Get started

Community ideas

Timing when day trading can be everythingTiming when day trading can be everything In Stock markets typically more volatility (or price activity) occurs at market opening and closings When it comes to Forex (foreign exchange market), the world’s most traded market, unlike other financial markets, there is no centralized marketplace, currencies trade over the counter in whatever market is open at that time, where time becomes of more importance and key to get better trading opportunities. There are four major forex trading sessions, which are Sydney, Tokyo, London and New York sessions Forex market is traded 24 hours a day, 5 days a week across by banks, institutions and individual traders worldwide, but that doesn’t mean it’s always active the entire day. It may be very difficult time trying to make money when the market doesn’t move at all. The busiest times with highest trading volume occurs during the overlap of the London and New York trading sessions, because U.S. dollar (USD) and the Euro (EUR) are the two most popular currencies traded. Typically most of the trading activity for a specific currency pair will occur when the trading sessions of the individual currencies overlap. For example, Australian Dollar (AUD) and Japanese Yen (JPY) will experience a higher trading volume when both Sydney and Tokyo sessions are open There is one influence that impacts Forex matkets and should not be forgotten : the release of the significant news and reports . When a major announcement is made regarding economic data, currency can lose or gain value within a matter of seconds Cryptocurrency market s on the other hand remain open 24/7, even during public holidays Until 2021, the Asian impact was so significant in Cryptocurrency markets but recent reasearch reports shows that those patterns have changed and the correlation with the U.S. trading hours is becoming a clear evolving trend. Unlike any other market Crypto doesn’t rest on weekends, there’s a drop-off in participation and yet algorithmic trading bots and market makers (or liquidity providers) can create a high volume of activity. Never trust the weekend’ is a good thing to remind yourself One more factor that needs to be taken into accout is Blockchain transaction fees, which are responsive to network congestion and can change dramatically from one hour to the next In general, Cryptocurrency markets are highly volatile, which means that the price of a coin can change dramatically over a short time period in either direction The Bottom Line The more traders trading, the higher the trading volume, and the more active the market. The more active the market, the higher the liquidity (availability of counterparties at any given time to exit or enter a trade), hence the tighter the spreads (the difference between ask and bid price) and the less slippage (the difference between the expected fill price and the actual fill price) - in a nutshell, yield to many good trading opportunities and better order execution (a process of filling the requested buy or sell order) The best time to trade is when the market is the most active and therefore has the largest trading volume, trading all day long will not only deplete a trader's reserves quickly, but it can burn out even the most persistent trader. Knowing when the markets are more active will give traders peace of mind, that opportunities are not slipping away when they take their eyes off the markets or need to get a few hours of sleep You are kindly invited to check the script that helps to identify market peak hours : Day Trading Booster .
Education
by dgtrd
23
Incorporating Alternative Investments into Portfolio BuildsIncorporating alternative investments such as private equity, hedge funds, and real assets can be a rewarding strategy for diversification and enhancing returns. These alternative assets provide unique risk-return profiles that can complement traditional investments in forex, commodities, and indices. 1️⃣ Understanding the Role of Alternative Investments Alternative investments can play an important role in diversification due to their low correlation with traditional asset classes. By including assets like private equity, hedge funds, and real assets, you can reduce overall portfolio volatility. For example, during the 2008 financial crisis, many hedge funds and private equity investments outperformed traditional equities, providing a buffer against market downturns. Understanding the unique risk-return characteristics of each alternative investment is essential for effective integration. 2️⃣ Analyzing Historical Performance and Risk To effectively incorporate alternative investments, it's important to analyze their historical performance and risk profiles. For instance, private equity has historically offered higher returns than public equities, but with greater risk and illiquidity. Hedge funds, on the other hand, provide diverse strategies such as long-short equity, market neutral, and global macro, each with different risk-return dynamics. Real assets like real estate and infrastructure provide stable cash flows and inflation protection, but come with their own set of risks. 3️⃣ Diversification Strategies Diversification is the cornerstone of portfolio construction. When integrating alternatives, consider spreading investments across different types of alternative assets. For example, combining private equity with hedge funds and real assets can help mitigate the risk associated with any single asset class. A diversified portfolio might include a mix of growth-oriented private equity, income-generating real estate, and tactical hedge fund strategies. 4️⃣ Assessing Liquidity Needs One of the main challenges with alternative investments is liquidity. Private equity and real assets typically have long lock-up periods, whereas hedge funds may offer more liquidity but still not as much as traditional assets. Assess your liquidity needs and time horizon before allocating significant portions of your portfolio to these investments. For example, an investor with a long-term horizon might allocate more to private equity, while those needing shorter-term liquidity might prefer hedge funds. 5️⃣ Evaluating Manager Expertise and Due Diligence The success of alternative investments often hinges on the expertise of the fund managers. Conduct thorough due diligence by evaluating the manager’s track record, investment strategy, and risk management practices. For example, when selecting a private equity fund, consider the fund’s history of successful exits, management team’s experience, and alignment of interests. Similarly, for hedge funds, assess the manager's ability to generate alpha across different market conditions. 6️⃣ Tactical Asset Allocation Integrating alternative investments requires a dynamic approach to asset allocation. Tactical asset allocation involves adjusting the portfolio mix based on market conditions and opportunities. For instance, during periods of low interest rates and high equity valuations, increasing exposure to private equity and real assets might provide better returns. Conversely, in volatile markets, hedge funds employing market neutral or global macro strategies can offer downside protection. 7️⃣ Monitoring and Rebalancing Regular monitoring and rebalancing are essential to maintain the desired risk-return profile of the portfolio. Set predefined thresholds for rebalancing to ensure the portfolio stays aligned with your investment goals. For example, if the allocation to private equity exceeds the target due to strong performance, consider rebalancing by allocating more to underperforming or undervalued assets like certain commodities or forex positions. This disciplined approach helps in maintaining the optimal balance between traditional and alternative investments. Incorporating alternative investments into a portfolio that includes forex, commodities, and indices offers a pathway to enhanced diversification and potential returns. By understanding the unique characteristics of private equity, hedge funds, and real assets, investors can craft a balanced and resilient portfolio. Remember to conduct thorough due diligence, assess liquidity needs, and regularly monitor and rebalance the portfolio to adapt to changing market conditions.
TVC:GOLDEducation
by AlexSoro
8
Why Using Charts Can Help You with Your TradingImagine you've decided to buy a particular stock. Your position starts to make money, and you're thrilled. But what do you do now? Should you hold onto your position or cash it in? Has it made enough profit, or will it go further? It's painful to lose money, but it's also frustrating to take profits only to see your original investment quadruple in price after you've cashed out too early. Is there something that can help you make these decisions? Yes, there is! It's called technical analysis. But what if you're a complete novice to technical analysis? It may look complicated and difficult, but don't worry. The beauty of technical analysis is that it can help with your decision-making, and once you learn the rules, it's easy to apply. I have attached a short video explaining the steps I go through when I first look at a chart. Do you know how to determine a trend? Do you know how to apply trend lines? Do you know what a momentum indicator is? Do you know why and how to use moving averages? Do you understand continuation and reversal signals?
CBOE:SPXEducation
by The_STA
3
Optimizing Technical Analysis with Logarithmic Scales▮ Introduction In the realm of technical analysis, making sense of market behavior is crucial for traders and investors. One foundational aspect is selecting the right scale to view price charts. This educational piece delves into the significance of logarithmic scaling and how it can enhance your technical analysis. ▮ Understanding Scales - Linear Scale This is a common graphing approach where each unit change on the vertical axis represents the same absolute value. - Logarithmic Scale Unlike the linear scale, the logarithmic scale adjusts intervals to represent percentage changes. Here, each step up/down the axis signifies a constant percentage increase/decrease. ▮ Why Use the Logarithmic Scale? The logarithmic scale offers a more insightful way to analyze price movements, especially when the price range varies significantly. By focusing on percentage changes rather than absolute values, long-term trends and patterns become more apparent, making it easier to make informed trading decisions. ▮ Comparative Examples Consider the Bitcoin price movement: - On a linear scale, a 343% increase from $3,124 to $13,870 looks smaller compared to the same percentage increase from $13,870 to $61,769. This disparity occurs because the linear scale emphasizes absolute changes. - On the logarithmic scale, both 343% increases appear proportional, giving a clearer representation. Additionally, in a falling price scenario, a linear graph might show a smaller box for an 84% drop compared to a 77% drop, simply because of absolute values' significance. The logarithmic scale corrects this, showing the true extent of percentage declines. ▮ Advantages and Disadvantages Advantages: - Fairer comparison of price movements. - Consistent representation of percentage changes. - More reliable support and resistance lines. Disadvantages: - Potential misalignment of alerts (www.tradingview.com). - Drawing inclined lines might create distortions when switching scales: A possible solution is the use the "Object Tree" feature on TradingView to manage graphical elements distinctly for each scale. ▮ How to Apply Logarithmic Scale on TradingView Enabling the logarithmic scale on TradingView is straightforward: - Click on the letter "L" in the lower right corner of the graph (the column where prices are shown); - Another option is use of the keyboard shortcut, pressing ALT + L . ▮ Conclusion The logarithmic scale is an invaluable tool for technical analysis, providing a more accurate representation of percentage changes and simplifying long-term pattern recognition. While it has its limitations, thoughtful application alongside other analytical tools can greatly enhance your market insights.
INDEX:BTCUSDEducation
by andre_007
5
Volume Spread Analysis (VSA): Volume and Price DynamicsVolume Spread Analysis (VSA): Understanding Market Intentions through Volume and Price Dynamics. █ Simple Explanation: Volume Spread Analysis (VSA) is a trading technique that identifies key market patterns and trends by analyzing the relationship between volume and price spread, revealing traders' actions and market behavior. Essentials in Volume Spread Analysis (VSA): Laws. VSA Indicator. Signs of Strength. Signs of Weakness. Note that while the provided examples are excellent for illustrating the points, they are unlikely to play out perfectly in most scenarios. █ Laws Three basic laws forming the foundation of Volume Spread Analysis (VSA). The Law of Supply and Demand This law states that supply and demand balance each other over time. High demand and low supply lead to rising prices until demand falls to a level where supply can meet it. Conversely, low demand and high supply cause prices to fall until demand increases enough to absorb the excess supply. The Law of Cause and Effect This law assumes that a 'cause' will result in an 'effect' proportional to the 'cause'. A strong 'cause' will lead to a strong trend (effect), while a weak 'cause' will lead to a weak trend. The Law of Effort vs Result This law asserts that the result should reflect the effort exerted. In trading terms, a large volume should result in a significant price move (spread). If the spread is small, the volume should also be small. Any deviation from this pattern is considered an anomaly. █ VSA Indicator This indicator simplifies the identification of Volume and Spread Levels. It provides options to display volume and/or spread bars. An enhanced version of the indicator auto-scales both volume and spread for optimal chart presentation, reloading every time the chart is moved. Levels: Representing the levels of both volume and spread using the terminalogy of low, normal, high, and ultra. Indicator Version 1: Display volume and/or spread bars. When both are displayed, the spread bars are shown in a fixed quantity. Indicator Version 2: Display both volume and spread bars, with the spread bars scaled to the volume bars. █ Signs of Strength Indicates that the market is likely to experience bullish behavior. Down Thrust: Indicates strong buying interest at lower prices, suggesting a potential upward reversal. Selling Climax: Signifies a reversal point as panic selling exhausts and smart money starts accumulating. Bear Effort No Result: A large downward price move without strong selling effort (volume) indicates an anomaly where the result doesn't match the effort, suggesting the down move may be unsustained. No Effort Bear Result: Strong selling effort (volume) fails to push prices down indicating an anomaly where the result doesn't match the effort, suggesting a potential lack of downward momentum. Inverse Down Thrust: Shows buyers overpowering sellers, likely leading to a bullish market reversal. Failed Selling Climax: Failed selling effort suggests strong buying support and a possible upward trend reversal. Bull Outside Reversal: Indicates strong buying reversing a downtrend, confirmed by higher close. End of Falling Market: Signifies strong buying absorbs panic selling at new lows, likely leading to stabilized price or reversal. Pseudo Down Thrust: Suggests weakening of the downward momentum with a potential upward continuation if broken above high. No Supply: Indicates a lack of selling interest at lower prices, potentially setting up for a price rise. █ Signs of Weakness Indicates that the market is likely to experience bearish behavior. Up Thrust: Indicates sellers overpowering buyers during a price rise, suggesting a potential downward reversal. Buying Climax: Represents peak buying, typically at price highs, with potential for reversal as sellers take control. No Effort Bull Result: A large upward price move without strong buying pressure (volume) indicates an anomaly where the result doesn't match the effort, suggesting the up move may be unsustained. Bull Effort No Result: Strong buying (volume) fails to drive prices higher indicates an anomaly where the result doesn't match the effort, suggesting a potential lack of upward momentum. Inverse Up Thrust: Increased selling pressure during an uptrend suggests a possible shift to a downtrend. Failed Buying Climax: High buying volume fails to sustain higher prices, indicating a potential reversal to downtrend. Bear Outside Reversal: Strong selling pressure reversing an uptrend, signaling a potential downtrend. End of Rising Market: Indicates buying saturation at market peaks, suggesting a possible reversal as demand exhausts. Pseudo Down Thrust: Indicates weakening upward momentum with potential for downward continuation if broken below low. No Demand: Indicates reduced buying interest at higher prices, possibly leading to a price decline.
INDEX:BTCUSDEducation
by TanHef
9
Charting the Markets: Top 10 Technical Analysis Terms to KnowWelcome, market watchers, traders, and influencers to yet another teaching session with your favorite finance and markets platform! Today, we learn how to marketspeak — are you ready to up your trading game and talk like a Wall Street pro? We’ve got you covered. This guide will take you through the top technical analysis terms every trader should know. So, kick back, grab a drink, and let’s roll into the world of candlesticks, moving averages, and all things chart-tastic! 1. Candlestick Patterns First up, we have candlesticks , the bread and butter of any chart enthusiast. These little bars show the opening, closing, high, and low prices of a stock over a set period. Here are some key patterns to recognize next time you pop open a chart: Doji : Signals market indecision; looks like a plus sign. Hammer : Indicates potential reversal; resembles, well, a hammer. Engulfing : A larger candle engulfs the previous one, suggesting a momentum shift. Want these automated? There's a TradingView indicator for that. 2. Moving Averages (MA) Next, we glide into moving averages . These are practically lines that smooth out price data to help identify trends over time. Here are the big players: Simple Moving Average (SMA) : A straightforward average of prices over a specific period of days. Exponential Moving Average (EMA) : An average of prices but with more weight to recent prices, making it more responsive to new information. 3. Relative Strength Index (RSI) The RSI is your go-to for spotting overbought and oversold conditions. Ranging from 0 to 100, a reading above 70 means a stock might be overbought (time to sell?), while below 30 suggests it could be oversold (time to buy?). Super common mainstay indicator among traders from all levels. 4. Bollinger Bands Bollinger Bands consist of a moving average with two standard deviation lines above and below it. When the bands squeeze, it signals low volatility, and when they expand, high volatility is in play. Think of Bollinger Bands as the mood rings of the trading world! 5. MACD (Moving Average Convergence Divergence) The MACD is all about momentum. It’s made up of two lines: the MACD line (difference between two EMAs) and the signal line (an EMA of the MACD line). When these lines cross, it can be a signal to buy or sell. Think of it as the heartbeat of the market. 6. Fibonacci Retracement Named after a 13th-century mathematician, Fibonacci retracement levels are used to predict potential support and resistance levels. Traders use these golden ratios (23.6%, 38.2%, 50%, 61.8%, and 100%) to find points where an asset like a stock or a currency might reverse its direction. 7. Support and Resistance Support and resistance are the battle lines drawn on your chart. Support is where the price tends to stop falling — finds enough buyers to support it — and resistance is where it tends to stop rising — finds enough sellers to resist it. Think of these two levels as the floor and ceiling of your trading room. 8. Volume Volume is the fuel in your trading engine. It shows how much of a stock is being traded and can confirm trends. High volume means high interest, while low volume suggests the market is taking a nap from its responsibilities. 9. Trend Lines Trend lines are your visual guide to understanding the market’s direction. Technical traders, generally, are big on trend lines. You can draw them by connecting at least a couple of lows in an uptrend or at least a couple of highs in a downtrend. They help you see where the market has been and where it might be headed. 10. Head and Shoulders No, it’s not shampoo. The head and shoulders pattern is a classic reversal pattern. It consists of three peaks: a higher middle peak (head) between two lower peaks (shoulders). When you see this take shape in your chart, it might be time to rethink your position. What’s Your Favorite? So there you have it, a whirlwind tour of the top technical analysis terms that’ll help your trading yield better results and, as a bonus, make you sound like a trading guru. What’s your favorite among these 10 technical analysis tools? Share your thoughts in the comments below!
Education
by TradingView
18
Taking On Discipline In StagesOnce you have decided that you need discipline in your trading, knowing where to start can be difficult and overwhelming. There are many pieces to a trading plan, and it's easy to feel overwhelmed. You can break the task into manageable sections and master one discipline at a time, or focus on the the discipline you need. This approach makes the process more manageable and ensures that each aspect of your trading strategy is given the attention it deserves. Trading Plan Components: Each of these sections should have objective rules so there isn't any escape room. Method Rules Entry Rules Stop Rules trailing Stop Rules Exit Rules Journaling Trade Plan for TME, COIN Shane
NYSE:TMEEducation
by ShaneBlankenship
6
What Is a Dead Cat Bounce Pattern, and How Can One Trade It?What Is a Dead Cat Bounce Pattern, and How Can One Trade It? A dead cat bounce is a common pattern in financial markets, often confusing traders with its brief recovery followed by continued decline. Understanding this pattern is crucial for traders aiming to navigate market downturns. This article delves into what a dead cat bounce is, its causes, how to identify it, and strategies for trading it. Understanding the Dead Cat Bounce Pattern A dead cat bounce is a temporary recovery in the price of a declining asset, followed by a continuation of the downtrend. This phenomenon occurs in all types of financial markets, including stocks, forex, and crypto*, and can mislead traders into believing that a market or asset has started to recover, only to see prices fall again. The term "dead cat bounce" originates from the saying that "even a dead cat will bounce if it falls from a great height." In financial terms, this means that a sharp decline is often followed by a brief, albeit false, recovery. For example, during the 2008 financial crisis, many stocks experienced dead cat bounces as they briefly recovered before continuing their downward trajectory. Identifying a dead cat bounce requires careful analysis. For instance, in a dead cat bounce in a crypto* asset, a sudden 10% rise might appear promising. However, if this increase is followed by another decline surpassing the recent lows, it confirms a dead cat bounce. Traders often use volume analysis and resistance levels to spot these patterns, noting that a true recovery is usually accompanied by sustained volume and breaking through significant resistance levels. Characteristics of a Dead Cat Bounce A dead cat bounce is characterised by specific market behaviours that signal a temporary recovery amidst a prolonged downtrend. Recognising these features can help traders avoid being misled by false recoveries. - Sharp Decline Preceding the Bounce: A significant drop in asset prices that breaks through single or multiple support levels. - Brief and Sudden Rebound: The asset experiences a quick, short-lived rise in price. - Low Trading Volume: The bounce usually occurs with lower trading volume compared to the initial decline, indicating weak buyer interest. - Continuation of Downtrend: After the brief rebound, the asset's price continues to fall, often reaching new lows. - Lack of Strong Fundamentals: The recovery lacks strong fundamental support, often driven by short-covering or speculative buying rather than genuine positive news. Causes of a Dead Cat Bounce A dead cat bounce is typically caused by several common factors that create a temporary illusion of recovery in a declining market. - Short-Covering: Traders who have previously sold the asset buy it back to cover their positions, causing a temporary price increase. - Speculative Buying: Some investors buy into the declining asset, hoping to capitalise on what they perceive as a bargain, which briefly drives prices up. - Technical Support Levels: The asset hits a technical support level, prompting a temporary rebound as traders react to these key price points. - Positive News: Positive news related to the asset, such as cost-cutting measures in a company, strong country GDP growth, or even rumours can cause temporary optimism and buying interest. However, while these factors may provide some support for the asset, it’s rare for the market to recover fully. Given that the sharp fall preceding the bounce is often due to a significant shift in fundamentals or indicative of strong selling pressure, the bearish trend is likely to prevail. Identifying a Dead Cat Bounce Identifying a dead cat bounce involves careful analysis of price movements, trading volume, resistance levels, momentum indicators, and market sentiment. Recognising these signals may help traders avoid being misled by temporary market recoveries. Price Movements A dead cat bounce typically follows a sharp decline that clears previous support levels with little resistance, often prompted by significant news releases. After this steep fall, the price may find a temporary base at another support level and begin to rise. However, this recovery generally regains less than 50% of the initial drop. Volume The rebound in a dead cat bounce often occurs on weaker volume, indicating less conviction behind the recovery. This is especially noticeable in assets traded on centralised exchanges, like stocks or crypto*. In forex, assessing volume can be challenging due to its decentralised nature. It’s important to consider the timeframe; daily charts may be most effective for detecting volume patterns in a dead cat bounce, while intraday volumes can be misinterpreted due to natural ebbs and flows as trading sessions progress. Resistance Levels The rebound may fail to break through significant resistance levels, such as a prior support level turned resistance or the last swing high in the downtrend. If the price approaches but cannot surpass these levels and subsequently drops again, it's a strong indication of a dead cat bounce. Monitoring these resistance points helps validate the pattern. Momentum Indicators Using technical indicators like the Stochastic Oscillator or Awesome Oscillator (AO) can provide clues about a dead cat bounce. These indicators may show only a slight improvement or remain in bearish territory, indicating weak momentum. It’s important to recognise that these indicators might show false bullish signals, such as an oversold Stochastic or a bullish AO zero-line crossover, as the bounce begins. Therefore, they may have the most value in detecting continuation, such as a bearish hidden divergence. To explore these indicators among 1,200+ trading tools, head over to FXOpen’s free TickTrader platform. Market Sentiment If broader market conditions and sentiment remain negative or if the news driving the rebound is not substantial, the bounce is likely temporary. It’s important to consider the overall picture and what has fundamentally changed for the asset rather than reacting to temporary retracement. How to Trade a Dead Cat Bounce When a trader recognises a potential dead cat bounce, they might consider entering a short position to capitalise on the continuing downtrend. Here are some key strategies that may potentially help trade this pattern effectively. Since a bounce may sometimes be genuine and lead to a quick recovery, it's prudent for traders to wait for confirmation that the downtrend is ready to continue. This cautious approach also allows for placing a stop loss in a defined area—specifically, just above the high of the bounce. Key Trading Signals Traders typically watch for the last higher low established during the bounce to be traded through. In other words, they wait for the short-term bullish trend to appear to falter with a lower low. As seen in the dead cat bounce chart above, this indicates that the most recent support level during the bounce has failed, signalling the downtrend might continue. Greater confidence in the downtrend continuation can be achieved if the price fails to break through a prior area of resistance or a previous support level now acting as resistance. Momentum Indicators Momentum indicators can be used to confirm that the downtrend is ready to continue. Specifically, a hidden bearish divergence, where the RSI makes a high higher than the high before or at the beginning of the downtrend; the RSI showing the asset is overbought; or the RSI struggling to break above 50 on a slightly higher timeframe (RSI < 50 indicates bearish conditions) can add confirmation. With the MACD, the signal line may cross under the MACD line or struggle to break out of negative territory. Chart Patterns and Candlestick Patterns - Bearish Chart Patterns: Breaking out of patterns like a rising wedge, bearish quasimodo, or descending triangle can confirm the move lower. - Bearish Candlestick Patterns: Patterns such as a shooting star, tweezer top, or marubozu candle can add confluence and confidence to the trade. Setting Stop Loss and Take Profit - Stop Loss: Traders usually set a stop loss just above the high of the dead cat bounce to potentially limit losses if the price unexpectedly rises. - Take Profit: Given the likelihood of another significant downward leg, a take-profit order may be set at the next major support level. This potentially ensures capturing returns before the market finds new support and reverses. Context-Dependent Strategy Ultimately, there is no single way to trade a dead cat bounce in stocks or any other asset. However, using these factors to seek confirmation and waiting for a further breakdown before taking a position can help traders navigate and take advantage of trading on this pattern. The Bottom Line Recognising and understanding a dead cat bounce can potentially help traders avoid false recoveries and optimise their strategies. By carefully analysing market signals and using appropriate trading techniques, traders might better navigate downtrends. To apply these insights and enhance your trading experience, open an FXOpen account today. FAQs What Is a Dead Cat Bounce? The dead cat bounce meaning refers to a temporary recovery in the price of a falling asset, followed by a continuation of the downtrend. It often misleads traders into believing that the market or asset is recovering, only to see prices fall again. What Causes a Dead Cat Bounce? Several factors can cause a dead cat bounce, including short-covering, speculative buying, and hitting technical support levels. Temporary improvements in market sentiment or positive news can also trigger these short-lived recoveries. How to Spot a Dead Cat Bounce? A dead cat bounce can be identified by a sharp decline followed by a brief recovery that regains less than 50% of the initial drop. Low trading volume during the rebound, failure to break significant resistance levels, and weak momentum indicators are key signals. Is a Dead Cat Bounce Bullish or Bearish? A dead cat bounce is a bearish pattern. It represents a brief, false recovery in a downtrend, followed by a continuation of the falling market. How Long Does a Dead Cat Bounce Last? The duration of a dead cat bounce varies depending on the timeframe but is typically short. On a daily chart, it may take between a few days and a few weeks; on a 5-minute chart, potentially less than a few hours. How to Analyse a Dead Cat Bounce? Analysing a dead cat bounce involves considering price action, volume, resistance levels, momentum indicators, and overall market sentiment. Recognising these factors can help identify the potential for a temporary recovery in a declining market. *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.
NASDAQ:NFLXEducation
by FXOpen
7
Technical Analysis vs. Fundamental Analysis: Why Not Both?Hey there, fellow traders and market mavens! Ever found yourself staring confused at the screen and not making sense of things that happen in trading? So you decided to wander off deep into technical analysis shutting out its other half — fundamental analysis? Or vice versa — you digested every economic report that big media outlets churned out and yet failed to factor in some support and resistance levels? Fear not, for we've got the lowdown on why you don't have to pick sides and go with either the Fibonacci sequence or the latest jobs data . In fact, we're here to tell you why embracing both might just be your secret to trading success. So, grab your charts and financial reports and let's dive into the world where candlesticks meet earnings reports! Technical Analysis: The Lost Art of Tape Reading Technical analysis is like the cool, intuitive friend who always seems to know what's going to happen next. It's all about reading the market's mood through price charts, patterns and indicators. Here's why tech analysis should be in your skill set: Trend Spotting : Ever wished you could predict the next big trend? With moving averages, trend lines and momentum indicators like the MACD, you can ride the waves like a pro surfer and let the market carry your trades into a sea of profits. Timing is Everything : Candlestick patterns and support/resistance levels are your besties when it comes to perfect timing. The more you study them, the more you elevate your chances of entering and exiting trades with ninja-like precision. Market Sentiment : Tools like the Relative Strength Index (RSI) and Bollinger Bands give you the scoop on whether the market's feeling overbought, oversold or just right. Learn these if you want to increase the probability of correctly gauging the market’s mood. But hold up, before you get lost in the charts, let's not forget about the fundamentals. Fundamental Analysis: Making Sense of Things If technical analysis is your go-to for instant market vibes, fundamental analysis is the place to figure out why things happened in the first place. Here’s why fundamentals are a big deal and can help you to a) learn what moves markets and b) become fluent in marketspeak and own every trading conversation: Long-Term Vision : While technical analysis can sometimes feel like guesswork, fundamental analysis is spitting facts. Earnings reports, P/E ratios and economic indicators help you see the bigger picture and educate you into a better, more knowledgeable trader. Value Hunting : Ever heard of value investing legends like Warren Buffett? They thrive on finding undervalued gems through rigorous fundamental analysis. And, some say, this approach to investing is not reserved for companies only. It works for crypto, too. Economic Health Check : Understanding GDP growth, interest rates and inflation can feel like having a crystal ball for market trends. And, one big plus is that you’ll become a lot more interesting when you explain things like monetary policy or forward-looking guidance to your uncle at the Thanksgiving table. The Power Couple: Combining Technical and Fundamental Analysis Now, here’s the kicker: Why choose one when you can have both? Imagine the synergy when you combine the swift foresightedness of technical analysis with the solid foundation of fundamental analysis. Here’s how to make this dynamic duo work for you: Double-Check Your Entries and Exits : Use technical analysis for pinpointing your entry and exit points but back it up with fundamental analysis to build a convincing narrative of the asset’s long-term potential. Confirm the Trend : Spot a promising trend with technical indicators? Validate it with strong fundamentals to make sure it’s not just a flash in the pan. Risk Management : Technical analysis can help set your stop-loss levels, while fundamental analysis keeps you informed about any potential game-changers in the market. Diversification : Fundamental analysis might show you the hottest sectors right now, while technical analysis can help you call tops and bottoms if an indicator you trust is showing oversold or overbought levels. Wrapping Up So, there you have it, folks! Technical analysis and fundamental analysis don’t have to be opposite camps. Think of them as your dynamic duo, Batman and Robin, peanut butter and jelly — better together. By blending the best of both worlds, you’ll increase your chances of success in trading and do yourself a favor — you’ll get to know a lot and become more interesting! Ready to take your trading game to the next level? Start combining technical and fundamental analysis and watch as your trading strategies transform into a market-crushing masterpiece. Happy trading and may your profits be ever in your favor!
SP:SPXEducation
by TradingView
14
Why Are Bonds Still Crashing?Why are US, UK, and EU bonds still crashing since March 2020? In this video, we are going to study the relationship between bonds, yields, and interest rates, which many of us find confusing. How can we understand them, and why are bond prices leading the yield, followed by interest rates this season? 10 Year Yield Futures Ticker: 10Y Minimum fluctuation: 0.001 Index points (1/10th basis point per annum) = $1.00 Disclaimer: • What presented here is not a recommendation, please consult your licensed broker. • Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises. CME Real-time Market Data help identify trading set-ups in real-time and express my market views. 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
TVC:US30YEducation
by konhow
9
Do Not Overwhelm Your Price Chart! In this article, we will discuss a very important term in trading psychology - paralysis by analysis in trading. Paralysis by analysis occurs when the trader is overwhelmed by a complexity of the data that he is working with. Most of the time, it happens when one is relying on wide spectra of non correlated metrics. That can be various trading indicators, different news outlets and analytical articles and multiple technical tools. Relying on such a mixed basket, one will inevitably be stuck with the contradictory data. For example, the technical indicators may show very bearish clues while the fundamental data is very bullish. Or it can be even worse, when the traders have dozens of indicators on his chart and half of them dictates to open a long position, while another half dictates to sell. Above, you can see an example of a EURUSD price chart that is overwhelmed by various technical indicators: Ichimoku, MA, Volume, ATR support and resistance levels fundamental data As a result, the one becomes paralyzed , not being able to make a decision. Moreover, each attempt to comprehend the data leads to deeper and deeper overthinking, driving into a vicious circle. The paralysis breeds the inaction that necessarily means the missed trading opportunities and profits. How to deal with that? The best option is to limit the number of data sources used for a decision-making. The rule here is simple - the fewer indicators you use, the easier it is to make a decision. EURUSD chart that we discussed earlier can look much better. Removing a bunch of tools will make the analysis easier and more accurate. There is a common fallacy among traders, that complexity breeds the profit. With so many years of trading, I realized, however, that the opposite is true... Keep the things simple, and you will be impressed how accurate your predictions will become. ❤️Please, support my work with like, thank you!❤️
Education
by VasilyTrader
18
Nasdaq's Stellar Returns, Potential Risks AheadThe Nasdaq-100 has been a stellar performer since its debut in 1985, rising 22,900% (with dividends reinvested) for a 14.8% compounded annual total rate of return. By comparison, the S&P 500 returned 7,200% over the same period with dividends reinvested, an 11.5% compounded return (Figure 1). Figure 1: Since the inception of the Nasdaq-100 index in 1985, it has outperformed the S&P Source: Bloomberg Professional (XNDX and SPXT) However, the Nasdaq’s outperformance can partly be attributed to higher risk levels. It has been consistently more volatile than the S&P 500 (Figure 2) and has been subject to much greater drawdowns. On March 28, 2000, Nasdaq began a drawdown that reached -81.76% on August 5, 2002 (Figure 3). The total return index didn’t hit a new high-water mark until February 12, 2015. It also had a sharper drawdown during the 2022 bear market. Figure 2: The Nasdaq-100 has nearly always been more volatile than the S&P 500 Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations Figure 3: From 2000 to 2002, the Nasdaq-100 fell by nearly 82% and didn’t recover until 2015. Source: Bloomberg Professional (XNDX and SPXT), CME Economic Research Calculations A large part of the reason for the Nasdaq’s greater overall return, higher volatility and its heightened susceptibility to deep and long drawdowns is its dependence on one sector: information technology. Since at least the 1990s, Nasdaq has been nearly synonymous with the tech sector. While nearly every sector has at least some presence in the Nasdaq, since its launch in 1999 it has always had a near-perfect correlation with the S&P 500 Information Technology Index (the basis for the S&P E-Mini Technology Select Sector futures launched in 2011). That correlation has never fallen below +0.9 and has sometimes been as high as +0.98. In the past 12 months the correlation has been +0.95 (Figure 4). Figure 4: The Nasdaq-100 has always had extremely high correlations with the tech sector Source: Bloomberg Professional (NDX, S5INFT, S5UTIL, S5ENRS, S5FINL, S5HLTH, S5CONS, S5COND, S5MATR, S5INDU, S5TELS) The preponderance of technology stocks in the Nasdaq is largely a function of history. Nasdaq was founded in 1971 as the world’s first electronic stock market and it began to attract technology companies, in part, because it had more flexible listing requirements regarding revenue and profitability than other venues. Over time the technology ecosystem settled largely on this market and came to dominate the Nasdaq-100 Index. Those who need to minimize tracking risks with respect to the S&P 500 Information Technology Index can do so with the Select Sector futures. However, those who wish to increase or decrease exposure to the technology sector more generally, and for whom tracking risks is a less of a concern can easily increase or reduce their exposure with the Nasdaq-100 futures. Also launched in June 1999 were E-mini Nasdaq-100 futures, which are now turning 25 years old. The contracts caught on quickly, and today trade at more than 668K contracts or $60 billion in notional value each day. E-mini Nasdaq-100 futures offer capital-efficient exposure to the Nasdaq-100 index, and allow investors to trade and track one NQ futures contract versus 100 stocks to achieve nearly identical exposure. These futures also help mitigate risk against the top-heavy nature of the Nasdaq-100 index, where the so-called Magnificent Seven companies—Microsoft, Apple, Nvidia, Amazon.com, Meta Platforms, Google-parent Alphabet and Tesla—have dominated recently. Broad exposure to this index acts as a hedge if the Magnificent Seven stocks decline. The Nasdaq has also correlated highly in recent years with consumer discretionary stocks as well as telecoms. By contrast, it has typically low correlations with traditional high-dividend sectors such as consumer staples, energy and utilities which tend to be listed on other exchanges. The exception to this rule is during down markets, when stocks tend to become more highly correlated. The Nasdaq also has very different interest rate sensitivities than its peers. For starters, high short-term interest rates seem to benefit the Nasdaq-100 companies as many of them have large reserves of cash that are earning high rates of return by sitting in T-Bills and other short-term maturities. This is a sharp contrast to the Russell 2000 index, which has suffered as Federal Reserve (Fed) rate hikes have increased the cost of financing for smaller and mid-sized firms, which borrow from banks rather than bond holders and don’t usually have substantial cash reserves. By contrast, the Nasdaq has shown a very negative sensitivity to higher long-term bond yields. Many of the technology stocks in the Nasdaq-100 are trading at high earnings multiples. Some have market capitalization exceeding $1 trillion. Higher long-term bond yields are a potential threat because much the value of these corporations is what equity analysts might refer to as their “value in perpetuity,” meaning beyond any reasonable forecast horizon. Typically, such earnings are discounted using long-term bond yields and the higher those yields go, the lower the net present value of those future earnings. Additionally, higher long-term bond yields can also induce investors to switch out of highly volatile and expensive equity portfolios into the relatively less volatile, fixed- income securities. The Nasdaq’s high sensitivity to long-term bond yields may explain why the index sold off so sharply in 2022 alongside a steep fall in the price of long-dated U.S. Treasuries, whose yields were rising in anticipation of Fed tightening and due to concerns about the persistence of inflation. By contrast, the Nasdaq has done well since October 2022 despite the Fed continuing to raise short-term rates through July 2023 and subsequently keeping those rates high. On the one hand, many of the cash-rich Nasdaq companies are benefitting from higher returns on their holdings of short-term securities. On the other hand, they are also benefitting from the fact that higher short-term rates have steadied long-term bond yields by making it clear that the Fed is taking inflation seriously. This isn’t to suggest that the Nasdaq is immune from downside risks. History shows that the risks are very real, especially in the event of an economic downturn. In the 2001 tech wreck recession, the Fed cut short-term rates from 6.5% to 1% but long-term bond yields remained relatively high, which was not a helpful combination for the tech sector. In addition to its 82% decline during the tech wreck recession, it also fell sharply during the global financial crisis, though not as badly as the S&P 500, which had a far larger weighting to bank stocks. This time around, potential threats to the Nasdaq include: The possibility of an economic downturn which could crimp corporate profits. Rate cuts which would reduce the return on cash positions. Large budget deficits and quantitative tightening which could push up long-term bond yields. Possibly tighter regulation of the tech sector in the U.S. and abroad. 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 Erik Norland, Executive Director and Senior Economist, CME Group *CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc. **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.
CME_MINI:NQ1!Education
by CME_Group
6
How to Trade a Break of a TrendlineHow to Trade a Break of a Trendline Trading broken trendlines is a critical aspect of technical analysis. Understanding how to interpret and act upon the break of trendlines can make a significant difference to a trader's performance. This FXOpen article delves into the intricacies of trading broken trendlines, providing insights, strategies, and risk management techniques to help traders navigate this essential aspect of market analysis. Understanding Trendlines Although you know what trendlines are, let’s briefly go over the subject. Trendlines are foundational tools used in technical analysis to visualise the direction of price movements. Drawing accurate trendlines involves selecting the appropriate highs and lows to connect, so they provide a clear representation of the prevailing trend. According to the established rules, there should be at least two highs/lows to draw a strong trendline. The more points you connect, the more solid the line is supposed to be. There are trendlines in forex, stock, commodity, index, and cryptocurrency* charts. Still, it may be easier to find trendlines on charts of assets experiencing less price volatility. The three primary types of trendlines are: 1. Uptrend lines connect higher lows and act as support levels. They represent bullish market conditions. 2. Downtrend lines connect lower highs and serve as resistance levels. They depict bearish market conditions. 3. Sideways or Range-Bound lines connect comparable highs and lows, indicating a range-bound or consolidating market. Significance of Broken Trendlines Broken trendlines create trading opportunities for traders with different trading styles and risk tolerances. Traders can employ various strategies based on trendlines with breaks, including trend continuation, trend reversal, and breakout strategies. These opportunities can provide traders with entry and exit points to take advantage of changing market dynamics. Identification of Trend Reversals Perhaps the key value of broken trendlines is their role in identifying potential trend reversals. When an established trendline is decisively broken, it often signifies a shift in market sentiment. This break indicates that the previous trend's momentum has weakened or reversed, which can be a vital turning point for traders. In an uptrend, the break of an uptrend line can suggest a potential reversal to a downtrend, and conversely, the break of a downtrend line in a downtrend may signal a potential reversal to an uptrend. If the price breaks the sideways trendline, it usually reflects the end of consolidation and the formation of a new trend, either upward or downward. In the chart above, the price broke above the downward trendline, after which a new uptrend was formed. Confirmation of Price Movements Broken trendlines can act as confirmation signals for other technical analysis tools and patterns. For example, when a trendline break aligns with the formation of chart patterns like head and shoulders or double top and double bottom, it may reinforce the validity of these patterns and their associated price projections. Market Sentiment Broken trendlines can also provide insights into market sentiment and psychology. Traders' reactions to trendline breaks can reveal their beliefs and expectations regarding future price movements, which can impact market dynamics and create trading opportunities. False Trendline Breakout A false trendline breakout, also known as a fakeout or failed breakout, occurs when the price of an asset appears to break a trendline but then reverses direction, often moving back within the trendline's boundaries. False breakouts can mislead traders and can result in losses for those who initiate trades based on the initial breakout signal. Here's a breakdown of the key characteristics of a false trendline breakout: - Initial Breakout. Initially, the price of the asset appears to break above or below a trendline. This break may even be accompanied by increased trading volume, which can provide confirmation of the breakout. - Traders' Reactions. Many traders may interpret the breakout as a significant move and initiate trades in that direction. For example, if a downtrend line is seemingly broken to the upside, traders may start buying, expecting a trend reversal. - Reversal. However, instead of continuing in the direction of the breakout, the price reverses course and moves back within the boundaries of the trendline. This reversal negates the initial breakout signal and can catch traders off guard. Look at the chart above. The price broke above the falling trendline, but the uptrend didn’t form, so the downtrend resumed. There are several reasons for false trendline breakouts, including: - Market Manipulation: In some cases, market participants with substantial resources may deliberately manipulate prices to trigger breakouts and then reverse the market's direction to take advantage of the price swings. - Lack of Confirmation: Fakeouts often occur when there is a lack of confirmation from other technical indicators or factors. Therefore, experienced traders look for multiple signals aligning to increase the validity of a breakout. - Whipsawing Markets: In volatile or indecisive markets, prices can frequently whipsaw above and below trendlines, making it challenging to distinguish between genuine and fakeouts. Factors to Consider When Trading Broken Trendlines To reduce the risk of falling victim to false trendline breakouts, traders often use additional technical analysis tools and confirmation signals. These may include waiting for reversal signals from other indicators, monitoring price action after the breakout, and setting stop-loss orders to potentially reduce losses in case of a reversal. Confirmation Signals Confirmation signals can come from various technical indicators and patterns, including but not limited to: - Candlestick Patterns. Traders look for candlestick patterns that support the direction of the breakout, such as bullish engulfing patterns for an upside breakout and bearish engulfing patterns for a downside breakout. - Oscillators. Oscillators like the Relative Strength Index (RSI) or the Stochastic can provide overbought or oversold conditions, which may help traders confirm the strength of the move. - Chart Patterns. Aside from candlestick patterns, chart formations, such as flags, triangles, or pennants, that coincide with the trendline break may provide additional confirmation. Volume Analysis Analysing trading volume is a crucial component of evaluating broken trendlines. Volume can provide insights into the significance of the breakout and whether it is more likely to be genuine or a false signal. A breakout with increasing volume is generally seen as more reliable. It suggests that market participants are actively involved in the move, increasing the chances of a sustained trend. Conversely, a breakout with decreasing volume may be less reliable, as it indicates a lack of enthusiasm among traders and raises the possibility of a false breakout. Timeframes Considering multiple timeframes is essential when trading broken trendlines. Different periods may provide different perspectives on the trendline break, and using a combination of them may enhance decision-making. Here's how traders approach timeframes: - Higher Timeframes. They start by analysing higher timeframes (e.g., daily or weekly) to identify the primary trend direction. This provides context for the trendline break observed on shorter timeframes. - Lower Timeframes. Market participants use lower timeframes (e.g., hourly or 15-minute charts) for finer entry and exit points. These shorter timeframes may help pinpoint optimal trade execution levels after the trendline break. - Confluence. Traders seek confluence between different timeframes. When a trendline break aligns with a breakout on higher timeframes, it adds strength to the trade signal. Support and Resistance Levels When trading broken trendlines, it's crucial to consider nearby support and resistance levels. These levels can influence price movements and provide valuable context for trade management. Fibonacci Retracement and Extension Tools Fibonacci retracement and extension levels can complement trendline analysis. If the price breaks the Fibo level after a trendline breakout, this may confirm the strength of the newly forming trend. Risk Management and Position Sizing when Trading Trendline Breakouts Effective risk management is paramount when trading trendline breakouts. When trading with trendlines, potential profits and losses can be determined via these techniques: - Setting Stop Losses. Setting appropriate stop-loss orders is a crucial component of risk management strategies. - Proper Position Sizing. Position sizing is a critical aspect of risk management, especially when trading trendline breakouts. It determines the amount of capital allocated to each trade and helps control exposure to potential losses. - Risk-Reward Ratios. Risk-reward ratios are essential for evaluating the potential effectiveness of a trade relative to the risk taken. Common Mistakes to Avoid when Trading Trendline Breakouts Common mistakes when trading trendline breakouts include making decisions based on insufficient confirmation signals, ignoring fundamental factors, and being guided by emotions. By implementing a disciplined approach and being aware of these pitfalls, traders may increase their chances of making informed trading decisions. Ignoring Confirmation Signals One of the most common mistakes traders make when trading trendline breakouts is ignoring confirmation signals. Relying solely on the trendline break itself can lead to premature or misguided trades. Overlooking Fundamentals While technical analysis plays a significant role in trading trendline breakouts, overlooking fundamental factors can be a costly mistake. Traders consider the broader market context and macroeconomic factors that may impact the assets they trade. Fundamental events like economic releases, earnings reports, or geopolitical developments can influence market sentiment and override technical signals. Emotional Trading Emotional trading is a common pitfall for traders, and it becomes particularly pronounced when trading trendline breakouts. Emotions such as fear and greed can lead to impulsive decisions and erode trading discipline. Final Thoughts The ability to trade broken trendlines is a valuable skill for market analysts and traders. Understanding the basics of trendlines, recognising their significance, and implementing effective trendline strategies and risk management techniques may lead to more sound trading outcomes. It's essential to approach broken trendline trading with discipline, patience, and continuous learning to navigate the complexities of financial markets effectively. *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.
Education
by FXOpen
6
How to Plot Head & Shoulders Pattern on TradingViewWelcome back, Traders! We’re excited to have you here on TradingView where we share valuable trading insights and educational posts to help you succeed in the markets. Today, we’re diving into one of the most reliable chart patterns in technical analysis: the Head and Shoulders pattern. Understanding and identifying this pattern can significantly improve your trading strategy, whether you’re dealing with forex, stocks, or commodities. What is the Head and Shoulders Pattern? The Head and Shoulders pattern is a bearish reversal pattern that indicates a potential end to an uptrend and the beginning of a downtrend. It consists of three peaks: Left Shoulder: The first peak followed by a decline. Head: The highest peak followed by a decline. Right Shoulder: A peak similar in height to the left shoulder, followed by a decline. The neckline is the support line that connects the lows after the left shoulder and the head. How to Trade the Head and Shoulders Pattern: Identify the Pattern: Look for the three distinct peaks with the head being the highest. Draw the Neckline: Connect the lows after the left shoulder and the head to form the neckline. Entry Point: Enter a short position when the price breaks below the neckline. Target: Measure the distance from the head to the neckline and subtract this distance from the breakout point to set your target. Stop Loss: Place a stop loss above the right shoulder to manage your risk. Inverse Head and Shoulders Pattern Conversely, the Inverse Head and Shoulders is a bullish reversal pattern signaling the end of a downtrend and the start of an uptrend. It consists of three troughs: Left Shoulder: The first trough followed by a rise. Head: The lowest trough followed by a rise. Right Shoulder: A trough similar in depth to the left shoulder, followed by a rise. The neckline is the resistance line connecting the highs after the left shoulder and the head. How to Trade the Inverse Head and Shoulders Pattern: Identify the Pattern: Look for the three distinct troughs with the head being the lowest. Draw the Neckline: Connect the highs after the left shoulder and the head to form the neckline. Entry Point: Enter a long position when the price breaks above the neckline. Target: Measure the distance from the head to the neckline and add this distance to the breakout point to set your target. Stop Loss: Place a stop loss below the right shoulder to manage your risk. Follow us on TradingView for more helpful ideas and educational posts! Stay tuned as we continue to share insights that will help you on your trading journey. Happy trading! - BK Trading Academy
Education
by BKTradingAcademy
7
How to Trade on Support and Resistance ReversalsHow to Trade on Support and Resistance Reversals Trading in the financial markets can be a complex endeavour, but it may become more manageable when traders have a solid grasp of support and resistance levels. Recognising support and resistance reversals is a crucial skill that may enhance one's trading performance. In this FXOpen article, we will learn the types of support and resistance and consider some trading strategies based on market reversals. Recognising Support and Resistance Reversals It’s unlikely you will need to ask, “What are support and resistance lines?” Still, let’s refresh your memory. A support line is a level at which an asset's price tends to find buying interest, preventing it from falling further. In other words, it's where demand for the asset is strong enough to counteract selling pressure. Traders often identify support as a potential point when going long or a take-profit target when selling. It can be formed at various price points on a chart and can be horizontal and diagonal (trendlines). A resistance line is a level at which an asset's price tends to encounter selling pressure, preventing it from rising further. It represents a point where supply exceeds demand, leading to potential reversals or pullbacks. Traders often identify resistance as a potential point when going short or a take-profit target when buying. Like support, resistance levels can also be horizontal, diagonal, or coincide with round numbers. Support and Resistance: Types There are various types of support and resistance, including trendlines, round numbers, Fibonacci retracements and extensions, pivot points, and dynamic lines. Trendlines Trendlines are one of the most fundamental tools in technical analysis. They are lines drawn on a price chart to connect consecutive lows and consecutive highs to identify the direction of the market. Trendlines act as support and resistance, helping traders identify potential reversal points and trend continuations. The intersection of price movements with trendlines often signifies significant market sentiment shifts. There are three fundamental types of trendlines: - Uptrend Lines: Uptrend lines connect a series of higher lows and function as support levels on a price chart. These lines are indicative of bullish market conditions, signifying a consistent upward trajectory in asset value. Traders often use uptrend lines to identify potential entry points for long positions. - Downtrend Lines: Downtrend lines link lower highs and act as resistance in technical analysis. They reflect bearish market conditions, suggesting a persistent downward trend in asset value. Downtrend lines are valuable for traders looking to establish potential entry points for short positions. - Sideways or Range-Bound Lines: Sideways or range-bound lines connect comparable highs and lows, illustrating a market in a state of consolidation or trading within a defined range. These lines indicate the lack of strong trends in either direction and are essential for traders to recognise when markets are moving sideways. Closest Swing Points Traders can draw support and resistance through the most recent swing point. - Support: To find a support level based on the closest swing point, traders identify a recent swing low. This low point is where buying interest emerged previously. - Resistance: To determine a resistance level based on the closest swing point, traders look for the recent swing high. This high point is where selling pressure halted a previous uptrend. Round Numbers Round numbers are psychological levels that often serve as support or resistance. They tend to attract the attention of traders and investors due to their simplicity and significance. For example, in a currency pair like EUR/USD, a round number might be 1.2000. These levels can act as barriers where traders make decisions to buy or sell, making them essential reference points in technical analysis. Fibonacci Retracements and Extensions Fibonacci retracement and extension levels are based on the Fibonacci sequence and are used to identify potential support and resistance zones. The most commonly used Fibonacci retracements are 23.6%, 38.2%, 50%, and 61.8%. Traders apply these levels to charts to determine where price reversals or corrections may occur. Fibonacci extensions are key tools in technical analysis used to project potential price targets beyond the original trend. The most commonly used levels are 161.8%, 261.8%, and 423.6%. Pivot Points Pivot points are calculated levels that help traders identify critical support and resistance points. They are used to determine potential price reversals or breakouts. Traders often look at multiple pivot point levels, including support 1 (S1), support 2 (S2), resistance 1 (R1), and resistance 2 (R2), to gauge the market's sentiment and make trading decisions accordingly. Dynamic Lines Dynamic support and resistance are not fixed on the chart but change with market conditions. Common examples include moving averages and Bollinger Bands. Moving averages can act as dynamic support or resistance depending on their positioning relative to the current price: if the price is above the MA, the moving average serves as a support, while if the price is below the MA, the moving average can be used as a resistance. Bollinger Bands consist of a middle band (the moving average) and upper and lower bands that represent dynamic support and resistance zones based on price volatility. Trading Strategies for Support and Resistance Reversals Below, you will find two of the most straightforward strategies you can apply to various markets and timeframes. Bounce Trading Strategy Objective: To capitalise on confirmed support or resistance by entering positions when the price bounces off these levels. Entry Point: - Long Trade (Support Bounce): Traders may wait for the market to approach a strong support level. They always look for a confirmation signal, including a bullish candlestick pattern, such as a hammer or engulfing pattern, or a technical indicator. You may enter the trade at the opening of the next candle after the bullish confirmation signal. - Short Trade (Resistance Bounce): The trader may wait for the market to approach a robust resistance level. They always look for confirmation with a bearish candlestick pattern, such as a shooting star or bearish engulfing pattern, near the resistance level or a technical indicator. You may enter the trade at the opening of the next candle after the bearish confirmation signal. Exit Point: - Take Profit: Traders might set a take-profit order at a reasonable distance from their entry point, aiming for a risk-reward ratio of at least 1:2. - Stop-Loss: One common practice you may consider is to place a stop-loss order just below (for long trades) or above (for short trades) the support or resistance level you are trading. This may help protect against significant losses if the market moves against your trade. Look at the chart above. A trader could initiate two trades on the support level. In the first one, they could get confirmation from consecutive candles with small or non-existing lower shadows and rising bullish volumes. In the second trade, they may get confirmation from the Bollinger Bands as the lower band is aligned with the support level. Pullback and Retest Strategy Objective: To enter trades on pullbacks to previously broken support or resistance levels, which may now act as new support or resistance. Entry Point: - Long Trade (Resistance Turned Support): Traders wait for the price to break significant resistance and retrace to retest it as new support. To confirm a successful retest, you may look for reduced volume and bullish candlestick patterns. To enter a trade, you may wait for the next candle after the retest confirmation to open. - Short Trade (Support Turned Resistance): Traders wait for the price to break substantial support and retrace to retest it as new resistance. You may ask, “If the price is dancing above the support zone but hasn't broken below it, what should we do?” To make the strategy work, you will need to wait for a breakout and confirm the retest. To get a confirmation signal, you may look for reduced volume and bearish candlestick patterns. An entry point may be initiated when the next candle after the retest confirmation opens. Exit Point: - Take Profit: You may set a take-profit order based on your desired risk-reward ratio, considering the potential price target based on the recent significant swing point. - Stop-Loss: Traders usually place a stop-loss order just below (for long trades) or above (for short trades) the retested support or resistance level to manage risk. In the chart above, a trader could enter a trade on a retest of a broken resistance level that turned into support. Rising bullish volumes on a support point could serve as a confirmation signal. Common Pitfalls to Avoid Trading on support and resistance reversals may be a rewarding strategy, but it's essential to steer clear of common pitfalls that may lead to losses. Here are three significant pitfalls to avoid: - Overtrading. As the support and resistance reversal strategies are straightforward and conditions for them can be found on almost any market and any timeframe, traders may fall into an overtrading trap. Overtrading occurs when traders execute an excessive number of trades, often driven by the fear of missing out or the desire for quick profits. - Ignoring Fundamental Analysis. While technical analysis plays a crucial role in trading support and resistance reversals, ignoring fundamental analysis can be a significant pitfall. Economic data releases, geopolitical events, or company news can lead to unexpected market moves. - Neglecting Risk Management. Neglecting risk management is a critical mistake that traders should avoid, regardless of their strategies. Failing to implement proper risk management can result in substantial losses that outweigh gains. Final Thoughts Understanding the various types of support and resistance, including trendlines, round numbers, Fibonacci retracements and extensions, pivot points, and dynamic levels, is essential for traders and analysts to make informed decisions in the financial markets. These tools offer valuable insights into potential market reversals and overall market sentiment. Support vs resistance trading strategies are straightforward and may be applied to almost any market. If you want to test them, open an FXOpen account and enjoy trading in over 600 markets on the TickTrader platform! This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
8
Developing Emotional Resilience: Bouncing Back from LossesOkay, fellow TradingViewers, it’s time we tackle a topic that may make you a bit uncomfortable. But, rest assured — it’s for your own good! Today, we explore the realm of emotional resilience and, more precisely, how to bounce back from losses. Losses are inevitable. Ask anyone — even the big dogs in the industry have gone through painful losses (as you’ll see at the end of this write-up). Drawdowns so severe that they’ve nearly put hedge funds out of business (just ask Ray Dalio). And yet, bouncing back from losses is what has helped these one-time losers to develop emotional resilience and make the best out of the experience. Acknowledge the loss, but don’t overblow it Accept that losses happen and they’re a natural part of the trading journey. No matter how skilled or successful you are, you will have losing positions every once in a while. First, make sure you find out what went wrong. And second, don’t dwell on the losses too much and don’t let them cloud your prospects of becoming a better trader. Size your positions according to risk tolerance Never let a single position wipe out your entire account if it turned against you. We know how attractive it is to bet big on currencies swings spanning European countries . But keep in mind that, in such case, the old market adage "You're as good as your last trade" will hold true and it may not be pretty. There are two main ways to prevent the wipeout of your account with a single trade — don’t bet too big (or use too much leverage). If you do bet big, make sure you have a tight stop loss that won’t let your balance get washed out and drawn underwater. Always think about defense before you think about offense. Let your strategy take care of your trading You won’t have to be emotional if you let your strategy take care of your trading. Having the right trading plan will eliminate the need to react on the spot and make rushed decisions out of emotion. A solid strategy can empower you to withstand even the harshest market conditions with your chin up and trading account unscathed. Embrace the power of habit and routine In trading, consistency is key. Create for yourself a nice and easy-to-follow trading routine. This may include making your cup of coffee before you sit to do some chart reading. Or get a workout in before you read the daily news. Whatever will help you stay disciplined and emotionally balanced — do more of that. Invest in yourself and then trade the markets Your most valuable asset isn’t your trading account — it’s you. Invest time in learning, reading, watching interviews of successful traders and financiers. Read books on finance and trading, study the economic calendar , or sign up for a paper-trading account to test your trading skills risk-free. The more knowledge and practice you soak up, the more resilient and prepared you will become. Know when to step back and get a break Sometimes, the best thing to do after a loss is do nothing at all. It’s understandable if you feel emotionally unstable, off-kilter and overwhelmed when the markets gives you a slap in the face. Especially if you’re just starting out in the volatile trading space. What to do then? Unplug, unwind, recharge. The market will still be there tomorrow — go touch grass and come back with a refreshed perspective. Celebrate the wins — no matter how small Trading has to be about more than just coping with losses. Give yourself a nice pat on the back for every little victory. Made a successful trade? Or even got out at breakeven thanks to your stop loss? Perfect. Recognize and celebrate these moments. They’re little milestones to remind you that you’re on the right path to success. Loss advice from the big dogs in trading Let’s wrap up some with loss advice from the world’s best traders and see how they dealt with the blows of Mr. Market. Paul Tudor Jones , hedge fund manager: “Losses are not your problem. It's how you react to them. Ignore losses with no plan, or try to double down on your losses to recoup, and those losses will come back like a Mack truck to run over your account.” Ray Dalio , founder of the world’s largest hedge fund Bridgewater, on how he viewed a near-bankruptcy experience: “I needed to balance my aggressiveness and shift my mindset from thinking ‘I’m right’ to asking myself, ‘How do I know I’m right?’ It was very, very painful, yet it changed my way of thinking. It was one of the best things that ever happened to me.” George Soros , pioneer of the hedge fund industry: “It’s not whether you’re right or wrong, but how much money you make when you’re right and how much you lose when you’re wrong.” Let’s hear from you How do you usually deal with a trading loss? What’s the best thing a loss has taught you? Comment below and let’s spin up a nice discussion!
Education
by TradingView
7
Applying a Champions Mindset to TradingWith the Wimbledon tennis championships starting this week, it seems only appropriate that we take inspiration from tennis GOAT Roger Federer, whose wisdom extends far beyond the court. It’s Only a Point In a recent speech at Dartmouth College in the US, Roger Federer, a 20-time major winner, shared insights from his tennis career that resonate deeply with those pursuing success in day trading: “In the 1,526 singles matches I played in my career, I won almost 80% of those matches. Now, I have a question for you, what percentage of points do you think I won in those matches? Only 54%. In other words, only top-ranked tennis players win barely half of the points they play.” These words, while referring to tennis, hold a mirror to the experience of highly successful day traders, who can finish profitable on 80% of trading days but manage win/loss ratios hovering around 50%. Losing frequently is a reality they manage with resilience and strategy. “When you lose every second point on average, you learn not to dwell on every shot… When you play a point, it has to be the most important thing in the world, but when it’s behind you, it’s behind you. This mindset is crucial because it frees you to fully commit to the next point and the next point after that with intensity, clarity, and focus.” The Psychology of Champions Elements of Federer’s tennis speech touches the core of elite trading psychology. Mastering each trade with intensity, clarity, and focus, while maintaining detachment from individual outcomes, forms a clear pathway to success. “You want to become a master at overcoming hard moments… The best in the world are not the best because they win every point; it’s because they know they will lose again and again and have learned how to deal with it.” Practical Applications of Federer’s Mentality Here are practical tips on applying a champion’s mindset to your trading: • Focus on Process Over Outcome: Emphasise executing your trading plan flawlessly rather than fixating on individual trade results. This approach aims to cultivate discipline and consistency, enabling you to make decisions based on logic and strategy rather than emotions. • Learn from Losses: Traders applying this mindset can look to use losses as opportunities to refine their strategy and improve decision-making. • Maintain Emotional Balance: Try to avoid letting wins or losses dictate your emotional state. Developing techniques such as mindfulness or journaling can help to manage stress and keep your emotions in check. • Commit to Continuous Improvement: Just as Federer constantly evolved his tennis game, traders could embrace continuous learning and adaptation in trading. • Resilience in Hard Times: Developing mental toughness to navigate challenges takes time. Traders could look to build a support system, whether through mentors, trading communities, or personal networks, to help you stay motivated and resilient. Conclusion While the parallels between trading and tennis can only go so far, the psychological insights of a true champion should not be underestimated. By adopting a mindset that prioritises process, resilience, and continual improvement, traders are better placed to navigate the complexities of the market with confidence and clarity. As Wimbledon unfolds, let Federer’s wisdom inspire you to approach your trading with the same intensity, focus, and strategic clarity that defines a champion. Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Education
by Capitalcom
4
10-Year T-Note vs. 10-Year Yield Futures: Which One To Trade?Introduction: The 10-Year T-Note Futures and 10-Year Yield Futures are two prominent instruments in the financial markets, offering traders unique opportunities to capitalize on interest rate movements. This video compares these two products, focusing on their key characteristics, liquidity, and the differences in point and tick values, ultimately helping you decide which one to trade. Key Characteristics: 10-Year T-Note Futures represent a contract based on the value of U.S. Treasury notes with a 10-year maturity, while 10-Year Yield Futures are based on the yield of these notes. The T-Note Futures contract size is $100,000, while the 10-Year Yield Futures contract size is based on $1,000 per index point, reflecting a $10 DV01 (dollar value of a one basis point move). Liquidity Comparison: Both 10-Year T-Note Futures and 10-Year Yield Futures are highly liquid, with substantial daily trading volumes and open interest. This high liquidity ensures tight spreads and efficient trade execution, providing traders with confidence in entering and exiting positions in both markets. Point and Tick Values: Understanding the point and tick values is crucial for effective trading. For 10-Year T-Note Futures, each tick is 1/32nd of a point, worth $31.25 per contract. The 10-Year Yield Futures have a tick value of 0.001 percent, worth $1.00 per contract. These values influence trading costs and profit potential differently and are essential for precise strategy formulation. Margin Information: The initial margin requirement for 10-Year T-Note Futures typically ranges around $1,500 per contract, while the maintenance margin is slightly lower. For 10-Year Yield Futures, the initial margin is approximately $500 per contract, reflecting its lower notional value and DV01. Maintenance margins for yield futures are also marginally lower, providing traders with flexible capital management options. Trade Execution: We demonstrate planning and placing a bracket order for both products. Using TradingView charts, we set up entry and exit points, showcasing how the different tick values and liquidity levels impact trade execution and potential outcomes. Risk Management: Effective risk management is vital when trading futures. Utilizing stop-loss orders and hedging techniques can mitigate potential losses. Avoiding undefined risk exposure and ensuring precise entries and exits help maintain a balanced risk-reward ratio, which is essential for long-term trading success. Conclusion: Both 10-Year T-Note Futures and 10-Year Yield Futures offer unique advantages. The choice depends on your trading strategy, risk tolerance, and market outlook. Watch the full video for a detailed analysis and insights on leveraging these products in your trading endeavors. When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CBOT_MINI:10Y1!Education
by traddictiv
4
Price Action Fluency As A Second LanguageThis is the most important educational video I have shared. Reading price action is akin to acquiring a second or foreign language. Just as fluency in a new language provides fluency and articulation, mastering price action offers traders a nuanced understanding of market dynamics. One would not expect to learn a new language in a short amount of time. It often takes years while keeping up the practice for the rest of ones life. Price action is no different. There are literally hundreds of subtleties revealing their secrets to the ones who 𓁼 . Indicators obstructing the view of plain truth is most often a useless distraction. It's not just about recognizing patterns; it's about developing a foundational understanding that allows for intuitive and informed trading decisions. Building this skill set enables traders to interpret market 'sentiments' and react more adeptly to volatility, much like a fluent speaker picks up on subtle nuances in conversation. Thus, learning to 'speak' the language of price action is essential for anyone serious about trading, as it equips them with the tools to navigate and succeed in the complex world of financial markets.
KRAKEN:BTCUSDEducation
by EsotericTrading
34
How to Read the MACD Indicator and Use It in Your TradingTechnical analysis is a vast field with thousands of indicators, which may be confusing to those among us who are just starting out. In this Idea, we look at one of the most popular indicators and also one of the easiest ones to fire up and start using from Day 1. MACD (Moving Average Convergence Divergence) MACD is arguably the most widely used indicator that can get slapped on virtually every chart out there. The indicator’s full name is Moving Average Convergence Divergence, but you don’t need to remember that. If you need to take away one thing, it’s this: MACD is easy to read. Here’s how to do it. Technical Side of Things Add the MACD in your chart of choice — any chart, any time frame. You’ll see three default numbers used to set it up — 12, 26, 9. The 12 is the moving average of the previous 12 bars (also called faster moving average). The 26 is the moving average of the previous 26 bars (also called slower moving average). The 9 is the moving average of the difference between the two averages in play. Next, you see that there are two lines that move up and down and cross each other occasionally. The two lines are: The MACD line: the difference between the two moving averages and the “faster line”. The Signal line: the moving average of the MACD line and the “slower line”. Because the two lines measure price changes at different speeds, the faster one (MACD) will always run ahead and react before the slower one (Signal) catches up. How to Trade with MACD If all that sounds a bit complex, here’s the gist of it: Faster line leads, slower line follows. Faster line crosses slower line to the downside — a downward trend may be forming. Faster line crosses slower line to the upside — an upward trend may be forming. Technically, whenever a new trend is shaping up, the slower line should confirm it by following the faster line. And that happens when the two cross over. The way to potentially spot new trading opportunities is to look for the crossover. This, in a nutshell, is how to read the MACD indicator and use it to help you become a more profitable trader. There's a whole plethora of MACD examples in action — dive right in ! Let us know your thoughts and experience with the MACD in the comments below!
Education
by TradingView
7
EBS Base Breakout SetupHey everybody got my camera working for this trade idea. Here we have the ebs stock setting up for a breakout in an uptrend and we're hoping for a bullish continuation here. I describe my entry points my stop loss and my profit target one and the logic behind them and how to position your share count so you can manage your risk and prepare to lose as much or as little money that you want if the trade goes against you every decision in this trade has meaning and logic to it that pertains to the particular stock and the setup therefore you know why you are doing everything that you're doing when trading. Let me know if you have any questions or if this is new to you or if you need help setting it up or calculating how much money you should win or lose. The only issue with this stock is that it's not in the technology sector and it's not in the communication sector so it is not in the most high performing sector right now although the healthcare sector is performing pretty decently with financials as well.
NYSE:EBSEducation
by PappyTrading
4
Trade the TREND with 4 Trend Indicators4 Trend Indicators you can use to identify the current MACRO Trend. It's always important to know where your market is currently trading. Is it bullish, bearish, or range trading? If you have established the trend, you can trade with the trend instead of against it. Trading against the trend ( for example shorting during a bullish cycle ) adds unnecessary risk to an already risky trade (leverage). 1) Bollinger Bands 2) Logarithmic View 3) Super Trend 4) Moving Averages + RSI Let me know how YOU determine the macro trend! _________________________ BINANCE:DOGEUSDT MEXC:ETHUSDT KRAKEN:BTCUSD COINBASE:SOLUSD
Education
by CryptoCheck-
4
Is It Possible to Define the Probability of an Effective Trade?Is It Possible to Define the Probability of an Effective Trade? Traders are constantly trying to figure out the secret of effective trading. However, the inherent unpredictability of markets minimises the ability to accurately determine the probability of an effective trade. This FXOpen article focuses on the many variables that contribute to the dynamism and uncertainty of financial markets. Let’s consider why it is impossible to estimate the chance of lucky trade and what can be done instead. Why Is Defining Trading Outcomes Difficult? Trading involves a multitude of variables, which make it challenging to define the probability of an effective trade. Economic indicators, earnings reports, news releases, and geopolitical events all contribute to trading results. Economic indicators that reflect the state of the economy are subject to revisions and unexpected changes. Geopolitical events, from political tensions to trade agreements, can quickly change the market trajectory. Market sentiment, influenced by news, social media, and psychological factors, introduces a human element that cannot be accurately quantified. That’s why it’s a challenge to define probability in trading. Factors Influencing Trading Outcomes Trading the odds is not an effective approach. This implies an attempt to determine market movements intuitively and believing in the best. However, by relying solely on the illusion of predicting the odds, traders gain a false sense of security and overlook other influential factors. Still, there are several factors that surely influence the results of trading, including market conditions, risk management, and trader psychology. For instance, volatility and liquidity significantly impact trading. Then, building a risk management strategy and using stop-loss orders may help mitigate potential losses. Lastly, understanding trader psychology, including emotional regulation and discipline, plays a vital role in making objective and consistent decisions. The Role of Market Analysis It’s unlikely that someone will be able to fully explain how lucky trades work. But it’s definitely possible to identify how trades built on analysis work and why they’re smarter. Market analysis, such as technical, fundamental, and sentiment analysis, provides insights into market movements. Technical analysis examines historical price patterns and indicators, while fundamental analysis delves into economic factors. Sentiment analysis gauges the mood of market participants through various indicators, such as social media trends. Trades based on an understanding of charts, fundamentals, and reasons for price movements are much more reliable and more likely to be effective than guessing. However, traders should not forget about the complexity of defining trading outcomes. Even using advanced indicators, one cannot analyse future price movements with 100% precision. Markets are not static entities, and adaptability and risk management are key. Risk-Reward Ratio and Win Rate The risk-reward ratio is a critical tool for improving trading performance. The R/R ratio is a mathematical calculation used to measure the expected gains for every unit of risk undertaken. However, it’s important to note that this is a risk management tool rather than a measure of probability. Traders often fall into the trap of solely focusing on historical high win rates, believing this guarantees success in the future. However, the efficacy of a trade doesn’t solely hinge on the win rate. A high win rate may be effective when paired with favourable risk-reward ratios, potentially creating a sustainable trading strategy. Historical Performance Historical performance analysis involves scrutinising past market data, price movements, and trading patterns to identify trends, correlations, and potential signals. Traders use this analysis to make informed decisions about future market movements based on the belief that historical patterns can repeat themselves. Analysing historical performance gives traders a valuable perspective on potential future movements. Chart patterns, support and resistance levels, and key technical indicators become tools for analysing market behaviour based on past events. However, retrieving information from past market behaviour comes with limitations. Relying on historical data without considering current market dynamics may lead to misguided conclusions. Additionally, the occurrence of black swan events can disrupt established patterns. The Influence of Trader Skill Trader skill — a combination of experience and knowledge — plays a key role in overcoming uncertainty in trading. Experienced traders can interpret market signals with higher precision. Through exposure to diverse market conditions, traders develop a nuanced understanding of when to adhere to strategies and when to adapt. However, even the most seasoned traders are not immune to market unpredictability. While trader skill empowers individuals to make informed decisions, it does not ensure infallibility. Final Thoughts Ultimately, no one can determine the lucky trade chance. But while there are no guarantees, managing risk and maintaining a long-term perspective are crucial elements for traders. Analysing charts that can be found on the TickTrader trading platform, relying on indicators, adaptation, and getting as much practice as possible may improve performance in the market. In any case, one should not rely on luck alone. To continue gaining experience, you can open an FXOpen account and enjoy the exciting trading conditions available in the market. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
6