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This is for the Gamblers out there...This trade is not for traders. Trading 1:1 is very risky and should not be used for a passive Trading strategy. Not only it implies that more than 50% of your trades must be a success, but also making your gain to loss trades 1:1. If you like gambling play luck of bad luck games, don't trade forex like this. I make this trade a 0.01 volume, just for fun. Before you go in the markets trading, make a strategy, a trading plan, a risk to reward ration. Beware that you are responsable for all your trades. They all start at 50-50 chance Your knowledge and experience will tip the balance in your favor. Stay active and stay learning... Cheers, Kingzman
OANDA:XAUUSDLong
by Kingzman
2
Something's wrong? S&P500 vs XLY:XLP + a history lesson/reviewWelcome! Today we'll have a look at an interesting development in the S&P500, as well as look back at some past history making events. First up, I'm not predicting anything. I'm not in the business of predictions because it's a fools errand. I trade what happens, and until something happens all of this is academic. However, I am in the business of making money, and that means managing risk. When we see something in the markets that makes our little internal alarm bells start ringing, we should factor that into our decision making going forward. Secondly, this isn't a unique analysis/comparison. I'm sure there's lots of articles out there covering a similar correlation between these two markets, so I'm not claiming originality. Alright, let's go! So we're looking at a correlation between: The S&P500, the behemoth of equity markets and benchmark of US economic healthy/activity (orange on the main chart). XLY:XLP - a custom symbol that looks at the relationship between the Consumer Discretionary Sector (XLY), and the Consumer Staples Sector (XLP). In a nutshell, if this symbol (black on the charts) is moving up, consumers are spending more on discretionary items, and vice versa if it's moving down. The theory is that if consumers are spending on discretionary (read: luxury) items, they are feeling good about their situation and the situation of the economy going forward. The opposite is true if they aren't. Why is this comparison interesting? Basically, these two symbols/markets should move in sync, and do have a strong historic correlation. A rising S&P500 is a sign of economic strength, which means XLY:XLP should be rising along with it. The REALLY interesting things happen when that correlation goes away. Okay, we're going to commence with a review of previous correlation divergences, and a look at what happened to each symbol. By the end of our review you should have an idea of where I'm going with this, but I'll cover it at the end as well. I've created a second chart that is numbered so you can follow which market cycle/time period I'm talking about: 1. 2007-2009 GFC: Okay, let's start with the biggie. I won't go into the history or the fundamentals behind the GFC, so let's look at our charts. It's important to begin by noting that this was the longest correlation divergence of the last few decades - I'll leave you to decide whether that's significant or not. What we can see on our chart is XLY:XLP peaking in late 2004, and forming a series of lower highs until the bottom of the markets fell out in 2007-2008. Contrast that with what happened to the S&P500 in the same period; a slow, steady rise, culminating in a peak in October 2007. What really jumps out at me from studying that period is how a week or two after the S&P500 peaked (was anyone calling it that back then?) the XLY:XLP symbol made multi-year lows (since 2003). Basically, if we take our theory that a rising XLY:XLP is a sign of economic strength, then something was seriously wrong with the US economy from 2004-2007. Of course, we now know that there was. Lastly, because it'll become important later on... the momentum indicator on the main chart (it's based on the S&P500) shows a distinctive pattern seen prior to all market corrections over the last two decades. A series of lower highs; indicative of failing momentum in the market. 2. Market Bottom - 2009: The S&P500 bottomed out in early 2009 after falling 50% in 1.5 years. What we can see from our comparison is another correlation divergence, but a bullish one this time. XLY:XLP formed higher lows, and combined with a S&P500 momentum divergence of the same nature, it was a clear signal that markets had started reversing. I encourage you to check out that period in more detail; in particular, have a look at how XLY:XLP started rising sharply a few weeks before the S&P500 followed suit. It's no secret that the Consumer Discretionary Sector is a market leader in expansions, and that was a perfect sign of how you can use it to time markets - which some people say is impossible! 3. 2011 Downturn: Markets rose steadily for two years until early 2011, when the S&P formed the first of what would be three (roughly) equal peaks. Looking back at XLY:XLP, we can see that it actually topped out at that first peak in February 2011. From there it fell steadily, while the S&P500 sorted itself out and was ready to fall (read: smart money). Markets fell roughly 15-20% before recovering in late 2011. 4. Minor drop? This one is pretty interesting (well, I find it interesting). We can see another correlation divergence in 2014, when the XLY:XLP symbol formed lower highs, while the S&P500 kept rising. What I find interesting is the fact that this didn't lead to any sustained drop... However, if you look at the S&P500 in September 2014, you can see it actually fell quite heavily, and sharply, but recovered quickly. In fact, at it's peak it fell 10% in a month - it was the largest fall since 2011. 2014-2016 - Crazy town: Okay, let's get to one of the stranger periods in the S&P500 over the last few decades. Jumping back to our charts we can see that the S&P500 topped out in (roughly) mid 2015. However, XLY:XLP actually formed higher highs from March 2014 to November 2015. That latter peak was actually formed on a lower high on the S&P500 - clearly, something was askew. Sure enough, markets went haywire, and had two sharp corrections in what was effectively a sideways movement for the entirety of June 2015 - July 2016. One interpretation is the consumers were blindsided by the falls, and it was linked to other factors (do some research, it'll be interesting!). Note: Look at that distinctive bearish momentum pattern on the S&P500... 6. Recovery within a recovery: The S&P500 reached it's 2015 high in July of 2016, but we can see that XLY:XLP symbol was far more sluggish in that period. Fun fact: it wouldn't reach its 2015 high until late in 2017. However, the really interesting thing is that the true S&P500 market expansion didn't occur until the XLY:XLP symbol had its largest single week rise in years during the last week of October 2016. We even see a small correction in the S&P500 in the weeks prior to that. Once consumer discretionary spending recovered and surged, so did the S&P500 for the next 3-4 years (until now!). 7. Today - what's going on? We now reach more recent history. As we all know, the S&P500 has surged higher over the last few years, breaking records along the way. We had a mini crash in late 2018, which was quickly recovered, and today the index sits at all-time highs. Great? Well, yes... and no. My concern (and remember this isn't a prediction - it's an observation on potential risk factors), is two-fold: firstly, XLY:XLP has seriously diverged from the S&P500, and peaked in June of 2018. Since then it's fallen into a distinctive bearish pattern of lower highs, and shows no signs of recovering. Consumers aren't happy or confident for some reason (rising interest rates, trade-war, and Trump are some of my initial thoughts). Combine that with what is by now, I hope, a fairly distinctive and obvious bearish momentum pattern on the S&P500. Momentum has been falling for over a year now (since January 2018), and scarily mirrors previous significant market corrections/downturns... --------------------- Alright. So let's recap... We've had a look at some interesting patterns and correlations that can be found when you create a XLY:XLP symbol, and compare it to the S&P500 Index. We've examined previous market corrections, and hopefully drawn some interesting lessons that we can POTENTIALLY (I can't stress that enough) use going forward. So, what am I saying about the health of the S&P500? Well, nothing really. The market is still rising, and until it's not, that's the only factor that is relevant. Betting against a rising market (especially an intrinsically upward biased one such as the S&P500), is a recipe for disaster. What I am saying is that everything doesn't seem as rosy as the S&P500 would have us think. Consumers are hurting and/or worried, and that's not good for the health of the US economy. Whether that will result in any downward correction is anyone's guess. I'll sign off by saying that I remain long in equity markets. I've seen no sign of a proper correction underway, and in fact I won't until the day that markets fall heavily. I am, however, tightening by stop losses and adjusting my risk management procedures to potentially account for increased market volatility and bearish movements. Okay, that's all for today. It's already an essay. I hope you've learnt something, and found this moderately interesting! Let me know if you have any queries/comments/suggestions. All the best, DD
AMEX:XLY
by DreamsDefined
6
BTC to trade in range?I would say the chart of BTC/USD clearly indicate the major support is around 9000, where the bull start a major rally after the slump in mid-March. The most crucial resistance is 11000$, because it's a triple technical confluence level. 1) it's the middle point of the slump this month 2) the rally afterward stops at 11000 , also a horizental resistance 3) Exponential Moving Average 100 happens to become a key threhold for bull and bear territory. All said, if the price pushes above 11,000$, it certainly signify the resumption of bull market, and bull will most likely take out 13000 & 14000 highs. However, current tepid market trading volume and these numberous minor rabounces show no sign of a new up offensive anytime s BITSTAMP:BTCUSD xoon. Range trading would be the most rational scenario . BITMEX:XBTUSD
COINBASE:BTCUSD
by UnknownUnicorn3838311
1
Trading Divergences - An Alternate View for New TradersTrading divergences is a very common technical analysis strategy, but it comes with one big problem: the most common divergences (not hidden) trade against the trend. This means that new traders can often get into trouble by constantly looking for, and trading, against a dominant trend. Here's an idea to help you become more profitable over the long-term: identify divergences on your chosen momentum indicator, but only trade on trend continuation signals. I'm not saying you need to do this forever, as once you're experienced you can trade both pullbacks and continuations - but doing so requires multiple layers of confirmation, and a lot of knowledge/planning/experience. By trading trend continuation signals after divergences, you're stacking the odds in your favour by going with the dominant trend. You're also training your eye to see divergences, and seeing how the markets react to divergences. For new traders this can be a valuable lesson in the power of momentum in financial markets. So, what are trend continuation signals? It depends on your chosen momentum indicator, so I can only provide general ideas; you need to adapt things according to what you're using. My chart contains a custom momentum indicator, loosely based on the RSI. However, it's far smoother than the RSI, so I can reliably trade precise signals (e.g. for me, a cross of 0). On the RSI, you may choose something a bit further down the scale, for example, a cross below Oversold (20/30). If you're using a Stochastic indicator, you may trade a cross below Overbought (70/80). If you don't understand why I'm suggesting you trade signals at the opposite end of the scale for RSI and Stochastic, let me know. Hopefully this all makes sense, and remember that it's just an idea if you're a new trader and struggling to make good trades. Let me know if you have any queries. DD
Education
by DreamsDefined
4
How to Trade Correlations for New Traders - AUD/USD vs NZD/USDWelcome! Here's a super simple chart, and strategy, which can help you get started in your trading journey. Trading strongly correlated pairs and looking for divergences is hardly an industry secret. It's a standard technique, and one that is heavily employed by large institutional investors. Basically, correlation means that certain pairs move in a similar fashion. For AUD/USD (AU) and NZD/USD (NU), they are both based on the USD, and the Australian and New Zealand economies are, broadly speaking, based on similar fundamentals. This means that the factors that impact the price of the AU market, will naturally have similar impacts on the NU market. The great thing about the AU and NU correlation is that it's long lasting, and strong. For a few decades now, the pairs have had a 80%+ positive correlation (a positive correlation means two markets move in the SAME direction, whereas a negative correlation means that move in the OPPOSITE direction). This strong correlation has held steady through some significant market events. The exception is a period between 2014-2016, where correlation dropped to a low of 15% - but that was due to a variety of factors that are too in-depth to cover here. However, it's worth stating that if the correlation were to drop below 80% in the future, this strategy/technique would no longer be valid. Hopefully the chart broadly explains things, but in a nutshell: The pairs should move the same. If they don't, e.g. if AU forms higher highs, but NU forms lower lows, that's a correlation divergence. Basically, the markets have moved out of synch for some reason. Often, these are simply short-term phenomenon, and we're counting on the correlation to re-establish itself, allowing us to profit from it. The nature of correlation divergences is that you don't know which pair is going to break first. Therefore, you need a secondary signal in order to make a trade. For example, AU is making higher highs, and NU is making lower highs - which one is going to break? Well, a simple idea is to grab your favourite momentum indicator and look for divergences on either market. On our chart, this plays out in the mid-late April trade. AU is grinding higher, but forming a bearish momentum divergence. Therefore, we're looking for AU to break lower. We can use a moving average, or a trend line break as our confirmation signal to enter the trade. This one worked out wonderfully, but not all of them will. Positive correlations are, like nearly all trading signals, stronger on higher time frames. on a 5min chart, correlations, like the markets themselves, are far more volatile. This is why I would suggest using H4 as your smallest time frame chart, and look at correlations on a Daily basis. A great website to measure/track correlations is www.mataf.net I hope that that all makes sense. I encourage you to try it out for yourself - pick two strongly correlated pairs and start training your brain to look for divergences. And, as with all trading, don't jump on the first correlation divergence you see. You need a secondary confirmation (e.g. momentum divergence, support/resistance), and then a confirmation signal, before making a trade. Trading success is all about how you do things, not what you do. If you have any questions, feel free to contact me. DD
Education
by DreamsDefined
CHFJPY: Analysis and Plan for the week ahead (15 JULY 2019)Looking at CHFJPY pair, there is a bearish engulfment going on. Price has hit Key Level and price is resisted indicating there is a probability that price will go bearish. Disclaimer: These are only an idea or a point of view of what will happen in the market. Please do your own analysis for more confirmation and do not copy blindly. I will not be responsible for any losses if you follow the idea. These ideas are meant for sharing and learning for those who are still new and learning like me. Please manage your risk-reward accordingly as it is very crucial. You are allowed at any moment to leave any comments below as those comments will be taken as a learning point or reviews. Trade at your own risk and good luck.
Short
by FUADALHAKIM