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HIGHEST OPEN / LOWEST OPEN TRADE✴️ Hello, ladies and gentlemen! Today we are going to talk about a popular strategy called Highest open Lowest open. This strategy was first published on forexfactory forum. The strategy is based on following the natural movements of the market, which you may consider unpredictable. Here, we will make money on those very movements. In this strategy, you will have to wait, you will have to be disciplined. The idea behind this strategy is as follows: There are two assumptions. First, during the day there are always seemingly chaotic zigzag movements of the price. Secondly, any candle, be it bearish/bullish, will have tails. Third, someone needs to be taken out of the market. As we remember, there are bulls, bears and there are pigs as described in many famous trading books. 1) So, let's mark the High/Low points of the current day and the previous day on the chart. 2) After that, on the current day, let's mark the highest and lowest points of the H1 candle opening. It is the opening price of the candle that is meant. These opening points can and will shift during the day, and this is normal. The entries of the strategy are quite short, and such a shift of the markup during the day can occur. This (for the moment) is the end of our markup. ✴️ Strategy Rules When do we buy or sell? So, we buy when the price goes below the lower line and comes back. That is, when the price is behind the line (for example, the lower line), we place a Buy Stop order on the line to enter on its breakout. To sell, we enter on the same principle: the price goes above the upper line, set an order on the border, inside the channel. It is not necessary to use a pending order for this, if you want, you can enter the market. But, how can we understand that the price has really been below the lower level or above the upper level? After all, it may well be that the price will break the level by only one pip, which, of course, will not be a signal to enter. But, for this reason, we have the concept of "entry timeframe", which can be M5, M15 or M1. So, when the M5 candle closes above the signal line and, accordingly, a new M5 candle opens we can enter to sell when the level is reached. The same is true for buying. M5 candle should close below the signal level, and at the opening of a new candle we set a pending order. Or, we wait until the level is reached and enter the market. At the same time, the opening price should not exceed the maximum and minimum of the day! ✴️ Trade details: TP and SL, Money Management The start time of trading is 8 am New York time. But in general, you can trade practically at any time. Since everyone has different time zones, you can choose a trading time that suits you, and the strategy will still work. We set the stop loss for the daily high, or for the daily low. The method of profit taking can be different. First, there is a basic rule: when the trade is in profit +5 pips, we move the stop to breakeven +1 pips of profit. Secondly, you can exit with a profit of 10 pips, or when a profit of 10 pips or more is reached, move the stop to breakeven +5 pips. Also, you can exit the position in partial portions, it is already from personal preferences. But it is better to follow the rule of putting the stop at breakeven. So, why did we mark the High-Low of the previous day? If the high or low of the previous day is broken, it means that there was a breakout and you should be careful here. It is quite possible that the price will run far beyond the marked level after the breakout. Also, the situation with several entries within one hour is quite possible. If the price on M5 constantly breaks the level and returns, you can enter at every suitable signal. Since the profit is small in most cases, it is better to use pairs with low spread in trading. This way you will be able to move the stop to breakeven faster. There can be a lot of entries on the strategy during the day. Especially if you use several pairs. Therefore, there is no sense to risk more than 1% of your capital per trade. Moreover, it is better to use 0.5%. ✴️ Examples Now let's look at a few examples. On the H1 chart, we mark the highest opening point, and move to the M5 chart. Here, we can see how the price closed beyond the level, below the high of the current day. On the breakout of the level, we enter to sell. We set the stop loss slightly above the maximum of the day. When the profit of 5 pips is reached, we turn on the trailing stop. In this trade we would have earned about 50 pips, with an initial stop of 10 pips. We move the level again to the opening of the next candle, and wait for the crossing on M5. This, in fact, is the process of trading. Once again, we are talking about the current daily highs and lows. Thus, if the highest or lowest opening price changes, we move the line accordingly. Also, when setting a stop, we take into account the current High and Low. If there is a breakout of the previous day's High or Low, enter with caution, as the price may well rush towards the breakout. ✴️ Conclusion This strategy requires attention, the ability to wait, discipline, calm and accurate calculation. Nevertheless, it is a powerful weapon in skillful hands. That proves the popularity of the strategy on the forexfactory forum. The strategy itself is quite simple.
Education
by DeGRAM
7
SUPPLY AND DEMAND LEVELS How do we determine the levels of supply and demand on a chart? To find supply, we will look at the highs of price movements, and to find demand, we will look at the lows. We need to note highs and lows with fast and strong price movements. Fast rises for demand and troughs for supply. The less the price stays at a level the better for us. The first thing we need to do, just like when marking support and resistance levels, is to look at the highs and lows on the charts. Note that the closest area to the current price has been tested on the chart below. And the lower one has not been tested yet. It has only been touched by price once, so this area is stronger than the one that has already been tested. At the marked levels, we observe that the price was at them for a short time. It reversed almost immediately and went down with large candles. The important factor here is the time that the price "did not stay" at the level. The less time the price was on the level, the more significant this level is. And it is worth keeping in mind the size of the candles. The bigger these candles are, the stronger the reaction. In addition, supply and demand levels become mirrored. Just like support and resistance. If we pay attention to the highlighted area on the UKOIL chart below, we can see that there was first supply and then a strong breakout. The price overcame the supply, took its remain orders and went higher. And now this area has become a demand area: As you can see, there was a quick bounce from it here. Our goal is to determine the demand at the low levels and the supply at the peaks. We find strong and fast price movements on the chart. A rise for demand and a fall for supply. These should be big candles and the price should not crowd in one place for a very long time. There should not be a long retracement. The less the price spends on the level, the better. In addition, pay attention to round levels. Such as 1,100; 1,500; 1,300 and so on.... Do not go back too far on the chart, because what happened on it earlier is not so important for the methodology of supply and demand levels. These are not support and resistance levels after all. And once again I want to repeat to you that the most important thing is that these levels should be visible not only to you, but also to other players. In order for them to work them out. What happens at these levels and why do they work? At these demand levels, large players place limit buy orders, and at supply levels they place sell orders. Why does this happen? Because at these levels it is easier for the large players to execute the order by collecting the positions of smaller players. Every time the price reaches the supply area, we have sell orders executed by the big players. They take the buy orders that other players open and use them to execute their sell orders. When the buy orders run out, the price falls again. When it rises to the same level again, many sell orders of the big players are executed again with the help of stops and buy orders of smaller traders. When the opposite orders run out, the price falls again. The point is that a large position cannot be opened simply without a significant change in price. That is why big players, banks, market makers have to play around and set some kind of traps for other traders in order to open larger positions at their expense. Now let's look at this area of the supply: It was a supply level, but on two occasions many sell orders of big players were executed on it. On the third time, as you can see, there were no big players left, so the price decided to break this level and went higher. From this we conclude that supply tends to run out, just like demand. Once it is over, there is nothing to stop the price from breaking this level and going higher. Therefore, it is considered that for profitable trading the supply and demand levels are suitable only for the first time, when the price has just touched the level. Then we can sell or buy on the retest of the level. But when the price comes back to it again (for the third time), we should not enter the trade it, as the breakout is very likely. I should note that a higher candlestick maximum does not always mean that a new supply area has been created. And a lower low does not mean that a new area of demand has been created. It can be just a spike, a trace from the execution of a large number of orders. In this trade, it is worth paying attention to higher time frames. If you trade on H4, look at daily and weekly charts. So that your buying on H4 does not fall into the supply area on the weekly charts. Use multiple timeframes in your trading and don't forget to look at the level on the higher timeframes.
Education
by Lingrid
14
WHAT IS EXPECTATION IN TRADING✴️ What is expectation in trading? Every trader should be familiar with the concept of mathematical expectation, we will briefly discuss this aspect again. Take a look at the figure above. In the end, the total net profit (or loss) comes from both the frequency of profitable and losing positions (however many there are) and their average size. The goal of any market analysis, any strategy, is to try to have more profitable trades (and therefore fewer losing trades). And while entry point analysis can have its advantages, at the end of the day, we can't predict the future. The average size of profitable and losing positions, on the other hand, gives us much more information and, in fact, a very large degree of control. For if we take a risk in our position of, say, three percent, our average loss will not exceed minus three percent. And the only thing we have to do for that is to close positions when the risk gets to three percent or less. No forecasting or analysis is needed at all. Similarly, we can also increase the average size of our profitable positions by simply holding them (i.e., not closing them) and adding to them (i.e., opening more positions in that direction) as they bring us large profits. So, in the end, it's all about minimizing losses and maximizing profits. Going back to the figure above, this means we should focus on the mass of weights. Being profitable in trading over the long term, comes down to minimizing losses and allowing profits to grow. It's not about whether you act right or wrong - it's about how you manage your profits and losses. ✴️ Problems with mathematical expectation Mathematical expectation isn't hard to understand. And to help understand it, very simple analogies are often used, such as gambling: dice, roulette, or even the lottery. Thanks to expectation, it is easy to prove that all such games are ultimately losers if played for quite a long time. And here we come to the heart of the problem. The concept, or you could say the myth of "expectation of one's system". A more popular term for traders is "edge". Legend has it that you should have positive expectations of your trading system. But this is a futile endeavor because, unlike gambling, the system may not have, and probably does not have, a consistent percentage of profitable positions. After all, markets do not move randomly. Thus, in financial markets, we only know our historical frequency of profitable and losing positions, unlike in a dice game where we also know the upcoming expectation. The myth that we need to have positive expectations of our system before trusting it with our money has dire consequences. It feeds the belief that you need to have an edge (in terms of math expectation) to be profitable in the long run. It also feeds the unhelpful need for backtesting. Any system that has negative expectations and is naturally backed up by backtesting is discarded. Good systems are criticized because they may be out of sync with the markets for a while, i.e. not profitable for a while. And it comes down to adjusting the yield curve on historical data, i.e. over-optimization. What do traders do in search of a system with positive expectations? The same thing: they do not take into account the probability distribution in the measurement domain. And if Nassim Nicholas Taleb's Black Swan has taught us anything, it's that we simply can't do that. We can't apply measurements beyond the interval in which those measurements were made. And we certainly have to realize that we have to look at expectations as a whole. It is precisely not the probabilities that are killing us, it is the outcomes. And once again, even probabilities (and perhaps similar distributions) are not stable in financial markets. Markets are chaotic, fractal in nature, with exponentially changing behavior (and not always). ✴️ What can we do to improve our mathematical expectation? The good news is that when a trader starts thinking with his head instead of relying on expectations, he/she doesn't have to do anything to his "system". Trading expectations (as opposed to expectations of one's system) is simply using the knowledge that we have much more control over the size of our profit/loss (average size of profitable and losing positions) than we have over probability (frequency of profitable and losing positions). And, because we don't focus on historical expectations, trading expectations can work for us. By keeping losses small and increasing our profits (and adding to profitable positions), we gain true advantages. The following experiment was conducted: the simulator opened random positions, from which the expectation and net profit were calculated. This model averaged several million sets of 30 long positions during a bear market. The average net loss was -12 percent; only about one-third of all positions were profitable. Now, by simply opening the same positions, cutting the losses to minus three percent (using a stop loss) and at the same time adding to the profitable positions, we achieved an average net result for the same positions of 1.8 percent profit (on average in a falling market). So, by using expectations in our favor, we actually changed the values of expectations! Traders who believed that initially negative expectations were useless would never have been able to do this because they had abandoned the system from the start. This doesn't mean that losses can be turned into profits exactly, but in the long run expectation works by closing out losing positions and adding to profitable positions. But when looking at the possible history of trades on the chart in the past, traders are often fooling themselves. Thus, none of the trading systems are either profitable or unprofitable, they look that way only in relation to the method of position size management and money management applied. ✴️ Conclusion To summarize, it is one thing to see how a forex strategy has behaved in history, but to expect it to behave the same way in the future is another. Traders should focus less on testing on history and more on the current situation: to cut losses and even more on maximizing their profits and adding to profitable positions. Follow this rule long enough and you will experience the true power of mathematical expectation in Forex trading.
Education
by DeGRAM
5
Signal Providers: Red Flags to Watch Out ForSignal providers are becoming increasingly popular among traders, offering automated trading recommendations or strategies to take advantage of forex. However, it is important to be aware of potential red flags that may indicate that a signal provider is not trustworthy. In this post, we will look at some of the most common "red flags" that signal providers can exhibit and how to recognize them. We'll discuss when to be suspicious, what to look out for, and how to avoid being scammed by signal providers. Unrealistic returns One of the most common red flags to look out for when researching signal providers is unrealistic claims about future returns. If they promise huge returns with no risk and little investment, it could be a sign that they are not being honest and realistic about the strategies they offer. Always do your own research to ensure that the results claimed by the signal provider are accurate and that you are getting a fair deal. These can be third party marketplaces that help verify trades. Hidden charges Be aware of any hidden costs or fees that the provider may charge. Many providers may advertise low rates or free services, but they may hide additional costs or fees that will be charged after a period of time. Be sure to read the terms and conditions carefully to understand what fees may be associated with the service. You should also contact customer service to see if there are any additional costs or fees that you have not considered. Competing interests Be wary of signal providers that have potential conflicts of interest, such as those that receive commissions from the trades they recommend. This can lead to biased recommendations and put your money at risk. Only use providers that have no conflict of interest and are unbiased. Inadequate customer service Signal providers with poor customer service should also be avoided. If a provider is unresponsive or unwilling to answer your questions, it could be a sign that they cannot be trusted. In addition, signal providers that do not provide adequate support to their customers can be a red flag. If you are being ignored for a long time, there is a high probability that you have been scammed for money. Lack of personalization If a signal provider does not offer any customization options for their strategies, it could be a sign that they do not provide personalized services. Always go for those providers who are willing to customize their strategies to suit your individual needs. Insistent demand to deposit your money Finally, look out for those providers who are pressuring you to fund your account immediately. These are big hints of unclean services. If they use aggressive sales tactics or make unrealistic promises, it could be a sign that they are not trustworthy. Always do your own research and make sure you understand all the risks and benefits of different investment options before depositing money. For example, you buy a subscription signal provider after a few days you are charged extra money for 100% utilization of the service. By understanding the red flags that signal providers may show, you can be sure to protect yourself from potential scams and fraud. If you have any doubts or concerns, be sure to do your own research and only use providers that you trust. Be sure to watch out for warning signs that may indicate a possible fraud or scam. These include, but are not limited to: if the provider asks for your banking information, if the provider asks for your social security or credit card numbers, if the provider asks for your personal information or money in an unusual or too random way. Run away from such signal providers.
Education
by UnknownUnicorn15614419
9
THE J-CURVE EFFECTHello traders. In today's post, we will look at such a concept as the J-curve. This curve is found in various fields and can visually represent various phenomena. However, today we will look at the J-curve as a phenomenon of trading. In the post, you will learn what a J-curve is and what its essence is. According to Investopedia , the J-curve is a trendline that illustrates a sharp gain after an initial decline. This pattern of movement looks like a capital "J" on a chart. The J-curve is useful for displaying an event or action's impact over a certain amount of time. Frankly, it demonstrates that problems will worsen before they get better. Let's remember how we started our journey into trading. We used to open trades with enthusiasm. The psychology of trading, oddly enough, was close to perfect. You start to get “good” at it. Sometimes the luck goes your way and you make money on a particularly good week. Things keep going. Until you blow your capital. And then another. And then another one. What seemed to be working somehow stops working. You decide to be smarter and win back by doubling the lot size each time. Or you open two trades, one up and one down. Sometimes it works, but at the end of the month your losses drained your account, and you lost substantial amount of money. The descent down the curve has begun. Then you decide to find a "more profitable strategy" for trading and at this point you are at a drawdown. Maybe you have spent months on this, or maybe a week was enough to realize that it's not that simple. It seems that there is no way to do without studying. And if you want to make money on it steadily, and not to make money on gambling to immediately lose it again, you need to study something. After several lost accounts, you never really got anywhere in the end. You are depressed. All that information, indicators, candlesticks, bars, patterns, books, courses, webinars, paid and free advice, trader chat rooms and YouTube channels, all this only led to the fact that you, a year later, lost even more money. You often experience fear. You are scared to open the chart, scared to look at how the price is going, whether the prediction will come true or not. It is so scary that after opening a trade you sometimes close the browser or terminal window just to avoid looking at it. In some moments of despair absolutely you do not understand anything. All of this is some kind of mess, complete nonsense. According to statistics, more than 60% of traders give up in the first 3 months and leave with an enormous hole in their wallet. After a year, another 30% will give up. Only 5-10% remain in the market after a year, and not all of them will get a stable profit in the following years. This is the bottom of the J curve and at this point you are in crisis, which for most will be catastrophic. But still, something keeps you from giving up. You continue to waste time and money trying to learn. You lose a couple more accounts. It's a big hole in your pocket. But gradually the losses diminish until they stop completely. You are tired of losing money by haste, in a blind game with the market. You learn to work with drawdowns. You know, it's because of trying to get back money that there were so many impulsive trades. So many trying to see a trend where there is no trend. You have too often gone into a trend time after time in the belief that it will continue. You constantly bet on a reversal of the price, and it never thought to turn. You try hard to build your strategy and gradually come to a system consisting of several elements, which shows better results than other options. It still constantly gives unsuccessful trades, but you no longer want to break the monitor with your fist. Suddenly it becomes clear it's all about trader discipline and time management. It's about stability and consistency. The fact that you know how to behave not only in case of profit, but also in case of loss. You learn how to psychologically cope with failures. You realize that it is the uncontrollable desire to recover the numbers on the balance that most often led to disaster. You have already bounced off the bottom of the J curve and are slowly climbing up. You are not a consistently profitable trader yet, but you are making much effort to become one. Sometimes there is nothing interesting on the chart for a week. Sometimes you work cautiously for a month or more, spending 90% of your time waiting for the right market conditions. The account is still standing still. Sometimes for months. You're increasing it, then you're back to the original amount. You realize things are going pretty well. You haven't lost any money at all in the past month. You at break even point on the J-curve. At some point, you are surprised to notice that you are increasingly successful in profitable trades despite regular failures. Time is going by. The account begins to increase steadily. The first month was a small profit. Second. Third. You are at the highest point of the J-curve. Exponential growth. So, what brings traders success? Trading is a business, and like any business or startup, things don't go smoothly at the beginning. That's why you have to survive before you thrive. The number-one key element is effort—trying to improve every day. Backtesting the strategy to make it suitable for you. Journaling your trades and emotions and all of these, of course, takes time. The more time you put into it, the faster you will get to the break-even point. You need to invest money in your trading education. Maybe it's a course or book. Or backtesting tool that will accelerate learning curve and improve your trading skills. The combination of these three elements creates success ( TIME + EFFORT + MONEY = SUCCESS ). If you take one of these out of the equation, the learning process may slow down. Some traders become profitable after 5–10 years, some after 12–18 months. All depend on balancing the equation.
Education
by Lingrid
9
PRICE ACTION: ENGULFING PATTERNIn this post we will analyze the Price Action engulfing pattern, one of the main candlestick patterns, which traders appreciate for its reliability and high percentage of success rate. Confirmed by other factors (key levels, indicator signals, fundamental preconditions), the engulfing pattern can become an effective tool for gaining profit. ✴️ What Does This Pattern Tell Us? The engulfing pattern (outside bar) is mostly a reversal pattern (although in most cases it can also indicate a trend continuation). It looks like two candles, the first of which is small in size, and the second is a large candle with a body larger than the entire previous candle and directed in the opposite direction. From the point of view of the crowd movement, this pattern means that the strength of the current trend is running out (as evidenced by the small size of the first candle being engulfed). The crowd does not know in what direction to move and, figuratively speaking, is treading on the spot. The appearance of a powerful candle, which absorbed the previous one and closed in the opposite direction, marks the beginning of a new, strong trend. The example above shows that the bears, having failed to find support, stopped the downward movement, after which the bulls, having organized an impulse in the price growth, collected stop losses of traders who opened positions on the downside, when the price was still moving downward by inertia at the beginning of the reversal candle formation. After the reversal and knocking these traders out of the market, the bulls finally strengthen and a powerful uptrend is formed. There are several mandatory conditions that a pattern must meet in order for its signal to provide the maximum probability of working out: 1. There must be a downtrend or uptrend in the market before the pattern itself. The movement can be small, but its presence is necessary. 2. The body of the second candle must be of a different color and direction (bearish after bullish and bullish after bearish). Shadows may not be engulfed, but then the signal is considered weaker. 3. The body of the second candle should have a contrasting color to the body of the first candle. The exception is when the body of the first candle is very small (doji). In addition to the basic rules of determining the pattern of the outside bar, there are other important nuances, taking into account which traders are more likely to increase the efficiency of their trading. It is worth avoiding trading in flat conditions. In a sideways movement, engulfing patterns are quite common, and if you trade each of them, you can get a lot of losing trades. A reversal pattern implies the presence of a trend. If you open a position on the signal of the outside bar only after a clear movement, the number of false entries into the market will be significantly reduced, respectively, the overall percentage of profitability of trading will increase. It is necessary to take into consideration the overall market situation before opening a trade, it is necessary to evaluate what happened to the price of the asset earlier. ✴️ Trading Engulfing Pattern If all conditions are met and the signal is strong enough, you can enter the market. Let's consider how exactly trading on the outside bar is conducted. It is better to enter a trade on the engulfing pattern by a pending stop order. It is placed a few points above the maximum of the bullish signal candle, or a few points below the minimum of the bearish candle. The breakout of the signal candle will confirm the market reversal and the validity of the open position. ✴️ Setting Stop Loss There are two ways of placing stop losses when trading the pattern. At the extreme of the signal candle (a few pips above the high of a bearish candle or below the low of a bullish candle). On the ATR indicator (the indicator value is multiplied by 2 and the stop loss is placed on the received number of points from the pending order). Setting a stop on the ATR is considered optimal, although it often coincides with the extremum of the signal candle. ✴️ Take Profit There are also several variants of take profit setting: By the ratio of 3:1 or more to the stop loss; By key levels. The ratio of 3:1 provides a positive mathematical expectation, but this method has no connection to the real market situation, and therefore is less effective. Taking a take profits at levels is optimal, because in this case the probability of price reaching the target and profit fixation increases. When placing a TP on a key level, a take/stop ratio of less than 3:1, but not less than 1:1 is acceptable. ✴️ Examples of Trading by Engulfing Pattern For an example, let's consider a trade on the 4-hourly chart of USDCHF. After a bullish trend, engulfing pattern was formed at the confluence level: a bullish candle engulfed the last small bearish candle, and the signal bar itself was larger than the previous ones. On this signal a buy stop order was placed to buy above the maximum of the engulfing candle. Stop Loss was set by ATR indicator (parameter 0.0010) at 20 pips from the order, TP was set near the key level at 30 pips from the order (the R:R ratio is almost 2:1). The pending order was activated by the next candle, and the price went up. A few hours later the trade was closed at take profit. The next trade was opened to buy EURUSD, also on 4-hourly. All conditions were met: we had bullish trend, a powerful full-body bullish candle that engulfed and closed above previous candles. A pending buy stop order was placed couple of pips above the candles high. Stop Loss was set the candle low, take profit at the nearest psychological level. The R:R ratio turned out to be 2:1, which is good. ✴️ Conclusions There are several factors to consider when trading Price Action. Candlestick patterns provide a guide to action, but the main trend and price levels should not be overlooked. The pattern itself should always have a support point. Such a comprehensive assessment will help to avoid knowingly false entries, and the habit of a calculated approach is only for the better.
Education
by DeGRAM
20
HOW TO EFFECTIVELY BACKTEST TRADING STRATEGYWhy Backtest Trading Strategies? The idea of strategy backtesting is to view the performance of a trading strategy in past circumstances. This is an important point in building a profitable trading system. There are various techniques to change the performance of a strategy that affects the final results. A backtest shows the overall profitability of a trading method and compares different trading parameters to find out what may work better than others. Backtesting on historical data increases trader's confidence and reduces emotional trading, because the series of losing and profitable trades is already known. If a trader has not backtested a strategy, he or she cannot know if the strategy is really profitable. It may be that the strategy used by the trader does not work in the new market conditions, thus destroying the trading psychology. Therefore, if the backtest gives unprofitable results, it is necessary to either change the settings or abandon the strategy. Steps of Manual Backtesting: 1. Identify Your Trading Strategy: Clearly define the rules and conditions of your strategy as well as entry and exit points. 2. Historical Data: Collect as much data as possible for the asset you plan to trade. This must include direction, price, open and close times, stop losses, market conditions, etc. 3. Set Up Your Backtesting Tool: Once you have the data, you will need to set up the backtesting tool. Use simulation tools to backtest your strategy, like replay on the TradingView or any other tool. 4. Evaluate strategy performance. Evaluate your collected data. What is overall performance? What is an average drawdown? Maximum losing streak? Worst day of the week to trade? What session bring most profit or loss? 5. Optimize and tune up. Analyze the results of the backtest. You can now see what can be adjusted in your strategy. For example, it could be certain hours of the day that bring the most losses, and once you eliminate these hours, your strategy's performance will significantly improve. 6. Do it again. Keep backtesting until you find the optimal entry condition, time, and risk/reward ratio. Tips For Testing Strategies Be realistic, don't look only for profitable trades. On the contrary, look for as many bad trades as possible to get the reason for losses and to avoid them in the future. Evaluate the result, taking into account a large number of trades. The minimum number of trades is 100, or 5 years of data. What comes first. Test your strategy under different market conditions. In trending market and a flat market. Don't forget that after the backtest, you should switch to the forward test. Conclusion Backtesting is a key moment in trading. It is almost one of the main tools that helps traders with trading psychology. Most traders open impulsive trades that lead to capital loss because they do not know when and where to open trades. If you have a trading plan but it does not include a backtested strategy, this plan is basically worthless. In fact, most successful traders spend more time backtesting than trading the real markets. Once you have a backtested strategy, you can now build rules around it and create a solid trading plan. And you are one step closer to being a consistently profitable trader.
Education
by Lingrid
13
TRADING RULES FROM REAL MARKET GURUSAll beginner traders, having received their first losses in the market, start to scramble in search of "golden rules" of trading or proven solutions from recognized gurus of financial markets. Basically, having received basic knowledge of trading and having traded for a few days on a demo account, they open a real account and deposit, sometimes, quite large sums of money into it. In most cases, the money is either partially or completely lost in a short period of time. It should be understood that trading is a serious work. It requires not only desire, but also free time and emotional expenditures. As in any job, young specialists turn to the experience of their professional colleagues, studying their experience and various effective techniques. Trading is no exception, where there are also plenty of professionals and real gurus whose experience should be studied. We will look at rules from world-famous traders. Rule #1 from Warren Buffett "The market is a device for transferring money from the impatient to the patient" Great words, aren't they? In the market with profit remains the one who knows how to wait patiently. Before you open a trade, you need to do a thorough analysis. Study all the factors that influence the trading instrument at the current moment of time, what will influence in the short and medium term. Calculate the support and resistance levels, etc. Only after that, start searching for the most promising point of entry into a trade. Do not rush to open a trade if there is no signal to open a trade. Patience is also necessary when fixing profits. "Let profits grow" thee say. Wait until the dynamics of movement does not begin to decrease, and the strategy does not begin to signal a change of trend. Only in this way you will be able to earn the maximum on each price movement. After making a profitable trade, take a break for rest. Those who rush in the market, sooner or later lose their capital. Rule #2 from Larry Connors "I get real, real concerned when I see trading strategies with too many rules" Everything brilliant is simple! Each of us is probably familiar with this expression. It is also applicable to trading on financial markets. If, again, we pay attention to trading gurus, we can see an interesting fact - all of them mostly use very simple trading systems (TS). Some of them use their own author's TS, some of them use existing ones that have been tested for years. Take Alexander Elder, who is the author of the "Three Screens" strategy. His system is as simple as possible and uses several standard technical indicators built into any trading platform. Anyone can master Alexander Elder's system, and due to its effectiveness, the TS is used by tens of thousands of traders around the world. Do not try to find or independently develop a mega-complex trading system. The more "elements", indicators, etc. in it, the more false signals it will produce. It will be quite difficult to find the only true signal among them. Your system should produce one or more signals, when they coincide, you open a trade. It is very important, as we pointed out in the first rule, to be patient and wait. Rule #3 from Peter Lynch “In this business if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.” Peter Lynch, a world-famous American investor, was also a follower of simple trading and market analysis techniques. What did the guru wanted to emphasize in his statement? First of all, a large number of beginner traders stay in a delusion for a long time. They think that it is possible to achieve such a level of analysis that will allow them to make 100% forecasts all the time. The market is volatile. Sometimes there are trading situations when the market goes against technical and fundamental analysis. It is impossible to predict such market behavior. Secondly, because of this misconception newbies try to achieve only profitable trades on the market. So that there was not a single losing one in their account history. As a result, they try different strategies, read tons of books on market analysis, but still lose money. As a result, someone "gets an idea" and starts to understand what Lynch was talking about, and someone just quits the market. Rule #4 from Henrique M. Simoes "In trading, the impossible happens about twice a year" In the fourth rule, we will focus on market volatility. These market "impossible" situations do occur periodically. For example, a trading instrument has been growing for a long time, and analyses signal us about the trend reversal. However, the instrument is still growing, breaking all levels. It happens that even some fundamental event, which 100% should lead to a trend reversal, on the contrary, accelerates the current trend even more. There are also more unpredictable situations, when the currency can rise in price twice within a few seconds. An example is the situation with the Swiss franc, which at the beginning of 2015 strengthened against the U.S. dollar by almost 3000 points. On that day, not only a large number of traders around the world went bankrupt, but also several large Western brokers. Yes, such situations are very rare, once in 5-10 years, but they happen. How to protect against them? If we consider the example with the Swiss franc, a stop-loss would not have saved you, because the price changed at once. The only thing that could really help is to open trades with a small volume that can withstand such a strong movement. Rule #5 from Jesse Livermore “There is time to go long, time to go short and time to go fishing” If you don't enjoy fishing, play a sport or make a field trip outdoors. You should definitely take a break from the market. Especially if you have a series of losing trades. Beginners are not ready for such psychological pressure, so regular breaks should be mandatory. The market will not go anywhere and will not run away, you can always return to it and continue trading. Large and experienced investors are well aware of this, so they do not forget to allocate enough time for rest. The situation is completely different for beginner traders. These two categories of traders mainly trade intraday or use scalping, so they have to constantly monitor the market sitting behind the monitor. As a result, psychological fatigue accumulates, the trader's eye gets tired and he starts to make mistakes that lead to losses. Be sure to rest, it is a guarantee not only of your health, but also of potential profit in the future. It is extremely important to study the experience of professional traders who have achieved outstanding success in the financial markets. As you can see, many quotes hide not only the entire trading experience collected in one phrase, but sometimes the entire life of the author.
Education
by DeGRAM
4
4 BUYING OPPORTUNITIES1. Impulse Move Buying Opportunity Impulse move buying is a trading strategy that involves buying when the price makes an impulse move from the key level. Price makes a higher high, breaking through the previous high—a break of structure. The market pulls back to 1/3 of the impulse move, and then traders can look for signals. Usually, price action doesn't make a deep pullback after an impulsive movement. A stop-loss may be placed at the 61.8% Fibonacci level. 2. Golden Zone Buying Opportunity Golden zone buying is a trading strategy that involves buying at a 61.8% Fibonacci level. The price pulls back to the key level and bounces off. Price action breaks the structure by making higher highs and higher closes above the previous high. The market can potentially cause a complex pullback towards the golden zone. The 61.8% golden zone must line up with a significant level, forming a confluence zone. The stop-loss may be placed at the 88.6% Fibonacci level, which is near the key level. 3. Institutional-Level Buying Opportunity Institutional-level buying occurs when large market participants collect liquidity at the key structure level. The price movement of the institutions may be recognized when prices make large moves like engulfing candles or pinbars. This zone creates supply and demand levels. As a general rule, the market breaks through the structure and pullbacks to the 78.6% discount zone, and at this point we can look for buying opportunities. A stop loss can be placed at the 113% Fibonacci inversion level of the leg that breaks the structure, which is HH-HL. 4. Stop Hunt Level Buying Opportunity Stop hunting level Buying is a trading strategy that involves buying a security at a price level that is attractive to large traders. This type of buying opportunity is typically used when a price reaches a level that is seen as attractive by large traders. The strategy is often used to capitalize on market inefficiencies and take advantage of the momentum created by large traders. The price action after the breaking structure usually returns to the key level by making a deep pullback. Many traders at this point have closed their positions, thinking the price might continue to move down. However, large institutions that pushed prices out of this zone protected the level, and prices continue to trend in the primary direction. The entry point is usually 88.6% Fibonacci, which gives the best R/R. A Stop loss below the level at the Fibonacci inversion level.
Education
by UnknownUnicorn15614419
11
Understanding the Elliott Waves The market always moves in waves. It is not surprising that for decades traders have been trying to find special market patterns that would help to predict the development of the wave structure of the market. Various systems were created, where the waves were based on theoretical and practical basis. Perhaps the most popular theory on this subject is called Elliott Waves. Ralph Nelson Elliott was actually a professional accountant. He obviously had a lot of time to analyze charts for several decades, so he put all his observations in a tiny book "The Wave Principle", which was published in 1938. According to Elliot, everything in human civilization is in some rhythmic order, so this rhythm, these wave amplitudes can be " drawn" into the future, which allows you to predict the financial markets. Elliot's theory seemed interesting to few people during his lifetime. Elliott passed away in 1948 and was immediately forgotten. His theory was used by just a few stock experts. Only thanks to Chalz Collins these waves were remembered on Wall Street. Then they were popularized by Hamilton Bolton in 1950-1960, publishing a book with a detailed description and practice of use. Certainly, Robert Prechter also has done the most job here. It was thanks to him, that Elliott waves became universally popular, almost 50 years after the accountant Elliott wrote a book on them. Many technical systems have a similar fate. They are forgotten, the authors are not appreciated during their lifetime, and then suddenly they become popular when they are promoted by a fanatical follower. Preckter is still considered the main expert on Elliott waves, and his site elliottwave.com is the world's main resource on the subject. There are a lot of cool forecasts there, for example, Prekter's experts predicted the 2008 crisis several years before it occurred. In fact, the modern Elliott is Prechter and his school. Elliott Waves, in their essence, have a fractal basis, and the goal of practice is to break down the waves into understandable elements. It is them that we will try to explore now. Fractals or Impulse Waves ✳️ The basic principle of Elliott Waves is that any wave consists of 2 parts; impulse and correction. Each of them, in turn, is made up of several elements, which also resemble waves, only smaller in size. Such a property, when a part resembles the whole object as a whole, is called fractality. For example, the ocean is made up of countless drops, and yet each drop is a "mini-ocean" because it repeats its properties and composition. Similarly, all living organisms are made up of cells. The concept is based on the Elliott Wave Law, according to which market movement can be described by a simple and visual model as shown above. It reflects the main principle of market behavior: the price does not move in a straight line, but in a wave-like manner. An asset starts moving (for example, price growth), after which a correction (downward pullback) is observed. Any wave consists of 2 parts: Correction is a pullback in the opposite direction. Each wave has an amplitude (difference between the 2 most distant points - upper and lower). At the same time, the impulse amplitude is always larger than the correction amplitude. To put it simply, the impulse is the main movement, while the correction is only a pullback in the opposite direction, which is always smaller in amplitude. That is why it is easy to distinguish them visually. Both parts make up a cycle, after completion of which the market can go sideways (flat) or go in the opposite direction. The ability to see an organized wave in the "disorderly" movement of the chart allows us to correctly determine the current location and make a correct forecast for the near future. After the correction is over, we can re-enter the market (BUY trade) and profit again on the price increase. Since each moving wave is accompanied by a pullback in the opposite direction, the concept is sometimes also called the Elliott Wave Correction Theory. Correction ✳️ The Elliott Wave Correction Theory predicts the end of the impulse after the formation of the last (fifth) wave. And after that there are 3 possible alternatives. The trend is reversed (a new fifth wave will follow). There comes a moment of uncertainty in the market, when the price will move in a narrow corridor for a long time (flat). The trend is maintained, but a short-term pullback occurs. This is a smaller in amplitude wave, consisting of 3 sections (so it is also called a triple). Elliott labeled each of them with the letters A, B and C: The A and B-C sections show a counter-trend correction as shown above. Now, if we combine all the elements into one picture, we can make a simplified wave analysis on the example of an uptrend. So we can see 2 large sections the impulse 1-5 and the correction A-C. The five consists of 5 sections with 3 trend movements and 2 small pullbacks. A 3 consists of 3 plots with 1 trend movement and 2 pullbacks. Example of Impulse and Correction ✳️
Education
by Lingrid
6
WHAT IS IMBALANCE AND HOW TO USE IT?Imbalance is a market phenomenon that can lead a trader to significant profits or losses. Imbalance (IMB) is a gap in fair value during moments of inefficient pricing. The trading volume is tilted towards the bid or ask side, but too quickly, so there are still unexecuted orders in the market. Simply put, imbalance occurs when there are many orders of the same type (buy, sell, limit) and a lack of liquidity (counter orders) in the market. For example, if there are many more buyers of a currency or stock than sellers, the balance tilts in favor of buyers. On the chart, imbalance looks like a price gap, within which only a part of the volume has been traded. The flow of new orders can be seen by the directional movement of long candles of the same color. Imbalance is indicated on a long candlestick as a gap between the wicks of neighboring candlesticks. Very often the gap occurs on the candlestick pattern "Marubozu" candlestick with a long body, without shadows or with short wicks. The IMB gap between the wicks of neighboring candles acts as a price magnet. It means that as liquidity fills, the price will close the imbalance. The speed of gap filling depends on the market makers, large traders and market factors. Market makers are organizations that maintain market liquidity by buying and selling currencies, securities. There is partial and full IMB fill in the market. A partial fill of up to 50% means that interested bidders were unable to push the price to fill. Full IMB fill is a rebalancing to 100%. Full filling indicates that buyers and sellers are ready to trade actively at an effective price. ✴️ Why do market imbalances occur? The emergence of persistent imbalances after long periods of stable pricing in one direction indicates that institutions are accumulating a position. These institutions can be funds, banks and other financial institutions (so-called "smart money"). The market is influenced not only by institutions, but also by market makers, investors, and traders with large capitals. For example, market makers place many orders and then modify or cancel them to bring the market back to equilibrium. Market makers, smart money and investors can both oppose each other and act in the same direction. Imbalance in Forex can occur after the release of economic and geopolitical news. Imbalances are seen when some countries run surpluses in their trade accounts while others run large external deficits. Imbalance in a security's exchange rate usually follows a dramatic event or publication. The news changes the market perception of the stock and causes a shift in the equilibrium price. This can be news affecting a single company or the economy as a whole. • Publication of financial statements. For example, a positive quarterly report can lead to an imbalance toward buyers. • Corporate announcements of bankruptcy, management changes, takeovers, business purchases, etc. • Government and regulatory actions. U.S. Federal Reserve rate hike contributes to the fall of indices and securities. • Geopolitical problems, natural disasters, etc. As the price moves from the old equilibrium level to the new equilibrium level, order imbalances can occur. ✴️ How to use imbalance to make trading decisions? Imbalance is a type of trading opportunity for intraday and swing traders. In trading, Imbalance is used to identify zones of interest. The zone from which the imbalance originated is characterized by a higher level of probability. The zone is suitable for analyzing and identifying entry points. Entry points are selected with the help of technical analysis within the selected trading methodology. In this case IMB acts as an additional factor. Most imbalances represent price inefficiencies. Therefore, there is a high probability that the market will come back to fill the IMB. For example, if a large bidder manipulated the market, a correction occurs afterward. Typically, price tends to mitigate the imbalance or the area from which it originated. Therefore, traders trade in the direction of the imbalance to profit from the price movement. However, sometimes price continues to push back against IMBs that are forming in the market. Here recent example of using imbalance on EURUSD ✴️ Conclusion Imbalances create "fuel" for trend price movement. However, you should not mindlessly enter a trade in any imbalance zone. It is necessary to monitor the context (economic news, indicators, patterns) and make decisions based on it.
Education
by DeGRAM
9
CURRENCY CORRELATIONSCorrelation is a popular method for using one asset as a beacon for predicting another. Virtually all assets are influenced in one way or another by commodities. You can see it yourself right now, when a stunning increase in the price of gold led to the growth of the AUD. Thereby demonstrating an almost 100% correlation between gold and the AUD. Examples of Correlations ❇️ We'll look at some examples, which will help you better understand the influence of different assets on each other. Australia (AUD = Australian dollar) is the third largest gold producer in the world by volume. Australia sells several billion dollars’ worth of gold every year. As a result, gold and AUD/USD have a positive correlation. Gold appreciates, but the Australian dollar strengthens against the U.S. dollar. Gold falls, so does the AUD. According to statistics, the correlation between these two assets is over 80%. Gold and AUD/USD Let's talk now about the black gold a.k.a oil. This is nothing else than the blood of the economy, which flows through the veins of the world industry, being the main source of energy. One of the largest oil exporters in the world is Canada. Canada sells more than 4 million barrels per day only to the U.S. as its main supplier. As a result, if the U.S. increases its demand for Canadian oil, so does the demand for the Canadian dollar. Canada is an export-oriented economy, where 85% of exports go to the US as a major trading partner. The USD/CAD is therefore entirely dependent on how consumers in the US respond to changes in oil prices. If the demand for goods in the U.S. rises, industrialists need more oil to ride on economic growth. If oil prices rise in the meantime, the USD/CAD exchange rate begins to fall (because the CAD is strengthening). Conversely, if oil is not needed and the U.S. economy is slowing, demand for the CAD falls. In other words, oil has a negative correlation to USD/CAD, an appreciation of one asset causes the other asset to fall and vice versa. UKOIL and USDCAD Bond Spread ❇️ The bond spread is the difference between the interest rates on the bonds of two countries. It is on a similar spread that the carry trade strategy is based, which strongly influences many currencies. By tracking bond spreads and expectations of how key rates will change, you can get key fundamental signs that affect the exchange rate. As the interest spread between the currencies in a currency pair widens, the currency of the country that has the higher interest on government bonds strengthens against the one that has the lower interest. BONDS and AUDJPY The chart above on AUD/JPY shows us this perfectly. It shows the spread between 10-year U.S. and Australian government bonds from start of 2023. When the spread rose the AUD/JPY exchange rate rose nearly 12% from the low. When the bond spread between Australian and Japanese bonds widens, institutional traders bet on the AUD/JPY going higher, why? Because that's how a carry trade works. But when the Reserve Bank of Australia began to increase key rates and the spread sharply widened, traders began to go "long" positions on AUD/JPY and the price, logically, began to rise. Dollar Index ❇️ The dollar index gives a general idea about the strength or weakness of the dollar, for it can be regarded as a universal indicator. It's important to remember that the euro makes up more than 50% of the index, so EUR/USD is the main subject here. If you need to assess the dollar's condition in all dollar pairs the index is the best for that. How similar are they really? EURUSD up and DXY down. Many traders continually check the DXY, not only for its correlations but also for its divergence with the EUR/USD. DXY and EURUSD If the dollar is the base currency (first in a currency pair, say, USD/*), then the dollar index and the currency pair will go in the same direction; If the dollar is the quoted currency (*/USD), then the index and the currency pair will go in different directions. Correlation analysis is fascinating. Everything in the world is correlated, so currencies, various economic indicators, government bonds and commodities. The essence of bonds is simple: everyone needs money, the government constantly borrows against its securities, and the greater the demand for those securities, the more desirable the national currency. However, if this pattern shows a negative correlation, and the increased demand for bonds does not lead to an increase in the currency, then other factors come into play, such as the state of the global and national economies, the discrepancy in key rates between countries .
Education
by Lingrid
13
FIBONACCI CLUSTER IN TRADINGHello traders! Today, we'll look at the basic application of Fibonacci levels to build cluster. Even a new trader will be able to fully understand this approach because of how simple it is. We will discuss Fibonacci clusters, including their definition and trading implications. We'll make use of the common Fibonacci retracement tool which reactions frequently occur at 38.2%, 50%, 61.8%, or 78.6%. ✴️ Bottom line A collection of Fibonacci lines that are relatively near to one another is referred to as a cluster. We compile all traders' estimates by drawing Fibonacci lines relative to various market swing highs and lows. As a result, the concentration of lines in one area indicates the most likely position of a key level or, more accurately, a critical zone. ✴️ What Is Fibonacci Confluence? Fibonacci confluence is a method that uses Fibonacci retracement and extension levels to identify potential areas where the price may find support or resistance (Or entry and exit points). To use Fibonacci confluence, traders take Fibonacci retracement and extension levels from multiple time frames and look for areas where two or more Fibonacci levels line up, which is called “confluence”. Then we can look for trade setups in these converged levels like engulfing candle or pinbar. ✴️ Fibonacci Retracements Cluster Fibonacci clusters can be an incredibly useful tool to identifying significant zones. Fibonacci clusters are a type of technical indicator that provides us with a way to identify potential support and resistance levels in the market. By applying these clusters, we can identify entry and exit points which can help them to maximize mathematical expectancy of the trades. Once you understand how Fibonacci clusters work, you can then begin to apply them to your trading. The first step is to identify a chart with a clear trend. Look at the chart and identify the market structure. Next, draw a series of Fibonacci retracement levels on the chart. These levels will help you identify potential support and resistance levels in the market. Generally, we can look for entry signal at 38.2%, 50.0% and 61.8% levels. If the price rejects either of these lines, then it may be a sign that the price is about to move in that direction. ✴️ How to Apply Them in Trading It is easier to trade levels if there is a clear unidirectional movement. This way we will know where the price is likely to go and we will be able to enter the "stream" at the most profitable opportunity. So, first of all, we determine the direction of the main trend. In this case, the AUD/JPY uptrend is obvious. Next, we use fibo on the chart. Our task is to find the nearest strong support level and set a buy pending order slightly above it. That is, we assume that the correction will end near this level and the price will then continue its upward movement. Stop loss is set slightly below the next Fibonacci cluster. This way we secure ourselves in case of incorrect forecasts. Take Profit is set equal to the stop or more. There are situations when one supercluster is formed on the chart. In such case, if the price is above the cluster zone, we set an order to buy just above the strongest level. We place Stop Loss after the supercluster, through which the price will almost certainly not return. Take profit is equal to the stop or more. ✴️ A quick and efficient technique to use Fibonacci in trading is through clusters. The key benefit of the strategy is that the clusters speak for themselves; you don't need to know which Fibonacci level the price should rise from. Additionally, clusters can reveal entire zones of resistance and support, or zones of uncertainty, where it is better to avoid entering the market.
Education
by DeGRAM
7
How to Trade Wolfe Wave PatternI will try to explain to you about the Wolf pattern. I myself prefer to call this formation a Wolf pattern rather than a wave, because it will not always remind of a wave and has nothing to do with the Elliott Wave Analysis. Before I get to the practical part, I want to note that this pattern is very easy to learn and often allows you to get a fantastic ratio (R:R). The flip side of the pattern is the art of determining its completion. Bill Wolf is the discoverer of this formation. He likes to call his trading a wave trading and for some reason explains the work of the pattern as a demonstration of Newton's law. His real achievement is the numerous study of the well-known wedge pattern, which he was so fond of, and the finding of patterns in it. All we have from the author is a little book. And the website wolfewave.com, the design of which has been preserved since '98. Bill's friendship with trader Linda Raschke is well known. In her book, Linda describes the Wolf wave as a quite profitable formation. It should be noted that especially skillful traders can detect Wolf waves practically in all price movements. Indeed, this characteristic formation of "spreading" can be found constantly, even if it does not have all the expressed qualities that are characteristic of an ideal wave. In traditional trading, the Wolf will often look like the famous and beloved wedge, but our task will be to enter and exit the trade more precisely. Formation 1. We determine point 2 as the top of the uptrend (a significant top). 2. Point 3 is the next minimum after point 2. 3. Point 4 is the next high after point 3 and is located below point 2. 4. Point 1 is insignificant, ideally it is the minimum before point 2, but sometimes point 1 is very weakly expressed. In this case, Bill Wolf himself recommends to draw a horizontal line to the left of point 3 and take the first bar opposite it as point 1. 5. The point 5 is on the line 1-3, or it often breaks through it, going to the sweet zone. The sweet zone is constructed by parallel transferring the line 2-4 to point 3. 6. Point 6 (target) is on the line 1-4 (EPA - Estimate Price at Arrival) and is determined by the vertical from the point of intersection 2-4 and 1-3 (ETA - Estimate Time on Arrival). How to Trade the Wolf with Trend For the purposes of this article, we will be looking at Wolf waves primarily on trend. I strongly recommend trading them this way. In this way, the pattern will be a correction, the end of which we are trading. In addition, a couple of alternative examples will be given (Wolf as a trend reversal, Wolf in a sideways trend). Let's take a good trend, in this case the uptrend on CADJPY, and highlight the correction. Then let's move to H1 and see if there are any Wolf waves among these corrections: Example 1 In the first case we have a great Wolf wave. I pay attention to the clear arrival time of the target (ETA). R:R = 3.0. Example 2. In the second case, we don't have the prettiest formation. Many would argue that it is a Wolf wave, but I assure you that it is. The ETA also clearly worked and we got R:R = 3.5. Note Wolf waves are quite frequent formation. Their best working out is trend trading, there are plenty of them. Even more of them are in the sideways. It can be said that a sidewall is a constant succession of Woolf waves in different directions. Perhaps, someone may apply this style to a flat, but a sideways trend can be traded more traditionally. An ideal wave is not always found. There are traders who prefer to wait for them without considering other Woolf waves as such. Practice Perhaps, we have come to the most interesting part of the article. Here I will just try to outline the best possible way to enter a trade and the best way to get out of it. The advice given in this section is a subjective result of trading and is provided for general guidance. I am convinced that a practicing trader will find the optimal TS settings by himself. Examples Any TS has its disadvantages and if the speculator gets along with them, he makes the TS "his", otherwise he has to look for another instrument, picking it up like a puzzle that suits him psychologically. The problem of the Wolf wave, on the other hand, is the search for the point 5. Recent example We use Fibonacci extension tool to identify optimal entry point. Fibonacci extension level such as 1.13, 1.272, 1.141 and 1.618. Conclusion In this article I have tried to set forth my view of the Wolf wave. As I see it, this pattern is well underestimated by the mass of suffering traders.
Education
by Lingrid
12
TREND CONTINUATION PATTERNSChart pattern construction is an important part of any market analysis. Charting patterns are powerful indicators of potential market movements. These patterns appear on a chart and are used to predict when a trend is likely to continue or reverse. The three most common patterns are triangles, wedges, and flags. They are all typically seen as signs of a trend continuing, but their specific meaning varies depending on the trend they are associated with. For example, a triangle can signal a continuation of a trend, while a flag can signal a potential reversal. ✴️ Triangles Triangles are formed when two trend lines converge, forming a pattern that resembles a triangle. These can be either symmetrical or asymmetrical, and are usually seen as a sign of a bullish or bearish trend continuing. Symmetrical triangles can be seen as a sign of consolidation before a breakout in either direction. Asymmetrical triangles are usually seen as a sign of a continuation of the existing trend. ✴️ How to trade triangles Trading triangles can be a very profitable endeavor, but it can also be risky. There are three main types of triangles: ascending, descending, and symmetrical. Ascending and descending triangles are bullish or bearish, while symmetrical triangles can be bullish or bearish, depending on the trend. Once you have identified a triangle pattern, you need to wait for a breakout. A breakout is when the price breaks out of the triangle pattern and continues in the direction of the trend. When trading triangles, it is important to wait for a confirmed breakout. A confirmed breakout is when there is a clear break of the triangle pattern and the price has moved in the desired direction. There are a number of different signals you can look for to help you determine when a breakout is happening. These include candlestick patterns, moving averages, and volume. ✴️ Wedges Wedges are similar to triangles in that they are formed by two converging trend lines. However, the difference is that wedges form a pattern that resembles a wedge shape. Wedges can be either rising or falling, and are usually seen as a sign of continuation for the existing trend. Rising wedges are generally seen as bearish, while falling wedges are seen as bullish. Wedges can be a useful signal if used correctly, but they are not always clear-cut. It is important to understand whether a wedge is rising or falling, and whether it is being viewed as bearish or bullish, in order to get the most out of this pattern. ✴️ How to Trade wedges When trading wedges in the forex market, there are two main approaches – the breakout approach and the reversal approach. The breakout approach involves trading the breakout of a falling wedge pattern. This type of pattern is typically seen during an uptrend and is seen as a potential sign of a reversal. When trading a falling wedge, traders will look for prices to break out of the wedge by either going above the resistance trend line or below the support trend line. If prices break out above the resistance trend line, it is seen as a sign that the uptrend will continue and traders can look to buy. On the other hand, if prices break out below the support trend line, it is seen as a sign that the uptrend is over and traders can look to sell. The reversal approach involves trading the reversal of a rising wedge pattern. This type of pattern is typically seen during a downtrend and is seen as a potential sign of a reversal. When trading a rising wedge, traders will look for prices to break out of the wedge by either going above the resistance trend line or below the support trend line. If prices break out above the resistance trend line, it is seen as a sign that the downtrend is over and traders can look to buy. On the other hand, if prices break out below the support trend line, it is seen as a sign that the downtrend will continue and traders can look to sell.   ✴️ Flags Flags are formed when two parallel trend lines form a pattern that resembles a flag. They are usually seen as a sign of a continuation of the existing trend, although they can also signal a reversal. Bullish flags are typically seen as a sign that the trend will continue higher, while bearish flags are seen as a sign that the trend will continue lower. In light of the recent market volatility, it is important to remember that chart continuation patterns such as triangles, wedges and flags can be a powerful tool for predicting potential market movements. They are usually seen as a sign of a trend continuing, although their individual meaning can depend on the trend they are associated with. As such, it is important to be familiar with these patterns to be able to accurately predict potential market movements. ✴️ How to trade flags When looking for a flag pattern to trade, you should be on the lookout for two distinct highs or lows that form a trend line. The trend line should then be connected to a parallel line that is a few pips below the lower peak. If you identify a valid flag pattern, then you can move on to the next step. Once you have identified a valid flag pattern, you should then calculate your risk and reward. Your stop loss should be placed just below the lower parallel line of the flag pattern, and your target price should be placed at the upper parallel line. Good luck, and happy trading!
Education
by DeGRAM
5
TRANSPARENCY IN PROVIDING FOREX SIGNALSTransparency of forex signal providers is an important concept for making successful trading decisions. Transparency of forex signal providers means that an investor can view a signal provider's trading history, including results and statistics. This gives an investor the opportunity to evaluate the verified trading history and make a decision on whether to connect or disconnect a signal provider. The advantage of forex signal provider transparency is simply invaluable. As every investor knows, there are many signal providers in the Forex market with bad reputations which can cause an investor great losses. This is why it is essential to have transparent information about signal providers, which gives the investor the advantage of making a more informed decision. Fortunately, thanks to technology and global support from forex brokers, transparency of forex signal providers is becoming more and more accessible. Usually trading platforms provide detailed information about signal providers, including their trading history, results, win/loss percentages, types of trading strategies, etc. This gives investors confidence in their decision, which means they don't have to worry about the signal provider hiding information. Forex signal providers are important to traders because they provide information that can help them make investment decisions. Therefore, it is very important for signal providers to be transparent. To have the right to be called transparent, forex signal providers should provide traders with complete and reliable information about their methods of analysis and trading. This way, traders can make an objective and informed decision on whether to use their services. Here are a few signs of transparency that can help traders evaluate a forex signal provider: 1. Open price presentation: the forex provider should present transparent prices for currency pairs, including spreads, commissions and other fees. 2. Transparent pricing: Forex signal providers must provide traders with complete information about the rates and terms of their services. This will help traders avoid misunderstandings and miscommunication in trading. 3. Transparency in the process: Forex signal providers must also provide traders with detailed information about how they analyze and trade the markets. This way, traders can get more information about how the signal provider makes decisions. 4. Open risk policies: Transparent forex providers have a clear risk policy and provide information about their policies and precautions. 5. Openness about historical results: Forex providers must provide access to their historical results to show you how they operate. Given the above signs of transparency, you will be able to choose a reliable forex provider and make the right decision about your trading actions. You will need to do your homework and study the market, but this will allow you to choose a transparent forex provider that will give you the opportunity to profit in forex trading. Overall, the transparency of a forex signal provider is an essential part of successful trading. Traders should have access to complete and reliable information in order to make the most of their investment. In conclusion, the transparency of forex signal providers plays a key role in successful trading. Thanks to the availability of information about signal providers, investors can properly assess their risks and make informed trading decisions.
OANDA:XAUUSDEducation
by UnknownUnicorn15614419
9
WHAT IS CUP AND HANDLE FORMATIONIn the traders' job the chart patterns indicating price changes are of great importance. This includes the "Cup and Handle" formation. A cup and handle is a popular chart pattern among technicians that was developed by William O’Neil and introduced in 1998. What does the pattern look like? "Cup with handle" is the term chosen because of the undeniable similarity between this type of dishes and what the trader sees on the chart. It is hard to judge how much this pattern is in demand among traders, because there are more practical interest formations. Cup The formation of a bullish trend is considered as an important condition that leads to the formation of such a position. Although experts consider it to be a reversal. "Cup with a handle" is formed at the moment when the correction of the previous rising direction of the chart takes place. At the same time, the trader should definitely pay attention to the depth of the chart. It is of interest if the formed slope does not exceed 80% of the trend that was before the formation of this specific pattern. The bottom of the formed bowl meets the period of price consolidation, upon its completion the ascent begins. Handle The handle on the chart means nothing else than the correction of prices in relation to those that were at the time when the right side of the cup was formed. Trades compare this section not so much to a pen as to a flag. Of interest is the situation when the flag begins to form immediately after the end of the formation of the right side of the cup. The length of the handle created by the chart should not exceed 50% of the size of the right side of the cup. The formation of this part of the graph takes quite a long time. The long-time interval indicates the subsequent formation of the trend. This section of the chart becomes fully complete only after the resistance level is broken. If we look at what we see on the chart from a practical point of view, we can say the following: when the left part of the cup is drawn, there is a gradual decline in prices, at the time of formation of the bottom they remain stably low, and during the creation of the right part there is a gradual increase in prices. At the moment of the breakdown a sharp increase in the number of trades is observed. How to trade the chart pattern on Forex Aggressive Conservative Regular Each of them has its own positive and negative characteristics. Low demand among the used Forex methodologies is caused by the fact that it requires taking into account a large number of indicators, otherwise the probability of making a mistake is very high. Particular difficulties may occur in the analysis of the depth and width of the chart figure. The probability of missing a profit when working with this type of chart is rather high. Aggressive method It is considered riskier. It is based on the behavior of the handle. The orders should be started after the breakout of the handle or, using another terminology, the breakout of the flag. In this case the "stop" position is placed below the level that the breakout of the candle. Regular Method The regular approach to trade positions are opened immediately after the breakdown of the pattern line. Stop-loss should be placed below the handle, that is, below the line involved in the formation of resistance. Conservative method It is used most often. It is based on the classical traditions of trading. Attention is paid to the breakdown of the technical line. The ideal variant is entering after the retest of the breakout line. The stop-loss should be below the handle or below the "breakout" candle from the breakout line (at least if it is big enough).
Education
by Lingrid
5
WHAT IS ChoCH AND HOW TO USE ITChoCH in trading is a change of sentiment (change of character) in trading order blocks. ✴️ Definition The ChoCh (change of character) is a change of sentiment in the market. That is, the change in the nature of the movement of the market from bullish to bearish or vice versa. This term is used in technical analysis strategies of order block trading. It is used by traders in the forex market, as well as in the cryptocurrency market. Choch is also known as a reversal when the price fails to form a new higher high or lower low. It then breaks the pattern and starts moving in a different direction. To form a Choch using the smart money concept on a chart in a downtrend, you must as shown above: 1.Gradually decreasing highs and lows of the bearish trend. 2. The last maximum price update. It is at this point that a change in sentiment is formed. We will go over the basics of Choch trading and the main advantages of trading. ✴️ Combination of timeframes on Forex The best entry points are formed when combining two timeframes: Keep in mind that a change in structure does not always involve a global change in market trend. 1. On the higher timeframe the order block is formed as support or resistance level, in the zone of which the reversal is looked for. This is H1, H4 or D1 time frame. 2. The lower timeframe is used to identify the change of character and entry on the trade signal after the Order Block test. On the mt4 chart this looks like the example, where the order block is highlighted by a rectangular range below. ✴️ How to trade Let's analyze EURUSD recent trading opportunity for the change of the market movement. The first one shows that a bos (break of structure) was formed after the choch. The buy position took place when the chart returned to the order block area. The next reversal pattern is relevant in determining the liquidity zone, where there are the stop losses of the crowd of traders. The difference between the previous pattern is that the price tends to break the liquidity zone after the bos. Buying is performed on the order block at the very minimum of the chart. ✴️ Conclusion Choch in trading allows the trader to determine the best reversal point with a high-risk profit ratio. Often the values reach 1k5 or more. The change of mood is easy to identify even for beginners in Forex trading on smart money. At the same time, its success rate reaches 60 percent.
Education
by DeGRAM
12
MOST POWERFUL TRADING SETUPThe fakey setup is a powerful trading strategy that can be used to identify high-probability entries in the forex market. It combines three different chart patterns and requires the trader to be patient and wait for the right setup to form. With a bit of practice, traders can become very proficient at spotting fakey setups and taking advantage of them. Fakey setup begins with an inside bar or false breakout pattern. This is when price breaks out of a range but quickly reverses and closes back inside the range. This shows that the breakout was false and signals a potential reversal. The false breakout is followed by a pin bar. This is a strong candlestick pattern that has a long tail and a short body. The long wick indicates a rejection of a certain price level. Simply put, this setup is formed when a false breakout of the triangle pattern occurs. The inside bar is actually a triangle if you look at the small timeframe, and its false breakout forms this strong setup. On a bitcoin chart for example, you can find many such setups. This is another version of the fakey setup. Where a false breakout of the triangle leads to a strong bullish movement. In the forex market this setup is traded as usual. Fakey setup in Forex market *️⃣ The main form occurs when one of the highs or lows of the mother bar breaks with a bar with a long tail. IMPORTANT TO KNOW *️⃣ In the forex market the fakey setup is traded only on H4 timeframes, better on D1 only on the trend, it is very risky to catch reversals on its tops or lows. As in any Price Action pattern, there must be a confluence point, which can be support or resistance levels. Fibonacci levels or trend lines are right place to take trade if you find this setup. Trading is conducted by pending buy and sell orders. Take profit can be taken at a distance of "stop loss multiplied by n", where the recommended value of n = 2 (there can be more), or at the nearest horizontal level. But each trader's method of exiting a trade may be different. You can trade fakey setup against the main trend, but like any other counter-trend setup, it must be absolutely obvious with a perfect shape and must be on an obvious and strong daily level. You should not trade fakey against the trend until you learn how to trade this setup with the trend on the daily charts. Keep in mind that fakey on hourly charts has almost no power. Only the breakout of the mother candle following the breakout of the inside bar is a is a signal to enter the trade. Because there was not a substantial breaking of the mother candle as in a significant fakeout, there is a need for further confirmation that the market is actually going in our favor. The fakey is a particularly successful setup since a false-break that developed in the opposite direction of the strong trend suggests that the trend is going to continue. Even if false breakout of horizontal market support and resistance levels don't happen frequently. The price crosses the horizontal level in the example below, but the subsequent candle bounces rapidly and moves upward, indicating that the level was a false breakout and also forming Inside Bar setup: A false triangle breakout can be found in any market. Bitcoin really likes this pattern, but in a slightly different form although the essence remains the same. How does it happen? The market essentially consolidates, after a trend movement forms a triangle, and a false breakout of this pattern leads to a continuation of the movement. This pattern can be found from 2014 on the BTC chart.   Fakey is one of the best sets of price action since it reveals market activity and predicts what is likely to occur in the near future. Because a strong trend has both technical and fundamental reasons to move in one direction or another, this setup works best in trend markets. A fake breakout happens when "amateurs" try to buy at the top or sell at the bottom because professional players enter the market and profit from the brief retreat brought on by the "amateurs'" greed and emotional trading.
Education
by Lingrid
13