Get started

Trend Analysis

Tracking The Footprints of WRB GapsThis is the first in a series of posts on Gaps. Gaps are a sudden supply/demand imbalance that shows up in the price bars of a chart, It's the expansion that comes after a contraction. Gaps will show us a significant area of buyers/sellers that take control and when they lose that control. In the video, I discuss and define a Wide Range Bar (WRB) Gap and show how to mark it out on a chart. A WRB Gap is a bar larger than the last 3 bars with a space between the previous bar and the subsequent bar. We will be marking the base of the gap. If it's an up Gap, mark out the bottom 1/3 of the bar, if it's a down gap, mark out the upper 1/3 of the bar. We can then make observations about how price interacts with the base of this gap when or if it gets there. Then begin to notice where in the swing process the Gap is happening. Don't make conclusions, just observe and learn. There are many ways to trade Gaps but first, we must first lay out some foundations and then come up with objective ways to see them. For now, simply look for the biggest ugliest bars on your chart and mark them out and observe. These are footprints that we can follow and track. Shane
AMEX:ARKKEducation
by ShaneBlankenship
2
One-Line Practice: Set Yourself Aside and FollowIn this video, I set up a trading plan and introduce a trend line exercise you can practice in any market and in any time frame. There is no one right way to draw a trend line, it's a matter of function and what you are trying to see. We will be drawing a trend line off two relative (same size swings). This will identify the footprints of organized volatility on a chart. This exercise is designed so that you can learn about markets and price flow in your own hand. Its objectives are: 1. Learn to isolate relative market structures. 2. Learn to set yourself aside and follow price no matter what price is doing. 3. Allow the practice and price flow to teach you. We first need to make some objective swing definitions: Confirmed Swing High/Low: A new high confirms a swing low and a new low confirms a swing high. Balanced/Relative Swing: Same size reaction legs. One Line Practice Instructions: 1. Identify two confirmed relative (same size reaction legs) swings. 2. Anchor a trend line at the two lows and make observations (not expectations) about how price interacts with the line. 3. Always follow the last two relative confirmed swings with the trend line. 4. Draw a box across the top of each swing and observe how price interacts with the boxes. By identifying two same sized swings that confirmed new highs, we have found some organized volatility and behavior. We can then participate in that continued behavior or have a way to know when it changes. Shane
NYSE:NOWEducation
by ShaneBlankenship
2
What LOSER Traders Say – 6 PhrasesI like to say… Go where winners thrive and excuse givers die! If you’ve ever uttered the following phrases below – I urge you to stop saying them from today. And when you do utter these below phrases, you’re going to manifest losing, despair and hopelessness. But it’s not your fault. It’s the conditions and echo of amateur traders – that other traders listen to. I don’t believe for one second you want the loser mentality. I believe you want to embrace the mindset of a true trading champion. So let’s stop saying the below: The Market is Wrong: A Blame Game for the Weak Newsflash: the market isn’t out to get you. Another newsflash, the market is NEVER wrong. It goes up, down and sideways. What you’re seeing in the charts is HISTORICAL. So, what comes out in the future is untold but the truth. There should be NO ego for ever saying – The market is wrong. Take control of what the market is currently doing and what it has done and analyze your approach. I Suck at Trading: The Pity Party Pitfall Negative self-talk is the fastest route to trading mediocrity. We are ALL bad at something when we start. We continue to be bad at something if we don’t practice hard, work at it and have persistence. If you’re convinced you suck at trading, it’s time to silence that inner critic. Trading is no different from picking up another skill, vocation, endeavour and hobby. Maybe I Should Just Give Up: The Quitters’ Anthem Throwing in the towel is the easy way out. In fact, I don’t believe traders lose. They simply quit. But winners persevere. If thoughts of giving up dance in your mind, consider this: Success often comes to those who refuse to quit. Risk less. Tweak your strategy. Have your game plan with a solid back tested journal. Reassess your goals. Take a deep breath and remember that every setback is a setup for a comeback. Damn, This is a Slow Process: Impatience, the Silent Killer Trading success is not a sprint; it’s a marathon. Complaining about the slow process won’t expedite your journey to financial triumph. Whether you’re holding gold and waiting for the market to rally to new highs – It will come – you just need patience. Winners understand that patience is a trader’s virtue. So either you run the marathon, or give up trying knowing it’s going to be a long road. I Can’t Do It Your mind is a powerful tool. And when there are challenges and doubts, you’ll find that you’ll keep telling yourself – you can’t do it. Think of thoughts as tiny branches of a tree. The more you think a certain way, the bigger the tree becomes. And this will set yourself up for failure. Random thought: This is why when a woman says I’m fat 1,000 times. No matter how thin she is, you can’t convince her that she is thin. Because of the tree she has build in her mind about her self-image. Same with trading. Stop saying negative thoughts. Be kinder to yourself and who you are. Winners replace “I can’t” with “I will.” Winners replace Should, Would, Could with DO! Cultivate a positive trading mindset, believe in your abilities, and watch how your confidence transforms your trading outcomes. I’ll Start Tomorrow Procrastination is the biggest thief of success. Tomorrow is the favorite day of the loser. If you constantly push your trading plans to the next day, you’re delaying your success. You’re delaying profit opportunities. You’re delaying your learning process. Winners take action today. Start now, stick to your plan, and relish the progress you’ll make. Tomorrow’s victories are earned through today’s actions. FINAL WORDS: So from today, say and manifest a more optimistic and positive mindset. Don’t say any more loser phrases. And let’s cultivate a winning mentality and tree of positive branches to your mind. Let’s sum up the phrases you must NOT say: The Market is Wrong: A Blame Game for the Weak I Suck at Trading: The Pity Party Pitfall Maybe I Should Just Give Up: The Quitters’ Anthem Damn, This is a Slow Process: Impatience, the Silent Killer I Can’t Do It I’ll Start Tomorrow
TVC:SA40Education
by Timonrosso
Level breakdown. The most effective setupsWhat is a level breakout? A breakout is the price's consolidation above a certain level followed by further movement in the direction of the breakout. But the immediate question that should arise in your mind is about the consolidation of price, as it might be difficult for inexperienced individuals to understand. However, there is nothing overly complex about it either; consolidation refers to the candle closing above the level A breakdown can occur at a horizontal or inclined level. Bullish breakout: We observe a trending market encountering resistance at a horizontal level. After two unsuccessful attempts, the price breaks through the level. Bearish breakout: Why do level breakouts work? Imagine a scenario: a strong resistance level on the chart is heavily defended by bears, preventing the price from breaking through. Despite several attempts, the bears hold their ground until the bulls come to the rescue. They overpower the bears, but their strategy doesn't end there. Instead of retreating, they press forward, driving the opposition towards the next resistance level, where the cycle repeats. Breakouts occur when the price breaches a significant level. Observing price movements on a chart reveals that prices often consolidate and encounter specific levels. When the price reaches a level and swiftly reverses, it indicates the strength of that level. Upon a price retest of this level, careful monitoring is essential to anticipate a potential breakout. Repeated tests of the same level signify its strength, yet eventually, the price will break through any level. This is when traders should be prepared to initiate a breakout trade. Breakouts offer lucrative trading opportunities because they often mark the inception of new price movements and trends. By entering trades at the onset of emerging trends, traders position themselves for potential profits. Moreover, reliable breakouts typically occur during periods of robust price momentum when traders seek to capitalize on rapid price fluctuations. Breakouts occur at important price levels. It can be: Support or resistance levels. Patterns Market highs or lows. Trend lines. Price channels. Moving averages. Fibonacci levels. One reason breakouts can lead to rapid price movements is due to the attention they attract from market participants monitoring key levels. When one group of traders capitalizes on a breakout, another group is compelled to swiftly exit their losing positions, resulting in sharp price fluctuations post-breakout. There exist various types of breakouts, and as traders, our objective is to identify high-probability breakout opportunities and initiate trades. However, this task is not always straightforward. Consequently, levels marked at potential breakout points should be regarded as zones rather than rigid lines. Identifying Psychologically Important Levels: Repeated testing of a specific zone by the price often signifies its significance. Having reached a certain level, the price enters a sideways movement, forming a consolidation. Using a rectangle, we outline the area encompassing the lower wicks of the candles, delineating our support/resistance area. When trading breakouts, it is wise to wait until the candle closes outside the support or resistance area to confirm the breakout. Triangles are chart patterns indicating price compression, often culminating in a breakout. The direction of the breakout is typically uncertain. Within the circle, you can observe the precise location of a potential breakout. Notably, there is a robust breakout momentum evidenced by several full-bodied candles. Subsequent to breaching the upper level of the triangle, the price retraces to test the previously breached resistance, now acting as a support area. This pullback serves as a crucial confirmation signal. Breakouts and false breakouts: Typically, candlestick shadow breakouts are not considered true breakouts. A true breakout occurs only when the price finally closes outside the level. This approach provides a more secure entry point, making it easier to open positions in the appropriate direction. The upper rectangle constantly holds down the price, with the exception of some candles, characterized as a pin bar. This represents an initial false breakout as only one candle breaks the resistance area but fails to close, leaving its body above that area. Therefore, we classify this signal as false. However, the subsequent pin bar pushes the price higher, causing the candle to close above the resistance area. This is a genuine breakout signal, especially enhanced by the presence of a strong, saturated breakout candle. Trading Breakouts: Trading market breakouts carries inherent risks due to the prevalence of false breakouts, which are statistically more common. Therefore, it is extremely important to understand the market structure and monitor the movement of prices to the appropriate level. Markets operate in cycles, moving between trending phases and periods of consolidation. The duration of market consolidation correlates with the strength of subsequent breakouts and subsequent trends. Prolonged consolidation periods are not only observed by you, but by traders worldwide. Among them, some opt for trading bounces from levels, while others prefer trading breakouts. Extended consolidation behind a resistance level can trigger stop-loss orders for many bears and prompt numerous bulls to initiate new buying positions. Consequently, after prolonged periods of flat movement, prices frequently surge explosively following a breakout, ushering in a robust trend. The breakout trading strategy offers multiple entry approaches, allowing traders to select the one that aligns best with their preferences and objectives. Entering the breakout after the price has consolidated beyond the zone: One strategy assumes that the breakout occurred when the candle closed outside the level. While this pattern can be effective, I personally find it risky due to the many nuances associated with this strategy. Instead I prefer a different approach... Breakout entry with retest: This tactic is a bit more challenging as it requires patience and discipline. What particularly appeals to me in this strategy is that I rely on additional data during a potential retest (with a 60-70% likelihood after the zone is breached). Breakout of the symmetrical triangle pattern: As the market tightens its consolidation, it eventually breaches the support of the triangle, followed by a retest of this level as new resistance. For the stop-loss placement, it's advisable to position it inside the triangle above the breakout candle. Regarding take profit, we target the nearest level, ensuring the risk-to-reward ratio remains acceptable. Best Breakout Trading Method: Accumulation of positions/liquidations - consolidation. When a tight consolidation occurs near a resistance level, it tells us that buying pressure remains high for a long period of time and sellers do not have enough strength to reverse the price from the level. When the price breaks through a resistance level, traders with short positions cut their losses. At the same time, the pressure from buying traders who will open breakout transactions is increasing. All these factors cause the price to rapidly move up without significant pullbacks. __________________________________________________________________________________ I have only covered a portion of the basics. Of course, trading involves various elements such as price action, indicators (divergences), but that would make this post too long ;) If you enjoy my educational articles, please leave comments, and I'll continue writing them.
Education
by truepersonal
9
Options Blueprint Series: Calendar Spreads - Timing the MarketIntroduction to Calendar Spreads Calendar spreads, also known as time spreads or horizontal spreads, are advanced options strategies that involve buying and selling two options contracts on the same underlying asset, such as the S&P 500 Futures, but with different expiration dates. The strategy aims to profit from the differing time decay rates of the short-term and long-term options. Traders often deploy calendar spreads to capitalize on expected stable or sideways market conditions. Why S&P 500 Futures Options for Calendar Spreads? The S&P 500 index, encapsulating the performance of 500 of the largest companies listed on stock exchanges in the United States, serves as a premier gauge of U.S. equities. Its derivative products, notably the S&P 500 Futures Options, present traders with a fertile ground for executing calendar spread strategies. These options inherit the index's broad market exposure and liquidity, making them an ideal candidate for such strategies. Let's delve into the contract specifications and characteristics that make S&P 500 Futures Options and Micro Options particularly suited for calendar spreads. Contract Specifications: S&P 500 Futures Options (Standard): These contracts are based on the E-mini S&P 500 futures. Each contract represents an agreement to buy or sell the futures contract at a set price before the option expires. The standard option contract size typically mirrors the underlying futures contract, which is valued at $50 x S&P 500 Index. Micro S&P 500 Futures Options: Introduced as a more accessible variant, Micro S&P 500 Futures Options are 1/10th the size of their standard counterparts. This smaller contract size reduces the capital requirement, making it more appealing for individual traders and those looking to fine-tune their market exposure. The contract size for Micro Options is $5 x S&P 500 Index, maintaining the leverage and flexibility of the standard options but at a scale more manageable for a wider range of investors. Characteristics Beneficial for Calendar Spreads: Liquidity: Both standard and micro contracts benefit from high liquidity, ensuring tight bid-ask spreads. This liquidity facilitates easier entry and exit from positions, a critical factor when managing calendar spreads that require precision in timing and the ability to adjust positions quickly in response to market movements. Volatility Patterns: Understanding and anticipating volatility patterns is crucial for the success of calendar spreads. The S&P 500's inherent volatility, influenced by economic indicators, corporate earnings, and geopolitical events, can affect options pricing and the optimal structuring of calendar spreads. Strategic Flexibility: The availability of both standard and micro contract sizes provides traders with flexibility in managing their market exposure and tailoring their strategies to match their risk appetite and investment goals. Incorporating S&P 500 Futures Options into calendar spread strategies not only leverages these inherent characteristics but also taps into the dynamic interplay of time decay and market movements. Traders must, however, remain vigilant of the underlying market conditions and adapt their strategies to align with evolving market dynamics. Constructing a Calendar Spread To construct a calendar spread with S&P 500 Futures Options, a trader needs to undertake a series of thoughtful steps. Initially, one must select an appropriate strike price that aligns with their market outlook. Typically, at-the-money (ATM) or slightly out-of-the-money (OTM) options are preferred due to their sensitivity to time decay, which is a pivotal component of this strategy. Example Setup: Buying a Long-term Option: Consider purchasing a long-term put option on the S&P 500 Futures with an expiration date 30 days from now. The selection of a long-term option is strategic, as it retains its time value better compared to shorter-term options. Selling a Short-term Option: Simultaneously, sell a short-term put option on the S&P 500 Futures with the same strike price as the long-term call but with an expiration date 5 days away. This option is expected to lose time value rapidly, which is beneficial for the seller. As seen on the below screenshot, we are using the CME Options Calculator in order to generate fair value prices and Greeks for any options on futures contracts. Underlying Asset: S&P 500 Futures (Symbol: ES1! or MES1!) Strategy Setup: o Buy 1 OTM put option with a strike price of 5260 (Cost: 44.97) o Sell 1 OTM put options with a strike price of 5260 (Credit: 7.78) Net Debit: 37.19 (44.97 – 7.78) Maximum Profit: Achieved if prices are at 5260 at expiration. Maximum Risk: Limited to the net debit of 37.19. The essence of this setup lies in capitalizing on the accelerated time decay of the short-term sold option relative to the slower decay of the long-term bought option. Ideally, the underlying asset's price will be close to the strike price at the short option's expiration, maximizing the profit from its time decay while still benefiting from the long-term option's retained value. Adjustments for Market Movements: f the market moves significantly, the spread can be adjusted by rolling the short-term option forward to the next month, potentially locking in gains or reducing losses. A successful calendar spread hinges on precise timing and a keen understanding of volatility. The trader must monitor the implied volatility of the options, as an increase in volatility can enhance the spread's value, while a decrease can diminish it. Potential Market Scenarios and Responses Optimal Market Condition : The calendar spread thrives in a market exhibiting minimal price movement, particularly around the strike price of the options involved in the spread. This stability allows the trader to exploit the differential time decay effectively. Market Moves Against the Position : In the event of adverse market movements, the trader might need to adjust the strategy. This could involve rolling the short option to a different strike or expiration date, or possibly closing the position early to mitigate losses. Flexibility and proactive risk management are paramount, as market conditions can change rapidly. The construction and management of a calendar spread with S&P 500 Futures Options involve a delicate balance of market prediction, timing, and risk management. By judiciously selecting strike prices, expiration dates, and adjusting in response to market movements, traders can navigate the complexities of calendar spreads to seek profit from the nuances of time decay and implied volatility in the options market. Risk Management Effective risk management is crucial when trading calendar spreads, particularly with S&P 500 Futures Options, due to the potential for rapid changes in market conditions. Identifying and mitigating potential losses involve several strategies: Position Sizing: Keeping each trade to a reasonable proportion of the total portfolio reduces the impact of any single trade's loss. Diversification across different strategies and assets can also help manage systemic risks. Stop-Loss Orders: Implementing stop-loss orders for the position can help limit losses. This is especially important if the market moves sharply in an unexpected direction, affecting the spread unfavorably. Continuous Monitoring and Adjustments: The calendar spread requires regular monitoring and potential adjustments to respond to changes in the underlying asset's price or volatility. This may involve rolling out the short position to a further expiration date or adjusting strike prices to better align with the market conditions. Hedging: In some scenarios, traders might consider using additional options strategies or the underlying futures contracts themselves to hedge against significant market moves. This approach can help protect the portfolio from large, unexpected shifts in the market. Conclusion Calendar spreads offer a sophisticated strategy for traders looking to profit from the nuances of time decay and volatility in the options market, particularly with S&P 500 Futures Options. This strategy suits those with a nuanced understanding of market movements and the patience to monitor and adjust their positions over time. While calendar spreads can offer attractive opportunities for profit, especially in sideways markets, they also require diligent risk management and an active trading approach. Encouraging further education and risk-aware trading practices is essential for success in options trading. Traders should continually seek to expand their knowledge of market conditions, options strategies, and risk management techniques to refine their trading approach and better navigate the complexities of the financial markets. By embracing a disciplined approach to trading calendar spreads, investors can explore the potential of this strategy to enhance their trading arsenal, leveraging the dynamic nature of S&P 500 Futures Options to tap into market opportunities while managing the inherent risks of options trading.   When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. General Disclaimer: The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
CME_MINI:ES1!Education
by traddictiv
What Is the Spot Market?What Is the Spot Market? The spot market is a fundamental aspect of the financial world. The concept may be unfamiliar to some, hence it is important to provide a comprehensive spot market definition, examine the types of markets, and identify the key players. Let’s delve into the topic. Spot Market: Meaning A spot market is a financial market in which assets such as commodities, equities, and currency pairs are traded for the immediate delivery of an asset or its cash alternative. To make it even simpler, it is a marketplace in which buyers and sellers come together to trade assets and settle the transactions immediately, unlike a futures contract, which involves trading contracts for future delivery. What Is a Spot Trade? A spot trade is a financial transaction in which assets are bought or sold at the current market price, referred to as the spot price. In a spot trade, the asset is delivered immediately or within a concise timeframe (often, it may take up to 2 business days, not counting the day of the transaction). In highly liquid markets, the spot price typically fluctuates within seconds due to trades being quickly executed and new transactions occurring. Spot Market Buying If you believe the currency pair will rise in value, you will buy the base currency (go long). For example, if you believe EUR will rise in value against USD, and the EUR/USD’s current bid price is 1.0900, you would buy at 1.0900. Spot Market Selling If you believe the quote currency will rise in value against the base currency, you will sell the currency pair (go short). For example, if you thought USD would rise in value against the EUR, and the current ask price of the EUR/USD pair was 1.0800, you would sell at 1.0800. How the Spot Market Works The spot market is organised through OTC and exchange trading. Traders open buy and sell positions on a particular asset, counting on instant delivery of an asset or its cash equivalent. What Different Spots Mean Over-the-counter (OTC) trading refers to financial transactions that take place outside of a traditional exchange. It’s typically done between two parties, such as a buyer and a seller, and can include a wide range of financial instruments such as stocks, bonds, currencies, and commodities. Since OTC trading does not take place on a formal exchange, it is not subject to the same regulations and oversight as exchange-based trading. Exchanges function as meeting points for traders and dealers to buy and sell financial instruments. By gathering orders from various participants, the exchange calculates and displays the current price and trading volume of each asset. Electronic platforms have made trading more efficient, with prices determined instantly, given the large number of trades on exchanges. What Is the Spot Forex Market? The spot market in forex is the largest and most liquid OTC marketplace in the world, with an average daily trading volume of over $7.5 trillion. Like any other spot trade, FX spot trade is the purchase or sale of a currency traded in pairs. What Is the Difference Between Futures and Spot Markets? Futures contracts are derivatives in which the underlying asset is traded in the spot market. The main difference between the terms is the timing of when the delivery takes place. In the spot market, delivery is immediate, whereas when dealing with futures contracts, the delivery occurs at a future date. Traders frequently close out their contracts to avoid making or taking delivery. Example of a Spot Market Trade Toni owns an electronics store in California and is looking for suppliers dealing with good quality electronics at a competitive rate. He looks on the internet and finds a Chinese supplier giving almost a 30% discount on bulk orders of over $20,000. The payment needs to be made in CNY, and Toni might save a lot if the current rate for USD/CNY is high. He checks the current USD/CNY rate, which is 6.74. Toni decides to execute a foreign exchange trade to convert the CNY equivalent of $20,000. USD/CNY rate = 6.74 Purchase amount = $20,000 CNY amount = 134,800 ($20,000 X 6.74) The foreign exchange spot market transaction is settled, and Toni can make the payment, which allows him 30% savings on his purchase. Advantages and Disadvantages of the Spot Market The spot market has several benefits, such as real-time access, flexibility, considerable liquidity, and generally lower costs than the futures contracts. However, it also carries a risk of “unexpected” price and lack of planning. Advantages: If traders are dissatisfied with current prices and terms, they can hold and look for a better deal. Traders can take advantage of real-time prices, which can be beneficial for those looking to manage their short-term exposure to an asset. In contrast to some futures contracts, which have minimum investment amounts for a single contract, there may be no minimum capital requirements. Unlike futures contracts, spot trades don’t have an expiry date. It is considered to be highly liquid, making it easy for traders to enter or exit positions quickly and at favourable prices. Disadvantages: As some financial instruments are highly volatile, a trader may make a transaction at a worse price than they expected. As a result, trading on the spot can pose some risks, particularly for highly volatile assets. Spot trades typically lack planning, as opposed to futures, in which parties agree on a price and delivery at a later date. Final Thoughts Before engaging in spot trades, traders and investors prefer to learn the definition and meaning of the spot market as well as the risks involved when trading in it. Having a solid understanding and developing a well-thought-out strategy is essential. 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
2
How To Trade A Symmetrical Triangle Break-Out A symmetrical triangle is a geometric formation found in technical analysis, often appearing during periods of market consolidation. It's characterized by converging trendlines, typically drawn by connecting a series of lower highs and higher lows. This pattern reflects a balance between buyers and sellers, signaling indecision in the market regarding the future price direction. Here's how a symmetrical triangle pattern typically looks: Upper Trendline: Connects a series of lower highs. Lower Trendline: Connects a series of higher lows. As the price oscillates between these trendlines, the trading range becomes narrower, forming the triangle pattern. Trading a breakout in forex involves capitalizing on a significant price movement that occurs when the price breaks out of the symmetrical triangle pattern. Traders employ a systematic approach to identify, confirm, and capitalize on these breakouts: Pattern Identification: Recognizing the symmetrical triangle pattern entails observing the converging trendlines and confirming their formation with multiple swing highs and swing lows. Determining Breakout Direction: Traders closely monitor price action within the triangle, looking for signs of an impending breakout. Breakouts can manifest in either direction, and traders seek confirmation through a decisive breach of a trendline, often accompanied by increased trading volume. Confirmation and Entry: Patience is key as traders await confirmation of the breakout. Some may wait for a close above or below the trendline, while others may enter trades immediately upon breakout, anticipating further momentum. Risk Management: Implementing effective risk management strategies is crucial. This involves setting stop-loss orders to mitigate potential losses if the breakout fails or reverses. Monitoring and Adjusting: Traders diligently monitor price action post-breakout, anticipating volatility and potential retests of breakout levels. They adjust stop-loss and take-profit levels based on evolving market conditions and price movements. Trade Management: Once in a trade, traders adhere to their predefined trading plans. They consider scaling out of positions as price reaches predetermined targets or if market conditions shift. Successful breakout trading in forex requires discipline, patience, and effective risk management. It's imperative to integrate technical analysis with other market factors like fundamentals and sentiment for well-informed decision-making.
Editors' picks
EIGHTCAP:XAUUSDEducation
by CASHTICKER
33
WHAT IS THE BEST TRADER MINDSET?Optimism, pessimism and realism which trader's mindset is better? The answer seems obvious: optimism. Optimistic traders overestimate their strength and the situation, pessimists do not believe in their strength, so the best is common sense realism. The realistic version of the world perception implies assumption of both favorable and unfavorable variants of the event outcome. But on the other hand, realist traders miss the opportunities that optimists see and underestimate the risks. All three types of trader's thinking have their own strengths and weaknesses. WHICH TYPE OF TRADER'S MINDSET IS THE MOST PRODUCTIVE? 1. Optimism "Think positive", "Set yourself up only for success" such motivational mottos are in every trading book. An optimistic attitude has many advantages: Optimist traders are better motivated. They believe in success, so they set the bar higher. Optimist traders are better at dealing with negative emotions. Optimist traders are more confident in their abilities. Optimist traders' brains are programmed in advance for a positive outcome. All of this is good as long as it is within the bounds of common sense. And often the boundary between common sense and unhealthy thinking of a trader is not visible. And as soon as optimism crosses the boundaries of adequacy, problems begin: Ignoring danger. Imagine a person who confidently drives through a red light, thinking that nothing will happen to him. The only thing left to do is to convince other drivers of this. Overestimating possibilities. The set goals turn out to be unattainable. And trying to achieve them leads to burnout. Denial of the need to solve problems. The optimist believes in the best, but problems do not go anywhere. And someday their volume will become critical. Everything is good in moderation. An optimist is inclined to work harder, but he is also inclined to take unreasonable risks. 2. Pessimism The strength of pessimism is the ability to assess risks and minimize them. Pessimist traders are more cautious. They try to double-check everything 10 times, so they are less likely to take risky actions. However, they also earn less. A pessimist trader tries to diversify risks, thinks through several ways of retreat. Pessimism goes to the extreme, when a trader thinks that everything is bad and it will be even worse in the future. They blame others for failures, as they cannot find the strength to admit his mistakes. They have no motivation; they live in constant expectation. 3. Realism The sweet spot? Not a fact. The realist trader does have a sober assessment of the risks without going overboard. But they also have extremes: Fatalism. While optimistic traders believe in the best, realists follow the path of pessimistic traders. They accept reality, believing that this is fate. Realist traders do not fall into stress, but do not believe that the situation can be changed for the better. Pragmatism. Realist traders think that a bird in the hand is worth two in the bush. They effectively solve current problems, but trying to look at something bigger is out of the question. Rationalism. Algorithmic, schematic thinking of the trader is manifested in other aspects of life. Which type of trader's mindset is the most productive? All three types in one trader, from which the best is taken. Moderate optimism in achieving goals, moderate pessimism in assessing risks, moderate realism in building a system. And extremes are best avoided. In conclusion, each of these traits has its strengths and weaknesses, but when combined in moderation, they can create a well-rounded approach to trading. Optimism provides motivation, confidence, and a positive outlook, which can help traders set higher goals and persevere through challenges. Pessimism, on the other hand, can help traders assess and minimize risks, promoting caution and careful decision-making. Realism offers a sober assessment of situations and helps traders develop practical solutions to problems. Ultimately, the most constructive trader's mindset is one that leverages the strengths of each of these traits while avoiding their extremes. When you lose a trade, don't think too negatively. When you win, try not to get euphoric. Extreme emotional swings will push you into the abyss. Therefore, the most constructive trader's mindset is a balanced combination of optimism, pessimism, and realism. Traders, If you liked this educational post🎓, give it a boost 🚀 and drop a comment
Education
by Lingrid
9
Break down of our 700 pip trade.Below, we explain why and how we entered the market. On the 30-minute timeframe, we identified an engulfing candle, marking it as a Point of Interest (POI). With a refined risk of just 1 pip, we patiently awaited price to retrace to this level, anticipating a high probability bounce to the upside.. We observed the price returning to our Point of Interest (POI), meeting perfectly with a 4-hour candle and rebounding as anticipated from the engulfing candle. Our target is now set at the previous high, where we plan to take profit 1. As the trade unfolded, a 4-hour trend emerged and was honored before propelling towards our target and surpassing it. This straightforward technique serves as a method to mitigate risks while aiming for substantial rewards, offering a valuable approach for your trading endeavors.
TVC:GOLDEducation
by samstoobad
10 EMA strategy ^BEST TREND-FOLLOWING STRATEGY^Welcome! Today, I'm excited to share with you one of the most effective trend-following strategies that is adaptable to any timeframe and asset class ( OANDA:XAUUSD , NSE:NIFTY , FX:USDCHF ), boasting a remarkable risk/reward ratio of up to 1:10. Let's dive right in. As mentioned, this strategy revolves around the Exponential Moving Average (EMA), specifically the 10-period EMA. For those unfamiliar, the EMA places greater emphasis on recent price data compared to a Simple Moving Average (SMA), providing a dynamic view of market trends. When the price on your chart is above the 10 EMA, it signifies a bullish trend; conversely, when the 10 EMA is above the price, it indicates a bearish trend. Let's illustrate with an example: Imagine a bullish trend with four consecutive green candles followed by a red candle. Our entry point occurs when this red candle, the trigger candle, fails to touch the 10 EMA. Subsequently, when a green candle crosses above the high of the trigger candle, we enter the trade. Setting our stop loss (SL) just below the EMA line beneath the trigger candle, we establish our take profit (TP) based on a risk/reward ratio, starting at 1:2 and potentially reaching an impressive 1:10. Trailing the 10 EMA line allows us to stay in the trade longer, albeit experiencing initial stop-loss hits. However, perseverance reveals the strategy's efficacy over time. Now, for short positions, such as during a downtrend characterized by three red candles followed by a green candle, our entry occurs when the low of the green candle is breached by the subsequent red candle. Setting the SL just above the EMA line above the trigger candle and TP based on the risk/reward ratio, we execute the trade. For those interested in trailing stops, there are two options: firstly, trailing along the 10 EMA line; secondly, utilizing the Average True Range (ATR) for algorithmic trading enthusiasts. With this strategy's flexibility and potential for significant returns, it offers traders a robust approach to navigating diverse market conditions. ***Here are 2 examples of Long & Short: Long position in BINANCE:SOLUSDT www.tradingview.com Short in FOREXCOM:EURCAD It's crucial not only to grasp the concept of this strategy but also to put it into practice. 💼 Start by implementing it with small capital or utilize paper trading, which platforms like TradingView offer. 📝 Additionally, don't hesitate to experiment. For instance, try using an 11-period EMA and assess its effectiveness. You might find that it better suits your trading style and objectives. 🧪💡 Remember, trading is a journey of discovery! 🚀 Don't be afraid to explore new strategies and techniques along the way. 🌟 Like (boost), follow, comment, and share this strategy to spread the knowledge and empower fellow traders! 📈🚀👍 For the optimal TradingView experience, upgrade now to unlock the platform's full potential: www.tradingview.com
NASDAQ:TSLAEducation
by smarttrader012
Understanding Trends: Indicators, Trendlines, and PivotsIn this video I describe trends, what the are, what a proper trend should look like and ways of indentifying a trend. I cover the following tools to identify trends: Trendlines (with consistency) Internal Trendlines Indicators: Linear regression, EMA, Channels/Bands Pivot swings I think no matter how YOU define a trend, it should be the following things: Consistent Measurable - so you can analyze it later Fit your trading style I hope you learned something new in this video. Please drop a comment if you like the content.
AMEX:SPYEducation
by JoeRodTrades
Trade in a sideways marketMain price pattern of financial instruments So, when we talk about the price of financial stuff, like stocks or crypto, it often moves in specific ranges over different timeframes, right? Whether it's weekly, daily, hourly, or even minute charts, prices tend to hang out in these ranges for a while. Traders call this kind of price movement "consolidation," "range-bound," or simply a "sideways market." In this article, we'll just call it a sideways market or range. When prices are stuck in this sideways action, they can break out with a sudden burst of momentum, kickstarting a trend, or they might just keep bouncing around, forming a new sideways pattern. Let's check out the daily chart of BTCUSDT starting from October 2021. On the chart (see above), we've marked those periods where the price was moving sideways with blue markers. Since October 2021, we've spotted 7 of these sideways patterns. We label the first point of each sideways move as "1". Out of 884 trading days, the price was stuck in this sideways action for 758 days (884 - 72 - 39 - 15), which makes up about 85%. This means that throughout this whole period, you could've been looking at trades from one edge of the sideways range to the other. Based on my estimates, most financial instruments spend more than 75% of their time in this sideways market mode. So, knowing how to trade in sideways markets is a super important skill for traders. And for investors, understanding these sideways moves can really amp up the profitability of their investments by pinpointing better entry and exit points. For example, right now, considering buying BABA stocks might be a good idea because the price is chilling at the bottom of a sideways range on the weekly chart. Example1 Mastering the Skills for Successful Trading in Sideways Market Being able to effectively trade within trading ranges, between their boundaries, requires not only a certain amount of knowledge but also the development of specific skills. Initially, one must grasp the theoretical foundations and then apply them in practice, gradually honing their skills. Let's look at the necessary skills: Skill 1: Understanding and applying the Concept of Time Frame (TF) Interconnection: higher TF, lower TF. Grasping the context of the higher TF in relation to the sideways market TF. Skill 2: Identifying sideways market: determining the absolute and current boundaries of the range, as well as the current direction (vector) of price movement. Skill 3: Recognizing zones of interest for buyers and sellers. Skill 4: Determining the presence of buyers at the lower boundary (bottom protection by buyers) and sellers at the upper boundary (top protection by sellers). Skill 5: Adhering to risk management principles when entering trades (especially crucial for traders). Each of these skills is based on a vast amount of knowledge that needs to be absorbed first and then applied in practice. The journey can be long and sometimes tedious. Is there a way to hack this system and shorten the time it takes to acquire knowledge, develop skills, and start trading? Well, there are options. For example, you can use technical indicators (such as RSI, Bollinger Bands, ATR, etc.) to make buying or selling decisions. Or you could completely bypass the process of acquiring knowledge and skills and rely on signals from Telegram channels or expert opinions. But what will you find there about trading in sideways market (ranges), where the market spends more than 75% of its time? This series of articles is written for those who are ready to take control of their financial destiny, who strive to understand how financial markets work, and who want to master the skills of independent trading and making more informed investment decisions. Here you will find the knowledge and tools to start understanding what is happening in the financial markets and how to profit from it. I don't promise any magic pills or "money" buttons:). So, let's get started. Skill 1: Applying the Concept of Time Frame Interconnection The higher time frame (TF) always takes precedence over the lower one. For instance, if we observe on the daily chart that the market is in a seller's zone (which is determined by Skill 3), then on the hourly chart, we need to analyze the seller's actions (Skill 4) and primarily look for selling opportunities. However, there might be a situation where the seller is inactive, and the price starts to rise due to buyer pressure (in this case, Skill 4 comes into play again). Example2 On the provided chart, areas of seller interest are marked in red, while buyer interest areas are marked in blue. Let's examine the period from March 25th to March 27th, highlighted in yellow on the chart. On the daily TF, we observe sideways movement since December 22, 2023, with the bearish vector (11-12) being relevant. The first target of the bearish vector, 3.119, was reached on March 19, 2024. The second target (2.822) and the third (2.611) remain valid. On March 25th, the price returned to the seller's zone on the daily chart (the red zone with the lower boundary at 3.680). On the hourly chart, on March 25th, the price trend reached the daily seller's zone and formed a range with 7 points. The breakout from this range occurred downwards on March 27th. Therefore, in this range, it was advisable to look for selling opportunities from the upper boundary and riskily consider buying from the lower one. Similarly, you can make investment decisions by analyzing, for example, the weekly and daily TFs. To be continued... P.S. This is indeed an interesting point! Despite the fact that the market spends more than 75% of its time in sideways movement, indicators and strategies specifically designed for trading in this mode have not gained as much popularity as other trading approaches. Even on the internet, including TV and trading Telegram channels, signals or analyses based on identifying sideways movement are very rarely encountered. If you have experience or knowledge about trading methods in sideways markets (including indicators), please share them in the comments!
Education
by AlexeyWolf
Here are 12 crucial insights every trader should keep in mindIn the fast-paced world of trading, where every tick of the clock can mean profit or loss, mastering the art requires more than just luck or intuition. Whether you're a seasoned veteran or just dipping your toes into the market waters, understanding some fundamental principles can make all the difference. Adaptability is Paramount: In the ever-evolving landscape of financial markets, rigidity can be a trader's worst enemy. Markets are influenced by a myriad of factors, from economic indicators to geopolitical events, and they can shift direction swiftly. Successful traders understand the importance of remaining agile, ready to adjust their strategies in response to changing market conditions. This might involve switching trading styles, altering risk management techniques, or even completely reversing positions based on new information. The ability to adapt is not just a skill but a necessity for thriving in the unpredictable world of trading. Quality Over Quantity: In the pursuit of profitability, it's easy to fall into the trap of chasing every potential trade opportunity. However, experienced traders recognize that success is not measured by the sheer number of trades executed but by the quality of those trades. Rather than spreading themselves thin across multiple positions, they focus their efforts on identifying high-probability setups with favorable risk-reward ratios. This disciplined approach allows them to maintain consistency and avoid unnecessary losses associated with impulsive trading decisions. Stick to Your Strengths: The trading arena is vast and diverse, offering countless strategies and approaches. While it may be tempting to experiment with new techniques, seasoned traders understand the importance of sticking to what they know best. By honing their skills in a particular trading style or asset class, they can develop a deeper understanding of market dynamics and recognize opportunities that align with their expertise. This doesn't mean being stagnant or closed-minded but rather embracing a strategy that plays to their strengths and maximizes their chances of success. Learn from Mistakes: Mistakes are an inevitable part of the trading journey, but they can also serve as valuable learning opportunities. Rather than dwelling on losses or repeating the same errors, successful traders approach each setback as a chance to grow and improve. They meticulously analyze their trades, identifying patterns of behavior or market conditions that led to unfavorable outcomes. By keeping detailed records and maintaining a journal of trades, they can track their progress over time and make adjustments to their strategy accordingly. Patience Pays Off: In a world where information moves at the speed of light and markets can react in an instant, patience is a virtue that can't be overstated. Successful traders understand that waiting for the right opportunity is often more profitable than chasing every price fluctuation. They exercise patience and discipline, refusing to enter trades until all criteria of their trading plan are met. This approach not only reduces the likelihood of impulsive decisions but also increases the probability of success by focusing on high-quality setups with optimal risk-reward ratios. Trade Wisely, Not Desperately: Desperation is the enemy of rational decision-making in trading. Whether driven by fear of missing out or a desire to recoup losses, impulsive trading can lead to disastrous consequences. Seasoned traders maintain a cool head and adhere to their trading plan, even in the face of adversity. They understand that forcing trades out of desperation is akin to gambling and prioritize long-term success over short-term gains. By staying disciplined and trading only when conditions are favorable, they avoid the pitfalls of emotional trading and preserve capital for future opportunities. Stay Grounded: Market euphoria can be a dangerous sentiment, clouding judgment and fueling irrational exuberance. Successful traders remain grounded in reality, avoiding the temptation to get swept up in hype or hysteria. They approach each trade with a clear mind and objective analysis, unaffected by the emotions of the crowd. By maintaining a healthy skepticism and focusing on empirical evidence rather than speculative fervor, they can navigate volatile markets with confidence and composure. Read the Market, Not Just the News: While staying informed about market news and economic developments is essential, successful traders understand that price action is the ultimate arbiter of market sentiment. They pay close attention to how prices react to news events, recognizing that market sentiment can often diverge from fundamental analysis. By reading the market's response in real-time, they can identify potential opportunities or threats that may not be immediately apparent from headlines alone. This nuanced understanding allows them to make informed trading decisions based on price action rather than speculation. Look Beyond the Headlines: Major news events and economic indicators can often trigger significant market movements, but their impact may be short-lived or already priced into the market. Successful traders look beyond the headlines, focusing on the broader context and underlying trends that drive price action over the long term. They understand that market sentiment is influenced by a complex interplay of factors, including investor psychology, market structure, and macroeconomic trends. By considering the deeper implications of news events and anticipating market reactions, they can position themselves to capitalize on emerging opportunities and mitigate risks. Know Your Comfort Zone: Emotional stability is essential for maintaining consistency and avoiding costly mistakes in trading. Successful traders know their emotional and financial limits, trading within their comfort zone to prevent fear or greed from dictating their decisions. They size their positions accordingly, ensuring that potential losses are manageable and won't disrupt their overall trading plan. By staying within their comfort zone, they can approach each trade with confidence and objectivity, regardless of market conditions or external pressures. Embrace Your Unique Style: While there's no shortage of trading strategies and methodologies, successful traders understand that there's no one-size-fits-all approach to trading. Instead of blindly following the crowd or adopting the latest fad, they embrace their unique style and tailor their approach to suit their personality, risk tolerance, and market outlook. Whether it's day trading, swing trading, or long-term investing, they focus on strategies that play to their strengths and align with their objectives. By embracing their individuality and staying true to their convictions, they can navigate the markets with confidence and consistency. Trade with Conviction: Confidence is a cornerstone of successful trading. Whether entering a new position or managing an existing trade, successful traders approach each decision with unwavering conviction, based on thorough analysis and a clear understanding of their strategy. They trust their instincts and remain steadfast in their convictions, even in the face of uncertainty or adversity. By trading with conviction, they project confidence to the market and instill trust in their own abilities, fostering a positive feedback loop of success and self-assurance. In conclusion, trading is both an art and a science. While there's no guaranteed formula for success , mastering these fundamental insights can significantly improve your odds in the dynamic world of trading. Stay adaptable, stay informed, and above all, stay true to your strategy. Happy trading!
Education
by Vestinda
WHAT PIVOT POINTS ARE IN SIMPLE TERMSLet's start with the fact that Pivot points are quite an old tool and have been used for a long time. The difference is that in the early days traders had to build Pivot points themselves, but today there are indicators that build these points. ✴️ BASIC CONCEPTS Pivot points are key points of price chart reversal, i.e. the place from which the price chart is most likely to reverse. Different pivot points have different calculation formulas. This is very similar to Fibonacci, as there are no clear criteria and several possible courses of action. The following is a list of the most popular calculation of data: 1. Traditional is the very first method of calculation, still popular in the stock exchange; 2. Classic derived from traditional, slight differences in calculations; 3. DeMark is the formula developed by the SAC Capital Advisors fund; 4. Woody the formula heavily references the previous day's closing price; 5. Camarilla derived from the classic one, slight differences in calculations; 6. Fibonacci is based on the Fibonacci formula. Of course, the points don't always work and they have false signals, but how to filter let's figure it out. There are also Pivot points like this, these are just the ones built using the traditional formula: ✴️ TRADING STRATEGIES We intentionally did not write each formula, as this information is fully available on the Internet and not everyone is interested in it. The most interesting thing is to learn how to use these indicators in practice, which we will do now. If we think logically, there can be only two strategies: Strategy for level breakout; Strategy for the level rebound. That's all, there is nothing else to think of. ✴️ LEVEL BREAKOUT STRATEGY For the breakout of any level, you need to take into account several details: 1. The quality of the breakout, i.e. the presence of an impulsive movement; 2. The trend moves in the direction in which the breakout occurred, i.e. the exclusion of a false breakout; If these factors are met, then we can say that the breakout is real and it is worth looking for an entry point. Ideally, it should be like this: Obvious consolidation above the control resistance by pivot points. Stop in this case is placed slightly below the breakout candle, take profits can be stretched by a grid between the Pivot points above. That is, if there was a trade, it would look like this: ✴️ LEVEL BREAKOUT STRATEGY The strategy for level breakout should also be accompanied by some additional model. For example, it can be a pinbar, RSI divergence and so on. That is, you can choose many variants, the main thing is the presence of a reversal level nearby. In the simplest form, it should look like this: As you might expect, there are 3 factors to enter the trade and not to buy here would be a much bigger risk than to stay on the sidelines. There is RSI divergence, there is double bottom by candlestick analysis, there is Pivot level, risk/profit ratio is very good. It looks like this: ✴️ CONCLUSION The pivot point indicator is a great way to find trend reversal points and corrections, for example, you can combine it with Fibonacci levels and find out the end of a correction more precisely. Try it, trade, the indicator is very easy to use and understand. Successful trading and good luck in the markets!
Education
by DeGRAM
1
How to use Fibonacci Retracement ⁉️‼️ Forex traders use Fibonacci retracements to pinpoint where to place orders for market entry, taking profits and stop-loss orders. Fibonacci levels are commonly used in forex trading to identify and trade off support and resistance levels. After a significant price movement up or down, the new support and resistance levels are often at or near these trend lines . Usually the price retracts to 50% or until OTE (0.62, 0.705, 0.79) before another impulse movement occurs.
OANDA:XAUUSDEducation
by Snick3rSD
2
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
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
A Renko Trading Strategy with Multiple Indicators (Update 3)An update from the last summary: Stating the obvious but the recurring pattern did not play out. This was a painful past couple of days but some realizations that I will walk through here for anyone who may be on a similar journey or realizations. “Buy high and sell low” or “buy support and sell resistance” are simple words to speak, to walk through in back testing, but, in the heat of the moment with live data and markets unfolding in ways you weren’t expecting make these phrases an near impossible accomplishment. As for the chart setup, I’ve with the following for the Renko WTI/CL chart: 25 tick block size and a 15-minute timeframe (more on this later) DEMA at 12 and 20 MA at 20 with a 9 period (or block in case of Renko) WMA Stoch of 5,3,3 and 25,3,3 DMI of 5,5 Bull Bear Power at 25 (this is new and seems to provide good insights) Wednesday and Thursday had me watching the Renko charts waiting for an opportunity to go short (remember, my trading style is to buy either Calls or Puts as near to the money as possible and at least 3 to 4 months out). From the patterns I saw on the Renko, I firmly believed that the market was ready to sell off and I wanted to be in. As an aside, I cap my losses at 10% of the price I pay for the option. In my losses this week, I realized that my strategies for every period of time that I’ve tried to trade had basically been a breakout trader. It wasn’t that I made a definitive statement of “Hey, my methodology is that of a breakout trader” but more like “Hey, I need to see confirmation of the price movement before I enter”. The problem is that the confirmation I was looking for was well after price had started moving and, as I looked at it, it was what could be classified as a breakout. And it was in my 3rd loss for the week, that I realized what I was doing wasn’t working. Sure, I could find points in time where it would have seemed to work but not this week. As closed out my 3rd loss, I read back through some items I had highlighted in the “Pivot Boss” book referenced earlier and in it found the pages were I had marked up the callout that you have to buy at support and sell into resistance if your going to succeed. It seem intuitive but in reality, it goes completely against my nature while trying to find an entry point with live data flying by. By now, if you’ve read this far, you may have picked out some items that resonate with you or you may be finding this as a serious source of entertainment :D For the discussion that continues, you’ll need to reference the previous article I wrote to see the specific charts before the price action on Thursday. The following link will give you view of how price played out. The red rectangle outline on the chart is where I was looking for price to repeat a similar pattern noted in the related article. How simple (and unrealistic) could this be. What played out was a price movement that I didn’t know how to handle and took me some time to figure out where to get in. As price continued to go up, I realized this was where I would usually just try to get in and then, I would get in at a intra-day high, have price pull back and 10-20% of my option value hit and I’d be out just to watch the market reverse. So, on this day, I resolved myself not to make a trade unless I could figure out this “buy support and sell resistance” thing. In my resolve, I agreed to some points: I will only buy at support and will sell into resistance: (the hardest concept known to man, not in understanding but execution) The key must be in the Camarilla Pivots so use them and the system that is outlined in the book. Or, as close as you can with how you want to trade. Renko chart setting will stay at 25 ticks for a block size and 15 minutes for a timeframe. What does this mean for Renko in TV? It means that price of a 25 tick increment must be held for 15 minutes before the block is committed or printed. Because volume profile and camarilla pivots are not a natural fit on the Renko charts, I’ll create a candle chart side-by-side to the Renko chart and then place all of these indicators on it. Additionally, all of the mark-ups I do for projecting the volume area on the chart and the opening range will be done on the candle chart The Renko chart will continue to have the indicators I track on it but they will be for confirmation and helping to form an opinion of the market and nothing to do with entry or exit. Remember, I want to buy support and sell resistance and not breakouts. I wanted to have multiple periods of levels on my candle chart so I included 3 sets of camarilla, a daily, weekly, and monthly set of levels. The next big decision I had to make was the timeframe for the candle chart itself. After much experimentation and debate with myself, I landed with the following: Start with an hourly chart. The first general notion of entry and if at support or resistance will come from the hourly chart. I will continue with my volume area and opening range markup but it will be for a weekly timeframe. Meaning that the volume profile indicator is set to weekly and I use the first 5 hours of the week to set the opening range. From these markups I’ll create an opinion of the coming week and a trading plan based on what I see. Then, I’ll let price movement between the camarilla pivots prove out my opinion or lead me to adjust it. Once I find a potential trigger, I will switch the 1hr candle chart to a 5 minute candle chart and look for candle setups to trigger the actual trade. What do I use for triggers and how to I decide where to look? The following chart is a bit of an eye chart but you get the idea. With the 3 camarilla pivots plus a year pivot, you can see the various levels. While it may seem like a confused mess, there is some method to the madness. The Camarilla pivots in TV allow you to color code the levels plus set the size or pixel width of the lines of the levels. For all periods, I set the pivot to black, R1/S1 and R2/S2 to purple and then based on the book’s recommendation, R3/S4 to red, R4/S3 to green, and R5/S5 to blue. For the daily, week, monthly, and yearly pivots, I set their pixel width to 1px, 2px, 3px, and 4px respectively. This is how I get a visual clue on what timeframe price is approaching (by the width) and the type of triggers or market behavior I should be looking for based on the color. I will use the weekly, monthly, and hourly pivots to look for price levels of support or resistance. It will be at these levels that I’ll look for price action to provide insight as to what the market wants to do with the level (there is a good discussion in the “Pivot Boss” book on identifying candle patterns that distills a lot of complexities of endless chapters of concepts into a few simple ones in one chapter). Once I see some type of candle pattern on the 1 hour chart that could indicate a trigger to enter, I change it to a 5 minute chart to find a pattern in the price movement of the next candle to make the entry. In theory, this should provide me with an entry at support; don’t wait for a confirmation via a breakout. So, why mess with the Renko charts then? Fair enough of a question; I believe that the Renko chart setup will filter noise out of the view and provide a cleaner view of support and resistance lines due to the nature of its makeup. If you follow along with any of this in your own charts, you will begin to see that the pivots begin to form identifiable lines of support and resistance in the Renko chart. And, back to the point that the Renko setup I have with the specific indicators and their settings seem to provide a good path toward confirmation of trends and positions. Another key issue I was struggling with was how to correlate the Renko chart with the candle chart. This is where I came up with the 5-minute chart which, after thinking about it, I realized that the 5-minute chart would reconcile nicely with the 15-minute Renko chart. If you look at how Renko charts are printed, they will print on the time frame that you set so, if a brick prints, it should do so on a :15-minute boundary. And, the 5-minute candle will correlate to it. The next chart shows the Renko with the 1hr candle side-by-side with the same rectangle. The rectangle on the 1hr is a reasonable estimate but squarely in the middle is an interesting candle formation that happens to be near the daily S5 and the weekly R1. I looked at this for awhile in real-time and thought, how do you really decide to make this trade? It seems like price has moved further from the trigger before you have the nerve to pull the trigger on the trade. Plus, if you look at the DEMA on the Renko at this time, it’s still set bearish with 20 above the 12 and the -DI was still swapped above the +DI. All things I’ve used in the past and now causing paralysis in pulling the trigger in a “buy at support” trade. The next is the same chart setup but I’ve switched to the 5 minute view and have adjusted the red rectangle in the candle chart a little. The candle chart shows the boundary of the lowest red brick, the one red brick to the left and the two green bricks to the right. In this price action, candle on the one hour chart (engulfing is corroborated by the extended wick of the green brick that is the first reversed color in the down move. However, with the DEMA swapped bearish, what would lead you to look to buy on this. There are valid cases where price continues down from the one green brick. This is where the importance of the camarilla pivots along with the 5 minute chart come in. With the engulfing candle on the 1-hour chart and the green brick on the Renko, what I should have done is use the 5-minute chart with the various pivots to find support and candle patterns to enter the market long. This would have been fulfilling the mantra of “Buy Support; Sell Resistance”. The following chart zooms in to both the Renko and the 5-minute candle in hopes to show details of how to get from potential triggers to confirmations and physical entries with tighter reins on the stops to guard more on the ‘Hope this will work’ strategy. By using the 15-minute Renko and the 5-minute chart, I can now see exactly what’s going on in the Renko bricks to get a better feel of what the market is doing. The blue double arrow on the Renko correlates with the 5-minute candle. With the first green brick being a trigger, then the key is to look at what is going on once that brick prints to see how price behaves around the Camarilla pivots. The green dashed line is the time that the first green brick printed (committed, good to go). So, what is important is to now watch the price to find a setup to enter. Or we see the market push through the support of the camarilla pivots that are in close proximity and begin the search for an entry short. The chart below is zoomed in even more on the candle chart with the daily Camarilla S4 which, from a daily context, is the last level of support before more sellers hop in and drive price lower. I’ve outlined this pivot in a green rectangle and here you can see price action and find some interesting setups. I’ve put some black arrows at some of the more interesting candles and those which are probably some type of reversal patters of 2 or 3 in nature. I’ll end this here but have more in my notes that I’ll include in a future update.
NYMEX:CL1!Education
by mxb1961
The Wyckoff Trading MethodThe Wyckoff Trading Method The Wyckoff method is a popular technique for analysing market trends, finding reversals, and making informed trading decisions. In this article, we’ll provide an overview of this decades-old system and explain how you may apply it to your strategy. What Is the Wyckoff Method? The Wyckoff method is a type of technical analysis developed in the early 20th century by Richard D. Wyckoff, a renowned stock market trader and analyst. The method is based on the belief that markets are driven by fundamental supply and demand forces and that these forces can be traded through repeatable patterns. The Wyckoff methodology offers traders a comprehensive system that gives them all the tools they need to create a potentially successful trading strategy. This system includes the relationship between price and volume, the identification of market structure, and the role liquidity plays in financial markets. The Market Cycle The Wyckoff methodology frames the markets in four repeated phases. These are accumulations, markups, distributions, and markdowns. Accumulations Most often seen in ranges, accumulations represent areas where large players are building up a position to go long before the market reveals its true direction to other traders. Markups Once they hold a large enough position, these players start to bid the price up, encouraging other traders to jump in and push the price up further. This self-reinforcing cycle of more and more traders getting involved causes the price to shoot up out of the range and begin an uptrend. Note that a markup may have multiple re-accumulations where it pauses and consolidates before breaking higher. Distributions Once the price reaches its target and the buying pressure from other traders subsides, the big players will begin to distribute (sell) their positions while building up shorts. This will, again, look like a range before a sharp move down. Markdowns This sharp move down is known as the markdown. It’s essentially the opposite of a markup: financial institutions push the price down and encourage traders to enter short positions to begin a downtrend. Like markups, there are also phases of redistribution that consolidate before moving lower. Why the Wyckoff Model Works To fill big trades, financial institutions require a counterparty like everyone else, i.e., a seller if they want to buy, and vice versa. But when you’re trading billions of dollars at any one time, how do you fill your order at an optimal price without slippage? Enter stop losses and breakout trades. These “smart money” players know that there are stop losses above and below equal highs/lows, trendlines, and support and resistance levels that may facilitate their trades. There are also traders waiting to get in on the breakout. They realise there is liquidity above and below these levels ready to be used to fill their orders. By pushing prices past these levels and playing on retail traders' emotions, they may get in without risking millions of dollars trying to get their orders filled at suboptimal prices. This is the fundamental idea behind the Wyckoff theory in forex, commodities, crypto, stocks, and more. Key Principles of the Richard D. Wyckoff Method There are a few fundamental principles of the Wyckoff methodology that are critical to your understanding: the Composite Man and the three laws. Composite Man The Composite Man is the idea that traders should imagine that just one party controls the markets and that they should study them as such. He is, in essence, the “smart money.” Wyckoff believed that the Composite Man carefully plans and executes his trades, encouraging buyers (or sellers) only after he has accumulated a sizable position. The Law of Supply and Demand Simply put, if the demand for an asset is greater than its supply, prices will rise. On the other hand, if the supply of an asset is greater than its demand, prices will decrease. The Law of Cause and Effect This law states that the dynamics of supply and demand are determined by specific Wyckoff events (the cause), like accumulations and distributions. It also says that the effect, or the price movements, are proportional to the cause. An accumulation that occurs on the daily timeframe will produce a much more significant effect than one on the 1 minute, for instance. The Law of Effort vs. Results This law says that price movements are a result of effort, characterised by volume. If a bullish trend is supported by strong volume, it will likely continue. Moreover, if a trading range has a high volume but remains consolidated (a minor result), a potential trend reversal could be about to start. Wyckoff Schematics While this might sound like a lot to take in, it’s relatively easy to spot using the time-tested Wyckoff chart patterns. If you want to test your own understanding, you may use the TickTrader terminal with us at FXOpen. It’s completely free to use, with no signup required if you don’t plan to open trades but just want to examine what patterns look like on the chart. Note that Wyckoff accumulations and distributions are practically identical, just flipped upside down. The key concepts, points, and phases are all the same. Type 1 Schematics Accumulations Phase A Preliminary Support (PS): After a markdown, buying action interrupts the downtrend and causes a slight uptick in price. Volume increases. Selling Climax (SC): Long traders have their stop losses triggered, while breakout traders jump in short, believing the downtrend will continue. Here, the Composite Man absorbs the selling pressure. The SC may sometimes leave a long wick that shows the buying pressure. Automatic Rally (AR): Given that selling pressure is exhausted, buy orders push prices up easily, and shorts exit their trades, typically below PS. Note that the high of the AR sets the first upper bound for the accumulation. Secondary Test (ST): The price falls from the AR to form a low near the SC, creating the ST. It can create equal lows or end up slightly higher or lower than the SC. This may also occur multiple times, creating a visual area of support. Volume is likely to be low. Phase B Sign of Strength in Phase B (SOS(b)): After the ST, the price can rebound higher than the AR, forming the SOS(b). This won’t always occur, but if it does, it creates our second upper bound. Again, it is supposed to fall below the PS. Secondary Test in Phase B (ST(b)): This is the first “liquidation” event of the accumulation. A sharp move downward takes out the ST and, ideally, the SC. Here, the Composite Man taps into the stop losses below the ST and breakout sell orders to fill his buy orders, creating the Cause. Phase C Spring: Following the ST(b), the price will likely test the first and second upper bounds, but it is supposed to always stay within them. After doing so, the Composite Man will push the price down for the last time below the ST(b), liquidating any orders resting below here to form the Spring. Test: After creating the Spring, the Composite Man will often test the area to see if there’s any supply left. The price will create a higher low near the Spring, often with lower volume. Note that there can be multiple tests. Phase D Last Point of Support (LPS): Following the test and another leg higher, the price will pull back to test supply once again. LPSs are usually much higher than the initial Tests, and are often the last move before the markup begins. LPSs can form both before and after the SOS, depending on how the price action plays out. Sign of Strength (SOS): Here, the price breaks above the highest upper bound and confirms the schematic, often with higher volume. As mentioned, the LPS can form after the breakout and fall back in the range or test the upper resistance line. After the SOS forms, the markup begins and produces the Effect as seen in the Wyckoff accumulation chart above. Distributions Phase A Preliminary Supply (PSY): After an uptrend, the Composite Man begins to unload his position, causing the price to fall slightly. Buying Climax (BC): Like the SC, the BC is where buying pressure is at its most extreme, coinciding with high volume. Automatic Rally (AR): After buying subsidies, prices fall to form the AR, usually above the PSY. This is our first lower bound. Secondary Test (ST): The price revisits the BC area to create another high usually below the BC, building up liquidity for future phases. The volume should be low. Phase B Sign of Weakness in Phase B (SOW(b)): A move down past the AR that indicates supply is entering the market. Like the SOS(b), the SOW(b) doesn’t always occur, but if it does, it forms our second lower bound. Upthrust (UT): This is the distribution equivalent of a ST(b). It must reach higher than the ST and may take out the BC. Here, the Composite Man uses short stop losses and breakout trades to fill his sell orders. Phase C Upthrust After Distribution (UTAD): The UTAD is analogous to an accumulation’s Spring. Following the UT, one last tap into areas of liquidity is made before the markdown. Test: Similar to accumulation, there are usually one or more tests made near the UTAD attempting to see if any demand remains. Phase D Last Point of Supply (LPSY): After the price declines, the final tests of demand are made. Like accumulations, these points can occur before or after the Sign of Weakness. They’re typically the last bullish moves made before the markdown begins. Sign of Weakness (SOW): The lowest bound is broken as the price begins to confirm its bearish structure. Another LPSY can be made, but this is the final step before the markdown. Type 2 Schematics Type 2 Wyckoff schematics have all of the same ingredients, just without a Spring or UTAD. How do you know if what you’re looking at is a Type 2 schematic? Just wait for the SOS or SOW to occur. If you have just a single ST and an ST(b), or an ST and UT, and the markup or markdown begins, you know it’s a Type 2. This is seen in the Wyckoff graph above. Both can be traded in the same ways as a Type 1. The Five-Step Wyckoff Trading Strategy Luckily for us, Wyckoff developed a five-step strategy for using his methodology. This could be used to create your own Wyckoff forex trading strategy. Determine the current market trend. Assess whether the overall market is bullish or bearish. Choose your market. Find a pair that strongly correlates to this overall trend. Find a pair currently undergoing accumulation or distribution. Determine the pair’s readiness to move. This involves examining the Wyckoff phase of the asset and volume. If a Spring or UTAD has just occurred, you could consider it viable. Find your entry. Traders often enter on Tests or LPS/LPSYs. Does the Wyckoff Method Work? Despite nearly being a century old, Wyckoff’s logic in forex trading has helped traders around the world to develop trading strategies. It may form the basis of an effective strategy when combined with other types of technical analysis, such as harmonic patterns, indicators, and support/resistance. You may consider opening an FXOpen account today to start putting your knowledge to work. 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