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Fundamental Analysis

WHAT ARE Fakeouts, Shakeouts and Whipsaws?YOUR QUESTION ANSWERED! What on earth are Fake outs, Shake outs and Whipsaws? After this you will know… Fake-out: (When the price makes a false breakout of a chart pattern) A fake-out occurs when the price of a market appears to break out of a certain chart pattern. This could be a trendline, support, or resistance level. But then quickly reverses and retreats back within the pattern. Shake-out: (Where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades) A shake-out is a scenario where the market becomes highly volatile and the price moves rapidly to levels that trigger the stop-loss orders of many traders. Stop-loss orders are pre-set risk levels at which traders automatically exit their positions to limit their losses. A shake-out is designed to “shake out” weak or inexperienced traders from the market. When stop-loss orders are triggered, it can create a temporary spike in the opposite direction of the prevailing trend. Once these traders are “shaken out,” the market might resume its original trend. You’ll see this most commonly with low liquid, high volatile markets like Penny Stocks or Penny Cryptos. Whipsaw: (This is where the market will change its most prominent direction within the day). Whipsaw refers to a situation where the market quickly changes its direction within a relatively short period, often during a single trading day. This can cause confusion and losses for traders who are caught off-guard. Whipsaws can occur due to various factors, such as sudden news releases, economic data surprises, or changes in sentiment. They are characterized by sharp price movements that can make it difficult to make accurate trading decisions. Whipsaws are especially common during periods of high market uncertainty or when there’s a lack of a clear trend. Let’s create a quick summary of the three: Fake-out: (When the price makes a false breakout of a chart pattern) Shake-out: (where the market is highly volatile and the price moves to levels that hits their stop losses and gets traders out of their trades) Whipsaw: (This is where the market will change its most prominent direction within the day). If you have any trading question let me know in the comments
TVC:SA40Education
by Timonrosso
The Role of Geopolitical Risks in Forex TradingIn the complex world of forex trading, a myriad of factors contribute to the ever-shifting landscape of exchange rates. Among these, geopolitical risks stand out as potent catalysts capable of triggering significant fluctuations in currency values. This article delves into the intricate relationship between geopolitical events and forex markets, exploring how political instability, conflicts, and trade disputes can impact exchange rates. What Are Geopolitical Risks? Geopolitical risks encompass a broad spectrum of factors that have the potential to disrupt the global economic order. From political instability and armed conflicts to trade disputes and diplomatic tensions, these risks can send shockwaves through financial markets. Traders navigating the forex landscape must grapple with the uncertainty emanating from geopolitical hotspots worldwide, which means understanding profoundly how geopolitical risks impact forex markets. Geopolitical Impact on Forex The primary conduit through which geopolitical events influence currency fluctuations is the introduction of uncertainty. This uncertainty, in turn, triggers a surge in market volatility. Effective forex trading with geopolitical risks means not only reacting to these events but also anticipating and positioning strategically, leveraging the volatility to a competitive advantage. Reactions of Different Currencies to Geopolitical Events Various types of geopolitical events affect forex currencies differently. Currencies of nations heavily reliant on commodity exports, such as the Australian dollar and the Canadian dollar, can be particularly sensitive to disruptions in global trade or commodity markets as such events may lead to supply chain issues and, respectively, to currency depreciation. Emerging market currencies often exhibit heightened sensitivity to geopolitical events because traders view these currencies as riskier assets and respond to geopolitical uncertainties by divesting from them. Consequently, geopolitical tensions may lead to depreciations in the currencies of emerging markets. Currencies within the Eurozone are influenced not only by global geopolitical events but also by dynamics within the European Union (EU). Political developments affecting EU member countries may impact the euro, requiring traders to consider both global and regional factors when assessing potential currency movements. You can visit FXOpen and try trading the forex markets on our free TickTrader trading platform. Safe-Haven Currencies and Geopolitical Uncertainty In the turbulent waters of geopolitical uncertainty, certain currencies emerge as beacons of stability and safety. These so-called safe-haven currencies play a crucial role as investors restructure their portfolios. The US dollar, often considered to be the quintessential safe-haven currency, tends to strengthen during periods of heightened geopolitical uncertainty. The global economic influence of the United States, coupled with the widespread use of the US dollar in international trade and finance, positions it as a go-to currency for investors seeking stability. The Japanese yen is another currency that historically attracts investors during geopolitical turmoil. Japan's reputation for economic stability and the predictable monetary policy of its central bank, coupled with its current account surplus, makes the yen an appealing asset. The Swiss franc also stands for financial stability and neutrality. Switzerland's commitment to maintaining a stable and resilient financial system positions the franc as an attractive choice for investors seeking shelter during geopolitical storms. The Swiss franc typically experiences appreciation when global uncertainty rises. Market Sentiment Impact How geopolitical risks affect forex also has a lot to do with the way market sentiment and risk appetite play out in the aftermath of major geopolitical news. For example, the resolution of a trade dispute or political stability in a previously uncertain region may make traders more optimistic. This optimistic outlook translates into increased confidence in riskier assets. This renewed risk appetite often leads to a surge in demand for higher-yielding currencies, such as emerging market currencies or those linked to commodities. As a result, these higher-yielding currencies may appreciate. Conversely, negative geopolitical news has the opposite effect, triggering a flight to safety among investors. Historical Examples of the Relation Between Geopolitical Events and Forex Markets Let’s examine several historical examples of major currencies being affected by geopolitical events and decisions. Brexit: The Unravelling of the European Union The United Kingdom's decision to exit the European Union, commonly known as Brexit, unleashed a wave of uncertainty about the British pound (GBP). In the lead-up to the referendum and its aftermath, the GBP/USD currency pair witnessed significant swings, dropping sharply on the day on which it became clear that the majority of Britains opted to leave the European Union. The uncertainty surrounding the terms of the exit and the potential economic consequences for the UK led to a depreciation of the British pound. US-China Trade Tensions: A Global Economic Flashpoint The protracted trade tensions between the United States and China, characterised by ongoing negotiations, tariff changes, and trade restrictions, had a profound impact on forex markets. The Chinese yuan bore a direct impact, particularly during the period from mid-2018 to early 2020. During this timeframe, the trade tensions between the United States and China escalated significantly, marked by the imposition of tariffs and retaliatory measures, leading to the depreciation of the USD/CNH pair, as seen on the chart. Middle East Conflicts: Geopolitical Turmoil and Regional Currencies Geopolitical conflicts in the Middle East have historically contributed to volatility in regional currencies. One illustrative example is the Syrian Civil War (the Syrian conflict) and its devastating impact on the Turkish lira (TRY). The uncertainties arising from the conflict, coupled with the influx of refugees and economic challenges in the region, contributed to considerable fluctuations, while the intense phases of the Syrian conflict in 2015 initiated an ongoing depreciation for TRY against the US dollar. Conclusion Geopolitical risks are inherent in the modern world, and their influence on financial markets is undeniable; therefore, traders need to stay aware of the potential impact of these significant events and learn how to trade with geopolitical risks. Already have a promising trading strategy? You can open an FXOpen account and try out new trading possibilities. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
3
VOLATILITY IN THE FOREX MARKETHello Forex traders. Today we are going to talk about the concept of Volatility in the Forex market. We will talk about what it is, what volatility depends on, and most importantly how we can use this data to build and improve our own trading strategies and, as a result, get more profit from trading. What Is Volatility? Volatility is the range of price changes from high to low during a trading day, week, or month. The higher the volatility, the higher the range during the trading time period. This is considered to be a higher risk for your positions, but it gives you more opportunities to earn money. Volatility can be measured over different time periods. If we open a daily chart and measure the distance from high to low, we will get the volatility of the day: It turns out that on the chart above, it was 121 pips. We can also measure on another timeframe, for example, weekly chart. The distance from the high point to the low point was 162 pips. The total volatility during the week was 162 points. Volatility can be measured within a trading session or within a trading hour. This allows us to conclude that it is a fractal value. As a rule, the average volatility for the last candles is taken into account. If we take daily charts, the average volatility is usually considered for the last 10 days. Roughly speaking, the last 10 candles are summarized and divided by 10. What Does Volatility Depend On? It depends on the number of trades in the market, players, trading sessions, the general state of the economy of a currency, and, of course, on speculation. It depends on how speculative the market is about a given currency. Note that volatility can be measured both in points and in percent. But it should be noted that most often, the volatility of stocks is measured in percent. In forex, it is more usual to measure in pips. If you are told that the average price change of EURUSD is 0.7%, you can easily convert it into pips. And vice versa, you can calculate percentages from points if you need them for any research. Now let's move on to the most important question. How To Apply Volatility Data For Profit? It's actually quite simple. As they say, everyone knows about it, but no one applies it. This is especially true for intraday trading. Nobody wants to apply the simplest rule. Suppose you know that the average volatility of GBPUSD is 120 pips. Question: if the price has moved up 100 pips from the beginning of the day, should you open a buy position? The answer is obvious, we should not. Because the probability that the price will go up another number of pips is too low. Therefore, we should not open a buy position and on the contrary, we should focus on bearish positions. But for some reason people forget about this simple technique and follow their system. I believe that it is absolutely necessary to include volatility, at least on intraday strategies, in your checklist for market entry. The same can be done with higher timeframes. Let's imagine that we know that GBPUSD has an average weekly volatility of 200 pips. If the pair has moved 50 pips since Monday, we can expect that if the price continues to move down, there is a potential of about 150 pips. Of course, there are days when some movements become bigger or smaller, but we try to rely on statistics. With its help we can calculate the sizes of stops and take-outs. If we decided to be guided by the volatility data and open a sale on the pound, then we would try not to put a large (relative to the weekly timeframe) take profit. Because our expectation within the week is 150 pips. If the average volatility of a pair is 200 pips, it is silly to expect 1000 pips move. At least within a week. Thus, volatility can also be used for risk calculations. If you have opened many positions on different pairs, you can calculate what will happen if all stop-losses are triggered. Of course, the market is not obliged to obey your calculations, but it gives some support for your convenience and trading. Volatility-based Indicator The first indicator is ATR Average True Range indicator invented in 1972. It shows the average volatility and it is used most often to set targets and stop losses. The value of the indicator is multiplied by a multiplier and thus calculate the stop loss or and/or take profit. The calculations will automatically change depending on the current volatility. Volatility is higher, take profit becomes higher. Volatility is smaller and take profit becomes smaller. The next indicator is the CCI It is based on average price and moving average data. It is used as an oscillator, that is, when it is in the oversold zone, it is recommended to buy. And when it is in the overbought zone, it is recommended to sell. Another indicator, which is known to everyone, is Bollinger Bands They consist of a standard moving average and a moving average plus and minus standard deviation, which is calculated based on price. These bands are used most often to determine the limits of movement from the standard average. We can draw conclusions based on this indicator about the end of the movement, correction, etc. Conclusion In this article I have tried to give you an understanding of what volatility is in the forex market and most importantly how we can apply it in our trading. I hope that it will help you in developing and adjusting your own trading systems. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
11
INTUITION IN TRADINGWhy is it that when you feel that you should buy and you buy, the price goes down, and when you feel that you should sell, but do not open an order, the price immediately and sharply goes down? Murphy's Law? What should I do with my inner voice? Should I tell it to shut up or listen to it? In various sources, one can often find completely opposite opinions about the role of intuition in trading. Some say that only a systematic approach can bring success, while others, on the contrary, claim that it is impossible to achieve significant results without a "sixth sense". Who is right? Many people are interested in this question and we can make the most adequate conclusion: "Intuition is worth using, but only after you have gained experience of more or less successful trading within a year or two". Let's think for a second. How can a person who has no experience as a construction worker take a look at a house and immediately realize that there is "something wrong" with it? You can't. The person simply does not have enough experience, he is too poorly informed about the subject to make any judgments. There is a wonderful book by Malcolm Gladwell called Blink: The Power of Thinking Without Thinking. It deals in great detail with the "Thin-slicing Theory", what we call Intuition. I suggest you read it. So how to apply intuition in trading? The answer is simple. At first, gain experience by trading according to a mechanical system, without using any judgments like "I feel it, we are about to fall" or something like that. And only then, when you have an insight, be sure to check it with the help of technical analysis. Having found confirmation of your intuitive guess, you can already take some actions. In fact, there is even a book written on this topic, it is called "Trading from Your Gut". It is written by one of the "Turtles", Curtis Faiths. There is not so much information in this book specifically on the use of intuition, but there are a couple of useful thoughts. The less fear, the better intuition works. Perhaps this is the reason why it is so easy to make thousands of dollars on a demo account and so difficult on a real one. When trading on a demo, we release the full potential of our brain, because nothing limits our freedom, because the money is virtual and there is no fear of losing it.
Education
by DeGRAM
1
As Inflation Retreats, How Will Equities Perform in 2024?During the 1990s and again in the 2010s, equity and bond investors celebrated a goldilocks economy. GDP and employment growth were solid and core inflation remained comfortably around 2% per year despite increasingly tight labor markets. That scenario was occasionally interrupted, notably by the tech wreck recession in 2001, the 2008 global financial crisis, and most recently by the pandemic-era surge in inflation. But by late 2023, inflation appeared to be coming down globally. Comparing the annualized inflation rates during the six months from December 2022 to May 2023, and the six months from June to November 2023, inflation rates have fallen sharply in every major economy (Figure 1). Figure 1: Core inflation rates are falling rapidly worldwide Source: Bloomberg Professional (CPI XYOY, CACPTYOY, UKHCA9IC, CPIEXEMUY, JPCNEFEY, ACPMXVLY, NOCPULLY, CPEXSEYY, SZEXIYOY, NZCPIYOY) Granted, things still don’t feel great for consumers, who appear to be less sensitive to the rate of change in prices than they are to level of prices which remain high and are still climbing, albeit at a slower pace than before. Nevertheless, it appears that the main drivers of inflation -- supply chain disruptions (Figure 2) and surging government spending (Figure 3) -- subsided long ago. Supply chain disruptions sent the prices of manufactured goods soaring beginning in late 2020. Depressed pandemic-era services prices initially masked the surge in inflation, but services prices began soaring as the world reopened in 2021 and 2022 driven by surging government spending, which created new demand but no new supply of goods and services. Since then, however, supply chain disruptions have faded despite Russia’s invasion of Ukraine, and with little impact thus far from the conflict between Israel and Hamas. Moreover, government spending has rapidly contracted as pandemic-era support programs have expired despite some increases in spending related to infrastructure and the military. As such, not even the low levels of unemployment prevailing in Europe, U.S. and elsewhere appear to be sustaining the rates of inflation witnessed in 2021 and 2022. Figure 2: Supply chain disruptions drove inflation in manufactured goods in 2020 and 2021. Source: Bloomberg Professional (WCIDLASH and WDCISHLA) Figure 3: U.S. government spending has fallen from 35% to 22.6% of GDP Source: Bloomberg Professional (FFSTCORP, FFSTIND, FFSTEMPL, FFSTEXC, FFSTEST, FFSTCUST, FFSTOTHR, GDP CUR$, FDSSD), CME Group Economic Research Calculations U.S. core CPI is still running at 4% year on year but its annualized pace slowed to 2.9%. What’s more is that in the U.S. most of the increase in CPI has come from one component: owners’ equivalent rent, which imputes a rent that homeowners theoretically pay themselves based off actual rents on nearby properties. Outside of owners’ equivalent rent, inflation in the U.S. is back to 2%, its pre-pandemic norm (Figure 4). Figure 4: U.S. inflation is much lower when excluding home rental Source: Bureau of Labor Statistics, Bloomberg Professional (CPI YoY and CPI XYOY) Moreover, inflation in China has been running close to zero in recent months and has sometimes even shown year-on-year declines. In China, real estate grew to be as much as 28% of GDP, and the sector is now rapidly contracting. China’s year-on-year pace of growth for 2023 looks solid at around 5%, but that’s not too impressive given than the year-on-year growth rate compares to 2022, when the country spent much of the year in COVID lockdowns. By the end of 2023, China’s manufacturing and services sectors were both in a mild contraction, according to the country’s purchasing manager index data. If growth doesn’t improve in 2024, China may export deflationary pressures to the rest of the world. That doesn’t mean that the are no upward risks to prices. If the Israel-Hamas war broadens and interrupts oil supplies through the Suez Canal, that could reignite inflation. Moreover, green infrastructure spending, rising military spending, near-shoring as well as demographic trends in places like South Korea, Japan, China and Europe that limit the number of new entrants in the global labor market could potentially keep upward pressure on inflation. For the moment, however, any inflationary impacts from geopolitical or demographic factors appear to be overwhelmed by the usual set of factors keeping inflation contained including technological advancement and large labor cost differentials among nations. So, what does this mean for investors? As we begin 2024, fixed income investors are pricing about 200 basis points (bps) of rate cuts by the Federal Reserve over the next 24 months, and the S&P 500 is trading close to a record high. Be warned, however, interest rate expectations have been extremely volatile over the past 12 months, oscillating between expecting rate hikes to rate cuts by as many as 200 bps or more (Figure 5). If we continue to see strong employment and consumer spending numbers combined with weakening inflation numbers, this may keep rate expectations caught in a volatile crosscurrent. Figure 5: Investors price steep Fed cuts but rate expectations are extremely volatile Source: Bloomberg Professional (FDTRMID, FFZ15...FFZ25), CME Economic Research Calculations Moreover, while equities did well in 2023, their rally was narrow, driven by only a handful of large tech and consumer discretionary stocks, while most other stocks including small caps were largely left behind. Finally, the stock market itself isn’t cheap. The S&P 500 is trading at 23.37x earnings and the Nasdaq 100 at 59x earnings. As a percentage of GDP, the S&P 500’s market is still close to historic highs. Finally, even with 2023’s rally, the indexes are trading at basically the same levels at which they ended 2021 (Figure 6). Part of the reason stocks did so well in the 1990s and 2010s is that they started out those decades cheap. The same cannot be said of the starting values for 2024 (Figure 7). Figure 6: Nasdaq and S&P 500 are near end of 2021 levels but the Russell 2000 lags behind Source: Bloomberg Professional (SPX, NDX and RTY) Figure 7: Going into 2024, equities aren’t cheap like they were in 1994 or 2014 Source: Bloomberg Professional (SPX, GDP CUR$, USGG10YR). If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com By Erik Norland, Executive Director and Senior Economist, CME Group *CME Group futures are not suitable for all investors and involve the risk of loss. Copyright © 2023 CME Group Inc. **All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.
CME_MINI:ES1!Education
by CME_Group
Understanding Technical IndicatorsTrading indicators are essential tools for traders and investors to analyze and interpret financial market data. These indicators, derived from mathematical calculations based on price, volume, or open interest, etc, aid in visualizing market trends, momentum, and potential reversals. They serve as an additional layer of analysis, offering a structured and objective way to understand market dynamics. Understanding Trading Indicators 1.1 Definition : Trading indicators are graphical tools derived from price, volume, or open interest data. They help in identifying market trends, momentum, volatility, and possible trend reversals. 1.2 Types of Trading Indicators : Trend Indicators : These indicators, such as Moving Averages (MA), Moving Average Convergence Divergence (MACD), and Ichimoku Cloud, help in determining the direction and strength of market trends. Oscillators : Tools like the Relative Strength Index (RSI), Stochastic Oscillator, and Commodity Channel Index (CCI) measure overbought and oversold market conditions. Volume Indicators : Indicators such as On-Balance Volume (OBV) and Volume Weighted Average Price (VWAP) use trading volume data to confirm price movements. Volatility Indicators : These, including Bollinger Bands and Average True Range (ATR), assess the degree of price fluctuation in the market. Utilizing Trading Indicators 2.1 Trend Following Strategy : This approach involves capitalizing on the continuation of established market trends. Indicators like the Fourier Smoothed Stochastic (FSTOCH) help detect and follow these trends, providing smoother signals and filtering market noise for more accurate decision-making. 2.2 Mean Reversion Strategy : Contrary to trend following, mean reversion strategy focuses on price corrections when they deviate significantly from historical averages. The Bollinger Bands Percentile (BBPct) is a mean reversion indicator that uses Bollinger Bands to identify potential price reversals, indicating when an asset is overbought or oversold. Comparing Trend Following and Mean Reversion 3.1 Key Differences : Direction : Trend following identifies and exploits established trends, whereas mean reversion focuses on price reversals. Risk Profile : Trend following is typically higher risk due to the challenge of timing, while mean reversion is considered less risky as it banks on imminent price corrections. Market Conditions : Trend following excels in trending markets, while mean reversion is more effective in range-bound or sideways markets. 3.2 Combining Strategies : Using both strategies together can provide a more comprehensive market view and reduce reliance on a single approach. Mean reversion indicators can confirm trend reversals identified by trend-following indicators, while the latter can help avoid premature exits in mean reversion trades. Binary and Discrete Indicators 4.1 Binary Indicators : These indicators, like the Alpha Schaff, offer clear, binary (yes-or-no) signals. They are ideal for straightforward decision-making, indicating when to buy or sell. 4.2 Discrete Indicators : Unlike binary indicators, discrete indicators, such as the Average-True-Range, provide a range of values, offering more nuanced insights into market conditions. The Importance of Using Both Types of Indicators Combining binary and discrete indicators equips traders with a broader perspective on market conditions. While binary indicators provide clear entry and exit points, discrete indicators offer detailed insights into the strength of market trends and potential turning points. This combination enhances decision-making by enabling traders to cross-reference signals and identify high-probability trading opportunities. Conclusion : In the dynamic world of finance, trading indicators are invaluable for providing insights into market trends, momentum, and conditions. Utilizing a combination of trend following, mean reversion strategies, and both binary and discrete indicators, traders can develop a comprehensive and effective toolkit for navigating financial markets successfully.
BITSTAMP:BTCUSDEducation
by AlgoAlpha
Happy New Year 2024| Learn Our Methods | Read Description|Happy New Year Everyone 2024: Let's first talk about CHFJPY then we will talk about how you can improve and learn some tips. CHFJPY in last six or seven months price overbought heavily due to JPY poor performance and government's zero intention to interfere in the market. However, many reports suggests that JPY will likely to be rebound in first quarter of 2024 in this case we can see a strong shift in price characteristics. Our first entry indicates, that we should expect price to continue the bearish momentum and drop from current area of the price. However, as we will having NFP in the first week of the month, it is likely to see some unexpected movement in the market. Second entry, is when price fill the gaps in the market and then drop smoothly, we will keep you updated. We want all of you to succeed in the forex or commodities trading. Here how you can improve: Firstly find one or two pairs that suits you: meaning if you focus on every single instruments available to trade in the market, you will never succeed instead focus on one or two pairs and master them, know how and when these pairs move, what factors influence them in the market and trade swing highs and lows. Secondly, use longer time frames to have a better vision, have a longer vision which will help you catch the big moves, yes, it is time consuming but if you are beginner then focus first in this and then along the way you will learn intraday trading. Lastly, learn more about consolidation, accumulation and distribution: before the big reversal, price first will consolidate then accumulate and distribute, you should be looking to enter in phase of accumulation and take every enter when price consolidate which leads to a breakout. If you learn above information in details and practice, your chances of becoming a successful trade increase. There is no overnight success, it is all hard work, if you believe in your self and focus on above things you will one day be proud of yourself. Happy New Year and Trade Safe 2024. We wish all of you all the best. Team Setupsfx_
Education
by Setupsfx_
11
Market Algo or pain tradesI was reading another trading book today and much like watching the dumb money movie the other day, it prompted me to write another post. So, you may have heard the expression "the market is an Algorithm" whilst this is somewhat true, it's actually more a sequence, Ralph Elliott, Richard Wyckoff and Edward Jones knew this. In simple terms, the larger operators or what's known as sophisticated money - chase liquidity pools that are often areas Dumb Money have taken entries or placed stops. Now if it was as simple as this, you could simply write an indicator or be on the winning side 100% of the time. Unfortunately, there's a lot more to it! When I say the smart kids are taking the dinner money of the dumb kids, you need to appreciate the fact that winning whilst playing against retail traders is like putting the Patriots against your local under 12's side. Or like having the New Zealand All Blacks play against an old people's home in Pakistan. (I am not sure if Pakistan even have a 1st team in rugby). To gain some understanding, you need to appreciate there's such a thing as "pain trading". A "pain trade" refers to a situation in financial markets where a significant number of investors or traders find themselves on the wrong side of the market, leading to losses or discomfort. In other words, it describes a scenario in which the market moves in a way that causes the most amount of pain or financial losses to the largest number of participants. For example, if a majority of traders are positioned for a market to go up, a pain trade would be a sharp and unexpected decline in prices, catching those traders off guard and causing them losses. The term reflects the idea that markets often move in ways that inflict the most damage on the greatest number of participants. Understanding pain trades is important for investors and traders, as it highlights the potential risks of crowded trades and the importance of risk management strategies to mitigate unexpected market movements. Investors and traders often use various indicators, market sentiment analysis, and risk management techniques to try to avoid being caught on the wrong side of a pain trade. (Thanks ChatGPT for the summary). ====================================================== So take a company like Carvana for example... This type of move happens over and over again - creating cycles (But not always the same). In this image above you can see it's likely to have swept long stop losses and then rallied hard. You probably know about the Gamestop Saga. I wrote a post on that film recently. I talked about being on the wrong side - I can't get over how someone could be up $500,000 and still go broke? But it's all in the mindset. Liquidity is the name of the game. How do these things fit together? Well, Bitcoin is a prime example - retail mindset is "HODL, Buy the Dip, Diamond hands & Lambo" - whilst as a professional trader, it's enjoying your profits and buying/selling at the expense of the dumb money. These moves are shown as the last post, buy momentum. Here is the summary image from that post. Since we had a move up - retail seem to think it's up only, they seem to put all the eggs in the hope Blackrock and a halving will make them rich... I have read articles like this recently. After watching the Dumb Money film - you know where following the crowd goes. ----------------------------------------------------------------------- Why is this an important lesson? It's all to do with pain, where is the maximum pain? Retail sentiment would suggest pain comes in the form of little movement, grinding prices in up moves and fast aggressive drops. Some context from Blackrock themselves: What is Blackrocks Biggest ETF? So again, let's add a little logic. Where is liquidity sitting? If and it's a big if - Blackrock get an ETF approved and it's half the size of their biggest ETF to date, let's then assume Retail flood in and match it dollar for dollar. That market cap would still put us roughly at the current ATH, given coins in circulation. This again just amplifies, why we are simply - NOT READY, YET!!! The move I didn't want in 2022, looks to be the biggest liquidity grab we are likely to see in the Bitcoin chart. We are very, very likely still in an A-B move up for the slow pain of coming back to build sustainable momentum. Have a Happy New Year all! Stay safe and see you in 2024! Disclaimer This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
COINBASE:BTCUSDEducation
by Mayfair_Ventures
17
How to succeed in trading ✅From the experience I have in trading I have identified 3 pillars on which my success is based. I can't say that one is less important than another, so I try to combine all of them: 1) Psychology - is one of the most difficult aspects to master, which requires a lot of theoretical and practical knowledge, so I recommend first of all to study yourself, after you have managed to identify what kind of person you are, you will gain knowledge from books, videos, trainings that will help you control your emotions when trading. At the same time, this aspect can help you in your daily life. 2) Risk management - due to proper risk management, I managed to become funded. I also understood that in trading it is more important to tend to have a small risk, than a high profit, because greed for money can bring you into a less pleasant situation. I managed to take the account with a risk of 1% per trade and with an RR of at least 1: 2, which therefore showed me that even if I take 6 sls for 10 trades, I still remain profitable. 3) Trading plan - this is the aspect that motivates me to progress, once I have made a trading plan with well-defined goals, I tend to fulfill them. In addition to the purposes, a trading plan should contain the strategy applied, as well as the rules for entering / managing / exiting the transaction.
OANDA:XAUUSDEducation
by Snick3rSD
CHOCH vs BOS ‼️WHAT IS BOS ? BOS - break of strucuture. I will use market structure bullish or bearish to understand if the institutions are buying or selling a financial asset. To spot a bullish / bearish market structure we should see a higher highs and higher lows and viceversa, to spot the continuation of the bullish market structure we should see bullish price action above the last old high in the structure this is the BOS. BOS for me is a confirmation that price will go higher after the retracement and we are still in a bullish move WHAT IS CHOCH? CHOCH - change of character. Also known as reversal, when the price fails to make a new higher high or lower low, then the price broke the structure and continue in other direction.
OANDA:XAUUSDEducation
by Snick3rSD
4
What is Confluence❓✅ Confluence refers to any circumstance where you see multiple trade signals lining up on your charts and telling you to take a trade. Usually these are technical indicators, though sometimes they may be price patterns. It all depends on what you use to plan your trades. A lot of traders fill their charts with dozens of indicators for this reason. They want to find confluence — but oftentimes the result is conflicting signals. This can cause a lapse of confidence and a great deal of confusion. Some traders add more and more signals the less confident they get, and continue to make the problem worse for themselves. ✅ Confluence is very important to increase the chances of winning trades, a trader needs to have at least two factors of confluence to open a trade. When the confluence exists, the trader becomes more confident on his negotiations. ✅ The Factors Of Confluence Are: Higher Time Frame Analysis; Trade during London Open; Trade during New York Open; Refine Higher Time Frame key levels in Lower Time Frame entries; Combine setups; Trade during High Impact News Events. ✅ Refine HTF key levels in LTF entries or setups for confirmation that the HTF analysis will hold the price. HTF Key Levels Are: HTF Order Blocks; HTF Liquidity Pools; HTF Market Structure.
OANDA:XAUUSDEducation
by Snick3rSD
Market Structure Identification ✅Hello traders! I want to share with you some educational content. ✅ MARKET STRUCTURE . Today we will talk about market structure in the financial markets, market structure is basically the understading where the institutional traders/investors are positioned are they short or long on certain financial asset, it is very important to be positioned your trading opportunities with the trend as the saying says trend is your friend follow the trend when you are taking trades that are alligned with the strucutre you have a better probability of them closing in profit. ✅ Types of Market Structure Bearish Market Structure - institutions are positioned LONG, look only to enter long/buy trades, we are spotingt the bullish market strucutre if price is making higher highs (hh) and higher lows (hl) Bullish Market Structure - institutions are positioned SHORT, look only to enter short/sell trades, we are spoting the bearish market strucutre when price is making lower highs (lh) and lower lows (ll) Range Market Structure - the volumes on short/long trades are equall instiutions dont have a clear direction we are spoting this strucutre if we see price making equal highs and equal lows and is accumulating . I hope I was clear enough so you can understand this very important trading concept, remember its not in the number its in the quality of the trades and to have a better quality try to allign every trading idea with the actual structure
OANDA:XAUUSDEducation
by Snick3rSD
HOW TO IDENTIFY AN ASCENDING WEDGE AND A DESCENDING WEDGEThe wedge pattern is a popular chart formation that traders use to identify potential reversals in the markets. This pattern is formed from a series of higher highs and higher lows in an ascending wedge or lower highs and lower lows in a descending wedge. As the pattern narrows, the price action becomes more compressed, eventually leading to a breakout that can result in a significant move in the opposite direction. In this article, we will look at how to identify and trade this pattern. How to identify an ascending wedge and a descending wedge Rising wedge An ascending wedge is a bullish pattern that forms when price is sandwiched between an uptrend line and a horizontal or slightly upward sloping resistance line. To identify an ascending wedge: a. Draw a trend line connecting the lower lows. b. Draw a resistance line connecting the upper highs. c. The wedge should look like a symmetrical or slightly expanding formation. Downward wedge A descending wedge is a bearish pattern that forms when price is sandwiched between a falling trend line and a horizontal or slightly downward sloping support line. To identify a descending wedge: a. Draw a trend line connecting the upper highs. b. Draw a support line connecting the lower lows. c. The wedge should look like a symmetrical or slightly expanding formation. How to trade a wedge Rising Wedge When trading a rising wedge pattern: a. Place a buy stop order above the upper resistance line, aiming for a return to or beyond the initial point of the wedge. b. Place a stop loss below the lower trend line to minimize potential losses. c. Exit the trade when price reaches the target or when the pattern does not move beyond it as expected. Downward wedge When trading a descending wedge: a. Place a sell stop order below the lower support line, aiming for a return to or beyond the initial point of the wedge. b. Place a stop loss above the upper trend line to minimize potential losses. c. Exit the trade when price reaches the target or when the pattern does not break as expected. Risk Management Trading wedge patterns can be profitable, but it is important to manage risk effectively. Consider using a fixed percentage of your account for each trade and set strict stop loss orders to protect your capital. Also, remember that no pattern is foolproof and the market can sometimes give false breakouts. Conclusion When properly identified and traded, wedge patterns can provide valuable trading opportunities. By following the steps outlined in this article, you can improve your ability to identify these patterns and capitalize on them. However, always remember that trading involves risk, and a thorough understanding of market dynamics and risk management is essential for success.
Education
by UnknownUnicorn15614419
2
SIX HABITS TO ADOPT IN 2024Trading in the financial markets can be both rewarding and challenging. However, it's essential to recognize and overcome certain bad habits that can hinder your success and well-being. In this article, we will discuss six common habits that traders should avoid and provide actionable steps to improve their mindset, performance, and overall happiness. 1. Quit Complaining – Embrace a Positive Attitude Successful traders do not wallow in self-pity or exaggerate their problems. If you find yourself complaining about your trading issues, seek help from a mentor or support group to resolve your concerns. A positive attitude will not only improve your trading results but also create a more positive atmosphere around you. 2. Monitor Your Vices and Indulgences Traders often resort to unhealthy habits, such as excessive alcohol consumption or overeating, as a way to cope with stress and disappointment. Be mindful of your weaknesses and replace harmful habits with healthier alternatives that promote well-being and mental clarity. 3. Focus on the Present Moment – Avoid Future-Tripping Fear often stems from worrying about the future. To avoid this trap, concentrate on the tasks and decisions at hand. Focusing on the present moment will give you a sense of calm, security, and fulfillment that will ultimately improve your trading performance. 4. Continue Learning and Growing Once you achieve success in trading, don't become complacent or stop learning. Continue developing your skills and exploring new trading strategies. Learning new techniques or refining existing ones will keep you engaged, motivated, and adaptable in an ever-changing market environment. 5. Cultivate Strong Social Connections As a full-time trader, it's easy to become isolated and withdrawn from social interactions. Make an effort to maintain and build meaningful relationships with family, friends, and colleagues. Strong social connections will provide emotional support, reduce stress, and contribute to your overall happiness and well-being. 6. Practice Gratitude and Kindness Traders who experience negative emotions, such as envy or resentment, can benefit from practicing gratitude and acts of kindness. By expressing gratitude, volunteering, or offering compliments, you will improve your own happiness while fostering a positive atmosphere around you. Conclusion By recognizing and overcoming these six common bad habits, traders can significantly improve their well-being, trading performance, and overall happiness. Embrace a positive mindset, maintain healthy habits, focus on the present moment, continue learning and growing, cultivate strong social connections, and practice gratitude and kindness. By doing so, you will be well on your way to achieving success in the financial markets and leading a fulfilling life. In 2024, may traders who have yet to find success in the market be blessed with the wisdom to learn from their mistakes and the courage to embrace new strategies. May they cultivate a growth mindset, forging strong connections, and practicing gratitude and kindness. As the year unfolds, let their resilience and determination guide them towards a prosperous and fulfilling future in the world of trading. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
10
THE ESSENCE OF WYCKOFF'S METHODRichard Demille Wyckoff is a trader whose career coincided with the famous traders of the time: Jesse Livermore, Charles Dow and JP Morgan, W. Gann and others. All of these men are widely recognized for their terrific trading books. Wyckoff became famous for his insight, his trading method. Wyckoff has been involved with the financial markets since he was a teenager, and this is what gave him an understanding of how the market works. To become a successful trader, it is not enough to have good theoretical knowledge. Experience is the key to your success. That is why Wyckoff recommended to follow the tape for weeks to intuitively understand what is happening on the market. THE ESSENCE OF THE WYCKOFF METHOD The essence of Richard Wyckoff's idea is that in order to gain a large position in the market and not to move the price with large orders, a professional market maker needs to balance supply and demand. The equilibrium is observed when the price is in a narrow range of consolidation. After a position is gained, the price is pushed out of the trading range. WYCKOFF'S THREE LAWS The trading method is based on three laws: Supply and Demand. Wyckoff believed that the price of each asset goes up or down only by an overabundance of one thing. For example, the price goes up if demand exceeds supply. Simply put, if a whole city decides to buy 10 tons of apple, and the apple is in limited supply from the suppliers, they will start to raise the price because of the high demand. Cause and Effect. When an asset starts to rise in price - this is the consequence, and the previous news or a small price range this is the cause. When the price is between support and resistance zones for the X amount of time (cause), then a trend will start in the short term (effect). Effort vs. Result. A large volume traded, for example, during one day is an effort, while a price change is a result. Example: If a large player has spent a lot of money buying up most of the sell orders, and the price is still standing, it means that the effort spent did not bring the expected results. ACCUMULATION AND DISTRIBUTION The basic principle of trading is to see the equilibrium of supply and demand in time. Consolidation (also called range, zone, rectangle, sidewall, etc.) is a trading range of prices where accumulation or distribution takes place. Wyckoff's method is the use of accumulation and distribution phases. Accumulation is the formation of a trading zone where orders for further movement (price reversal) are accumulated within a certain time. Here "smart" money keeps the price at approximately the same level, where they buy up most of the market orders in order to sell (distribute) them at a higher price. Distribution is the formation of a trading zone where orders are distributed for further movement (price reversal) within a certain time. Similarly, to accumulation, smart money sells out all its previously accumulated assets in order to benefit from it. Consolidation is the place where the previous movement with the outweighing force of demand or supply stops and relative equilibrium finally occurs. This trading zone is a great time to make money, because it is the place where preparation for an explosive bull rally or bearish fall takes place. Consolidation can be considered as a place of refueling for a car, if not refueled, there will be nothing to drive on - it is the accumulated force, the reason that creates the subsequent movement. The longer the refueling takes place, the farther one can go. Therefore, after a long trading range, we should expect an equally long upward or downward movement. On the way to move from one zone to the opposite zone, the price does not fall in one go, it always makes pullbacks and stops, which are called accumulation. After his death, Wyckoff left trading methods for such zones. The principle is quite simple: Before the formation of a sideways trading range, sales peak and the accumulation phase begins. During the whole time the price is in this range, a large player buys up most of the sell orders. The price goes beyond the support and resistance zones, then reverses and the growth phase begins. At the end of the growth phase, the buying peaks. Then it is the same for the distribution phase. ACCUMULATION In the accumulation phase, professional traders buy up sell orders from uninformed traders. Usually it happens on the news, from all channels they say that shares of some company will fall, it is waiting for almost bankruptcy, everything is bad, etc. In Forex, various negative news on unemployment and similar. At this moment people start to get rid of long positions, and traders start to short the instrument. Wyckoff supporters realize that it is worth waiting for the price drop to stop and they should get ready to look for an entry point to buy the asset. Phase A and phase E are trend price movements, the phases between them are the trading range, which is analyzed by the Wyckoff trading method. Horizontal lines are support (at the bottom) and resistance (at the top) of the trading range. Do not consider them as exact lines, they are approximate ranges, in which the big one turns the price back to sideways. DISTRIBUTION Everything is similar to buying in the accumulation phase, only now those assets bought earlier should be sold off. This is just the basis, the main rules of trading according to the Wyckoff method in trading. Richard Wyckoff himself applied it on stocks and on daily charts (although he did not use charts, only tape). But nowadays, the time of algorithms, you can trade on any timeframe and any instruments. The method works well on the minute. It should be understood that there can be many phase patterns, the trading range can be different, the culmination with large candles and small, the volume is high and not very high, tests after the exit from the zone may or may not be. It all depends on who the big player is, when the accumulation or distribution occurs, what instrument you are watching and what timeframe is on the chart. Trading will be quite successful if you strictly follow your trading strategy according to the Wyckoff method, written on paper, competently determine the level of risk and position size. Observe the chart, find consolidations, see what happened inside and where the price went. You need to analyze every step, every movement. Big money thinks everything through, every price action on the chart is not accidental. And remember that whatever the big money does, it always leaves its traces. Good luck in trading!
Education
by DeGRAM
2
How to Become a Professional Trader!The Triad of Successful Trading: Strategies, Psychology, and Risk Management. Introduction: In the dynamic world of trading, achieving success is a multifaceted challenge that requires a comprehensive approach. While many enthusiasts focus primarily on trading strategies, it is crucial to recognize that a holistic approach, incorporating trading psychology and risk management, is indispensable for sustained success. This article delves into the three pillars of successful trading: trading strategies, psychology, and risk management. Trading Strategies (25 Marks): A robust trading strategy serves as the foundation of a trader's success. This section explores the importance of having a well-defined and tested trading strategy. Investors must understand that possessing the same strategy as others does not guarantee success; execution and adherence are key. Points will be awarded based on the clarity and effectiveness of the chosen strategy, as well as the ability to adapt to changing market conditions. Trading Psychology (35 Marks): Trading psychology plays a pivotal role in determining success or failure in the financial markets. This section emphasizes the significance of maintaining a disciplined and rational mindset. Factors such as emotional control, patience, and the ability to handle losses are crucial components of a trader's psychological makeup. The article will explore techniques to cultivate a resilient mindset, addressing the common pitfalls that novice traders often encounter. Risk Management (40 Marks): Arguably the most critical aspect of successful trading, risk management deserves the lion's share of consideration. This section delves into the methodologies and practices that traders should adopt to protect their capital. Key areas of discussion include position sizing, setting stop-loss orders, and diversification. The article will emphasize the importance of preserving capital and preventing catastrophic losses, assigning points based on the thoroughness and effectiveness of the risk management approach. Conclusion: In conclusion, the path to becoming a successful trader hinges on the harmonious integration of trading strategies, psychology, and risk management. While a strong trading strategy provides direction, a disciplined mindset ensures adherence to the plan, and prudent risk management safeguards against significant setbacks. Traders must recognize that neglecting any one of these pillars compromises the overall structure of their trading endeavors. By assigning marks to each component, this article underscores the balanced significance of these three elements and emphasizes their collective role in achieving success in the complex world of trading. I'm Shaw, a seasoned forex trader with 14+ years of success. Whether you're new or experienced, I'm here to help you achieve long-term profitability. Trending Hashtags: #TradingSuccess #TraderMindset #RiskManagement #TradingStrategies #FinancialMarkets #TradingPsychology #InvestmentStrategy #CapitalProtection #MarketDiscipline #ProfessionalTrader
FOREXCOM:XAUUSDEducation
by shaw42
The Phenomenon of Black Swans in ForexIn becoming a successful forex trader, understanding the impact of Black Swans in 2023 and beyond becomes crucial. Black Swan events, unpredictable and with significant repercussions, constantly reshape the financial landscape. This article delves into the essence of these phenomena, offering insights into their historical occurrences in forex and strategies to mitigate their unforeseen effects. Explaining Black Swan Events The Black Swan phenomenon refers to an event in financial markets that is completely unexpected, carries a major impact, and, only after it has occurred, is often inappropriately rationalised as predictable. Originating from Nassim Nicholas Taleb's work, this concept has since become a cornerstone in understanding market dynamics. In the realm of forex, just like in the stock market, these events shake the very foundations of trading strategies and economic forecasts. A Black Swan event in the stock market, for instance, could be a sudden geopolitical crisis or an unexpected economic policy shift that dramatically alters market values. These events are characterised by their rarity, extreme impact, and the widespread insistence that they were, in fact, predictable in hindsight. This phenomenon underscores the limitations of traditional market predictions and risk assessments. In essence, the Black Swan's meaning in the stock market and other types of markets extends beyond just defining unforeseen events. It encapsulates the human tendency to find simplistic explanations for these occurrences after the fact. This hindsight bias often overlooks the true complexity and randomness inherent in market systems. Historical Perspective of Black Swans in Forex The history of forex trading is marked by several Black Swan events, each reshaping traders' perspectives and strategies. To see how these events unfold, head over to FXOpen’s free TickTrader platform to access historical chart data. The 2008 financial crisis serves as a prime example, showcasing how unforeseen events can have far-reaching impacts. Triggered by the collapse of major financial institutions in the US, the crisis led to a massive flight to safety. This period was marked by extreme volatility and unpredictability in currency values, catching many traders and investors off guard. Another significant Black Swan event occurred in 2015 with the Swiss franc. The Swiss National Bank unexpectedly removed the cap on the franc's value against the euro, which had been in place to prevent excessive appreciation. This decision resulted in an unprecedented surge in the value of the Swiss franc, leading to substantial losses for traders who had positions betting against it. The rapidity and magnitude of this movement were unforeseen, making it a textbook example of a Black Swan in forex. Characteristics of Black Swan Events Black Swan events in the financial world are defined by three key characteristics: unpredictability, severe impact, and retrospective predictability. Firstly, these events are unforeseeable, arising from circumstances that lie outside the realm of regular expectations. No amount of historical data or market analysis can accurately predict their occurrence, making them a blind spot in investment strategies. The impact of a Black Swan on a portfolio can be profound. These events typically result in drastic changes in market dynamics, often leading to significant financial losses or gains. For instance, after a Black Swan, stock prices can collapse, catching investors off guard and leading to a swift devaluation of their portfolio. Finally, in hindsight, Black Swan events often appear predictable. After the fact, analysts and traders may claim that signs and signals were evident, as many did post-2008, leading to a false sense of understanding. This retrospective predictability, however, is misleading, as it ignores the inherent randomness and unpredictability of such events, underscoring the complexity of managing risks in financial markets. Risk Management Strategies in the Face of Black Swans In forex trading, effective risk management strategies are vital, especially in the context of Black Swan event trading. These strategies focus on minimising potential losses without hindering the opportunity for gains. Diversification is one of the key strategies to mitigate the impact of Black Swans. By spreading investments across various currencies and financial instruments, traders can reduce their exposure to any single market shock. This approach helps in cushioning the portfolio against unforeseen market movements. Setting stop-loss orders is another crucial tactic. In the event of a Black Swan, these orders can limit losses by automatically closing positions once a certain price level is hit. It's essential to set these orders at levels that balance between avoiding unnecessary triggers from normal market volatility and protecting from severe downturns. Hedging, using instruments like options and futures, can also provide a buffer against Black Swans. For example, purchasing options can help manage the risk of adverse price movements, providing a form of insurance against extreme events. Utilising a conservative leverage ratio is advisable. High leverage can amplify gains, but it can also magnify losses, especially during Black Swan events. Maintaining a lower leverage ratio can prevent the wiping out of capital when unexpected market swings occur. Finally, maintaining an emergency fund or reserve capital can be a lifesaver during market turmoil. This fund provides a financial cushion, allowing traders to weather the storm without liquidating positions at a loss. These strategies, while not foolproof, offer traders in the forex market a more resilient stance against the unpredictability and potential havoc wrought by Black Swan events. The Bottom Line In essence, Black Swan events serve as reminders of the importance of vigilance and adaptability. By understanding their characteristics and impact, traders can better navigate these tumultuous waters. For those looking to apply this knowledge practically, opening an FXOpen account can be a strategic step towards managing the unforeseen, offering diversification opportunities with hundreds of tradable markets. This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Education
by FXOpen
1
Trading on Holidays: Liquidity and Spreads When trading forex, it's essential to check spreads, especially during holidays. Trading forex during holidays can be a bit more challenging due to reduced liquidity in the market. Liquidity refers to the ease with which assets can be bought or sold without causing a significant change in price. During holidays, liquidity can be lower as many traders and financial institutions take time off, leading to fewer participants in the market. Lower liquidity can directly impact the spread, which is the difference between the bid and ask price of a currency pair. In times of reduced liquidity, spreads tend to widen, meaning the difference between the buying and selling price of a currency pair increases. This can lead to higher trading costs for traders, as wider spreads require a larger price movement in the underlying asset before a trade becomes profitable. It's essential for traders to be aware of these potential spread increases during holidays to avoid unexpected trading costs. Additionally, wider spreads can also lead to slippage , where a trade is executed at a different price than expected. This can further impact trading results, especially during fast-moving markets with low liquidity. Therefore, checking spreads during holidays is crucial for forex traders to anticipate potential increases in trading costs and adjust their trading strategies accordingly. On TradingView, you can check the spreads in the top left corner. There you can find bid, ask prices and the spread between them. It's important to factor in the impact of wider spreads on profitability and risk management when trading during these periods. By staying informed about spread changes during holidays, traders can make more informed decisions and better navigate the challenges of lower liquidity in the forex market. ❤️Please, support my work with like, thank you!❤️
Education
by VasilyTrader
4
TRADING PSYCHOLOGY: HOW TO OVERCOME YOURSELF?Hello forex traders! How much money have you lost because of emotions? How many losing trades have you closed because they went negative and it annoyed you? And how many times did the currency immediately reversed after you recorded a loss? As we all know up to 80% of success in forex trading depends on psychology. Money management is of great importance and only then strategy. Not everyone realizes it, but this is the harsh reality. How to defeat yourself? How to remain calm in any situation? How to protect yourself from negative emotions that cloud your mind? The Impact Of Emotions On Analysis When you are sitting in losses, you do not pay attention to what is happening on the chart. That is, your brain rejects the signals that indicate that the price will continue to go against you. On the contrary, your brain tries to convince you that the price is about to turn around, which, of course, does not happen. If you close the position and look at the market with a clear eye, you will realize that the situation in the market is not the same as it was in your head a moment ago. This distraction in the form of a minus on the position affects your attentiveness, and you do not notice the obvious. There is such a thing as analysis paralysis. That is, when some event literally knocks you out of the rut, after which you cannot adequately perceive the situation. This can be avoided with the help of reasonable sufficiency. That is, you stop looking for the perfect solution. Instead, you make the most correct and simple decision to close a losing position. Also, traders are often afraid of losing profit. But then again, how many times have you held a losing trade, hoping for a reversal, and it still went against you? It is the same with profitable trades. There is a constant feeling that the price is about to turn around and all the profit will be lost. As an option, in this case you can use a trailing stop. Then you will in any case know that in case of price reversal, the profit will not be lost. In principle, the cure for the influence of any emotions on the analysis is correct money management. That is, you just need to simply reduce your trading lot. The goal is to place such a lot, which would not cause you strong emotions. Until you are used to being disciplined in every situation, it is better to trade at a lot that you could forget about. For example, you could open a trade on the daily chart and forget about it (accidentally or naturally). At the very initial stages this approach is justified, as no open positions will not prevent you from analyzing the situation competently. At the same time, the very fact of a negative trade will not knock you out of your game. You Are Not Perfect Remember, you are not perfect. There is no person who, like a robot, does not get nervous about trades, who performs absolutely perfect trading and never makes mistakes anywhere and ever. All of us make mistakes, it is normal, and it should be understood. Let's say you read that you need to reduce the lot, not to be emotional, and you still make mistakes. The thought that "I am smarter" does not leave your head. But, in general, if you read the biographies of successful people in other areas, you will learn that they also made mistakes. Often, a person needs to make all possible mistakes only in order not to make them later. So, to speak, we learn from our mistakes. The average person believes that he is smarter than 80% of people. At the same time, there are always excuses for the question "why are you so smart, but so poor?" - something prevents you, you are too old, too young, your wife/husband prevents you, you were born in the wrong country and so on. Almost everyone thinks they are, so you don't have to worry, you are not the smartest. The Vicious Circle Of A Beginner Trader Searching for a system: you find a strategy that appeals to you. Trading: as a rule, this period lasts 1-2 days, at best a week if. First Losses: taking your first losses. It's usually down to the first few trades. Anger: naturally, there is a feeling of being cheated as the system did not deliver the promised profits; Blame: the system does not work; forex is a scam and the author of the system is a scammer. Someone is necessarily to blame, for example, the broker that closed the position a point later, but not the trader himself. And everything starts all over again. Exit From The Circle: Finding a system. Backtesting from the beginning to the end: the strategy should be either tested manually on the history or in a tester if the strategy is automatic. Absolute confidence in the strategy: when you have fully tested the strategy, know all the statistics, know all the pros and cons, you gain confidence in the chosen strategy. Good money management: further, you add a good money management. Now it is "your" trading strategy: the strategy should be completely yours. If you are not comfortable holding positions for 3-4 days, move to a smaller timeframe. Or, on the contrary, if you are too lazy to open trades often, choose a larger TF. That is, the strategy should suit your temperament and be customized for you. In general, all these pieces of the mosaic lead to the exit from the enchanted circle. You find a system, then trade, adequately perceiving losses. Accordingly, you further work with this system, solve problems with emotions, inputs and outputs, improve, tune-up and so on. A Little Bit About Our Brain The fact is that our brain compared to a computer has a very large hard disk, but a very small amount of RAM. Do you know the feeling when the brain is so overloaded that absolutely no information, even seemingly simple ones, can be stored in it? Of course, we cannot expand this memory, but we can control the number of simultaneously opened applications/programs. That is, we need to fight the so-called white noise. Remove social networks Facebook, messengers, YouTube, checking mail, and so on. This is all white noise that clogs your brain and prevents you from working adequately. There are many opponents and many supporters of meditation. Meditation is, in fact, nothing more than to lie/sit under calm music and go into a certain semi-trance state. Humans periodically need three states: being awake, sleep and a trance state. Usually after a certain mental effort, you start to get very dumb without doing any useful work. This is the brain signaling that you are lacking the trance state. 30 minutes of trance a day is quite enough. Do Not Set Goals In Trading When you set yourself a specific goal, for example, to make 1% every day it doesn't work. You start looking for non-existent trades again, clouding your brain. Therefore, you should not set profit targets. On the other hand, it is possible and even necessary to set loss limits! Sometimes, there is a sudden unreasonable desire to open a trade. Although the system did not give a signal. As a way out of this situation, you can try to open two accounts, one for adequate trading, where you will open trades clearly according to the rules of the system. Another smaller one for aggressive trading, when you have an irresistible desire to open a trade. If it really "works", you will still get profit, though not so big. Bottom Line As you can see, strategy is often not the deciding factor in trading. Psychology is what ultimately makes you act in one way or another. It takes the right approach and practice to be unstoppable in trading. The rest comes with experience over time.
Education
by Lingrid
11
TILT IN TRADINGAs it is known, a trader on the market is under constant pressure, the market is a constant process, in fact it is a river, and a trader should dive in and out of it to earn money. It is difficult to stay on the shore, when there is an endless river of money flowing nearby, hence the constant desire, well and of course stress, because the market gives unlimited opportunities at the same risk. Everyone knows that the two worst emotions for a trader are fear and greed, although it is only fear, greed is one of the types of fear (fear of losing profit). Fear breeds many related behaviors that only bring financial pain and frustration in trading. Let's look at some of the groups of emotions that fear gives rise to. TILT IN TRADING What is tilt? Tilt comes to us from poker; it means the inability to perform reasonable actions while being at the mercy of emotions. Tilt is not a one-time process. First, there must be preconditions for its occurrence. Most often, it is a series of unsuccessful trades in a short period of time (scalping), after which the trader starts to lose control and, trying to recoup losses, goes all the way, forgetting both the rules of trading strategy and money management rules. The most interesting thing is that the same thing can happen during a series of profitable trades, i.e., tilt can be earned at any time; it is only necessary to let go of some emotion for some time. The worst thing (except for the loss of money, of course) is the acquisition of bad emotional habits, from which it is very difficult to get rid. Tilt can occur even on expectations, for example, the price is about to approach the level of trade open, and suddenly it turns around. Your finger froze over the buy/sell button and then it's over! And waiting for the next approach turns into a tilt. Market factors also provoke tilt in a trader, for example, increase of volatility during news, the price flies back and forth like crazy and pushes the trader to open a trade. SO HOW DO YOU AVOID TILT? The answer to this question is always right under our noses. It is discipline, and only discipline. The rules of the trading system and the rules of money management, and as few emotions as possible. Do not trade in an agitated, tired, and painful state; wait it out; the market will not run away from you. With the emergence of the crypto market, new concepts have appeared, but they already relate to the psychological manipulation of traders, and although they are based on the same fear, we will try to describe them separately. Besides, these concepts have always been there and apply to all kinds of markets, not just the cryptocurrency market. FOMO & FUD cycle FOMO (Fear of missing out) information throwing in the bright prospects of some crypto coin or crypto market as a whole, in order to provoke the purchase, often and densely along with Pump of a particular crypto coin. FUD (fear, uncertainty, and doubt) is a negative information dump to provoke sales. All the same, only sales and DUMP (sharp sale of crypto-asset), the purpose is to reset the price of the crypto asset, again, to make it attractive to the investor. No, what a concern for potential investors! Both pump and dump are reverse actions, and the goal is the same attractiveness for investing! The only difference is the timing. The topic of psychology in trading is big; we covered only a couple of psychological aspects: one is the trader's problem, and the other is the trader's provocation by the market and information space. In general, psychology accounts for 80% of all trading. You can memorize techniques, but it is very difficult to understand and change yourself in terms of psychology. To understand how the "crowd" acts, what will be the reaction of "big money"? All this is what you should strive for in your search for profit. Therefore, the trader's "holy grail" is patience, self-discipline, and as few emotions as possible. If you feel that you are about to lose it, just leave the terminal and go to your family, to the gym, or to nature. Do not sit at the terminal on an emotional tilt. Work on your emotions and you will be profitable.
Education
by DeGRAM
1
What is Fundamental Analysis in the Forex Market?Fundamental Analysis in Forex Trading: Factors that Affect Currencies READING TIME: 11 MINUTES Estimating future price movements in the currency market is challenging for many. Globally, the foreign exchange market commands the biggest slice of the financial ‘cake’, claiming an eye-watering US$6.6 trillion in global FX market turnover. Traders will use a variety of tools to assist them in predicting the price movement, most commonly technical analysis and fundamental analysis are methods that traders use to get a gauge of potential movement in the market. Fundamental Analysis Defined Currency pair in forex refers to, two currencies are paired together and quoted through a ‘base’ and ‘quote’ currency. The euro in EUR/USD (a major currency pair) is the base currency and represents one unit; the US dollar is the quote currency and provides the value of a currency: the euro in this case. Fundamental analysis studies economic developments of a country, events influencing the supply and demand of their respective exchange rates, either positively or negatively. Analysts employing fundamental analysis tend to approach markets using a macro-driven theme. Macro analysis, or top-down approach, focuses on broad economic factors. This involves a comprehensive assessment of the economy, evaluating aspects such as economic indicators—interest rates, growth and inflation—as well as central bank policy. Fundamental analysis is composed of three core elements: • Central bank policies • Economic indicators • Geopolitical events These three components working in harmony should translate to clearer market trends and present potential trading opportunities. If one of these areas is in disorder, interpreting a fundamental picture becomes difficult. Fundamental analysis essentially informs traders and investors why the market advances and declines, and provides a trade decision: to buy, sell or trade flat. Central Banks A country’s central bank is charged with the duty of regulating banking institutions and implementing monetary and fiscal policies. Well-known central banks: • United States Federal Reserve (or ‘Fed’) • European Central Bank (ECB) • Bank of England (BoE) • Bank of Japan (BoJ) • Reserve Bank of Australia (RBA) Everything begins with the central bank and they’re assessment of economic indicators. Traders and investors attempt to anticipate a central bank’s actions by evaluating economic indicators and reacting to the outcomes from the forecast (Actual versus Variance). The market projects a forecast for an economic indicator and subsequently responds to the actual figure released. Ultimately, trading opportunities present themselves when economic data harmonises with a central bank’s sentiment. This—coupled with a well-defined technical approach to fine tune entry techniques—delivers an overall trading picture to operate with. Central Bank Announcements: Major central banks meet every 4-6 weeks. The Fed and BoE meet every six weeks (8 times per year), while the RBA meets 11 times each year. Market trend, or ‘market direction’, is derived from the sentiment within the market, with the central bank acting as a stabilizer by using monetary policy. It is therefore crucial market participants recognise the arrangement of these central bank meetings and understand the terminology used. Central bank governors are the head of their respective central banks. The head of the US Federal Reserve currently is Jerome H. Powell; Andrew Bailey heads the Bank of England and the governor of the Reserve Bank of Australia is Philip Lowe. Central Banks: Why Are They Important? Central banks assess the current market sentiment at each meeting and consider whether any changes need to be made for the near-term monetary policy. The members will review data gathered over the last 6 weeks to assess on what measures need to be taken such as changing the current interest rates or using quantitative easing. A country’s central bank raising rates can be categorised by way of a ‘hawkish bias’; what they’re essentially doing here is talking up the prospect of raising rates. The prospect of cutting rates is also an option on the table for central banks, emphasising a ‘dovish bias’. Either a hawkish or dovish tone can translate into big price moves in financial markets. If economic conditions remain unchanged, the central bank is likely to adopt a neutral stance: no bias. Typically, the central bank meeting is accompanied by a statement and, of course, the interest rate decision. These are critical to understand. The statement is the primary avenue employed to communicate with investors regarding monetary policy (actions undertaken by a central bank): the outcome of the vote on interest rates alongside other policy measures and economic commentary. In addition, here you will find what the central bank’s forward projections are. A week or so later, the ‘minutes’ are available: a more comprehensive analysis of the statement and the talking points discussed in the meeting. See here for the latest US Federal Open Market Committee (FOMC) Statement. Out of the interest rate decision and statement, you’re looking for market sentiment—the direction provided by central banks and the core overall trends in the market. The first two weeks of every month is ‘usually’ clear in terms of central bank sentiment, following a fresh statement from the bank. Economic Indicators Economic indicators, as their name implies, are statistics—often on a macroeconomic scale—designed to measure economic activity. Traders and investors use these indicators to analyse the well-being of a country’s economy. Government organisations and private groups release several economic reports on a weekly, monthly and quarterly basis, each measuring activity in a particular segment of the economy. Widely followed indicators are employment/unemployment (payrolls), inflation (consumer price index), growth (or gross domestic product), retail sales, the stock market, industrial production (Producer Price Index) and housing figures. In terms of release schedules, approximately five key economic indicators are released each week. No single indicator provides a clear picture of the economy’s health. At best, each indicator provides a ‘snapshot’ of current conditions. But when piecing the economic indicators together, you should get a clearer picture of how the economy is faring. However, it is crucial to understand that some economic indicators are more important than others at certain points in time. Inflation, as of this article, is important. Significant indicators to watch can be found on the statements from central banks in their forward guidance. Economic Calendar An Economic Calendar is widely used among independent Forex traders and investors. High-impacting economic releases are marked red. Orange represents potentially medium-impacting events and yellow indicates a low-expected impact on price levels, or price action. We also have Previous or ‘Prior’, ‘Forecast’ and ‘Actual’ figures. Forecasts are generally a collection of economists’ views which are then averaged. New Forex traders might want to note what the Q/Q and Y/Y labels refer to. Geopolitical Events Geopolitical tensions can complicate technical analysis and fundamental analysis, distorting the general flow of key fundamental drivers in the market. However, absent of disruptive geopolitical events, trending markets become visible. Geopolitics events are divided into wars and conflicts, terrorist attacks and international tensions. US-China trade is a good example and the ‘Brexit’ situation (United Kingdom exit from the European Union). The announcements surrounding geopolitical issues are usually not scheduled, unlike the central bank announcements and economic data. As you can imagine, this may cause confusion in currency markets and make them difficult to trade. Conclusion To wrap things up, fundamental market analysis in the Forex market looks at three core components: the central bank’s ‘direction’, economic indicators to provide instant bias, and the geopolitical situation. To aid timing, we use technical analysis to fine-tune entries. Like technical analysis, fundamental analysis involves broad study and is beyond the scope of an article to detail each element. For that reason, the objective of this article is to provide a foundation in which to build from.
Education
by FPMarkets
BROADENING PATTERNSBroadening patterns are very unstable from a technical point of view. They are usually formed after the trend has already gained strength. It looks as if the battle between buyers and sellers is out of control, as the price starts to move in a wider and wider range. The situation is exactly the opposite of triangles, where the price shrinks to an extremely balanced state before the breakout. Broadening patterns are formed when three or more price waves expand so much that their highs and lows can be connected by two expanding trend lines. Just as there are two types of triangles, there are two types of broadening patterns. They are called the conventional (classic) pattern and the rectangular pattern. The last one can also be called an expanding pattern with a flat top or flat bottom. Conventional Broadening Patterns It consists of three trends where each high is higher than the previous high. The highs are separated by two lows, where the second is lower than the first. These patterns are more likely to indicate the completion of a rising market, rather than a breakout higher. The conventional broadening top is sometimes called an inverse triangle, because that is exactly what they are. In general, some patterns are just perfect for trading, as they mark by default the places where to place stops with low risks. A rectangular triangle broken close to the top is just a good example. But conventional broadening tops, however, alas, do not have this feature. Such patterns are extremely difficult to detect before the final top is formed. Besides, there is no obvious support line, the breakdown of which would serve as a convenient tool for us. The furious, emotional reaction of price and volumes reflects chaos and complicates the work with such patterns. Of course, it is not easy to determine the breakout in such conditions, but if the pattern is more or less symmetrical, there are options. It is a decisive movement under the descending trend line, which connects both lows or even a movement below the second low, which will serve as a warning of a future decline. Targets are not easy to determine either, however, the volatile price reaction during the extension indicates that the distribution phase is almost complete. Successful completion of such a pattern is usually followed by a proportional fall in price. But the rectangular expanding patterns, which we will talk about next, are another example.   Rectangular Broadening Patterns Most simply defined broadening patterns with a flat top or bottom are the easiest to identify. This is called a rectangular broadening pattern. Since the very concept of wild price movements implies an extreme degree of emotional involvement, it is difficult to add volume here. At market tops, though, volume is usually quite significant.These patterns also resemble a head and shoulders pattern, except that the "head" in an broadening pattern is the last element of the pattern. In this case, the bearish signal is activated with a decisive downward breakdown of the pattern. A broadening pattern with a flat top is an accumulation pattern, and it is important that the volumes grow on the breakdown. They are essentially head and shoulders in a situation so bearish (or bullish) that price simply does not have time to form a right shoulder. Psychological Perspective Of The Broadening Patterns From a psychological perspective, expanding patterns can be seen as a reflection of the changing attitudes and beliefs of market participants. As the pattern widens, it suggests that there is increasing disagreement among traders about the direction of the market. This can lead to greater volatility and larger price swings as different groups of traders try to push the market in their preferred direction. At the same time, broadening patterns can also be seen as a sign of indecision and uncertainty. Traders may be hesitant to commit to a particular direction, leading to a widening range of prices as buyers and sellers struggle to gain control. This can create a sense of tension and anxiety among traders as they try to navigate an increasingly complex and unpredictable market. Target Points To determine where the price can reach, you need to take the distance from the maximum (minimum) of the pattern and its horizontal line. Then the same distance is set aside in the direction of the breakout. Rectangular expanding patterns often show pullbacks like any other patterns. Since these patterns are very emotional and unstable, these pullbacks can be sharp and volatile. Fortunately, they don't live very long. In this case, the downside price target was reached on a downside breakout. Generally, a subsequent sharp reversal is a rare thing, as the price usually goes much farther than the price target. Failed Broadening Patterns Occasionally, such patterns fail to produce the expected result. Unfortunately, there is no super-reliable way to recognize that the pattern has failed. This will only become obvious when a small bottom or price top is formed after the breakout. However, we can protect ourselves from such situations by using the 50% rule, in which we measure half of the final price reaction in a pattern for a rise or fall. Which is shown by the dotted line, once reached, the pattern is considered a failure. Of course, sometimes there are patterns that work even after breaking through the 50% zone with a subsequent pullback. However, breaking such a line with a strong trend in most cases indicates that the pattern has failed. In any case, carefully use the patterns that predict the price movement in the direction of the trend that was previously the main one. In Summary Broadening patterns are a trading range after a trend, between two extended trend lines. At least two touches are needed. It will take imagination to draw, as the touches are not always accurate. However, this is true for many other patterns as well. The maximum depth of the pattern is put off in the direction of the breakout. Since these are very dynamic and volatile patterns, pullbacks are usually short but very fast. False breakout is difficult to detect: the signal can be a price rise above the previous low/maximum or a pullback of more than 50% against the breakout. Overall, broadening patterns can be a useful tool for traders looking to understand the psychology of the market. By analyzing these patterns and the underlying factors that are driving them, we can gain valuable insights into the attitudes and beliefs of other market participants. This can help to make more informed trading decisions and better manage their risk in a rapidly changing market environment. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
14