). In this post, we perform an advanced analysis of broadening wedges patterns. We provide a description of each pattern and its implications. We also review the literature in order to find their deterministic cause. 1. Broadening Wedges Broadening wedges are characterized by price variations laying within one support and resistance, both having the same direction and broadening over time. As such the apex of the support/resistance in a broadening wedge is located to the left. Broadening wedges must not be confused with other broadening formations. While they all have a broadening characteristic they can have different identification rules Broadening wedges are classified depending on the direction of the support/resistance. 1.1 Ascending Ascending broadening wedges mostly occur during uptrends with rising local maxima (higher highs) forming an upward sloping resistance and raising local minimas (higher lows) forming an upward slopping support. The slope of both the support & the resistance should be significantly different from 0. Bulkowski suggests the price needs to test the support and resistance three times each. Additionally, the resistance should be steeper than the support. Volume tends to increase during the formation of such pattern. Ascending broadening wedges have a bearish bias with breakouts mostly occurring downward. Downward breakouts are often followed by a decrease in price. Example of an ascending broadening wedge followed by a downward breakout on SOLUSDT 4h. 1.2 Descending Descending broadening wedges mostly occur during downtrends with declining local maxima (lower highs) forming a downward sloping resistance and declining local minimas (lower lows) forming a downward slopping support. The slope of both the support & the resistance should be significantly different from 0. Similarly to ascending broadening wedges, Bulkowski suggests the price needs to test the support and resistance three times each. Additionally, the support should be steeper than the resistance. Volume tends to increase during the formation of such pattern. Descending broadening wedges have a bullish bias with breakouts mostly occurring upward. Upward breakouts are often followed by an increase in price. Example of an ascending broadening wedge followed by a downward breakout on AVAX 1h. 2. Partial Rises/Declines Partial rises/declines are phenomena described by Bulkowski in broadening formations and are described as being common. Partial rises/declines often indicate the direction of a breakout. Partial rises commonly occur in broadening ascending wedges, price bounces off the support, moves towards the resistance without reaching it, and go back to the support. We can expect a potential downward breakout after that. Note that a partial rise always starts from the test of the support. Partial declines commonly occur in broadening descending wedges. The price bounces off the resistance, moves towards the support without reaching it, and then goes back to the resistance where we can expect a potential breakout upwards. Note that a partial decline always starts from the test of the resistance. Partial rises and declines can offer a better price to buy/sell instead of waiting for a breakout. 3. Measure Rule The measure rule for broadening wedges allows us to determine the position of a take-profit/stop-loss. For a broadening ascending wedge the measure rule would place our take profit at the lowest low inside the formation. Selling directly after a partial rise would allow for higher profits. For a broadening descending wedge the measure rule would place our take profit at the highest high inside the formation. Selling directly after a partial decline would allow for higher profits. Certain analysts close trades caused by partial rises/declines when the price reaches the support/resistance of the wedge, opening a new position in the case of a breakout while using the metric rule for setting their take profit. 4. Causes Of Broadening Wedges Bulkowski offers a description of the causes of broadening wedges in the market in terms of the market participant's behavior. The cause of an ascending broadening wedge is a surge from an initial buying impulse, driving the price higher. Momentum traders follow the initial impulse further pushing prices up. Contrarian traders judge the price to be trading above its intrinsic value, selling and thus creating a decline in prices. However, before the decline reaches the previously established low, certain market participants buy again. These participants can be composed of initial buyers, accumulating positions, or late traders seeing the potential to buy at a better price. This allows the creation of a new impulse, with only a divergence left. This scenario eventually repeats itself with increased volume, causing impulses and retracements of higher magnitude reinforcing a positive feedback loop until the price is judged overbought even by initial buyers. A broadening falling wedge follows the same scenario structure but with sellers instead of buyers. 5. Other Observations The amplitude of the cyclical variations within a broadening wedge increases over time, thus potentially highlighting volatility clusters in higher time-frames. Another interesting observation that can be made is that prices within a broadening wedge are subject to heteroscedasticity (variability is not constant, it increases inside a broadening wedge), while prices inside a channel are homoscedastic (variability remains constant). This concept is inherent to regression analysis. 6. Conclusion In this post we described broadening wedge patterns in depth. We have highlighted partial rises/declines as well as how the measure rule applies to such patterns. We then focused on showing how market participants act during the formation of broadening wedges. Note that unlike triangles patterns we did not find a significant amount of studies mentioning such patterns, nor any agent models developed to describe their occurrence. 7. References (1) Bulkowski, T. N. (2021). Encyclopedia of chart patterns. John Wiley & Sons.
LEducation
by LuxAlgo
44
Fourier: Interpreting and Over-interpreting Frequency AnalysisGreetings to all! In this post, I'd like to share some thoughts on frequency analysis based on Fourier transform. This mathematical method breaks down data into cyclical constituents (frequency components). Then the importance of each frequency component in the original data is expressed as the square of its amplitude, that is, power . Some time ago I published a Pine Script implementation of the Fast Fourier Transform (FFT) algorithm. I made it specially designed to be used for filtering data based on its frequency content. The concept of FFT filtering is well known and quite simple (for detail, see the link to my script below). When it comes to frequency analysis , that's a whole different story. Using the power versus FFT frequency plot (i.e., the spectrum ) to study the data is an extremely popular analytical technique in science and technology. But with financial data, it is tougher than it sounds. When dealing with noisy, non-stationary and overall uncertain price data, the FFT never works as well as it does in math textbooks. Here, to illustrate the capabilities, limitations, and some myths of frequency analysis, I generated artificial price data, applied an FFT to each price column, and plotted a power spectrum as a function of time (i.e. a spectrogram ). The spectrogram shows frequency information along the vertical axis. The lowest frequency content is displayed at the bottom, the highest frequency content is displayed at the top. Frequencies are given as the number of cycles per sample size (256 bars in the above chart). Power levels are defined by the color map shown to the right. As for the generated data, it is basically a random walk with a few non-random constituents added at given time intervals (sinusoidal functions and a gap). Now let's discuss a few aspects seen in the chart: 1. True periodicity Starting on a high note, if there is real oscillatory behavior in the data (see the green and red areas in the above chart), the FFT can reveal this quite well. The problem is that the frequency resolution is heavily influenced by the sample size. For example, with a sample size of 64 price bars, it is impossible to resolve cycles longer than, you guessed it, 64 bars. It should also be noted that the ideal deterministic sinusoidal functions shown in the above chart can never be found in real market data. 2. Discontinuities If there is a gap, it's bad. Gaps, that is, discontinuities in the data, are prominent features that have broad and smooth frequency spectra that can overshadow other features. If you google "Fourier transform of a step function", you can see what I mean. Thus, if a gap occurs somewhere within the sample window, the Fourier spectrum is unlikely to be reliable. 3. Random walk This is not surprising, but even purely random data can produce rich frequency content. It is even difficult to tell from the spectrogram where the purely-random area changes into the one containg a sinusoid. (Well, if we accept the random walk theory of markets, the last comment does not make much sense. But here we are talking about syncretic data). The situation, however, becomes much more fun if we analyze the change in data per bar (i.e., data - data ), rather than the actual data. In the case of a random walk, these changes are purely ... well, random. And it is known from textbooks that the Fourier spectrum of random noise contains only noise. However, in areas containing sine, there is an order in the data. In other words, the data is autocorrelated. As a result, the FFT spectra of the data reveal the corresponding frequency components way above the noise level. In this sense, Fourier analysis may seem as a potential tool to to test market efficiency. (There is even a Fourier-based version of the Dickey-Fuller test for stationarity of time series, but that is a different story.) However, I am not aware if it can somehow outperform the more commonly used tests. Conclusion In the context of financial time series, the Fourier transform is often associated with the estimation of marked cycles. I think that's why it has become one of the most polarizing technical tools out there. While it is certainly a powerful math tool, it is helpful to know its limitations. Can one capitalize on the revealed qualitative information about the "cycle" periods? Regardless of how to think about the concept of market cycles, I don't think so. But could the Fourier transform be potentially useful in general for analyzing price data? Definitely yes! See below for how to use FFT to filter data:
AMEX:SPYEducation
by tbiktag
27
[Advanced] How to aggressively grow a small (10k) account?Most of the time growing an account is a very slow grind. Make some, lose some, hope to make a little bit more than you lose. For example, with an average risk to reward of 1 to 5, and a win ratio of 21% (not counting once a year outliers), which is pretty good, breakeven being at 16.67%, after 100 trades the result will be - with a risk of 1% (flat) each time: - Profits = 21*5 = 105% - Loses = 78*1 = - 79% Net result = 26% Finding 100 good trades might take more than 1 year. With a theoritical compounding of 1% each trade the max profit would be: - Net = (1.05)^21 * (0.99)^79 = 25.94% Compounding is not always the magic trick. You might be looking at something like 20% a year. But once in a while, often in September-October, and sometimes at specific times such as March-April 2020, we get these monsters that go way further than usual. Often from a boring tight period, an explosion that grows exponentially, this pushes the reward dramatically. So we can end with a few winners at 10, 15R, rather than the usual ~5. So you can "easily" get the regular barely above breakeven 20% (for the example) with on top of that an occasional 10, 20, or even more, percent. On our small accounts these extras feel good, and they give a nice boost, but nothing dramatic. Growing a 10k account into 100k even with 50% a year will take 6 years. With 30% a year that would take 9 years. With 20% a year, 13 years. An experienced but poor investor, that spent years working on entries, exits, and so on, will need do something rather "dramatic" to grow his account. Doesn't have to be a complete gamble. An idea is after one of these "boost" periods, the investor could put all of that profit at risk. Say he made 32%, losing it all would be a major drawdown of 25%, but if the investor sees it as extra it is not the same as a crippling drawdown. Having a great period is nice (within years of moderate consistency), but it is not life changing. It might be a good idea to use that as some sort of springboard (or launchpad): - Losing that profit is a return to last step it is disapointing and the grind continues but even with an extra 30% the grind would still continue it wasn't going to be life changing. Maybe 6 months - 1 year worth of profit lost (but it was "extra" anyway). - Not losing it all (winning or even a period of breakeven) is great because it will allow the account to leap up suddenly, you quickly end up years ahead. So how does this work? Going to use an example. The investor gets 100 trades a year because why not (that's 2 a week or a little over 8 a month), has a reward 5 times the risk and a winrate of 21% (PF = 1.33). Account size = $10,000. Risk per trade = $100. The investor was able to grow 4000 into 10,000 over 4 years "slowly" (not that slow) but surely. The biggest drawdown ever was 20%. The yearly return is 26%. Over September to November he made $4000. He would "normally" make $1000 over 3 active months like this, but as is often the case, that period was violent with fear moves, winners just kept going and our investor that was able to add early ended up with 2 winners at 9+7 R each. So 32R. It can go very fast. 32%, on top of 8% on other grindy trades (over 3 months). Trying to catch whole trends and hold forever in my opinion is not realistic, but adding once or twice to winners is (talking about FX here), and winners (especially in March 2020 or September-October) going vertical does happen. So now how does the 10K investor scale up? Well $100 was 1%. 1% of 14,000 would be $140. but how about he more than doubles the risk?! So investor's profit in Sept-Nov was $4000 ("regular" $800 + "extra" $3200) and he/she decides to put it all at risk. He pushes the risk up to $280 which is now 2% of the new account size. After 12 loss in a row (down 3360) all the "extra" will be gone with only $640 profit left, the risk will then be reduced progressively, first down to 200 and if losses continue, 150 and finally back to 100. To attempt this our investor must have several years of results. From these years, taking out the handful of outliers, we know average RR & WR. The important question is what are the odds of 12 losses in a row? (With 21% WR) ==> First the probability of 12 losses in a row (if it was a random coinflip) are 6%. The odds are rather low. ==> Second the odds of exactly 11 losses out of 12 are 19%. In that case investor lost 1680/3360 -> Half. Still 6 lives left. ==> Once investor has 6 lives left the odds of losing all 6 times are 24%. Risking 280 rather than 140 means in 1 year rather than grow by 3640 (26%) the account will grow by 7280 (52%). Basically fast forward 1 year. In a way this is risking 1 year of profits to make 2. With something like 80% odds of making it. Aiming for much less than 12 lives is really gambling. An investor could also go for 20 or more lives but the higher the number the slower the grind. With 6 lives there is 1 chance in 4 to lose it all. But it would be a $560 risk, a huge increase from $100. Is there really a need to increase size by that much at once? It would not even accelerate growth that much. Our little investor can always make another jump after that first one. Because yes, that snowball can keep getting bigger. It is a terrible idea to keep going double or nothing, eventually it will be nothing, but we could find a compromise between being very careful and careless. We might not accept a 30% drawdown, or losing 3 years of very difficult very slow profit but if we can separate that say slow grindy 15% a year and go "I won't risk this" but the once a year or two monsters that provide 20%-40% at once (arbitrary numbers) we can see it as "extra", we got our account with 10k in in and the 4000 we just made well losing the 4000 technically would be a 30% drawdown on 14k but we can perhaps separate this, it was unexpected, and we put all of this capital at risk, without hurting our "main" capital. Might be a great way to boost growth without risking to blow up or being set back years. And if it works out. As I said the example investor (which is already at least in the top 5% by the way) made 7280 rather than 3640. An extra $3640. Actually since his account was $10,000 and he was supposed to make about 3600 in 1.25 year, but instead made 7280 + 4000 = 11,280, well that's an extra of about $7500. Last time investor risked 3400/4000 in 12 trades (6% odds of losing all 12 and perhaps ~15% odds of losing all that money over a longer time), maybe this time investor wants to risk 6000/7500 in 12 trades ($500 each!). 26R = $13,000. If it works out in 2 years investor's account went from $10,000 to $34,000 rather than $16,000. $24,000 profit rather than $6000 (or $10000 with the big winners). With what? 1 in 4 odds of only making 6000? It is still going to take years anyway, but it is possible to take ponctual big risks to try and jump up a few steps, without playing russian roulette either. Another quick example... I think this example is within the good compromise area. It would be possible to go "I will risk $1200 over the next 3 ($400 each)" but just 3 trades that gets rather random so it becomes gambling. Over several years risking "1200" (12% base account) over the next 3, well the randomness would even out but seems bad, better to have some sort of certainty. 4% and 6% odds to immediately fail means 94/96% odds of success, unless really bad luck that should rarely happen, this should work. Just not with rent money. And even if it fails the "base account" is still here, simply some unexpected profit evaporated. If it fails, can always re-try next time, after another while of grinding, making sure we are still actually profitable and it was just bad luck. On top of this whole concept of putting profit at risk for a boost, there are the very rare "generational" trades (George Soros versus BoE 1992), where risk is known to be limited (so no swiss tsunami), the odds are really high (way more than 21%), and the reward will be even better than 5R. Also more generally when having a great winning period, great conditions, but I would not trust anyone to be objective about that. Our eager investor that made 4000 could out 3000 at risk over 12 trades with $250 each, and leave the remaining 1000 for the "great ones" where maybe $300 can be risked at once (and if it works out a one time 1500-3000 boost), 300 being "only" 2% of 14000 so it's still fine, not completely crazy (we are talking about a serious investor that has been doing well for a few years not a retail day trader with a gambling addiction). Just like with trade selection strategies, there is no secret magic trick. This scaling strategy is honestly the best I can do. Maybe 1 last example... And finally, this can be tweaked. Rather than rambo the risk from $100 to $280 in the example I choose, still putting all or most of the 4000 at risk, an investor could first increase the risk to $190 (takes 20 losses to lose most of the 4000 rather than 12), and if that goes well, which if it's a profitable investor is more likely than not, then once at +5R (+$950) or so investor could then increase it $280 which overall is safer, and much more likely to work out. With $280 from the start 5R would be 1400 so investor left 450 on the table, not that big of a deal. From that point the next 12 will have a 280 risk, if unlucky then there is still profits left and we can drop to 190 before returning to only 100 which hopefully won't be the case, at least most of the time. Then stay at 280 a while (if it works out) and next time big profits appear, risk that + a part of the 4000, without touching the rest of the profit made in the meantime. Risking profits is really not the same as risking the "bulk" or "base" capital, that's a slippery slope... Rule number 1 = protect your capital Rule number 2 = do not lose money
Education
by MrRenev
99
And The TradingClue Winner Is...Our second TradingClue competition has come to a close, with over 38,000 views of the first clue alone. Was it harder than last time? Well, by the end only 472 people were able to successfully find their way through the clues cunningly hidden by our Cluemakers: decrypting, unpicking, and puzzling their way to the final answer. Well done to all who entered. 🏆 🏆 🏆 We know our TradingClue hunts aren’t easy, but neither is trading, so we hope our challenge reinforced the need to do your research, to look hard, and to persevere. From the pool of correct entries we’ve drawn the winners completely at random, we’ve double and triple checked to ensure their entry followed our terms & conditions, and the winner of A DECADE of Premium access is... 🎉 Connor_Blewett 🎉 Huge congratulations! He was one of the many who correctly solved the clues and found that the final answer was PERSEVERANCE ! Well done and superb detective work – a big round of applause! 👏👏👏👏 Next up are five lucky winners of a year’s Premium access – congratulations to: astronomicalpalentology dirtyoldrag hoplabubba kurtsmock MF_Forex And finally, 10 winners of our coveted TradingViewmug – well done to: aacceessoorreemmootto austinwhite96 hadestar81 cryptoking16 dRWarHead impossibleSeah28567 liptonfung Nickwarm danieltruesdale Steelfine Special mention to Jakenfred , who submitted the first correct answer! They also win a year’s free Premium access! We’ll be in touch with the winners! Now - Show me the answers! Here’s the big reveal: We said the star of our latest promotional video had the first clue on his profile page. The star of our video is of course the legendary Leo Houlding - and there was an idea posted on his account with the second clue. Did you find it? It’s a straightforward deciphering challenge – the letters in the answer have to be worked out to spell a phrase: THE NEXT CLUE YOU SEEK CAN BE FOUND IN A SPARK FROM THE RISE OF THE MACHINES So you decoded the message, but what does that mean? The answer was in our new Sparks section. Sparks are individually curated lists of symbols around all kinds of topics, designed to give you that spark of inspiration for your next trade – they cover everything from vegan food manufacturers to female-led companies. So a Spark from the rise of the machines meant the next clue was hidden on the AI stocks: Rise of the Machines Sparks list... There’s a symbol on this page you need to take a look at. To find out which one, break this code: 46 61 63 65 62 6f 6f 6b Hexademicalisation! A simple enough code when you know it, it can be broken with a hexadecimal to text converter - the answer is one of the symbols in the Spark list: FACEBOOK. Over to the Facebook symbol page and it’s an old trick from our first TradingClue competition - the next clue is hidden on Facebook’s extensive timeline at September 28, 2016 – five years to the day of the competition launch. If you found it, well done! This one was in Morse Code. Solve this, then use the answer to search for the next clue: --- -. / .- / ... .... .. .--. / - .... . .-. . / .- .-. . / - .... .-. . . / - .. -- . ... / .- ... / -- .- -. -.-- / -... .-.. ..- . / ..-. .-.. .- --. ... / .- ... / .-- .... .. - . / ..-. .-.. .- --. ... .-.-.- / - .... . .-. . / .- .-. . / . .-.. . ...- . -. / -- --- .-. . / .--. .. -. -.- / ..-. .-.. .- --. ... / - .... .- -. / .-- .... .. - . / .- -. -.. / ..-. --- ..- .-. / .-.. . ... ... / .--. ..- .-. .--. .-.. . / - .... .- -. / .--. .. -. -.- .-.-.- / - .... . .-. . / .- .-. . / -. .. -. . / .--. ..- .-. .--. .-.. . / ..-. .-.. .- --. ... / --- -. / - .... . / ... .... .. .--. .-.-.- / .... --- .-- / -- .- -. -.-- / -... .-.. ..- . / ..-. .-.. .- --. ... / .- .-. . / - .... . .-. . ..--.. Again, any online Morse Code converter could help you decipher the text. But there’s a twist here - now you have to use your brain to answer the question: On a ship there are three times as many blue flags as white flags. There are eleven more pink flags than white and four less purple than pink. There are nine purple flags on the ship. How many blue flags are there? Get it? The answer is: there are 6 blue flags. Where next? Over to the Six Flags symbol page of course, and here is the final clue, hidden on the Timeline tab. Well done, you’re nearly there! For the final answer, solve this and submit it here. ZNKGTYCKXOYVKXYKBKXGTIK This one was tricky, but many of you worked it out. Like last time, the final answer needed decoding then submitting on the form. But how? It needed another common cipher – the Caesar Shift. There are plenty of websites around that should have helped you out – you needed to use the number 6 to decode the message, which read: THEANSWERISPERSEVERANCE Perseverance - the backbone of success. Congratulations to everyone who got that far! And don’t worry, we counted everyone who entered a variation of the answer in the prize draw - whether it was the whole text or just the word ‘perseverance’. Did you enjoy TradingClue 2? We hope you did! Let us know your feedback in the comments below.
SEducation
by TradingView
89
How to adjust your charts for dividend paymentsBond funds like the SPDR Portfolio Mortgage Backed Bond ETF (SPMB) often look like money-losers when you view their returns on a non-adjusted basis. In this case, the price is down about -0.74% over the life of the fund. The picture looks very different when you adjust for dividends. For SPMB, the return changes to +46.09% over the life of the fund: That's obviously a very different chart than the non-adjusted chart. Dividend adjustment can also make a large difference for high-yield dividend stocks. For instance, IBM is down over the last ten years on a non-adjusted basis, but on an adjusted basis it has gone sideways. IBM, non-adjusted: IBM, adjusted: The commonly accepted adjustment methodology is that the most recent closing price will be the same on an adjusted and non-adjusted chart, but historical closing prices will be different. On an adjusted chart, the stock price on a historical date will be shown as the current closing price minus all dividends paid since then. Dividend subtractions typically are made on a percentage rather than dollar basis to prevent historical prices from showing as negative values. To actually perform the calculation is a little technical, but that's the overall idea. To apply dividend adjustment to a TradingView chart is super easy. In the lower right-hand corner of your chart, you will see the letters "adj". Click to toggle between adjusted and non-adjusted price data. When the text is blue, you are viewing the adjusted chart. When the text is black, adjustment is turned off. Right next to the letters "adj" is a "%" symbol. Toggling this on and off will switch the axis of the chart between dollars and percent change over the period visible on the chart. This is useful for comparing adjusted and non-adjusted returns. One implication of using adjusted charts is that the support levels and moving averages will be in different places. For instance, on a non-adjusted basis, VALE is currently below its 200-week moving average. On an adjusted basis, it is well above the average. VALE, non-adjusted: Vale, adjusted: In short, on an adjusted basis a stock may not be as cheap as it looks on a non-adjusted basis. Many quant traders and hedge funds will be using adjusted moving averages rather than non-adjusted ones.
AMEX:SPMBEducation
by ChristopherCarrollSmith
28
Top Crypto Influencers To Follow In 2021(part 1)Hi guys Today, I want to introduce you to the influencers that you should follow on Twitter and the news that they publish on their Twitter, can be effective in the crypto market. If you also know an important influencer who is not under this post, please comment. ♦️ 1.Elon Musk(@elonmusk) The ever unabashed defender of bitcoin and dogecoin, the King of Crypto on Twitter has amassed so much influence that a single, one-word tweet can make or break a currency, leading investors into some wild roller coasters as of late. Cleary, he’s the kind of crypto influencers to follow if you don’t want to miss out on all the action. ♦️ 2.Andreas Antonopoulos(@aantonop) This tech entrepreneur and open blockchain expert has long been regarded in the crypto community as a trusted and unbiased educator, with an extensive list of best-selling publications (The Internet of Money, Mastering Bitcoin) under his belt. He’s also the co-host of the hugely popular Speaking of Bitcoin, where he delves deeper into the technical aspect of digital currencies, the future of decentralized finance, the rise of neobanking, NFTs and, of course, the good ol' BTC. Antonopolous earned his stripes as an early adopter of digital assets and the blockchain, making him one of the very few bona fide crypto experts in an industry increasingly saturated by wannabe gurus. Follow his Twitter for all his latest tips and thoughts. ♦️ 3.Adam Back(@adam3us) As a pioneer of early digital asset research and adoption, Adam Back is best known for being the inventor of the proof-of-work system Hashcash, now used for cryptocurrency and blockchain verification purposes, all way the back in 1997. He also contributed to some of the world’s most revolutionary crypto-financial infrastructures through Bloc stream, a leading blockchain technology company of which he is the CEO and co-founder. The company places a heavy focus on developing distributed ledger technology (DLT) as well as other cryptocurrency ventures. Back has also gained his cloud as a top crypto expert by working as cryptography advisor specializing in security architecture, p2p systems, distributed file systems, protocol design and and cryptography protocols. ♦️ 4. Nick Szabo(@NickSzabo4) Before Bitcoin there was BitGold, one of the first-ever digital currencies, created by Nick Szabo in the early 2000s. In fact, such are the parallels between how both currencies came to life that many in the cryptocurrency industry believe Szabo to be none other than the illusive father of Bitcoin, Satoshi Nakamoto. Szabo has denied that claim to fame, but he can count developing the concept of smart contracts among many of the feats that have made him a legend in the crypto space. Szabo is well known for his political views on cryptocurrencies, often speaking on the issue of cryptocurrencies replacing fiat as a means for countries to bypass international sanctions. ♦️ 5.CryptoCred(@CryptoCred) CryptoCred is an independent Twitter educator and technical trader who has succeeded at amassing a massive online following for himself online with daily market analysis and trading tips. All his content is available for free and accessible across a number of platforms, including Twitter. ♦️ 6.Notsofast(@notsofast) Bringing with him a vast abundance of educational content and cryptocurrency market tidbits is Notsofast. He’s been around since the early beginnings of crypto and has become a prolific commenter on Bitcoin and Ethereum as well as Syscoin and niche crypto economies like Parkbyte. Notsofast is also an Altcoin miner . You can find his commentary across several YouTube channels and Twitter. ♦️ 7.PlanB(@100trillionUSD) If you are looking for a blockchain and cryptocurrency influencer who really knows his stuff then PlanB is definitely plan A. Commenting under an assumed identity, PlanB draws much of his experience from his two-decade-long experience as an institutional investment before migrating to the world of cryptocurrencies and becoming one of its most notorious investors and advocates. He’s also known for helping popularize Bitcoin’s Stock-to-Flow price predictive model, which has proven to be accurate time and time again. Based on that, PlanB has made some bold market predictions, most notably that BTC will hit $250,000 or higher in the near future. ♦️ 8.Josh Olszewicz(@CarpeNoctom) If you’re all about technical analysis trading, then Josh Olswzewics (aka CarpeNoctom) is another gem you might consider following on social media. This self-taught trader first got into cryptocurrencies after stumbling upon it by chance on Reddit, bought his first digital currency in 2013 and then famously predicted that Bitcoin would hit 33K by July of 2018. So yes, he’s widely known as the 33k Guy and his followers love it. Josh posts relevant information pertaining to current happenings, news, trading tips, and memes on his Twitter account. ♦️ 9.WhalePanda(@WhalePanda) Another fellow Bitcoin Class of 2013, WhalePanda has a long track record of commenting and making accurate predictions about cryptocurrencies and the blockchain. He’s also an angel investor and many industry followers turn to his hugely popular Twitter account for some sound advice. ♦️ 10.DonAlt(www.youtube.com) . . . If you’re looking for someone to help you with dipping your toes into digital asset investments and cryptocurrency trading, then DonAlt is another great educator. They are well known for having a strict no-promotion policy as well as dishing out no-nonsense advice across on social media. Together with CryptoCred, they’re also the host of TechnicalRoundup on Youtube.
BITSTAMP:BTCUSDEducation
by seyed_mehdi
65
TradingClue 2 - Do Your Research and Win 10 Years of PremiumWelcome to TradingClue 2, the second edition of our popular cryptic treasure hunt! We know how important research, data, and planning are to markets. That's why TradingClue was created - to inspire people to do more of it. Don't ever trade or invest blindly. Do your research, dive in, and learn as much as you can. Look first, then leap. With that being said, here are your instructions to winning 10 years of Premium: 1. There are several clues hidden on TradingView - we won’t say how many - and you have to go through them in order. Once you solve one, the answer will give you the clue for the next, and so on. 2. When you’ve solved all the clues you will find a link to a form to submit your answer. Incorrect answers and multiple entries won’t be counted, so make sure you’re confident you’ve got the right answer! Only submit it once! 3. There are no ‘red herrings’ or false trails (no, the answers aren’t hidden in the T&Cs somewhere!) 4. The team at TradingView will give a few hints along the way, but - just like trading - it’s up to you to engage those little grey cells and put the work in to solve the clues. 5. You can collaborate with others and ask questions in the comments, but do not share the answer. Remember, if you figure it out and share the answer, you will actually lower your chances of winning a final prize. The prizes are: 🏆 One winner of 10 years’ free Premium access 🎉 5 x winners of 1 years’ free Premium access each ☕️ 10 x winners of our exclusive TradingView mugs The competition will close at 5 PM ET on September 30 2021 - the form will be closed at this time sharp, and no further entries will be counted. However, remember that the first prize will be drawn anonymously at random from all correct entries, so you still have the same chance of winning whenever you enter! Let’s all help each other out, but please don’t reveal the answers and ruin it for others (yes, this did happen last time). You can use the comments below to discuss. With that being said, if you read this entire post you have already made your way to the FIRST clue. The first clue is... The star of our latest promotional video has it on his profile.
NASDAQ:NVDAEducation
by TradingView
453
How to Backtest a Trading StrategyBacktesting is a manual or systematic method of determining whether a trading strategy or trading setup has been profitable in the past. A trader should backtest a strategy to help determine if a trading strategy is likely a waste of time and money, or if it shows promise and profitability in a variety of markets. While you can get software that does systematic backtesting… we prefer manual backtesting as it can be carried out by any type of trader, It is a key component in developing an effective trading strategy. There are infinite possibilities for strategies, and any slight alteration will change the results. This is why backtesting is important, as it shows whether certain parameters will work better than others. What Do I Backtest?
The first thing to note is that you don’t need a full trading strategy in order to start backtesting. 

For example I personally am always looking at new trading setups and candlestick formation and then backtesting them to see how effective they are. 

You can test small parts of a trading strategy before putting them all together. 

And of course you can and SHOULD backtest your whole trading strategy in a number of different trading situations. 

How to Backtest

 1) You need data to use in testing… if you are testing short term strategies on small timeframes then use at least a few weeks of trading data.

If you are using higher timeframes then you should be using years of trading data.

 2. Define the strategy parameters. Entry conditions, exit conditions etc. Include as many “If X happens then I will do Y” scenarios as possible so that your strategy is repeatable. 

Its essential to include risk management in these parameters too. So decide on if you are risking a percentage of your account equally on each trade, what is that percentage. If you are managing your risk in another method, clearly define it as something you are able to measure. 

ALL OF THESE PARAMETERS ARE WHAT YOU ARE MEASURING AND TESTING. THESE ARE THE ELEMENTS THAT YOU CAN CHANGE TO SEE WHICH ARE MORE OR LESS PROFITABLE. 3. Use the TradingView rewind tool to go back in time and remove the predictive nature of knowing where the chart will be headed. 

You could go back in time and look for trades from a year, a month or a week in the past, depending on how far back you wish to look. 4. Analyse price charts for entry and exit signals. This can be done until all trades on the chart up to the current time have been located and marked or written down

(be aware that it can take some time and be prepared that you are unlikely to be able to do all of this backtesting in one session… it could take you a few sessions of backtesting and recording the trade outcomes to fully test a strategy.) 5. Once you have competed this process, then you can start to total all of the trade results up to see how profitable or unprofitable your trading strategy / setup has been over time. What Goes Wrong in Backtesting

Typically the pitfalls and the ways that people fail at backtesting are based around not being through enough. 

That could mean that people haven’t included enough data in the backtest. 

It could mean that they left too many unknowns in the strategy so when using it in a live trading situation the strategy isn’t usable or realistic.

Also it could be that people don’t back test for long enough to see if the strategy is profitable or not. If you only have a small sample size of trade then even a short losing or winning streak of trades would dramatically affect the results. You need enough trades to show winning streaks, losing streaks and all between so that you can be confident that your strategy will be able to withstand those situations in live trading. 

Imagine for example in your backtesting your strategy didn’t lose more than 2 trades in a row but when you start using it in live trading you get 5 losses in a row. This is a situation that hasn’t been tested so could show a different result. 

The goal is to backtest for long enough and through enough so that nothing in live trading hasn’t been tested previously. While it may not be possible to fully achieve this… it should be the goal and you should feel confident enough that you have done everything possible to ensure this is the case.
Education
by JoelWarby
56
5 Reasons Why Investors Fail & 10 Theories of We Can Do About itHi, welcome to this video. Most of the people lost hope in stock market as their money tied up there for a long time, or they think that after paying for investment courses they should be able to earn money from the stock market, unfortunately after 3 months, half-year even more than a year they can’t even earn back their learning fees. So, if you feel that earn money in stock market is hard, your money was tied up there, why you lose so much money in stock market, or you still can’t earn back your learning fees then this video definitely can help to avoid you from investing money to no avail and you know what to do next! Let’s start with 1st reason. Naïve • As a newbie, you are attracted by marketing wording like Financial Freedom, Secret Trading Strategy, Best Investment Class, Warren Buffett Way. • Then you thought that the tutor is 100% using the stock investment to become financial freedom. You want to be like him. • And you never really doubt about the Warren Buffett way could lead to being another Warren Buffett or not. • You were blinded by the successful testimonial but forget about the words that stay deep inside the loser’s heart. • Your logical thinking was flying away when you saw a webinar show a system or a video that can help you spot the best entry and exit point in a stock. Then after the learning, you straight away put your money in the stock market. This lead to 2nd reason call, Kupamanduka which means Frog in The Well. What you know might just tip of the iceberg. • You thought that Fundamental Analysis or Technical Analysis can use it independently. • Best company performance become your beliefs to buy the stock. Whereby there are more than 10 main factors that affect stock prices, company just one of them. • You are too focus on the Technical Indicators but leave The Way to Trade aside which is the main Key to Win the trade. • You just follow the top analyst opinion but cannot differentiate what types of analysts there are. Are they Macro analyst, Strategy analyst, Industry analyst, Individual stocks analyst or any other types that you don’t know? • You have lack of knowledge on macroeconomic factors which play a very important role that move a stock price up and down. Next will be your mentality of buying a stock, we called it Greedy • You love Bottom Fishing. • You want to sell at the Top point. • You wish to accomplish the Dream to get rich overnight in stock market. • Eventually Stock Market is your casino. The other one I called it Expectation Fog • You think that the stock price shouldn’t go down for such a long time. • You just expect that the stock price will go up again as quick as it went down, so you adding to positions once you saw white candlestick. • You keep on thinking that your favorite stock will never be disappointed you, so you ignore all the negative signs. • You simply get a few information to support your prediction of the stock and confidence that the result will become what you expect. Lastly, the reason that causes most of the people being abandoned by the stock market is Hidden Risk. You yourself are the biggest risk when you • Lack of trading discipline, • break the rules you set, • calling out your bad behavior while you losing money, • end up letting the personal feelings and emotions impact your decision-making Here are the 10 theories. First, Observe • Observe yourself when you saw the bait, find out what you need, measure the price you really need to pay. Authentication • Always raise questions that make you clear about the coin of two sides and how true of those particular statements. You don’t need other people’s success. Leap • Check out your level of knowledge in that field whenever you finished a study. The world is big, you are just not enough. Engrave • Keep the frog in mind. Your world is the well. Follow the game not yours • You need to follow the game rules not your way. Gaming • Practice to master the market. Gambling is random, stock market is value, supply, and demand. Shift • Shift your hope or expectation to reality. The result is enough for you to learn. One-sided love • Stock doesn’t know you love him/her. Only you • Only you can beat yourself. There’s must be another way to do that. Time Travel • Using your imagination to travel to your future to see what you gonna do if you win and lose for this buying decision. Conclusion, • Naïve makes you rely on the sources of learning; • Rely put you in the well; • Unrealistic grow your greed; • Fog come from your imaginary winning and your winning; • Prepare yourself from yourself; Powerful learning is your experience, let paper account practice be your partner. Everyone has their own success.
CAPITALCOM:GOOGEducation
by rayechan119
39
The importance of sticking to the plan 👊👌As traders we are our own worst enemies! A common theory with trading is as follows. 10% is having a good strategy, 30% is having good risk management and the final 60% is psychology. If we as traders fail to address the final psychology part of the sentence above then we as traders will fail in the markets. The chart shown in this idea is EURGBP working the 30 minute time frame. The strategy is a rules based mechanical approach working a 1:1 RR to fixed stop loss and take profit targets. I know I have a proven edge with this strategy as with all my ideas the built strategy tester report is at the foot of this idea shows the strategies credentials. Position sizing is correct I trade this strategy on a stand alone account for this pair and I'm happy to risk 2% per trade of my capital from said account. So where does the psychology part come in to all this? The emojis on screen show the emotions I would of been feeling with this trade once upon a time! An emotional roller coaster! The chart shows three trades. A short which hit TP followed by a long which hit SL. Then the trade I'm using for this idea which lasted a full 13 days! But this is where sticking to the plan and the rules I set help remove that emotional roller coaster. Not sticking to that plan could of created many outcomes. I could of closed for less profit than intended as part of the plan or worse still could of cut my losses only for the trade to go on and hit TP target. The above would of then led to more emotions thus effecting my future trading decisions and choices. With each trade I enter I am comfortable with said outcome whatever that maybe. That comes from trading a proven strategy, having correct risk management and then by sticking to the rules of the trading plan for the strategy. Sticking to a plan removes any subjectivity and helps take care of the psychological side of trading. I even automate my strategies now and not checking trades every minute of the day has helped removed all those up and down feelings the emojis on the chart represent. I'll end with one final thought patience has to be part of your plan. The markets take from the impatient and give to the patient ones among us. ------------------------------------------ I try and share as many ideas as I can as and when I have time. My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' on Trading View trying to find that one trade that you can retire from is not a sustainable way to trade. You might get lucky, but it will always end one way. ------------------------------------------ Please hit the 👍 LIKE button if you like my ideas🙏 Also follow my profile, then you will receive a notification whenever I post a trading idea - so you don't miss them. 🙌 No one likes missing out, do they? Also, see my 'related ideas' below to see more just like this. The stats for this pair are shown below too. Thank you. Darren
Education
by pow_removetheguesswork
38
Classic Chart Patterns That You Need To KnowHello everyone, as we all know the market action discounts everything :) _________________________________Make sure to Like and Follow if you like the idea_________________________________ In today’s video, we are going to learn the Classic reversal and continuation chart patterns, How to identify them and when to enter a trade, and how to use stop loss and take profit with these patterns. These patterns can be found in candlestick, bar and line charts. Anyone who is interested in analyzing any market and trading in general should know these so if u don’t know them have no worries after you watch this video you will. NOTE: you should always wait for confirmation when trading with these patterns. Confirmation in all of them is breaking the pattern and the market closing above or below it. Chart Patterns are divided into 2 categories : Reversal Patterns : They indicate a high probability that the existing trend has come to an end and that there is good chance of the trend reversing direction. Continuation Patterns : They indicate a high probability that the existing trend is still active and that there is a good chance of the trend continuing in the same direction. There are 2 types of these patterns : Bearish : it means that the market is going down. Bullish : It means that the market is going up Let's Start with the Bearish Reversal Patterns : 1) Double Top (75.01%) : The double top is one of the most common reversal price patterns. The double top is defined by two nearly equal highs with some space between the touches, The pattern is complete when price breaks below the swing low point created after the first high. The pattern is considered a success when price covers the same distance following the breakout as the distance from the double high to the recent swing low point 2) Triple Top (79.33%) : The triple top is defined by three nearly equal highs with some space between the touches, The pattern is complete when price breaks below the swing low points created between the highs. The pattern is considered a success when price covers the same distance after the breakout as the distance from the triple high to the furthest swing low point 3) Head and Shoulder (83.04%) : The head and shoulders patterns are statistically the most accurate of the price action patterns. The regular head and shoulders pattern is defined by two swing highs (the shoulders) with a higher high (the head) between them. The two outer swing highs/lows don't have to be at the same price, but the closer they are to the same area the stronger the pattern generally becomes. The pattern is complete when price breaks through the "neckline" created by the two swing low points. 4) Rising Wedge (73.03%) : A wedge pattern represents a tightening price movement between the support and resistance lines. the price is hypothesized to break through the support. This means the wedge is a reversal pattern as the breakout is opposite to the general trend. Rising Wedge serves as a reversal if appeared during an uptrend . Now let's Talk about the Bullish Reversal Chart patterns : 1) Double Bottom (78.55%) : The double bottom is one of the most common reversal price patterns. The double bottom is created from two nearly equal lows, The pattern is complete when price breaks above the swing high point created by the first low. The pattern is considered a success when price covers the same distance following the breakout as the distance from the double low to the recent swing high. 2) Triple Bottom (79.33%) : he triple bottom is another variation of reversal price patterns. the triple bottom is created from three nearly equal lows, The pattern is complete when price breaks above the swing high points created between the lows. The pattern is considered a success when price covers the same distance after the breakout as the distance from the triple low to furthest swing high. 3) Inverted Head and Shoulder (83.44%) : The head and shoulders patterns are statistically the most accurate of the price action patterns, The inverted head and shoulders pattern has two swing lows with a lower low between them. The two outer swing lows don't have to be at the same price, but the closer they are to the same area the stronger the pattern generally becomes. The pattern is complete when price breaks through the "neckline" created by the two swing high points . 4) Falling Wedge (72.88%) : A wedge pattern represents a tightening price movement between the support and resistance lines. the price is hypothesized to break through the support. This means the wedge is a reversal pattern as the breakout is opposite to the general trend. Failing Wedge serves as a reversal if appeared during a downtrend Let's move on now and start talking about Bearish Continuation patterns : 1) Rising Wedge (73.03%) : The Rising Wedge in the downtrend indicates a continuation of the previous trend. It is formed when the prices are making Higher Highs and Higher Lows compared to the previous price movements. 2) Bearish Flag (67.72%) : The flag is a continuation pattern that can occur after a strong trending move. It consists of a strong bearish trending move followed by a rapid series of higher lows and higher highs, These patterns are small hesitations in strong trends. The flag pattern appears as a small rectangle that is usually tilted against the prevailing trend in price. The best flag patterns have two features: 1) a very strong run in price (near vertical) prior to the setting up of the flag and 2) a tight flag that occurs right on the upper (or lower) edge of that run. This pattern is considered successful when it breaks the lower trendline and then proceeds to cover the same distance as the prior trending move starting from the outer edge of the pattern. 3) Bearish Pennant (55.19%) : The pennant often occurs in high momentum markets after a strong trending move, but the tight price formation that occurs can lead to breakouts against the preceding trend almost as often as we get continuation. The slight difference in the price pattern formation between flags and pennants is an important distinction that can make a big difference in your trading results so it's well worth being aware of while watching the market develop during your trading day. 4) Descending Triangle (72.93%) : The triangle pattern usually occurs in trends and acts as a continuation pattern. It's defined by a bearish trending move followed by two or more equal lows with a series of lower highs. The pattern is complete when price breaks below the horizontal support area and the pattern is considered successful if price extends beyond the breakout point for at least the same distance as the pattern width And finally we have the Bullish Continuation patterns : 1) Falling Wedge (72.88%) : The Falling Wedge in the downtrend indicates a continuation of the previous trend. It is formed when the prices are making lower Highs and lower Lows compared to the previous price movements. 2) Bullish Flag (67.13%) : The flag is a continuation pattern that can occur after a strong trending move. It consists of a strong bullish trending move followed by a rapid series of lower highs and lower lows, These patterns are small hesitations in strong trends. The flag pattern appears as a small rectangle that is usually tilted against the prevailing trend in price. The best flag patterns have two features: 1) a very strong run in price (near vertical) prior to the setting up of the flag and 2) a tight flag that occurs right on the upper (or lower) edge of that run. This pattern is considered successful when it breaks the upper trendline and then proceeds to cover the same distance as the prior trending move starting from the outer edge of the pattern. 3) Bullish Pennant (54.87%) : The pennant often occurs in high momentum markets after a strong trending move, but the tight price formation that occurs can lead to breakouts against the preceding trend almost as often as we get continuation. The slight difference in the price pattern formation between flags and pennants is an important distinction that can make a big difference in your trading results so it's well worth being aware of while watching the market develop during your trading day. 4) Ascending Triangle (72.77%) : The triangle pattern usually occurs in trends and acts as a continuation pattern. It's defined by a bullish trending move followed by two or more equal highs and a series of higher lows The pattern is complete when price breaks above the horizontal support area and the pattern is considered successful if price extends beyond the breakout point for at least the same distance as the pattern width 5 Rules To Always Follow I hope that I was able to help you understand Classic Continuation and Reversal Patterns better and if you have any more questions don't hesitate to ask. This is not Financial Advice its a pure Educational video. Hit that like if you found this helpful and check out my other video about the Moving Average, Stochastic oscillator, The Dow Jones Theory, How To Trade Breakouts, The RSI , The MACD , The Bollinger Bands , The Different Types Of Trading Strategies, Candlestick Charts Part 1 & 2 and 3 links will be bellow
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5 Important Candle Patterns that You Need to Know 5 most important candlesticks to know! Simplicity is the key to a positive result, and many traders ignore the simplicity of using these 5 MAIN candle patterns and the importance of each of them, as well as what they are. Many traders complicate everything and make trading more complicated than necessary. Using only these 5 candle patterns together with other basics of technical analysis is all you need to successfully make money in the market! Learn to read the market like a book, read candles-it's like reading words on a page. Candlesticks are the language of the market, and to understand the market, we must be fluent in the language of the markets. Knowing exactly where to find and trade these 5 candle patterns can change your trading forever. Candlesticks combined with other methods of applying technical analysis can be incredibly powerful in understanding where financial markets can go. It is important to remember that candlestick patterns are a physical representation of human psychology and decisions made in the market. Think deeper. The candles that you see on your charts, actually give you clear signs of what the dominant side (buyers or sellers) wants to do next. ❤️ Please, support our work with like & comment! ❤️
OANDA:XAUUSDEducation
by SignalProvider
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Patterns of possible market correction or reversal 😎Trend reversal or correction chart patterns announce a reversal of the current trend on the observed chart. The output of the figure is made, theoretically, in the opposite direction to the movement that precedes the formation of the pattern. In an uptrend, a reversal pattern indicates a bearish move. On the contrary, in a downtrend, it announces an upward movement. It works in all temporalities but, the longer the temporality of the candles, the better the pattern will do and the more effective
BITFINEX:BTCUSDEducation
by Ed_Ale
59
💡🎓 The Philosophy of Technical Analysis 🎓💡 To continue awareness our art of Technical Analysis, this idea is an educational post and summary of The Philosophy of Technical Analysis, from Technical Analysis of the Financial Markets, by John J. Murphy, 1999, Page 2-5 The Philosophy of Technical Analysis 1. Market Discounts Everything The cornerstone of TA is that anything that can possibly affect the price, is reflected in the price. - All that is required is a study of price action - Price action reflects shifts in supply and demand - If demand exceeds supply, prices rise - If supply exceeds demand, prices fall The underlying forces of supply and demand are the economic fundamentals of a market. This action is the basis of all economic and fundamental forecasting. It follows then that if everything that affects market price is ultimately reflected in market price, then the study of that market price is all that is necessary. Charts themselves do not cause markets to move, they simply reflect the bullish or bearish psychology. By studying price charts and a host of supporting technical indicators, the chartist in effect lets the market tell him or her which way it is most likely to go. The chartist does not necessarily try to outsmart or outguess the market. All of the technical tools discussed later on are simply techniques used to aid the chartist in the process of studying market action. The chartist knows there are reasons why markets go up or down. He or she just doesn't believe that knowing what those reasons are is necessary in the forecasting process. 2. Price Moves in Trends The concept of trend is absolutely essential to the technical approach. The whole purpose of charting the price action of a market is to identify trends in early stages of their development for the purpose of trading in the direction of those trends. In fact, most of the techniques used in this approach are trend-following in nature, meaning that their intent is to identify and follow existing trends. - Prices move in trends, a trend in motion is more likely to continue than to reverse. - A trend in motion will continue in the same direction until it reverses. - Issac Newton's first law of motion is empirical evidence of this. This is another one of those technical claims that seems almost circular. The entire trend-following approach is predicated on riding an existing trend until it shows signs of reversing. 3. History Repeats Much of the body of technical analysis and the study of market action has to do with the study of human psychology. Chart patterns, for example, which have been identified and categorised over the past one hundred years, reflect certain pictures that appear on price charts. These pictures reveal the bullish or bearish psychology of the market. Since these patterns have worked well in the past, it is assumed that they will continue to work well in the future. They are based on the study of human psychology, which tends not to change. Another way of saying this last premise is; History repeats itself The key to understanding the future lies in a study of the past What are your thoughts? yemala
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