Think in Probabilities Embracing Uncertainty Your Key To SuccessPicture this: You’re at your trading desk, eyes on the charts, heart pounding as the market swings unpredictably. Do you feel that fear creeping in?
Now, imagine knowing that this unpredictability doesn’t have to scare you. Instead, it can be the key to your success. Let's dive into why thinking in probabilities and staying calm in the face of uncertainty can turn trading from a gamble into a calculated path to consistent success.
Many traders struggle with uncertainty because they lack a solid, tested system. Trading randomly or without a proven strategy leads to anxiety and inconsistency. But once you have a reliable system that suits your lifestyle and mindset, and you fully understand your edge, you realize that while the outcome of each trade is random, the probabilities of your trading system will work out for you over time.
The Role of Probabilities in Trading
Trading isn’t about predicting the next big market move; it’s about understanding the odds and working them to your advantage. Each trade is a small part of a larger statistical framework, where the focus shifts from individual outcomes to the bigger picture.
Why Is Learning To Think In Probabilities So Important For Trading Success?
Reduces Emotional Bias : By thinking in probabilities, you understand that each trade is just one in a series of many. This helps reduce emotional reactions to individual losses or gains, such as revenge trading, doubling up on position sizing, or even smashing your new iPhone against the wall (been there, LOL).
For example, if you know that your strategy wins 60% of the time, you won't be devastated by a single loss. You'll see it as part of the statistical outcome.
Encourages Rational Decision-Making: Knowing your strategy has an actual edge helps you stick to your plan, even during losing streaks, and avoid impulsive decisions. To know your edge, you need to do plenty of backtesting and forward testing so you can gain confidence in the system.
For instance, if you experience a string of losses, understanding that this is normal and statistically probable helps you remain disciplined and not deviate from your strategy.
Builds Confidence in Your System : Confidence comes from knowing your strategy is backtested and has a proven edge over a large number of trades.
This knowledge helps you stay disciplined and focused on executing your plan. For example, if your backtesting shows a positive expectancy over 1,000 trades, you can trust your system even when short-term results are unfavorable.
Things That Have Helped Me Over the Years to Deal With the Uncertainty of Trading
Finding or Developing a System/Strategy That Suits You : As humans, we are all different, and this is especially true in trading. Some people are happy to be in and out of the market fast (scalpers) and have the ability to make big decisions quickly under pressure.
Others are slower thinkers and like to make decisions carefully, staying in the market for a longer period of time (swing traders).
You need to find what you're best at and stick to it. If you have a busy life with work and family, maybe swing trading suits you. If you’re younger and not as busy, then perhaps scalping is your style.
Playing Strategy Games and Games of Chance : This may not be something you've heard before, but I've met many traders, including myself, who have found that games like poker can really help your trading by teaching you to think in probabilities.
Another game I love to play is chess, as it encourages you to think ahead, and I’ve found it has helped me in my trading over the years.
Practicing Visualization : If you've ever read anything on the subconscious mind, you know it’s responsible for 95% of all your automatic behaviors, especially in trading. The subconscious doesn’t distinguish between what is real and what is imagined.
This is why visualization is such a powerful tool to help you embrace market uncertainty. By visualizing yourself placing trades confidently, managing risks well, and handling outcomes calmly, you prepare your mind for real trading scenarios.
This mental practice reinforces your belief in your system and prepares you for the market's ups and downs.
Books That Helped Me Think in Probabilities
Reading has been an invaluable part of my journey to understanding probabilities. Here are some books that have profoundly impacted my trading mindset:
"Thinking, Fast and Slow" by Daniel Kahneman
This book helped me understand how cognitive biases affect decision-making and how to overcome them by thinking more strategically.
"Fooled by Randomness" by Nassim Nicholas Taleb
Taleb's insights into the role of chance and randomness in our lives and the markets were eye-opening and changed how I view risk and probability.
"Beat the Dealer" by Edward O. Thorp
Although this book is about blackjack, Thorp’s exploration of probability and statistics offers valuable lessons for trading.
"The Theory of Poker" by David Sklansky
Sklansky breaks down the mathematics of poker, showing how to make decisions based on probability, a skill directly applicable to trading.
"The Intelligent Investor" by Benjamin Graham
This classic on value investing emphasizes the importance of long-term thinking and understanding market probabilities.
"A Man for All Markets" by Edward O. Thorp
This autobiography offers a fascinating look at how Thorp applied probability theory to beat the casino and the stock market.
"Sapiens: A Brief History of Humankind" by Yuval Noah Harari
Harari’s book provides context on human behavior and decision-making, offering insights into the psychological elements of trading.
"The Signal and the Noise" by Nate Silver
Silver’s exploration of how we can better understand predictions and probabilities is highly relevant to making informed trading decisions.
"Superforecasting: The Art and Science of Prediction" by Philip E. Tetlock and Dan M. Gardner
This book teaches how to improve forecasting skills through careful analysis and thinking in probabilities.
Thinking in probabilities was a game-changer for me. It shifted my focus from trying to predict every market move to playing the long game. By embracing this mindset, I turned fear into confidence and uncertainty into strategy.
Remember, trading isn’t about guessing the market. It’s about responding with a clear, composed mind. Trust your strategy, know your edge, and let the probabilities work in your favor. This approach transformed my trading journey, and it can do the same for you. Happy trading!
Uncertainty
Bitcoin - The Marco MazeHistory doesn't necessarily have to repeat! I see a lot of history based derivation for the timelines and price as to when and how high or low bitcoin can sore. As exciting and adrenaline pumping as these ideas seem, the outcome will just be as good as any coin toss! The truth however is the "macro maze" above. I've taken sensible assumptions to derive on the timelines and humanly possibe price floors and ceilings! In this environment sensible assumptions can easily turn out to be the most major blunder, so as I always say, please do your own analysis!
How to read the chart? It's quite simple, red is resistance or sell, green is support or buy. The intersections are where Bitcoin's price would likely be attracted to. There is no saying with precision when and where it would be. Kinda of like the Schrödinger's cat, you will only know when it happens. Anyone who says otherwise has a 50/50 chance of being right. Now, are you a trader or a gambler? Stay safe, peace out!
Disclaimer: These are not trading signals. Trade at your own risk!
USD on the Rise? Concerns for the EUR. We'll see at 07:30 CSTUSD trying to gain a foothold after yesterdays lows due to a Higher than Expected Unemployment Claims report.
The DXY dipped high in the morning from around 105.740, dropping to a low of around 105.200 and then went up slightly into a consolidating in a range from 105.332 high to 105.204 low.
That being said USDCAD took a hard drop yesterday.
These moves were beneficial to the AUDUSD & NZDUSD pairs as AUDUSD soared to a high of around 0.66230, retracing back to around 0.65994 before rising slightly into a consolidation pattern.
NZD had the same affect reaching a high of around 0.60400 before retracing to a low of 0.60142, retracing near the high before settling down into consolidation.
EUR pairs having the same reaction .
GBP & EUR news releases early this morning being mostly favorable for the pairs, USD trying to get a footing with the demand of Gold & Silver still on the rise, we're seeing some uncertainty in the market as we come to an end of weeks closing.
Awaiting further CAD Unemployment Claims report scheduled later this morning at 07:30 CST, this could be a make it or break it moment for the USD as we come to a close, pushing us into a Reversal for the week ahead or pushing us further down.
Good Hunting Traders.
GOLD/USD - Descending Triangle ( Bullish or Bearish Outcome) Good morning Traders ☕️
As we saw with the BTC/USD and Forex market the same counts for gold, the market is uncertain. This is due to war, inflation and some other factors slowing the bulls down. GOLD is no exception to this, we could potentially see either a bullish or bearish out break coming very soon. This break out will hopefully be upwards and this could spark a run to all time hime high on both gold and bitcoin.
Regardless I will be on the charts within these uncertain times, and I advise everyone to stay on the charts when they trade. It is imperative that you allow yourself to see shifts in the market.
Best of luck with your trading journey ❤️ and remember to follow the big 5 rules:
1.) Never enter a trade without a profit target and a stop loss.
2.) Always use multiple indicators to confirm a trade.
3.) Don't be greedy.
4.) If you lose take the day off and come back tomorrow.
5.) Do your own due diligence and analysis (market, technical and fundamental)
Bitcoin - Probabilistic MapSince traders are literally made of particles, it's vital to know the principles of their behavior in micro scale. Some people even use planetary cycles to implement into charting. But I believe the answer is deep in quantum world of probabilities - the fabric of reality itself.
Reference to Quantum Mechanics
The universe itself prohibits 100% prediction accuracy. This is called Heisenberg Uncertainty Principle, and it's the fundamental building blocks of Quantum Mechanics. In order to predict particles behavior, all you need are just 2 quantities/data/features:
1) Position of the particle
2) Momentum of the particles.
If you know it's position and it's momentum, you can easily predict it's trajectory. So if you have position and momentum data of all particles in the universe, and you have unlimited computational power, you can predict their behavior (interaction, movement, etc.), and basically predict the future (stock market, weather, natural disaster, etc).
However, the Heisenberg Uncertainty Principle states that it is impossible to collect information of particles's position and momentum with 100% certainty. The more certain you know about particle's position, the less certain it's momentum" and vice versa.
So if somehow with the unlimited computational power you can predict particle's position at time with 100% accuracy, then your prediction error for its velocity will be infinity, which prevent you for making accurate further predictions, rendering your model useless.
Hence, it's theoretically impossible to make 100% accurate prediction even with unlimited data and unlimited computational power.
So Is The Universe deterministic or probabilistic?
100% prediction accuracy also means the universe is deterministic - there's only one possible outcome of the future. Einstein was on this side, citing "God doesn't play with dice". On the other hand, folks like Heisenberg, Max Born, Schrodinger, Oppenheimer, etc.., the founding fathers of Quantum Mechanics, viewed the future as set of possible outcomes each having it's own probability.
Since market couldn't care less about anyone's subjective forecasts, I do predictions solely based on historic price dynamics in macro scale to stay objective and true with the market pulse rather than be bared with my endless interpretations of patterns. I don't need my consciousness to interpret because we already have a data derived from collective consciousnesses to work with. Chart is already a reflection of reality that captures the emotions of participants. In other words, it's a time fractal that exposes the essence of the market across timeframes. In turn the market itself is a function of trading time . These basis justify linking systematic fragments of cycles to work out the capacity of price action. Basically in Fractal Analysis, the question is how can direct metrics of the historic waves geometrically explain current and future price levels.
The Fibonacci sequence is a mathematical concept that appears in various aspects of nature. This connection between mathematics and the natural world is a fascinating example of how patterns and structures found in abstract concepts like numbers can manifest in physical reality . Particularly, using Golden Ratio as a key rule that governs order in chaos.
In TradingView, the "Fibonacci Channels" is a great tool to capture the waves (domestic certainty) and turn them into a probabilistic interconnected structure that captures the uncertainty of the market - the entanglement of price action.
To start with it's vital to use log scale where percentages are equally captured in distances. So a 100% a growth, say a vertical distance from $40 to $80 measures the same distance as from $1000 to $2000. Besides, percentages are what drives people to feel emotions which affect market behavior (collective executions). Finding geometric relationship between waves, the use of log scale is a must.
As I've done this before I want to show how market deviates near fibs.
A Direction of 2013 HIGH ⇨ 2017 HIGH with bottom of 2011 gives next bottom 2015 at 0.618 after -86% drop.
And also predicts the COVID bottom in 2019 after -72% drop as well as current level where price has cooled down locally.
We can note that previous ATHs are explained with logarithmic curve.
That's why we'd need another fib channel to connect 2017 HIGH ⇨ 2021 HIGH direction with previous bottom of -86% drop in 2015. FC of that direction predicts bottoms of 2018 (-84%) and covid 2019 (-72%) at 0.618 again.
Together they produce an interference pattern covers significant historic price changes.
To further interpret current levels though the chart itself, we can use line with angle of direction connecting 2021 double tops:
This shows the capacity of how high the market might still grow before next significant correction, if the local fib to the price hasn't yet dimmed the bullish incentive.
Another straight line can be used to connect 2019 COVID LOW (-72%) with 2022 LOW, because we might probably never see such price levels in the nearest future as price has broken out with high rate of change.
Now it needs more time and bearish capacity to go there. This line can indicate the bottom of hypothetical correction, if it happens now. Other than that it's a clear trendline with almost 4Y wavelength.
Since straight lines doesn't exist in nature, I didn't extend them to the right. Now we need a more adaptive version of it to connect recent local bottoms of the trend.
That would be a logarithmic trendline, in other words curves to mimic the function of exponential growth. Therefore falling below it, might indicate a possibility of correction and even reversal. Each day if it fails to grow with the curve, the bears will get depleted. A cross below the logarithmic curve of spreading information would be a confirmation of new bearish incentive. This is simply done to work out boundaries as limits of the function that explains the market.
Corrective wave has a timing of 15 days in respect to its domestic volatility properties, before it becomes bearish impulsive or continues the impulsive bullish wave.
Curves as a function of trading time explain pretty much all historic bullrun growths.
As if there is some kind of gravity that governs the trend or it's the PriceTime that curves with the emerging trend.
Individual cycles can be too curved accordingly.
So the more the price fails to break out that function, the more predictive curve becomes.
PDD - Update and what to look out for as we approach crucial PAAre buyers or sellers in control? We'll know very quickly within the next few days - if we use magenta strong controlled selling to build liquidity and then gap up above purple tapered, we'll know bulls are. However, if blue tapered controlled buying (the algorithm that has built liquidity for the bears over and over again prior to massive drops) holds price, we will need to reanalyze and take it from there.
Hope this was helpful as this stock has the ability to MOVE! We want to be ahead of it and be prepared for the next big one - either bullish or bearish.
Happy Trading :)
Gold price drifts lower amid elevated US bond yields, Fed rate c•Gold price ticks lower on Monday following the post-NFP price action whipsaw.
•Elevated US bond yields act as a tailwind for the USD and exert pressure on the XAU/USD.
•A softer risk tone should help limit deeper losses as the focus shifts to the US inflation data.
Gold price (XAU/USD) staged a goodish intraday recovery of around $40 from over a two-week low touched in the aftermath of the better-than-expected monthly employment details on Friday, albeit lacked any follow-through. The momentum ran out of steam near the $2,064 region amid the uncertainty about the Federal Reserve's (Fed) rate-cut trajectory, which, in turn, held back traders from placing aggressive directional bets around the non-yielding yellow metal.
The incoming US economic data pointed to a still-resilient economy, which, along with hawkish remarks by Fed officials, dashed hopes for a more aggressive policy easing by the central bank. This remains supportive of elevated US Treasury bond yields, which act as a headwind for the US Dollar (USD) and exert downward pressure on the Gold price during the Asian session on Monday. That said, a softer risk tone might help limit losses for the safe-haven XAU/USD.
Concerns about a slow economic recovery in China, along with geopolitical risks, weigh on investors' sentiment, which is evident from a fresh leg down in the US equity futures. Traders might also prefer to wait for the release of the US consumer inflation figures on Thursday to confirm the next leg of a directional move for the Gold price. This makes it prudent to wait for strong follow-through buying before positioning for the resumption of a one-week-old downtrend.
Daily Digest Market Movers: Gold price is undermined by reduced bets for aggressive Fed rate cuts
•Investors further scale back their expectations for an imminent shift in the Federal Reserve's policy stance following the release of a robust December monthly US jobs report on Friday.
•The US economy added 216K new jobs last week as compared to 170K expected, while the unemployment rate held steady at 3.7% vs. consensus estimates for an uptick to 3.8%.
•Adding to this, US Factory Orders surprised to the upside and grew more than expected in November, by 2.6%, after declining 3.4% in October (revised slightly up from -3.6%).
•Separately, the Institute for Supply Management (ISM) survey indicated that the US services sector, which accounts for more than two-thirds of the economy, slumped last month.
•The ISM's Non-Manufacturing Index dropped to 50.6 in December – the lowest reading since May – and the employment sub-component plunged to 43.3 – the lowest since July 2020.
•Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress.
•This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table.
•The yield on the benchmark 10-year US government bond holds steady above the 4.0% threshold, which acts as a tailwind for the US Dollar and is seen undermining the Gold price.
•The markets, however, are still pricing in a greater chance of the first interest rate cut by the Fed at the March meeting and a cumulative of five 25 basis points (bps) rate cuts for 2024.
•China's economic woes, along with an escalation of tensions in the Middle East, could lend some support to the safe-haven XAU/USD ahead of the US consumer inflation figures on Thursday.
•Lebanese militant group Hezbollah sent a barrage of rockets into northern Israel in what it called a “preliminary response” to the assassination of Hamas senior leader Saleh al-Arouri on Tuesday.
•The markets react little to an agreement between House Speaker Mike Johnson and Senate Majority Leader Chuck Schumer on topline spending level, which breaks the deadlock to avoid a shutdown.
Technical Analysis: Gold price seems vulnerable, multi-week low around $2,024 area holds the key
From a technical perspective, any subsequent slide is likely to find some support near the $2,030 level ahead of Friday’s swing low, around the $2,024 area. Some follow-through selling will be seen as a fresh trigger for bearish traders and drag the Gold price to the 50-day Simple Moving Average (SMA), currently around the $2,012-2,011 area. This is followed by the $2,000 psychological mark, which if broken should pave the way for a further near-term depreciating move.
On the flip side, momentum beyond the $2,050 immediate hurdle might continue to confront stiff resistance near the $2,064-2,065 area ahead of the $2,077 zone. A sustained strength beyond the said hurdles might prompt a short-covering rally and allow the Gold price
SPY Friday 3/10/23: Uncertainty?I like to assess pre-market conditions for assessing potential volume and price gap filling for the day. With a series of conflicting financial and stock market news, including this morning national payroll updates, I would be expecting a brief respite in price action for SPY up towards 392.5-393.5, but I'll note I'm uncertain SPY will push up its recent gap towards 394.5 today.
There is a notable bump in SP500 futures of 0.1-0.42%, but nothing significant to note. This is actually close to a 5-min resistance point from yesterday, which might suggest potential to short and continue with our push downwards.
Today's plan will be to sell call credit spread with 0DTE on SPY at open at 393/395; close or roll up/out if loss == 25%; take profit at 55-60%. This would allow for a .1-.25% SPY gain, with micro-room for flexibility. I've set a bear-ish bias since we're below the 100-day moving average on SPY.
Good luck, set a stop loss, and breathe.
Trading Psychology 101 | FEAR (1/2)A bit of a different video for you..
Thought i should talk about a sensitive subject here..
Psychology in trading and the key factors that you may need to finally BECOME a better trader..
In this part, I talk about FEAR and FOMO. Also, I added a more sensitive part, which is feeling burnt out and ways to overcome that.
Hope you find this helpful!
XRP's next move??My analysis shows that we can head towards 0.4 or plunged below 0.25
Please note that this is my own research profits are amplified, but so are losses.
Why doesn't technical analysis "always" work?A technical indicator could give a buy signal for a security with one set of values, and at the same time, could give a sell signal for the same security with a different set of values! How do you trust the indicators then?! Moreover, if a set of values works this time, the same set of values may not work the next time!
Technical analysis uses historical movements of a security to predict a probabilistic future direction or price of the security. By definition, technical analysis is probabilistic and thus its predictions are correct sometimes and go wrong other times. And we are aware of this uncertainty and are perfectly fine with it!. However, it is not possible for an indicator to describe the accuracy of its prediction. In the absence of that, basing our trade calls blindly on such predictions is as good as basing them on coin toss results. This article examines ways to assign an accuracy number to the predictions made.
Given this problem statement, the first thing that comes to our mind is backtesting. The results of backtesting give an indication of how an indicator has fared in the past. It is important to note that backtesting shows different results if applied to different timeframes (between two dates) or with different sets of values based on market behavior of that period. Our goal then is to know which set of values of all possibilities best suits a technical indicator for a given security for the current market conditions.
We all know that the price of a security doesn't move in a straight line! It keeps moving in a wavy pattern making highs (crests) and lows (troughs), both of short and long forms. Not only does the price change, but also the frequency and period (distance between crests and troughs, or swing highs and lows) of the security change on a day to day basis! This dynamic period plays a crucial role in selecting values for indicator parameters. For, e.g., it would be inappropriate to choose a longer length moving average when the security is volatile and making shorter swings. Also, the right set of parameters keep changing for an indicator with ever changing period of the security.
Without going into the complexities of establishing relationships between period and indicator parameters, we could backtest indicators for all possible values to arrive at the best set to use. For simplicity, let us consider a strategy that gives a buy signal if slope of the simple moving average is positive and sell signal if the slope turns negative. All that this takes is a single parameter - length of bars to the past (moving average length). Let us backtest with different lengths of and plot P&L for each with probabilities based on the number of trades won. The length with the best P&L could be considered as the ideal parameter. Note from the chart how this changes over time. Note also that this changes based on backtesting lengths, the chart uses 3-Jan-22 as the start date. (Another Note! Approximate P&L calculations with both long and short, for demonstration purposes only)
In summary, technical analysis methods work well with the right set of parameter values. And choosing the right set still has a lot of uncertainties to it, though the uncertainty could be reduced by backtesting and choosing a better set from time to time.
WHERE IS BTCUSDT HEADED : 33000, 35000 or 37000 ??Hello !!
Welcome to the quick update of BTCUSDT. From a long time, it was trading between 37200 and 39300. We saw a pump from 37200 until 40000. BTC suddenly took a dump until 37000 again breaking the bear flag downwards. Unfortunately, BTC was unable to hold the 37000 level and it broke the initial support.
As of now, BTC is tarding at around 35800 and I think more dump is incoming. As we can see in the charts, the respective resistance and support levels. In One scenario, BTC can come to 35000 and then pump until the next resistance R1, followed by R2 and R3. Whereas in the second scenario, it may come until 33000 and then pump until 35000 followed by 37200 and 39300.
As of now, we are very uncertain and the market is very unstable. I suggest everyone to hold your patience and wait for a clearer picture and trade only after confirmations. Till then be safe and wait for the right moment.
This is not financial advice, please do your own research before investing and we are not responsible for any of your losses or profits.
Please like and share and comment on this idea if you liked it.
BTCUSD - Welcome to the JungleLet's keep it simple: there's a lot of resistance we need to break past in order to actually break up. Even still, looking downwards for an easy path is not certain either. If Bitcoin can survive the declaration and act of sudden war of a large country and economic powerhouse such as Russia, can we even trust that it will break downwards?!
The path is not clear, other than the fact that the path will be painful. Still, let's make the best of it. Good luck out there.
Tough BTC marketSo BTC broke out of the 44k range and retraced back. Weekly closed below 42k resistance. So far bearish picture. Daily close above 43k would be first bullish sign worth a bid. Until then waiting for big weekly support at 32k. Currently the market follows stock market and this chop is PVP battle. Trying to trade low time frames is suicidal, at least for less experienced people. Safest thing is to look at the bigger picture and wait.
XAUUSD Ascending tunnel 4h Since 5th of June to today - ascending tunnel formation built out of higher highs and higher lows creating the shape of a tunnel going up.
The range to sustain the pattern is 1789 - 1825.
A break below 1789 with a 4h close, will allow for further decline down, as a first stage to 1760 hourly support.
A break above 1825 with a 4h close, will allow for target of 1920 weekly resistance to reach in the short-medium term.
Important levels range at the high 1790's and low 1800's.
Triple top between 2011-2013 on the weekly level show around 1800 - relevance to today is high.
A break above will be significant for the continuation of the uptrend breaking new highs.
On a fundamental level, needless to say, 10 trillion USD printed money together with overall lack of certainty and hysteria continue to push Gold higher.
Printed money dropping the US $ value and lack of real investment in equities don't provide much ground for drop of Gold price below important supports.
CHAOS AND OPPORTUNITY ARE CLOSE FRIENDSOne thing is certain, market uncertainty is here to stay. A bet to the contrary, IMHO, is a huge longshot.
Ukraine, Russia, China, Mid East, United States and Europe are all in .... re-arrangement ...
Yield Curve has again shown signs of 'flattening . inverting'.
What happens when the markets are uncertain?
Investors are willing to pay more money for options contracts.
I like the S&P to continue into a recess
I like the VIX to stay 'elevated' or 'increase'.
Speculative Play - I am interested in VIX Calls and SPY Puts on a 1 month expiry
Be smart.
Will
Pick A or BIs price accumulating or redistributing?
Price is moving within this range?
Where to next?
I’m inclined to believe A is the higher chance of of probabilities
I haven’t even checked but it looks like price is waiting for news catalyst to make a dramatic move, either way.
Pay attention to 4 hour candle closes
Things to Remember As the Market Dynamics ChangeA successful trader must be like a chameleon, willing to change with market conditions. Markets reflect the economic and geopolitical landscapes. The global pandemic changed many assumptions, forcing market participants to develop new skills to deal with the price carnage in early 2020. The impact of unprecedented central bank liquidity and government stimulus caused the need to pivot and adapt to new conditions.
Plan first- Trade or invest later
Risk-reward is critical
Leverage is a function of price variance
Stick to the game plan
There are always other opportunities in volatile markets
In early 2022, Russia’s invasion of Ukraine has turned the world upside down. The US, Europe, and allies worldwide support Ukraine by providing aid and slapping Russia with sanctions. However, the meeting between the Russian leader and Chinese President Xi at the Beijing Winter Olympics was a watershed event and may have set the stage for the incursion. China and Russia entered into a long-term $117 billion agreement for Russia to supply energy and other commodities to the world’s most populous country with the second-leading economy. The deal could make US and European sanctions toothless or lessen the bite on Russia’s economy as President Putin moves to take the former Soviet satellite back under his umbrella.
With the US, NATO, and other allies on one side and China, Russia, North Korea, and Iran on the other, the risk of a confrontation with nuclear ramifications dramatically increased. The pandemic has given way to a geopolitical crisis, requiring another pivot by investors and traders to deal with the current environment.
Volatility is likely to be the norm instead of the exception for the foreseeable future. The increasing price variance is a nightmare for passive investors but creates many opportunities for nimble traders with their fingers on the pulse of markets.
Success in markets always requires discipline, and increased volatility only makes discipline more critical. In early March 2022, we must remember the key factors that increase the odds of success in markets.
Plan first- Trade or invest later
Organization and planning are critical in life, and trading and investing are no exception. In a highly volatile market, planning becomes even more essential.
We follow three rules for considering any risk position:
Respect the market sentiment- The path of least resistance reflects market sentiment, making the trend your only friend in markets across all asset classes.
Write down your ideas, planning, organizing, and memorializing your thoughts. Referring back to the original justification for a trade or investment will remind you of the thought process.
Do not trade or invest for the sake of participating in any market. The risks in over-trading or investing without a plan increase with price volatility.
When considering entering any risk position, eliminate any emotional impulses by ignoring the news cycle and so-called “expert” advice. The price action is the most objective view of the market’s interpretation of the geopolitical and economic landscapes.
Risk-reward is critical
Any plan needs to outline the risk tolerance, which must be a function of profit targets. We follow three rules regarding risk versus reward:
The risk-reward equation should be at least 1:1, meaning do not risk more than your expected profit level.
Higher price variance should increase the expected reward level compared to the risk. Even the most successful traders call the market’s direction wrong more than right. A higher reward target versus risk increases the potential for success over time, allowing for small losses and higher profits.
Never increase the risk level because an asset price moves contrary to expectations. Admitting you are wrong can be humbling, but it is a critical element for financial survival.
Risk-reward is the essential part of a plan that establishes the discipline necessary for success. Risk-reward levels should always reflect price variance, and higher price volatility requires more expansive risk-reward levels.
Leverage is a function of price variance
Leverage can be a blessing or a curse. Greed and fear are impulses that drive human behavior.
Leverage levels should always reflect market volatility.
In volatile markets, reduce leverage to protect capital.
In static markets where volatility declines, increasing leverage is more appropriate.
When risk positions are in the money, greed drives us to feel we are not long or short enough. Fear makes us believe we are too long or short when they are out of the money. A plan and the appropriate leverage will help avoid listening to the little voice in our heads that incites the fear and greed impulses.
Stick to the game plan
Mike Tyson once said, “Everyone has a plan until they get punched in the mouth.” Markets are not forgiving when they move against our expectations. Sticking to a game plan prepares you for the sock in the kisser.
The risk level should be set in stone at the beginning of any trade or investment.
It is acceptable to increase reward horizons when prices move in our favor.
A risk position is always long or short at the current price, not the execution price.
Assess risk at each price level and adjust levels accordingly.
Adjust risk levels using trailing stops when an asset’s price moves in the desired direction.
Never allow a profitable position to become a loser by expanding the original risk level. Protect capital by protecting profits and have the fortitude to take small losses by sticking to the original game plan. When prices move contrary to expectations, admit to yourself you were wrong. When prices move in your favor, do not allow greed to creep into the plan.
There are always other opportunities in volatile markets
Most traders or investors will miss many trades and investment opportunities. Do not despair! In volatile markets, there is always another opportunity right around the corner.
Markets reflect the geopolitical and economic landscapes. The dynamics have dramatically changed with Russia’s invasion of Ukraine. Elevated volatility in markets across all asset classes will be the norm, not the exception.
When approaching markets, do the work and write down a plan. Make sure it has a logical risk-reward balance that reflects price variance before executing a buy or sell order. Follow the rules by sticking to your plan. Eliminate fear and greed emotions by establishing comfortable risk-reward levels.
A successful approach to trading and investing requires a portfolio approach. No one trade or investment should determine overall results. There are no guarantees in any markets, but following rules, sticking to a plan, and eliminating emotions will improve your chances of long-term success.
Be careful in markets as the dynamics have changed.
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failing double top or continuation (UVXY)if we fail the double top, and break 18.34 confirming a downtrend with a lower high, or immediately continue bear vix, im fine with selling volatility here.
if we immediately continue over 19.17, or we set a higher low over the .382 of the bounce and break the high i would stay long vix for the time being if multiple sectors are continuing to make new lows simultaneously.
vix looks like such a tempting bull trend on many larger timeframes. the weekly is shaping up to be a great reversal from lows, but indices also look equally extended though to the downside.
Relation Between uncertainty and United States Bond YieldsA simple economic condition: Uncertainty UP - US Bond Demand UP - Bond Prices UP - Bond Yields DOWN
This case study focuses on Covid news and investors reaction to uncertainty.
Possible scenarios for BTCAt the moment, 50k-53k is a very critical level for $BTC in order to determine whether or not we'll move into a bull run or not. Another rejection and bobos will have a field day seeing no one happy for Christmas this December.
I've laid out a couple of scenarios for BTC:
Bull case:
-We breach the trendline and make a higher high and complete a wave 3 target toward 100k without retesting the trendline
-The same as above but the trend line gets retested and a new bull trend gets created
-Exchange reserves decreasing significantly ever since the dump from 50k
-Taproot
-New local high on taker buy/sell ratio
-Spot ETF?
-Possibility of other social media platforms following twitter's adoption of BTC and ETH (OF btc donations from simps?)
-Btc volcano mining from El Salvador
Bear case:
-Bitcoin gets rejected at the trendline again increasing the likelihood of a bear market but with a much higher ath potential (300k+?) sometime in 2022 or 2023. I suspect the bottom to be anywhere between 22k-24k. Good time to pick up on alts and accumulate. Doesn't even matter if you are working min. wage at Mcdonald's or Amazon with this scenario, just have cash/stable coins ready to buy the dip, and cash out your 10x-100x ROI.
-Bids at 36k-40k region continuing to reduce whilst under 50k/major trendline, providing an opportunity for a selloff to sub 40k due to lack of support.
-Trusts/Funds selling at a negative premium
-SPX/CPI wave 5 target
-115% U.S. debt/GDP ratio
-Evergrande situation (tether correlation?)
Overall, wouldn't be surprised if we crabbed for a couple of months maybe even a year until either case becomes more dominant.
EURJPY: a pinbar where you need one!Yesterday price dropped down below 200 EMA to the support zone. Later, it moved back up again closing above EMA and within the previous candle's range.
This pinbar has three supportive factors making it more significant than any other.
► It breached 200 EMA, yet it closed above it confirming the dynamic level to be a support.
► Opened and closed within the previous candle's range => the whole downside momentum was completely absorbed within a single candle.
► Interest rates support the bullish narrative although it is 5 years since they were changed.
There is also one contrarian point that should be weighed in. Japanese Yen is usually a currency relied upon in times of uncertainty. I think we've got a lot of that lately.
Good luck!
Bitcoin dump analysis!!! (In persian)BITSTAMP:BTCUSD BINANCE:BTCUSDT
Hi ,In this video I will breakdown the reasons for the current Crypto Dump and and discuss about the potential outcomes of this event!!
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