Get started

Risk Management

Which Trader Are you?Hello Traders, here is an educational Traders Profile Know your Profile! Before we start - Let me know if you have any comments or questions, Your Support is Appreciated!! Which Trader Are you?? TRADER PROFILES & TRADE TYPES Trader profiles are very different and will dictate what type of trader are you going to become her with Global Fx Education © THE SCALPER – the scalper, often keeps trades open for a brief period and trades the market in times of very high volatility. THE DAY TRADER – the day trader closes all positions at the end of every day, with each day as a different trading day. THE SWING TRADER – this swing trader will keep trades open for days at a time and makes a profit from wide swings in the market. THE POSITION TRADER – The position trader who holds positions open the longest of all traders. Once an investment is made, the position could be kept open for months or even years. Let me Explain In Detail here : EXPLAINED 👇🏻👇🏻 THE SCALPER : Scalping is high risk, high reward trading strategy used by expert traders. The trading day is full of volatile periods which requires scalpers to continually monitor the charts for a good time to exit the trade. It is very high pace trading, with many small trades opening and closing all the time. Scalpers usually trade the openings of major markets. THE DAY TRADER : Day trading is slightly less risky than scalping and ideal for those who like to see their profit at the end of every day. This strategy is not for newcomers, and not for traders who hope to leave their trades unattended while at work. This option is also good for traders who can not trade every day of the week but can still commit a full day to their trading. THE SWING TRADER : Swing trading is a better setup for the beginner trader. Progress will be visible in your account over a couple of days. Swing trading is an opportunity for a trader to set up fewer but better trades, which suits a trader who is still learning. If you are making longer trades, hoping to make a profit from swings in the market, make sure you have a well-funded account so you don’t get a margin call by your broker at a time when closing your trade could mean a loss on your account. THE POSITION TRADER : Position trading is for someone who has limited time, and more ideal for those who spend long hours commuting that can be used for research. The downside of position trading is that much of the time your capital is going to be locked up in trades, so it limited your ability to jump on explosive trends to make a quick profit. Much Love! #education #gfx #tradewise
TVC:DXYEducation
by Global_Fx
9
In depth look at continuation bull/bear flag structures/patterns Hello everyone: Welcome back to another quick educational video on price action structures/patterns. Today let's go deeper into the continuation correctional structure. Specifically, the continuation bull/bear flag structure. First it's important to understand that a bullish/bearish flag is a continuation correction. They are representing a correctional phrase of the price action, before resuming the previous impulse phrase. As price action traders, we must be able to identify what correction we are seeing. This will allow you to get ahead and make your forecasting so you are prepare to any potential entries Second, bullish/bearish flag correction will appear in any time frames, any markets, and in different sizes. Typically a flag correction will have at least 2 swing highs and 2 swing lows and relatively even and proportion in angle or length. They can be slightly slanted or very parallel to each other. Remember the market is not perfect, it wont always present us picture perfect, textbook structures. Thirds, So its important to understand multi-time frame analysis, top down approach. A LTF bullish/bearish flag may or may not have the potential to start taking off massively due to the higher time frame showing us a conflicting bias. So its important to add as much confluence to your trade as possible. As always, any questions, feedback or comments please let me know :) See you all in my next weekly outlook stream. Thank you
BINANCE:XLMUSDEducation
by jojofang0901
18
Why Should You Avoid News Scalping?Hi traders. I've been receiving messages recently requesting for more educational content especially for people who are fairly new to trading. If there's only one emphasis to remind myself back then as a beginner trader, it'd definitely be risk management. So why is it so important to avoid scalping the news especially when you just got into the trading world? 1. Unusual spread & undefined risk - Regardless of how many winning streaks you had previously using certain news scalping strategy, there will be one time where the market catches you onto the wrong direction if you are unprepared. The typical news scalping strategy where majority of the new traders were introduced are the buy limit & sell stop (pending orders) strategy, it's basically setting both pending orders above and below the current market price, approximate 3-5 minutes before major events announcement betting the market to run aggressively into either side. Do not get me wrong, there are professionals who are successful using this system, but bare in mind that your capital is not protected due to the wide spread (up to 20 - 50 pips) and slippage, trust me there will be time where the market swings both ways aggressively triggering both orders sabotaging your account. Avoid the sense of urgency to notice a steep growth in your equity curve, begin focusing on long-term profitability instead. Protecting your capital should be your number one goal. 2. Lack of emotional control (greed & fear) - I've seen traders who had 10R of profits refusing to close out their scalp position due to greed, only to watch their profits run into red zone. In contrast, there are traders who refuse to cut their losses due to fear, only to watch half of their account being wiped out, or at worst, receive a margin call. Scalping is intense, it requires a high level of emotional detachment and patience, these traits are not often found in new traders due to the lack of experience. Successful traders are very patient with their winners and extremely impatient with their losers, always cut your losses without hesitation when things are not going according to your plan. Trading is a game of getting an edge out of uncertainty, to succeed in this game you MUST be very strict on yourself and extremely discipline. 3. Lack of knowledge - I've noticed majority of the traders choose to scalp because of the belief of 'fast money'. The more eager you want to make money quick, the higher tendency you will enforce your will into the market, the more risk you are involved, which is self-sabotaging. You do not need to put your hard earned capital at high risk in order to achieve high returns, treat trading like a marathon not a sprint. Spend more time on developing strategies/ systems that generate consistent returns, you only need a slight edge in the market to be consistently profitable. Be consistent with your action, profits will come. Success is not far away from you if you're constantly putting in consistent actions. Trade safe. Do follow my profile for daily fx forecast & educational content.
Education
by TraderNeoh
2
HOW-TO If you get two MTP Setups on the same BarIn this help Tutorial, I would like to cover what to do if you get two different MTPredictor Trade Setups on the same Bar. As explained in the video, this can arise sometime because we have two Scripts, one containing our Standard MTP Trade setups, the other containing our Advanced MTP Trade Setups. We have had to code two Scripts to overcome Pine Coding limits. In the video, I cover 3 possible trade management strategies, based on how experienced or aggressive a Trader you are. Every Trader is different, and will have a different Trading Plan that is individual to them. The first strategy is for the more conservative, or risk adverse, Trader who may look to consider the neatest Profit Target to look to come out of the market earlier. The second, more aggressive, Trader may wish to look to use a further out Target of the Wave 3 swing as calculated in the MTP Advanced Trade setup Script. The last option is to use the Higher Time Frame Chart, which in this case would be the Daily DP support zone. As you can see, there is no "one size fits all" in Trading, we are all different and have different levels of experience as well as different risk profiles. As such, it is important that we develop our own, and unique, Trading Plan that fits us, only then can we apply it time and time again in the markets. I hope this video has helped and given some guidance as to how to handle the situation if you get two different MTPredictor Trade Setups on the same Bar. Please note: this is not a trade recommendation, you should all perform your own Analysis. Losses can and will unfold when Trading, please always uses Stops and keep your losses small.
Education
by MTPredictor
How Much BTC Do You Need to Create Generational Wealth?Hi Tradingviewers, in this article I am going to break down this question into smaller items and try to give a concrete answer to the question: “How Much BTC Do You Need to Create Generational Wealth?” First, we’ll have to define what ‘wealth’ means. Then we need to define how we look at the ‘generational’ part. Lastly, we also need to take into consideration long term outlooks on Bitcoin. Let’s try and put some actual numbers on this and see how much BTC you would actually need. I’ve been on Twitter a lot lately (putting some more effort into my account!) and got inspired to answer this question as this was a very common topic on Twitter. The interesting thing is that I saw a lot of people talking about this, but nobody actually made an effort to go through the math. Without further ado, let’s dig into the numbers. First let’s look into some options to define wealth. Using data from the World Inequality Database and Statistics Canada), it takes about $488,000 to be considered part of the top 1% in the U.S in 2019. Let’s assume that this applies to the number needed in a family/household. Let’s make ~$500,000 our first option, I’d say belonging to the top 1% in the US would be a pretty fair definition of wealth. If we look further than the US, we can also use this same 1% methodology to define wealth on a global scale. In that case you would need at least $744,400 in combined income, investments, and personal assets according to the global wealth report from the Credit Suisse Research Institute. A slightly more ambitious goal compared to our first option but we could define this as ~$750,000. Another option to look at wealth is to look at financial independence . My preferred way to define financial independence is to have enough wealth such that you can completely live off the dividends. A common rule used by the FIRE community (Financial Independence, Retire Early) is the 4% rule. The 4% can be summarised as a safe withdrawal rate that will not lower your total wealth over the long run. Even when there are temporary downturns in the global economy. This assumes you invest all your money in the stock market. The median household income in the US is $61,937 per year. We could consider a passive income of the median household income as wealthy. If we divide $61,937 by 4% from the safe withdrawal rate above we get to a total of $1,548,425. So using this logic you would need roughly ~$1.5M in total assets in order to be considered wealthy. Now, let’s discuss the generational part. Honestly, I was surprised when I found the exact definition: “ generational wealth represents assets passed down from one generation to the next. If you can leave behind a notable inheritance to your descendants, that constitutes generational wealth. These assets can include real estate, stock market investments, a business, or anything else which contains monetary value. I had somehow expected it would be something more ambitious such as that for x generations they would all have to be considered “wealthy too”. Achieving generational wealth would then be relatively easy given method one and two. You would just need to make sure something is left of your $500,000 or $750,000 respectively. Option three even has it implied. The whole idea behind option three is to never actually spend any of your wealth, you’re simply living off the dividends. This leaves us with the most difficult one: how much Bitcoin would you need? The first and most obvious approach is to directly calculate the amount of bitcoin that represents our different definitions of wealth given the current price. If we take a Bitcoin price of $30,000 that would give 16 bitcoin for option 1, 25 bitcoin for option 2 and 50 bitcoin for option 3. Now let’s bring in some of the nuance. First of all if you’re expecting to live off your dividends you cannot have all of your wealth be in bitcoin itself as it doesn’t pay any dividends directly. Normally the wealth would be in the stock market or in real estate. Also, if you assume that the value of bitcoin will keep rising you would obviously need far less bitcoin today to achieve generational wealth later. For example, Bloomberg analysts have predicted a price target of $50,000 for Bitcoin in 2021, implying a $1 trillion market cap for just this cryptocurrency. JP Morgan analysts estimate the price of Bitcoin to grow more aggressively, as they estimate a value of $650,000 by the end of 2022. Let’s be more conservative on the date, but keep an aggressive price target for the sake of the argument here. If we take a $300,000 price target by the end of 2031 how much bitcoin would you need today to achieve generational wealth? This would give us 1.6 bitcoin for option 1 2.5 bitcoin for option 2 and 5 bitcoin for option 3. Specifically for option three it would still mean though that you would have to cash out all your crypto assets and convert them into dividend generating assets instead. Also, with a possibility to see hyperinflation later given that 35% of all dollars in existence have been printed during the last 10 months it is questionable whether thinking of generational sustainable health should even be expressed based on dollar figures to begin with. I wouldn’t know how to express it in any other way, but am really curious to hear if anyone has good alternatives on this point. I am really curious to hear your views on this. I used many assumptions here, how would you have approached this? Are there any flaws you see in my logic? Feel free to comment on anything, and please feel free to absolutely destroy it! I’d love to have the discussion. Just to summarize, based on this you would need today: 16 bitcoin to be considered among the top 1% wealthiest in the US 25 bitcoin to be considered among the top 1% wealthiest in the world 50 bitcoin to achieve generational financial freedom Trading-Guru p.s. You might have seen a few reposts of this article as Tradingview was struggling with a faulty spam detector. The moderators kindly helped blocking and unblocking some posts. Thanks @scheplick!
BITSTAMP:BTCUSDEducation
by Trading-Guru
11
HOW-TO Losses can and will unfoldIn this video, we take a look at losses. Losses, or losing trades are important, because every trading system will have losses. I just think it is important that vendors talk about losses to make it clear to everybody that no matter how good a system looks or appears to be, it will have losing trades. In the video we take a look at our "History Triangles" (which are the small green triangles on the chart), these show trade setups that would have been printed on the chart at the time, and would have been filed on the next bar, but would have been recalculated if the market moves through the setup without enough Bars having unfolded to create a new swing Pivot . These are not always losing trades, as they can also appear at double tops/bottom (where the stop level would not have been breached), but are usually losses. Position Sizing is used to keep these losses small, at just -1R, or 1 risk unit. I hope you all enjoyed this video, as it is an important reminder, that all systems have losses and it is important that vendors talk about losses in their posts.
Education
by MTPredictor
1
The ABCs of risk management. How to calculate risk and stop-lossHello, Traders Today we are going to explore risk management. First of all, risk management is what keeps traders alive! 1. First of all - it’s very risky to get into a single trade with more than 20% of your trading deposit. 2. To begin with, you need to calculate the percentage of risk you plan for each trade. To simplify, it’s an amount of money you’re willing to lose if something goes wrong - and if the losses are equal to that amount, you get out of the trade automatically. The stop-loss needs to be calculated with consideration of your tolerated risk. Let’s say your trading deposit is 20000$. The risk for one trade is 1% of your deposit, in our case it’s 200$. If you make a trade for 10% of your deposit (20 000$), then the position size should be 2000$. The tolerated risk, in this case, is 200$ (10% of your trade amount). Therefore your stop loss for the trade should be 10%, after which the position will be closed. If your position is equal to 20% of your deposit (20000$), then the position size should be 4000$. The loss you’re willing to tolerate here is 200$ (5% of 4000$). That’s your maximum stop-loss. 3. It's very important to understand that you have to make trades with a good risk/return ratio. The recommended minimum is 2 to 1, but 3 to 1 is better. You have to calculate that in order to remain profitable, otherwise, you can end up having losses executing lots of trades. For example, if the R/R ratio is 1 to 2, and you succeed in 4 of 10 trades with an estimated 20% profits and close 6 of your positions with a stop-loss of 10%, you’ll have 4*20% (80% profit) minus 6*10% (60% loss) and that’s still 20% profit. So you get 20% profit even if only 40% of your trades are profitable. Good luck and watch out for the market!
Education
by UnknownUnicorn10064030
9
In depth look into double tops/bottoms price action structures Merry Christmas everyone: Hope everyone is well and healthy, and enjoy the holiday season as much as we can :) Back here with another quick educational video on price action structures/patterns. I am going to go into detail on double tops/bottoms type of price action. Many of you have asked me to elaborate more on what double tops/bottoms truly mean, and they sometimes get confused with a support/resistance. I will go into more detail on this topic to clarify the differences. In addition, I will bring out some different examples in the market, and demonstrate how I see double tops/bottoms the way that works for my trading and its analysis. How I confirmed what a true double tops/bottoms is, and how to look for potential entries once you see them form. Understanding that multiple time frame analysis, nature of the market plays a big role to determine if the double tops/bottoms are “valid” and to give us more confidence to enter a position. The higher the time frame, the more significant it is to that double tops/bottoms and the potential reversal move from it. As always, any questions or feedback please let me know. Merry Christmas and happy new year everyone :) Thank you Jojo
OANDA:US30USDEducation
by jojofang0901
12
Trader Profile - Asking Yourself The Right Questions1. YOUR TRADER PROFILE The first thing most traders will have to do is build a portfolio, this process is more complex than just choosing what assets to trade, and in order to build a good portfolio you will need to find your trader profile, which can be determined by asking yourself the following questions: What is your initial capital? What is your targeted return rate? What is your risk aversion? What is the investment horizon? What is your availability? All these questions are related to each other, and as such, it can be difficult to find non-conflictive answers to them. The following sections give information about the theme of each question so that you may more easily identify your trader profile. 1.1 Initial Capital The initial capital you are willing to invest is an important matter, again we could ask ourselves various questions to determine it, but let's go with a simpler approach. A low capital can have a wide variety of effects. Capital is directly related to buying power, and a low buying power will result in the trader being unable to trade certain assets, but more importantly, it comes with a reduced ability to diversify a portfolio, and as a result, makes traders unable to lower their risk level. Leverage can increase buying power without having to have higher capital but it involves significantly increased risk. Having a low capital also means potentially reducing the lifetime of your portfolio since you won't be able to tank more losses, thus conflicting with your investment horizon target. Certain markets are more accessible than others for traders with low capital, this is the case of the forex and cryptocurrency markets that offer high leverages compared to the stock markets. 1.2 Risk/Returns Risk/returns are two correlated concepts, the more returns you expect from an investment, the more risk you are taking, an investment with large potential profits and low risk does not exist. Knowing your risk aversion is crucial if you want to build a good portfolio, and you will need to choose this level in coherence with the other aspects of your trader profile. Financial instruments all have a different risk/return ratio, and it is important to choose them wisely based on your profile. It is also possible to mix various financial instruments in your portfolio, this is a good way to reduce risk, as such you can have a portfolio consisting of 60% derivatives (futures, options...) and 40% bonds. 1.3 Investment Horizon Your investment horizon will be a huge factor of your success in trading, certain traders focus on long term trading, holding positions for years, and will use the buy and hold strategy. Others might hold a position from several days to several months, they are often defined as "swing-traders". Finally, some traders might open and close positions within one trading day, and as such are named "day-traders", a particularly well-known type of day-traders are scalpers, who usually hold positions for only several minutes. Most beginners in trading will start day-trading, and a lot will try scalping, however, it must be noted that the shorter your investment horizon is, the more difficult it will be to be consistently profitable. This has various reasons, one of them is that shorter-term investments require more precise timing, also you are expecting smaller profits than ones you would get using longer-term investments, thus encouraging a trader to use higher leverage, thus maximizing risk, also opening a high number of positions will mean you will lose more from frictional costs (commission, spread...), and since your profits will mostly be smaller, frictional costs will have a higher impact on your profit margin. We strongly advise beginners to stay away from scalping. 1.4 Availability Trading requires time and effort, and it is impossible not to be involved with your positions (even when everything is automated). However, some users will still have more time than others. Traders will have to do certain tasks: Monitor existing positions Execute orders Research for information Users who can allocate a majority of their time to trading will be able to build & update more advanced portfolios and do shorter-term trades, however, traders with less time will often have to seek longer-term trading styles such as swing trading. Conclusion Trader profiles will vary across every trader and understanding the importance of asking yourself the right questions to identify your own trader profile will likely help you overall increase your chances of success in trading. Thank you for reading!
BNC:BLXEducation
by LuxAlgo
7
10 reasons why being an active investor surpasses buy & holdMum and dad buy & hold (also known as "buy & forget" and "buy & hope") gets heavily promoted as some holy grail. Take advantage of the market rewards with the least effort, stress, and without having to pay fees to money managers, fees that will eat your retirement. To Bitcoin holders this is the greatest thing and they dream of wealth, they think they found the ultimate "best performing asset". But professionals don't really care about crypto, and anyone that is able to be somewhat competitive sees it as really bad. 1- The front page of this idea. Bitcoin holders are at 1.75R. In 3 years. 2- The risk adjusted returns are terrible. UBS Global Allocation Fund (buy & hold everything) has a max drawdown of close to 50% for a yearly return of something like 2.5%. The S&P averages about 7% a year and has drawdowns of 30%, 50%, and so on. Bitcoin has gone up 500% since september 2017, as well as march 2019, but it casually gets 85% drawdowns. Managed funds typically provide small returns for small risk, for example 5% annual returns and a max drawdown of 5%. Quants via ultra diversification (on assets and in time) get only green months, very little drawdowns and decent returns. Active traders, if they are good, get small volatility and consistent slow and steady growth. 3- It is what gets advised to noobs in investing as well as other competitive activities, like esports. Warren Buffett advises "just buy and hold". There is an equivalent. The game league of legends is popular so I think most people will get it. Players at the top say to poor players desperate to climb "just pick annie and roam", play an easy champion and rinse & repeat something simple. But no one is seeing armies of Annie one tricks in the higher elos. It's stupid advice that does not work. And if it does it's really the worse, second hand, "better than nothing" thing to do. 4- "Buy & Hold" is a one size fits all method, but there is no one size fits all opportunity. First an exception. People looking to pay their children university, or retire, have a 1 size fits all opportunity: fixed income. There are so many bonds and other contracts with all kinds of maturation dates, it's impossible to not find something right. Kid goes to uni in 10 year: Find a safe decent 10Y bond (still have to hedge currency risk if it is foreign...), collect some interest every year and get the entire amount in 10 years. So here you already see what can go wrong. What if you needed your money in March 2020? Bitcoin is down 80%. Sell? What if you bought and held Japan stock market and by the time you retire it's down in the gutter? Wait 30 years or more? 5- Some of the favored tools of passive investors do NOT buy & hold themselves. The vast majority US stocks go to zero. The S&P 500 which is buy & holders favorite itself does not buy & hold, performant stocks are added all the time, and poor ones are removed. So there is a fundamental flaw. And the S&P 500 strategy is as dumb as it gets, it simply buys winners sells losers. What if growth gets more volatile? It will be buying and selling all the time, or if there is a rule not to sell too often, hold losers too long and miss winners too. Besides the S&P 500 is only for the US and no matter what you think bull or bear it is basically betting on 1 single economy so still a simple buy & hold on a single thing (even with all the adding winners and removing losers). 6- Number 6 is abstract. Max simplicity and a total lack of effort and risk management cannot possibly create a reward. One cannot help but to think nothing can be free, there is no magical energy well, matter does not pop out of thin air, and in the same way there is no magical trick to get money without doing anything. Every critter on this planet needs to work to get something in return. In other activities being passive leads to no result. Do nothing, nothing happens. Why would this be different? The power of greed? Losing or gaining weight requires some action, magic trick special diets still do not work, buildings don't build themselves even government contractors have to work at some point. 7- No one successful does it. There might be a few lucky exceptions, but never lucky enough to really get to the top. George Soros was or is active, Buffett is active, every billionaire and centamillionaire on the planet is active. I have never heard of passive buy & holders that happily retired. The only "retired" passive novices are the ones that got lucky, bought dot coms before they went ballistic, bought Bitcoin early enough... 8- You'll miss out on great opportunities Giant contangos, mispricing, very underpriced stocks... Imagine being underwater rather than full of cash when a certain investment is super undervalued. And look at Bitcoiners, rushing in to buy "the dip" in january 2018 and laughing at me when I suggested a price decline and being patient as I thought there would be opportunities. They end up holding some $16000 BTC, then add more as the price goes down because let's risk everything. Each $16000 Bitcoin they have is 4 $4000 Bitcoin they did not buy. After 3 years BTC made it to 22000 wow fantastic! From 16k to 22k. If they "risked missing out", did something else with their cash, and bought $5000 BTC this year they'd have more than quadrupled their money. When BTC makes it to 20k then drops to 3000 it easily has much more upside than downside. I always said I would not short under 5000 even when I said it will eventually go to zero (it 100% will). Buying a coinflip ultra risky casino chip with no stop loss when it is close to ath. Just so bad. There is a difference between timing every top and bottom which only twitter crypto traders do, and avoiding really stupid actions. 9- "Buy & Hold" is a hoax perpetrated on credulous retail investors to milk them. You know what reduces risk and adds liquidity in the market? Dumb money consistently throwing money in the pot. Institutional investors that are happy to promote this hoax sell when they consider prices to buy too high, we witness phenomenal crashes, and why would anyone choose to not sell high prices and just hold the bag? Institutions are literally dumping on willing dumb money that has no idea how low prices will go and how long the drawdown will last. While they recommend to "just buy and hold" their own holding periods have never been shorter. And many of the professionals that buy and hold are just getting more AUM out of it. We know for a fact they are scamming energy ETF "investors" (USO), day traders, Robinhood "investors" From Jim Cramer: “Pick a couple of stocks, you gun them in the morning, and then you hope people are stupid enough and they buy them.” Like institutions cannot wait 9:30 to buy their shares, no no they are in a hurry they have to get in at terrible prices in the pre-market. Hedge funds are happy to rob dumb money. No matter how, no matter the time horizon. 10- I have no crystal ball do you? This scam summed up: "Hello individual investors. Today, based on available info, try guessing what will happen in the quarter century, and then for the next 25 years discard any new info". Emotions & logic are on a spectrum, and this idea is not on the more logic side of it. It makes less sense than buying a lottery ticket. At least the ticket buyer can say he is having fun, a sort of little adrenaline rush, and lottery ticket buyers can use flawed logic saying they only pay little and in their lives they'll never pay as much (not even close) as what the reward is. But buy & holders cannot even say they are having fun. What fun? Fun forgetting about something? "I'm having fun being passive sitting on a bench and not playing basketball and not even watching it". See it makes no sense. Or fun watching your money disappear while you do nothing maybe? And I don't see how they could use flawed logic here "ye so I make a bet on the future with limited info and as more info becomes available I put my fingers in my ears and go lalala".
Education
by MrRenev
3
#1 Trading Psychology : Accept Losses Its Part of the Process.I'm sure many of you have experienced this before. Me included. The market moves against you, so you extend your stop loss. The market moves against you again, so you extend your stop loss again, thinking that the market will reverse in your favor. We all know what happened next. The market never reversed and you lost a huge chunk of your capital. It is very important to respect your stop losses and let the market take you out so that you will not have to take the mother of all losses.
Education
by mbn_global
6
How to scale into the impulsive phrase of the market condition? Hello everyone: I want to go over an important topic of scaling into the market. This is something more advanced in my opinion, and should be used cautiously when applicable. First you will need to understand that it's important to fully accept the risk when you try to scale in a trade. Essentially you are doubling down on a trade when you do so. What is your risk management when it comes to scaling in ? Second thing to watch out for is managing your first initial position. I would generally move my SL to at least BE or in 1:1 profit. This way even if the second trade that I scale in end up to be a lost, I am BE overall on the two trades. Third point to remember is before you scale in the trade, is there enough R:R to justify it? No random entries just because there is a continuation correction on the 5 min chart as an example. Some price action must be present and give you enough confidence that the price is likely to continue from a structure, and then look to scale in the trade. Any questions or comments please let me know :) Thank you
Education
by jojofang0901
12
BUDGET TO FINANCIAL FREE DOOM / 7 Steps To Paying Of Your Debt All You Need To Know About Managing Money Wisely October 3, 2016 by National Debt Relief managing moneyManaging money wisely is not as complicated as you think – but it can be quite tedious. Maintaining a healthy level of finances is the same as keeping yourself physically fit. Just because you achieved your ideal weight, you will cease making an effort to live a healthy lifestyle. It is a continuous endeavor that will never stop. Of course, once you have reached your goal, maintaining it will not be as difficult as the effort you had to exert previously. But the bottom line is, you still need to exert effort. Some people have used financial management as a way out of debt. Most people have used it to improve their financial situation. The reason for managing money wisely is not really important as long as you are doing it. Regardless of your situation in life, it will help you take your money to the next level. According to an article from MarketWatch.com, consumers are starting to feel more confident about their money. Data reveal that they are beginning to increase their spending in non-essential expenses like entertainment and travel. While there is nothing wrong with feeling confident about your money, it should be approached with caution. The increase in spending should be done with money management in mind. Although consumers may be more financially abundant, they should increase their spending in accordance with their knowledge of their financial position. Without financial management, this would be hard to determine. The danger lies in spending too much and getting used to it. When your income is suddenly compromised, you might find yourself unable to cope with the changes that you need to implement to keep your finances from sinking. Three concepts you should know to manage your money well The key to keeping your finances in top shape is to manage it smartly. According to an article published on USAToday.com, making more money is the key to having a high credit score. A credit score is one of the indications of a strong financial position. Earning more is not the way to improve it. The best way is to start managing money wisely. Some people feel overwhelmed by this task. However, it is actually not complicated. It can be tedious to maintain a good financial position but it is not a complex concept to understand. In fact, there are only a couple of financial thoughts that you need to master in order to manage your finances well. Here are three of the most important. Interest. Admittedly, this is one of the most confusing for most consumers. For a beginner, it seems complicated but once you get a general idea, it can help you make smart decisions about your money. The interest is important on two financial fronts. One is your debt. You need to understand how this affects the amount of debt that you owe. If you have a high-interest debt like a credit card, you might end up paying a lot more than what you actually used the credit for – just because of the interest. The interest is also something that you can use to your advantage – specifically when investing is involved. Investing is the best way to make your money work for you. When you place your money in profitable investments, it earns compound interest. That means the amount you invested earns interest and even the accumulated interest will help you earn more. If you choose the right investments, that can really help you grow your finances – even without doing anything! Budgeting. The next concept that you need to master is budgeting. This is probably the most direct tool that will help in managing money wisely. In fact, if you want to achieve financial independence, this is one of the first habits that you should learn. A budget plan monitors your income and the various expenses that it funds. It allows you to control and manage where your income will be spent. If you need to add an expense, you can easily see the current categories that you are spending on. A budget plan will allow you to identify what expenses to sacrifice in order to make way for a new one. Current numbers. Finally, you need to master your own financial position. No matter how sophisticated your budget plan is and even if you perfectly understand the concept of interest rates, it will be for nothing if you do not know your finances. You need to keep your financial knowledge current so you can update your budget plan. Not only that, you can use this knowledge to help you decide if you can afford to get new credit or not. It will also allow you to make the right decisions about your investments. The current numbers involve not just your own financial number but also that of the market. You do not have to be a financial expert but you should at least know when the interest goes up or down. That way, you can take advantage of it. For instance, late last year, it was reported that the Federal Reserve will raise interest rates. That means the rest of the financial institutions will follow. If you have this knowledge, you should start to be aggressive in paying off your high-interest debts. These three are the important concepts that you need to consider while managing money wisely. There may be other important financial ideas to learn but that would depend on your own financial goals. Why is it important to manage your finances It is important to manage your money well because you use it on practically everything. While we do not want to be materialistic, your finances play an important role in this consumerist society. This is the main reason why you need to manage it well. Here are the specific reasons why you need to boost your financial management efforts. It helps you make smart decisions. Financial management involves a lot of decision-making. The more informed decisions you make, the better the outcome. Having a direct hand in managing your finances makes it easier for you to make informed and smart decisions precisely because you know your financial situation. When you know how much you have in your budget after sending out your monthly payments, you will know how much you can allot for your financial goals. It gives you an idea about the amount that you need to set aside for your retirement fund, reserves and even for your annual vacation. It allows you to avoid borrowing too much debt. According to the data from ValuePenguin.com, the average American Household Debt is currently as $16,048 – if you only include the households that are in debt. If you include all the households in the country, the average debt is $5,700. The current outstanding debt is $3.4 trillion with $929 billion specifically borrowed through revolving credit – the most common being credit card debt. 38.1% of households have some form of credit card debt and this high-interest debt is what can pull you down. If you fail in managing money wisely, all of these debts might go unnoticed. Not only that, poor financial management usually ends up compromising your savings. When you do not have savings, one emergency can push your finances over the edge and into a lot of debt. It lowers the risk of living from paycheck to paycheck. If you learn how to manage your money well, you can also avoid living from one paycheck to the other. You can budget your money well so you are not living up to your income limit. It is wise to live below your means because that leaves you with extra money to use on your financial goals or even emergencies. It keeps financial stress from ruining your life. When you are managing money wisely, that means you are in full control of your money. Being in full control will help eliminate or at least lower financial stress. Sometimes, we are stressed about something because we are uncertain about how it will end up. Having a full knowledge of your finances and being in full control will help you lower this uncertainty. It builds financial confidence. Apart from lowering stress, you will also feel more confident about your finances. This is a great trait to have when you are investing your money. It allows you to be braver in taking high-risk investments that will get you bigger returns. All of these make managing money wisely very important. You can significantly increase the opportunities for financial growth because you have a firm understanding of your finances. Common questions about managing money Question: What does managing money mean? Answer: This means you understand your financial position and you are organized in all your financial transactions. This keeps you from falling short on your budget and assures that important expenses are met. You are aware of every transaction and you are making smart financial decisions about it. Question: How should I manage money while self-employed? Answer: Managing your finances while self-employed is tougher because of your irregular income. The danger is budgeting for the lean months – which is usually the period when you do not have a high income coming in. To keep your household running, it might be best to base your budget on the income you get from the lean months. It is also best to give your emergency fund a boost to sustain your expenses when the income is quite low. Question: Why is managing money an important skill? Answer: This will help you avoid a lot of financial problems like wrong investment or credit decisions. It helps you reach your financial goals. More importantly, it helps you avoid incurring too much debt. Question: How can I start managing money wisely? Answer: You need to start by getting the tools that will help you keep track of your finances. A budget plan is a great way to start. Soon, you can add a spending plan, retirement plan, and a portfolio. These should cover the important aspects of your finances that you need to monitor. Question: Where can I learn to manage money? Answer: There are actually a lot of articles and self-help books that can give you the basic knowledge of managing money wisely. The challenge is in identifying which of them suits your purposes. It is best to know your financial goals first so you can choose the right advice that will help you reach your goals.
BITSTAMP:BTCUSDEducation
by GentleGoldenEngine
8
Investing for Beginners 101 - The power of Dollar Cost AveragingInvesting for Beginners 101 --------------------------- How do you build your investment fund? ---------------------------------------- There is no silver bullet to it, and it is easy when you build it across an extended period of time. Introducing the power of Dollar-Cost Averaging (DCA)! One of the easiest ways to get started. DCA is an investment strategy in which you purchase an asset over an extended period of time, to average in at a good price while avoiding the volatility of the market. This strategy proved to be quite effective for both novice and experienced investors. How do you do it? Let’s start with the easiest strategy. Example 1: ----------- Let’s say you want to invest 1000$ in bitcoin in one month, and you want to scale in twice per week, on Wednesday (W) and Friday (F). What you would do is divide the 1000$ by 8 (2 times per week over 4 weeks), and you would purchase 125$ on Wednesday and Friday. You’ll end up with 1000$ worth of BTC by the end of the month. Easy? Here’s another example. Example 2: ----------- You want to invest 1000$ in bitcoin for one month period, and you want to purchase daily: You end up splitting 1000$ by 30, and you’d purchase 33$ every day until the end. The trick here is finding the most optimal strategy, and calculating your average price. DCA aims to avoid making the mistake of making one lump-sum investment that is poorly timed with regard to asset pricing Investopedia. There are multiple strategies for DCA’ing into an asset. One way I do it is the following: After every successful trade, I invest 20% of the profits in both #Bitcoin or #Ethereum (equal split) and transfer another 10% $USDT over to my fund. Why is DCA effective? ----------------------- It removes the burden of buying at an optimal price and averages your whole purchases. Here’s a real example of how I did it at some point. I purchased on average 24$ worth of $BTC daily in the 9000-9400 range. Now notice that the average price I scaled in: 9175. While the price reached as high as 9400. Instead of purchasing 1 bitcoin at 13K for example, think how much you would save if you invested while the price fluctuates with time between 11K and 13K. That’s a lot. DCA works best when the price will eventually rise in the future. And you can truly reap its benefits on a macro scale. One last note, you do not trade with your investment fund. It’s best to leave it for years to come, and DCA’ing over multiple years into an asset that will increase in price in the next 10 years is the surest way to maximize your exposure to it. Hope you enjoyed this thread! Until next time 🙂
Education
by DarkMatter_CO
16
Calculating Position Size based on Risk and Stop LossCalculating position size and setting a stop loss is key to managing risk within your trades and protecting your hard earned profits. Some traders will use a one-size fits all position size as a percentage of portfolio. I prefer to vary the position size based on where I'm setting the stop loss. The stop loss that I set is based either on the volatility of the stock or on a technical analysis of the chart. I use the average true range of the stock I represent position size as a multiple of risk (referred to as R). R is the amount of my portfolio I'm willing to risk on a trade. I also like to calculate my profit and losses as a multiple of R. I can summarize a trade as I risked R with a position size of R10 to earn a profit of R2.5. I can also summarize a series of trades as I made 10 trades in which 4 trades were successful and 6 trades failed (40% success rate). My average winning trade was R2.5, losing trade is R1. I had total profits of R10 and total losses of R6 for a net profit of R4 and my average profit per trade is R0.4. If I have $5000 and want to earn $1200 with this system, and never risk more than 1% ($50) per trade, then I'd need ~60 trades. With ~5 trades per month, you are earning a 24% return in a year. Add some compounding too and its more like 27%. Not bad! In the highly recommended book "Trade Your Way to Financial Freedom", Van K Throp refers to these numbers in the following way: Expectancy: R0.4 (average profit per trade) Opportunity: 5 (number of trades) Expectunity: R2 per month (Expectancy x Opportunity) Want more profits? You can increase the number of trades (opportunity), improve the success rate of your trades (expectancy) or increase the amount of R (more risk). On the losing side, if you are losing R2 on each failed trade with 60% failed trades, your expectancy is now a loss of R0.5 and your net losses will be $600 in a year. That's why position size and risk management is so important. Control your losses, or your profits are for nothing! Here is how I think about (1) Risk, (2) Stop Loss and (3) Position Size: (1) Risk The first step with every trade should be where to enter a position and how confident I am in the trade. I determine a buy point and ask myself how much I am willing to risk on that trade. For this Idea, let's assume a buy point of the last high in a volatility contraction pattern for AAPL. That would be the high on 11/9 of 121.99. It's already past the buy point, but typically try to enter within 3-5%. Also, I usually add 10-20 cents to make sure the breakout clears the buy point. (Read another great book called "Trade Like a Stock Market Wizard" by Mark Minervini for an explanation of the volatility contraction pattern) Buy Point: 121.99 Typically, investors will risk 1-2% of their portfolio value on a trade. If you think a trade has more likelihood to fail, then maybe reduce that amount to 0.25% - 0.50%. For the purposes of this Idea, let's assume we will risk 1% of a $5,000 portfolio. We call this value R for Risk. R: $5,000 x 0.01 = $50 (2) Stop Loss Next I decide where I would set my stop loss for the trade. Many traders will set a fixed stop loss at 7-8% under the buy point. I find this creates too many oops outs (a stop hits intraday and then price rebounds). I use two different methods: a) I will often use a stop loss based on the Average True Range (ATR) over 10 days and multiplied by a factor (x2.7). I've backtested different factors and found 2.7 to work well. On the AAPL chart the 10d ATR is 2.62. This is a pretty tight ATR and supports the idea that this is a volatility contraction. Stop Gap: 2.62 x 2.7 = 7.08 Stop Loss: 121.99 - 7.08 = 114.92 Stop Loss %: (7.08/121.99) = 5.80% b) I will also look at the chart for a technical stop that would indicate that the trade was failing. For example, on the AAPL chart, I would consider a move below the low of 11/24 at 112.59 to be a failure. Alternate Stop Gap: 121.99 - 112.59 = 9.4 Stop Loss: 112.59 Stop Loss %: (9.4/121.99) = 7.70% (3) Position Size Now that we have the buy point, risk (R) and stop loss, we can compute the proper position size. An easy way to do that is to take the Risk (R) and divide it by the Stop Gap to get the number of shares to buy. Position Size (Shares): 50 / 7.08 = 7 Position Size (Dollars): 7 * 121.99 = $853.93 Position Size: 853.93 / 50 = R17.07 Another easy way to compute the Position Size is to compute the quotient of 1 and the Stop %. Position Size: 1 / 0.0770 = R12.99 Of course, the second example, using the alternate and larger stop %, requires a smaller position size to manage the risk to $50. I use TradingView and/or an Excel spreadsheet to calculate all this for me, but the R notation really helps me conceptualize how big the position will be.
NASDAQ:AAPLEducation
by drewby4321
65
HOW-TO: Backtest Your Forex Strategy & Increase Your Win-RateIn my earlier article, " Proving Your Trading System with Backtesting ", I demonstrated how, in the Futures market, you could backtest your trading system, see what works and what doesn't, change your variables, and rinse & repeat until you have a winning trading formula. You GET this winning formula by torture-testing (ahem, *back*testing) your system under every market condition. My last video backtested Futures as an example and I received dozens of requests to demonstrate and develop a similar system using Forex, so here it is! This video will show you HOW you can backtest your own Forex Trading system over time, determine its results, and refine it until it is bulletproof (or marketproof!). All you need is a Trading System, a Spreadsheet, and a great trading platform (ahem, like TradingView) :-) Trading can be the most rewarding of careers, but only after putting in the hours of hard work. And like everything else in life, if you don't put in the work, you won't get the results. And if you put in the work AHEAD of time, you won't have to put a DIME of your hard-earned capital into the market until you are CONFIDENT that your system will multiply that money in your account rather than feed the market monster. I hope you enjoy the video... but more importantly I hope it will help you become a better trader. If this was beneficial to you please feel free to leave a like, a follow, or a comment... I'd love to hear from you and stay in touch as we all move forward in our trading journeys! Trade hard, and trade well! -Anthony
Education
by ocaptain
29
Take a closer look at price action analysis in trading Hi traders: Hope all is doing well. I want to do another quick educational video on price action analysis. Many have asked me to elaborate on this topic, and I thought video is the best way to do so. So basic understanding of price action analysis is that after a strong impulse phrase in the market, we will get a period of consolidation (correction) before the price is likely to resume the direction. This is what we can structures and patterns when the correction begin to form. Understand that when we dont see a correctional structure after a strong impulse, this is usually a sign from the market telling us the price may reverse soon. Its important to fully acknowledge what the market is presenting to us, and if we are seeing different clues from the market, then accept it, and change your analysis's view. As always let me know if you have any questions or comments. Thank you
OANDA:XAUUSDEducation
by jojofang0901
6
Forex Pairs Correlation: Avoiding Contradictory TradesHello, in this post I will be talking about Forex Pair Correlations. A problem new traders frequently find themselves in is opening/having positions that are contradictory. I will elaborate on that but for now, let's understand first what correlation is. A correlation is a statistical relationship which means that when A moves a certain way, B will move a certain way. The stronger the correlation, the more likely that the price will move along with each other/opposite of each other. There are 2 types of correlation; Positive correlation which is A and B will move together, and negative correlation which is A and B will move opposite of each other. Now that we understand what correlations are, I can address the problem that new traders have. Contradictory positions: For example, having a long position in GPBUSD and a short position in GBPJPY is contradictory since these 2 pair has a 87.5% correlation which means 87.5% of the time, it will move together. As you can see in the graph, when the GPBUSD (Blue) moves up, GBPJPY (Orange) moves up and vice versa. This applies to moving down as well. GBPUSD (Blue) and AUDNZD (Yellow) is an example of a negative correlation (-69.7%). My recommendation to avoid having these problems is if you do not yet have an understanding of which pairs will move up and down together, check this website: www.myfxbook.com This website will show you every pair and its correlation. Of course, there are some exceptions to when contradictory trades are fine like when hedging against each other or when 1 trade is short-term/intraday/scalping, looking at the smaller trends and the other one is swing trading/position trading looking at the bigger trend. However, I do not recommend new traders to hold/open contradictory trades until they have some confidence in what they are doing. Main points: 1. A correlation is a statistical relationship which means that when A moves a certain way, B will move a certain way. 2. Positive relationship = Pairs will move the same way. 3. Negative relationship = Pairs will move the opposite way. 4. New traders should avoid contradictory trades. 5. Website for checking correlations: www.myfxbook.com Please give a thumbs up if you agree with the educational post and if there are any questions, feel free to comment down below.
Education
by AresFx
2
Why having 2 TP targets is good Hello, in this educational post I will be talking about why having 2 or 3 TP targets is good. As an example, I will be using one of the trades I have running currently on EURUSD. My initial target for this short position is to hit the lowest point of yesterday and it was going well until a pullback happened which is currently happening right now and probably reaching my entry point. If I didn't have more than 1 TP target, this trade could potentially be a loss or a breakeven but since I had another target that is closer to my entry point, I could close half of my position, move my SL to breakeven, and secure some profit. On the graph, you can see that I secured 33.5 pips of profit by closing half of my position so that if the price reverses, I would still gain some profit off of this trade and it did eventually reversed. A rule of thumb I normally use for my first TP is half of my final target or a closer/weaker support/resistance level. I do not recommend having more than 2 or 3 targets if you are relatively new to trading. *This only applies to Intraday Trading, Scalp, and Short Swing Trades.* To conclude all my points: 1. Having another TP before your final target is good to secure profits in cases it reverses. 2. Move to SL to breakeven once your first target is reached so if it reverses, you are guaranteed profit. 3. A rule of thumb I normally use for my first TP is half of my final target or a closer/weaker support/resistance level. Please give a thumbs up if you agree with the educational post and if there are any questions, feel free to comment down below.
Education
by AresFx
How to utilize Multi-time frame analysis in your trading Hello everyone: In this educational video, I will discuss how I utilize multi-time analysis in my trading. -What multi-time frame analysis does is to help us to get more clarity on what the overall market is doing from a top down approach. -Analysis should always start on the higher time frames such as Monthly/Weekly/Daily. -Then, drop down to the lower time frames such as 4H/1H,30/15/5 Min to confirm the HTF move and look for possible entries. Price action and structures work inter-related with multi-time frame analysis. -In a HTF impulsive phrase, there will be many LTF impulses and corrections to push the price up/down. -In a HTF correctional phrase, there will also be LTF impulses and corrections, but within the larger HTF correction. The key to multi-time frame analysis is to properly identify the next HTF impulsive phrase, and capitalize it by entering on the LTF price action. This allows you to maximize your R:R greatly. In addition, combining multi-time frame analysis with price action will also give you clues on where the price is likely to go, hence calculating your targets and anticipating the movement from the market. As always any questions or feedback please let me know :) Thank you
Education
by jojofang0901
23