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Meet All Triangles — Quick and Easy Guide.📊✨ Discovering All Triangle Chart Patterns 📈✨ Welcome, traders and investors, to the exciting world of Triangle patterns! Today, we'll explore all known triangle shapes: Symmetrical, Ascending, Descending and Broadening Triangles. Triangle chart patterns provide valuable insights into market dynamics, representing a battle between buyers and sellers within a narrowing price range. These patterns are often categorized as continuation or neutral patterns indicating that the price is likely to continue its existing trend after the pattern completes. Symmetrical Triangle: A symmetrical triangle occurs when the slope of the price's highs and lows converge, forming a triangular shape. This pattern signifies a period of consolidation, with lower highs and higher lows indicating a balance between buyers and sellers. As the slopes converge, a breakout becomes imminent, although the direction of the breakout is uncertain. To take advantage of a symmetrical triangle, we can place entry orders above the slope of the lower highs and below the slope of the higher lows, prepared to ride the price in the direction of the breakout. Ascending Triangle: An ascending triangle features a resistance level and a slope of higher lows. Buyers gradually push the price up, testing the resistance level. This pattern often signals a breakout to the upside, as buyers gain strength and attempt to break through the resistance. To trade an ascending triangle, we can set entry orders above the resistance line and below the slope of the higher lows, ready for a potential upward breakout. However, it's important to remain open to movement in either direction, as sometimes the resistance level may prove too strong. Descending Triangle: In contrast to the ascending triangle, a descending triangle consists of lower highs forming the upper line, with a strong support level acting as the lower line. Sellers gain ground against buyers, and in most cases, the support line eventually breaks, leading to a continued downward move. To trade a descending triangle, we can set entry orders above the upper line (lower highs) and below the support line, prepared for a potential breakout. However, it's important to note that in some instances, the support line may hold, resulting in a strong upward move. Broadening Triangle: Now, let's dive into the intriguing Broadening Triangle, also known as a Megaphone Pattern. This pattern stands out due to its expanding price range, creating a unique visual pattern on the chart. The Megaphone Pattern consists of a series of higher highs and lower lows, causing the price range to widen over time. This pattern reflects increasing volatility and uncertainty in the market, with both buyers and sellers actively participating. Trading Triangles requires careful analysis and risk management due to its nature and potential for unpredictable price moves. To approach Triangle patterns effectively: 1️⃣ Pay attention to the pattern's boundaries: Identify the upper trendline connecting the highs and the lower trendline connecting the lows. These trendlines define the range of price movement within the pattern. 2️⃣ Watch for breakouts and reversals: Triangles often precedes significant price movements. We can look for breakouts above the upper trendline or breakdowns below the lower trendline as potential trading opportunities. 3️⃣ Confirm with additional indicators: Combine your analysis with other technical indicators or tools to validate your trading decisions. Consider using indicators like moving averages, oscillators, or volume analysis to confirm the pattern's potential direction. Remember, trading the Triangles requires careful analysis and risk management. It's important to consider the overall market context, fundamental factors, and other technical signals to make informed trading decisions. While chart patterns provide valuable insights, they cannot guarantee future price movements. Always conduct thorough research, stay updated with market news, and adapt your strategy as market conditions evolve. Wishing you successful trading journeys guided by these fascinating patterns! 🚀📈✨
INDEX:BTCUSDEducation
by Vestinda
Convergence & DivergenceOne of the important concepts that traders should understand is the difference between divergence and convergence, two terms that are often used interchangeably but have distinct meanings and implications for trading. Convergence refers to a situation where both the price of an asset and a technical indicator are moving in the same direction. For example, in a situation in which both the price of an asset and an indicator show an uptrend, there is a high probability that the trend will continue. So, here, the price and indicator CONVERGE (follow the same direction), and the trader may hesitate to trade in the opposite direction, as this is often seen as confirmation that the price movement is strong and likely to continue. Divergence refers to a situation where the price of an asset is moving in one direction while a technical indicator is moving in the opposite direction. For example, if we again consider the situation when the price of an asset shows an uptrend and, this time, the trend of a technical indicator is falling, there is a high probability of a trend reversal. So, here, the price and indicator DIVERGE (go in opposite directions). This is often seen as a warning sign that the price movement may not be sustainable and could soon reverse. To further understand the difference between convergence and divergence, let's look at some of the most commonly used technical indicators in trading: Relative Strength Index (RSI) RSI measures the strength of an asset by comparing the average gains and losses over a specified period of time. When the RSI value is above 70, it is considered overbought and is seen as likely to reverse soon. When the RSI value is below 30, it is considered oversold and is seen as likely to rebound. RSI Convergence RSI Divergence Moving Average Convergence Divergence (MACD) MACD measures the difference between two moving averages of an asset's price movements. Traders use the MACD to identify when bullish or bearish momentum is high. There is usually one short-term moving average and one long-term moving average. When the short-term moving average crosses above the long-term moving average, it is seen as a bullish signal, while a cross below the long-term moving average is seen as a bearish signal. MACD Convergence MACD Divergence Commodity Channel Index (CCI) CCI measures the difference between an asset's price change and its average price change. High positive readings indicate that the asset's price is above its average, which is seen as a bullish signal. Low negative readings indicate the asset's price is below its average, which is seen as a bearish signal. If the CCI value is above +100, this is seen as a signal of the start of an uptrend. If the CCI value is below -100, this is seen as a signal of the start of a downtrend. CCI Convergence CCI Divergence It is crucial to note that convergence and divergence are not guaranteed indicators of future price movements. Traders should use them in conjunction with other technical and fundamental analyses to aid their trading decisions. Traders should also be cautious of the fact that all indicators are lagging behind the current price action, and therefore they must be prepared to adjust their strategies accordingly. Trade safely and responsibly. BluetonaFX
Education
by BluetonaFX
4
I want to share with you some points about Risk ManagementThis topic is so important, that´s why I wanted to share it with you and hope I can reach as much people as possible. Hope it will help some :) I saw in the last years many who crashed their accounts very hard, they lost a lot of money and for some it was very dreadful! It is hard to watch this people how they burn money and bring even his own family in financial danger. That´s why risk management in trading is so heavily important, to keep yourself and your life in balance. May be some will find very helpful, or some will remember this rules again :) I will keep it a bit shorter here as in my book, but the main points are still mentioned! I can´t say it often enough, always keep your rules during trading. Trading is not the way to get rich quick, it is a serious and hard business! It take a lot of time to learn, it requires a lot of patience and it will happen a lot of failures. This failures are even more important than your success! Success will not open up how it will not work, failures will. But let´s talk about risk management! For each investment you have to consider you take for each trade the risk to lose money, that´s why it is mandatory to handle each investment with a good risk/reward distribution. You have to keep in mind, the determined risk/reward is only theoretically and can result complete different. But with knowledge you can dedicate a good entry for your trades to keep your risk as low as possible. Determine important support and resistance levels and think about all situations what could happen and what will you do, if you are going into the red or into the green? Which levels are the best entries and exits? This all will help you to determine your riks/reward ratio. What is the Risk/Reward Ratio? Successful day traders are generally aware of both, the potential risk and potential reward before entering a trade. The goal of a day trader is to place trades where the potential reward outweighs the potential risk. These trades would be considered to have a good risk/reward ratio. A risk/reward ratio is simply the amount of money you plan to risk, compared to the amount of money you believe you can gain. For example, if you think a potential trade may result in either a $400 profit or $100 loss, the trade would have a risk/reward ratio of 1:4, making it a favorable setup. Contrarily, if you risk $100 to make $100, the trade has a risk/reward ratio of 1:1, giving you the same type of unfavorable odds that you can find in a casino. Which ratio should you desire? Like described above, finding trades with high risk/reward ratios (1:2 or higher), will help you maintain higher average profits and lower average losses, making your trading strategy more sustainable. The common suggestion between traders is a distribution of minimum 1:2 ratio. In reality there are often even better ratios available, if you do your technical chart analysis or financial stock analysis. But what should you do if you have to cut losses? We have to place our stop loss right below our support or other important levels we determined before. The purpose is to cut losses before they grow too large. Stopping out of a losing trade can be one of the hardest things for traders to do consistently. However, failing to take stops can result in margin calls, unnecessarily large losses, and ultimately account blowouts. How big should I enter a position? To lower your risk I recommend to think about your size to enter a position. Overall you shouldn´t risk money you need, only deposit money in your broker you can afford. Entering small can be the smartest way to safe your account. I suggest that because of four reasons: 1. You don´t risk to much of your funds and your stop loss should be tight anyway. 2. You can average down if the price is going in the other direction, but consider this option only if you are sure what you are doing. 3. You can buy the dips/pullbacks if the trend is strong and still heading in your desired direction. 4. Your emotional control is stronger if the price movement is heading in the wrong direction. This brings us to the next topic. Should you use leverage? Yes I know, big leverage will give you big gains...but as a beginner you will not have the experience to know which trade has a very big potential or not. Even experienced traders use only a small amount to enter a position and not the whole fund. If you use leverage the losses can be much higher and the problem with that is, if you lose money, your leverage will also decrease significantly and the losses are harder to recover after each loss. So what is the answer of the question, should you use leverage? For beginners we can easily answer: Take your hands of a big leverage! You can so hardly blow up yourself with that tool, it is ridiculous. Your way back into the profit zone will probably take years. But you have to save yourself and after a period of time, a period of taking profits and cutting losses you will gain knowledge until you feel much more comfortable on the market and you understand how trading really works, then you can consider to use leverage. Conclusion: As I said, I want to share only some big points about this topic, simple and understandable, because I think many new investors don´t understand how important that topic is! Safe yourself and have fun in trading and learning! Sincerely, TradeandGrow Trade safe!
Education
by TradeandGrow
3
TOP 10 Money MYTHSAre you tired of hearing the monotonous refrains of personal finance advice that seems to pervade every medium? “Create a budget,” “spend less than you earn,” – it's an endless loop. It is time to dissect and debunk 10 persistent myths that shroud the domain of personal finance. 1. Debt is Always Detrimental. Debt is often depicted as inherently negative, but this is not always the case. It is crucial to differentiate between unwise debt, such as credit card debt, over-extended payments, and high-interest loans, and strategic debt which can be beneficial in creating value over time. 2. Credit Cards Are to be Avoided. Credit cards themselves are not inherently bad. When used judiciously, they can provide cash back, purchase insurance, discounts, and travel benefits. The key is disciplined usage and ensuring that payments are managed properly. 3. Retirement Planning Can Wait. Procrastination in retirement planning can be costly. The longer you wait to start saving, the more you will need to set aside later to achieve the same financial goals. Early investment taking advantage of compound interest is much more effective. 4. Wealth Requires a High Income. A high income does not guarantee financial security. It is not just about how much money you earn, but how effectively you manage and invest it. There are cases of individuals with modest incomes amassing significant wealth through frugal living and intelligent investing. 5. Saving Alone Leads to Wealth. Relying solely on savings is an inefficient path to wealth. The power of investing, especially in appreciating assets, is critical for wealth accumulation. Investments tend to offer higher returns over the long term compared to traditional saving methods. 6. Money Alters Your Personality. It is a common belief that money changes people, often for the worse. However, money typically amplifies pre-existing traits rather than altering a person’s character. Financial success or failure does not inherently change who you are at your core. 7. Investing is Synonymous with High-Risk. Investing involves risks, but so does not investing. With inflation, the value of money decreases over time. By not investing, you may risk having insufficient funds in the future. A balanced investment portfolio can mitigate risks and facilitate financial growth. 8. Homeownership is Essential. Owning a home is often considered an essential financial achievement, but it’s not always the best option for everyone. Homeownership comes with costs such as down payments, property taxes, maintenance, and insurance. Sometimes renting can be a more economical and flexible option. 9. Investing is Only for the Wealthy. This is a common misconception. Investing is a means by which individuals can build wealth, regardless of income level. Even modest investments, if managed wisely, can grow over time and contribute to financial stability. 10. Money is Meant to Be Spent. While it’s true that money is a medium of exchange, how you allocate your spending is important. Excessive spending on non-essential items can hinder financial growth. It’s important to focus on acquiring assets that can generate income and contribute to long-term financial security. In summary, it is essential for anyone engaged in personal finance to critically examine common assumptions and develop strategies based on informed decision-making.
TVC:DXYEducation
by financialflagship
Educational: All in one technical indicator: Technical Rating.If you have ever wanted an indicator that accounts for a large number of other indicators to give you a rating of the market conditions, Then the technical rating indicator is what you've been looking for. 📊 What is the technical rating indicator and how it works The technical rating indicator (TRI) is a tool that aids traders and investors in assessing the technical analysis-based performance of a stock, ETF, or any other financial instrument. Technical analysis is the study of price changes, trends, patterns, and indications that can provide insight into the state of the market and an asset's supply and demand dynamics. It is a simplified version of TradingView "More Technicals" page for an asset. The TRI is derived by integrating a number of technical indicators, such as momentum, trend and volatility, that track various elements of price activity. Each indicator is given a score by the TRI based on how bullish or bearish it is, and the scores are then averaged to produce a final rating. The rating can be between 0 and 100, with 0 denoting extreme pessimism and 100 denoting extreme optimism. Here is a list of the indicators used in the calculations and how their ratings are determined: 🔹 All Moving Averages Buy — MA value < price Sell — MA value > price Neutral — MA value = price 🔹Ichimoku Cloud Buy — base line < price and conversion line crosses price from below and lead line 1 > price and lead line 1 > lead line 2 Sell — base line > price and conversion line crosses price from above and lead line 1 < price and lead line 1 < lead line 2 Neutral — neither Buy nor Sell 🔹Relative Strength Index Buy — indicator < 30 and rising Sell — indicator > 70 and falling Neutral — neither Buy nor Sell 🔹Stochastic Buy — main line < 20 and main line crosses over the signal line Sell — main line > 80 and main line crosses under the signal line Neutral — neither Buy nor Sell 🔹Commodity Channel Index Buy — indicator < -100 and rising Sell — indicator > 100 and falling Neutral — neither Buy nor Sell 🔹Average Directional Index Buy — indicator > 20 and +DI line crosses over -DI line Sell — indicator > 20 and +DI line crosses under -DI line Neutral — neither Buy nor Sell 🔹Awesome Oscillator Buy — saucer and values are greater than 0, or cross over the zero line Sell — saucer and values are lower than 0, or cross under the zero line Neutral — neither Buy nor Sell 🔹Momentum Buy — indicator values are rising Sell — indicator values are falling Neutral — neither Buy nor Sell 🔹MACD Buy — main line values > signal line values Sell — main line values < signal line values Neutral — neither Buy nor Sell 🔹Stochastic RSI Buy — downtrend and K and D lines < 20 and K line crosses over D line Sell — uptrend and K and D lines > 80 and K line crosses under D line Neutral — neither Buy nor Sell 🔹Williams Percent Range Buy — indicator < lower band and rising Sell — indicator > upper band and falling Neutral — neither Buy nor Sell 🔹Bulls and Bears Power Buy — uptrend and BearPower < zero and BearPower is rising Sell — downtrend and BullPower > zero and BullPower is falling Neutral — neither Buy nor Sell 🔹Ultimate Oscillator Buy — UO > 70 Sell — UO < 30 Neutral — neither Buy nor Sell The TRI can assist traders and investors in determining possible entry and exit opportunities as well as the intensity and direction of the current trend. Using the TRI, you may evaluate various assets and determine which ones are outperforming or underperforming the market. 📊 How to access the indicator: The technical rating indicator comes free with your TradingView account and you can access it by utilizing the indicator search tab. 📊 How to read the indicator The technical rating indicator can help you detect trends very early. It is displayed as a column chart by default. When the columns are closing above the 0 line, it indicates that there is more bullish confluence from multiple indicators, and when below 0 there is more bearish confluence. You may have also noticed that the colors are gradient Allowing the user to determine the intensity of a trend. : The price being bearish or bullish is an indication that most of the indicators used in the calculation are indicating sell or buy. Important note: Whenever the indicator is indicating a strong sell or buy usually the oscillators will be saying the opposite. This is due to the nature of how the indicators operate. See illustration below for explanation. If you would like to focus on finding reversals verses trend or vice versa you can adjust the settings of the indicator to either focus on moving averages or oscillators. Moving averages being trend based and oscillators being reversals. Here are some additional settings of the indicator: 1: This is where you can adjust what timeframe you would like the indicator to be based on. For example you can be on the 1Hr timeframe and get information on the daily timeframe. 2: Use these settings to determine what timeframe information you would like to see on the table 3: This is the table that displays information about other timeframes. 📊Some of the advantages of using the TRI are: 🔹 It simplifies the technical analysis by providing a single number that summarizes the overall technical condition of an asset. 🔹 It eliminates the subjective interpretation of individual indicators and reduces the risk of conflicting signals. 🔹 It adapts to different time frames and market conditions by using dynamic thresholds and weights for each indicator. 🔹 It can be customized by choosing different indicators and parameters according to personal preferences and trading styles. 📊Some of the limitations of using the TRI are: 🔸 It does not take into account fundamental factors, such as earnings, news, or economic data, that can affect the price of an asset. 🔸 It does not provide specific trading signals or recommendations, but rather a general overview of the technical situation. 🔸 It may lag behind the actual price movements, especially in fast-moving or choppy markets. 🔸 It may generate false or misleading signals, especially in sideways or range-bound markets. The TRI is not a magic formula that guarantees success in trading or investing. It is a useful tool that can complement other methods of analysis and decision making. As with any technical indicator, it is important to use it with caution and common sense, and to test it on historical data before applying it to real trading situations.
COINBASE:ETHUSDEducation
by ChristopherDownie
BTC ANALYSIS 11/7/23BYBIT:BTCUSDT.P Although we are sitting at quite a large order block on the bearish side of things BTC has given us the impression to NEVER count it out. In the last 4HR candle we came to the upside which them confirms a double bottom sitting right on that 100EMA line. I'm no Psychic but I like what I see for some long trades with some nice added amount of leverage to execute over the lower timeframes as I keep saying over and over again. this is just a game about finding support. PRACTICRS FOR 'ZEAL' Zeal meaning: Zeal - The inner flame that burns brightly for all to see. A person without zeal is like an engine without steam. *When you're feeling sick of being patient, be more patient. *A bundle of losses doesn't matter if you keep consistent. So, they ^ are my PRACTICES FOR 'ZEAL' for this idea which i will surely be doing on all of my posts from now on Thanks guys.
by RPMWealth-Capital
TYPE OF FOREX MARKET ANALYSISIntroduction: Forex trading involves analyzing various factors to make informed decisions in the foreign exchange market. Traders employ different types of analysis to gain insights into market trends, anticipate price fluctuations, and make profitable trading decisions. Let's explore three primary types of forex analysis: fundamental analysis, technical analysis, and sentiment analysis. Fundamental Analysis: Fundamental analysis assesses economic, social, and political factors that influence currency values. Traders analyze macroeconomic indicators, news releases, and economic data. Key components include economic indicators, central bank policies, geopolitical factors, and market sentiment. Technical Analysis: Technical analysis studies historical price data, charts, and patterns to predict future price movements. Traders use tools like price charts, indicators, oscillators, and chart patterns. Techniques include moving averages, trendlines, Fibonacci analysis, and identifying support and resistance levels. Sentiment Analysis: Sentiment analysis assesses market sentiment and the collective emotional state of traders. Traders monitor news, social media, and economic indicators' deviation from expectations. Additional sources include COT reports, market depth, and order flow analysis. Conclusion: Forex analysis plays a crucial role in making informed trading decisions. Fundamental analysis evaluates economic factors, technical analysis focuses on historical price patterns, and sentiment analysis examines market sentiment. Successful traders often combine multiple analysis techniques to gain a comprehensive understanding. By integrating these approaches, traders can enhance their decision-making capabilities and improve their overall profitability in the dynamic forex market.
BELEX:CGLTEducation
by M2FINANCIALS
Psychology and Trading: Conquering FOMO 🔥 Do you ever feel the Fear of Missing Out (FOMO) when trading? 🔥 It's a common struggle, but fear not! In this post, I'll share five crucial points that have been instrumental in helping me gain control over my psychology throughout my trading journey. 😎 Embrace the Unpredictability: The market is a wild ride, and it can change direction in the blink of an eye. Even the best setups can turn into losses within seconds. So, keep a neutral mindset! Recognize that prices can move in any direction, and be ready to adjust your bias as market structures develop. By staying neutral, you can reduce your emotions and build a strong trading psychology. 💪 Master Risk Management: Risk management is the holy grail of trading. Without it, you're just gambling. Losses are inevitable, but by limiting your risk to a small percentage (e.g., 1%), you can protect your capital and keep trading. Consistently managing risk and maximizing your reward-to-risk ratio will compound your profits and overshadow any losses. ⏳ Patience Pays Off: Don't chase after every trade. If you miss an entry, don't panic! There will always be new opportunities that fit your trading plan. Impulsively chasing volatility leads to revenge trading, greed, and unnecessary losses. Stay disciplined and wait for confirmation before jumping into a trade. 🚫 Leave Your Ego Behind: Your ego has no place in trading. Just because you think the price will hit your target doesn't mean it will. Profitability comes from taking what the market offers. Be humble and flexible, adjusting your trades according to the market's behavior. This mindset shift will help you avoid costly mistakes. 📝 Craft a Solid Trading Plan: Want to succeed? Have a well-defined trading plan! It's your compass in the chaotic market. Identify profit targets, stop levels, and entry/exit points. Stick to your plan with unwavering discipline. Consistency and emotional control are key to achieving your trading goals. 📈 Remember, there's no one-size-fits-all approach in trading. Each trader has their own style, plan, and mindset. As long as you follow your plan and your decisions align with your criteria, you're on the right track. At @Vestinda we hope you found these tips helpful! Trading is a journey of self-improvement and constant learning. By applying these principles, you'll gain better control over your psychology and increase your chances of success. Keep exploring, stay curious, and never stop honing your trading skills! 🤗
BITSTAMP:BTCUSDEducation
by Vestinda
5 Trades this week & +2.40% 😆 / Part 1In this Weekly Review I breakdown my thought process for my first 4 trades of the week. The video was cut short due to a 20 Minutes max length for tradingview. I just learned about this since I am new to video analyses on tradingview. I will be uploading the Part 2 for my final (5th) trade of the week at some point this weekend. If you enjoyed the video, please leave a rocket or a comment 😁 I will be making more video analysis for the channel as I have been enjoying them myself. Anyways have a nice weekend.
Education
by ShrewdCatfx
Importance of a Stop Loss🔴 A stop-loss (SL) is a limit order that specifies how much loss you are willing to take on a trade. It prevents you from making additional losses on a trading position. 🟢 A take-profit (TP) works as the exact opposite of a stop-loss. It specifies the price to close out a position for profit. When you have a take-profit order, the trading platform you are using closes your position automatically when the price level is reached. These tools are beginner friendly and are usually effective for short term trading. The first thing a trader should consider is that the stop loss must be placed at a logical level. This means a level that will both inform the trader when their trade signal is no longer valid, and that actually makes sense in the surrounding market structure. There are several tips on how to exit a trade in the right way. The first one is to let the market hit the predefined stop loss that you placed when you entered the trade. Another method is to exit manually, because the price action has generated a signal against your position. I advise you to use Stop Loss for EVERY trade that you open. Trading without a Stop Loss is a huge risk and it requires specific strategy and experience.
Education
by SanShone
GOLD buyXAUUSD aka Gold we will know have multi time frame anylsis and we start from daily TF in which gold is going to complete a falling wedge and has taken all the Sell orders on daily time frame through a fake out candle and now it will reach its buy zone soon 2- now as we see on H4 time frame on 1924 level it has given a beautiful Bearish engulfing which gives us a short term signal to short this commodity to our level at 1913 so we have take a scalp trade from our M15 bearish Engulfing zone 3- now on Daily time frame we have a buy confluance as gold is showing us rejecton and 200EMA also showing a buy side potential
OANDA:XAUUSDLong
by Wakeel_Saab
1
Educational: The issue with high risk to reward🔶 Introduction A high win rate—that is, the proportion of trades that result in profits—is appealing to many traders. They might believe that being lucrative requires a high win rate, or that it will increase their self-assurance and lessen their tension. A trader's performance may be negatively impacted over time if they have a high win rate, which is not a guarantee that they will be profitable. We will discuss the problem with high risk to reward and win rates in trading in this publication and why they are not the best measures of success. 🔶 Risk to reward and win rate Two ideas that are frequently used to gauge the effectiveness of a trading system or strategy are the risk to reward ratio and win rate. The risk to reward ratio calculates how much a trader is prepared to lose in exchange for a possible gain. A trader's risk to reward ratio, for instance, is 1:2 if they stake $100 in order to gain $200. The win rate calculates the percentage of trades that a trader wins out of all the trades they place. For instance, a trader's win rate is 80% if they win 80 out of every 100 trades. 🔶 Inverse Relationship between Risk to Reward Ratio and Win Rate One would believe that a successful trader should have a high win rate together with a high risk to reward ratio. This isn't always the case, though. In fact, the risk to reward ratio and win rate have an inverse connection, which means that when one goes up, the other goes down. This is due to the fact that the likelihood of achieving a reward decreases as it increases in potential, and vice versa. For example, if a trader aims for a 10:1 risk to reward ratio, they will have to find a very rare opportunity where they can risk $100 to make $1000, which is unlikely to happen often. On the other hand, if a trader aims for a 1:1 risk to reward ratio, they will have more chances of finding trades where they can risk $100 to make $100, but they will also have to win more than half of their trades to be profitable. 🔶 Importance of Positive Expectation Therefore, unless a trader also has a positive expectation, which is the average amount of money they gain or lose every deal, having a high win rate does not necessarily indicate that they are a profitable trader. The risk to reward ratio is multiplied by the win rate, and the loss rate—which equals 1 less than the win rate—is subtracted to determine the expectation. For instance, a trader's expectation is as follows if they have a 2:1 risk to reward ratio and a 60% win rate: Expectancy = (2 x 0.6) - (1 x 0.4) = 0.8 This indicates that they profit by $0.8 every trade on average. However, if their win rate remains at 60% and their risk to reward ratio falls to 1:1, their anticipation changes to: Expectancy = (1 x 0.6) - (1 x 0.4) = 0.2 This means that on average, they make only $0.2 per trade. As you can see, having a high win rate does not guarantee profitability, unless it is accompanied by a high enough risk to reward ratio. 🔶 The Limitations of High Risk-to-Reward Ratio and Win Rate High win rates can also be problematic because they might make traders overconfident and complacent. They might neglect the risks and uncertainties associated with trading because they believe they have discovered a perfect technique or plan that will always work in their favor. A second possibility is that they grow emotionally attached to their winning streaks and worry about losing them, which can lead them to stray from their trading strategy or take unwarranted risks. Furthermore, a high success rate may make traders more susceptible to cognitive errors like confirmation bias and hindsight bias, which can skew their judgment. 🔶 Conclusion It may not be as desirable as it may seem to have a high risk-to-reward ratio and win rate when trading. It does not necessarily imply that a trader is successful or profitable, and it may also have some negatives that adversely impact their performance. For long-term trading success, traders should pay more attention to other elements than only these indicators, such as expectancy, consistency, risk management, and emotional control.
COINBASE:ETHUSDEducation
by ChristopherDownie
3
KSE 100 INDEX BUYas Pakistan stock exchange has given an access to this portal and my first analysis is on KSE 100 INDEX i see a potential buy setup to a Daily Resistance Level and the first confluence for this setup is a GAP UP opening on Monday which is buy Signal the 2nd confluence is 200 EMA which is below candles and shows that it will be a buy setup third confluence is formation of a hammer candle which also shows us a buy setup but as i know the political situations and Geo economical position of Pakistan any move could be possible if everything goes smooth we will buying this 100 index
PSX:KSE100Long
by Wakeel_Saab
Educational: The truth about backtestingI recently started to read a number of finance books and watching a lot of YouTube channels specifically on the topic of chaos theory and backtesting. I am going to start a series here where I share what I am learning and today we are going to delve into the world of backtesting. "Those who fail to learn history are condemned to repeat it" - George Santayana Many would agree that the above statement is truth. However one of the first thing you learn in trading/finance is that "Past performance does not predict future results". This statement is on every website, every video and every article. Everyone arms themselves with this statement and then proceeds to base the information they provide on past performance/data. Well if this statement is truth, what is the alternative to using past performance/data? Financial reports, economic forecast, technical analysis, price action, footprint chart are all based on past performance/data. The truth is that the statement is made primarily as a legal protection against mislead investors who may believe that because something happened in the past it is guaranteed to happen again. But does that mean that there is no truth to the statement ? Well not exactly. "Hindsight is 20/20" When looking at market data of the past it is very easy to see clear patterns in market behavior that seemingly repeat over and over again, creating the illusion that if you map an investing/trading strategy on this data it is very likely to performance well in the future. But this is not truth at all. In order to understand why it is not true please try to imagine the activity below. Imagine you are a racecar driver, and you're brought to a new racing track that no one has every driven on . You are task with setting the best time record on the track. You got in your car, did your best and set a record of 10 minutes to complete the track. After the race you now have a map of the track and know what turns to expect and all the details of the road. Lets say you share this information to the next driver. He now attempts to set a record on the track and he beats your record by 2 minutes and the new record is now 8 minutes. The second driver now shares what he has learnt about the track to the third driver. The third driver takes the information from driver 1 and driver 2 and modifies his car to have the right tire's, right suspension, right aerodynamics etc. in order to have to best performance on the track. The third driver goes on the track and sets a record of 5 minutes. Completely outperforming driver 1 and driver 2. Driver 3 is now the champion of the track. Below is a simple visualization of what is happening in terms of information that each driver had on their first run of the track. Driver 3 is now dominating on the track and thinks he is unbeatable. Some time has past and driver 3 is brought to a new track that no one has raced on with his modified car from the first track. He attempts to race the track and sets a record of 12 minutes. He thinks he has done well. But driver 2 attempts the track and sets a record of 7 minutes out performing driver 3 Why didn't driver 3 outperform the other two drivers on the new track with his modified car? Well, what has happened here is that driver 3 has modified his car to the specifics of the first track as best as he can but when he went on another track that has different variables his car was not able to perform as well as it did before. Maybe the terrain was too rough or maybe the corners were too tight on this new track. Regardless of the reason, the modifications made to the car ended up working against him. In backtesting this is called "overfitting". Overfitting in backtesting is when a strategy has been developed too precisely on past data causing the strategy to "fit to the curve" and there is now a risk of it not performing in the future once the market behavior changes. Above we have a demonstration of how overfitting works. Where we looked at some data in the past and then we created a strategy that would have performance well on that data. Based on this information it now seems like we have a very profitable system but lets see what happens when me use this strategy on future data without adjusting our strategy. In the image above we can see that the same strategy is no longer working in the new market environment. There are periods where it does perform but overall it is far worst. Now you might wonder, why is this? If the strategy worked on the market in the past why wont it work in the future. This is because the market is unpredictable. People often say the market is random, it is not random, what it is, is unpredictable and that is very different from being random. I will be doing another publication on chaos theory in the markets which will go into this topic much deeper, but for now, know that the reason it doesn't work is because the market is unpredictable. When looking at past data if you take a bunch of variables and brute force your way into finding a strategy you will eventually find a strategy that "fits to the curve". You should not be using backtesting as a way to necessarily find a edge but it should be used as a way to validate your edge. So with knowing this information how do we combat overfitting of data and how to properly backtest a system. When backtesting you need to deploy your backtesting using out of sample and in sample data. And what that means is that you will break apart your data into clusters. Where your "in sample" data is where you design your strategy and parameters and your "out of sample" data is where you will apply your strategy to see if it works. For example lets say you are looking at 10 years of data that you want to backtest. Take 3 years of that 10 and develop your strategy. Then with the strategy you developed which performs well on your "in sample" data you will now use it to test the other 7 years, of your "out of sample" data. What this does is prevent you from overfitting to the curve by basing your strategy on the entire data set. Below is a visualization of this What this does allow you to create a robust strategy that can be forward tested on future data. Once again this is me sharing some of the knowledge I have attained. I am sure there are programmers here on tradingview that could possible explain this better or in more details. I welcome discussion and any criticism regarding my publication. Thank you for taking the time to read and I will update this publication in the future if needed.
COINBASE:ETHUSDEducation
by ChristopherDownie
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