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Harmonic Patterns

Bullish AB=CD alternate patternAB=CD pattern The regular AB=CD pattern, both the AB and CD are exactly the same length and/or pips on a forex chart- BUT- the alternate AB=CD is where the CD is longer then the AB leg/length- there can be a range of fib retracements and/or extensions which are part of this simple AB=CD pattern but that is OKAY. Scott Carney - creator of harmonic pattern rules and Harmonic Trading -- shows the essentials in minutes. He outlines the foundation of the AB=CD pattern in harmonic patterns in this effective presentation. If you like to further under this whole subject, please subscribe to his youtube channel: Harmonic Trading. His wisdom and insights about this subject will clarify everything you need to know about all harmonic patterns. You might even trade better and make more profits with your forex trading too. Which is what we strive to do is work less & play more in life.
Education
by Anbat
Bullish Butterfly PatternYes, you can scalp or day trade harmonic patterns in real live time, If you know what to look for. All harmonic patterns have their own fib retracement and/or extension ranges- which need to happen- for them to be called certain names. When a PRZ happens, instead of just jumping on a trade, get a confirmation move out of PRZ and then reversal back to it with an engulfing, harami and/or pin bar candlestick setup to then do a trade. This will prevent you from getting into a move too early and help with risk management on the trade too. Be Patience equals to Be Profitable- with a strategy and/or a plan. Risk management in your priority on each trade that you do, in this Forex trading and with the high liquidity and volatility that is happening at this time with many currency's, their is no place for either fear and/or greed. Lock in profits on all winning trades. Concentrate on getting a little piece of pip pie, not getting the whole pip pie in trading.
Education
by Anbat
2
Bullish Crab patternOn AJ 1 hour chart, did you notice that the example bullish crab pattern ended on Friday? On the AJ 4 hour time frame (refer to another article done today by myself) it showed another harmonic bullish pattern- see two time frames show that this pair when they open up on Sunday/Monday will be bullish when it starts out trading. Just wait for an Engulfing, Harami and/or Pin bar candlestick set up on this 1 hour and/or 15 minute timeframe to do any buy trades with. Different time frames give you another perception of candlesticks and shows you more probable's that you are trading in the right trend and with the current big banks, which you always need to be doing. All harmonic patterns have a bearish and/or bullish one, which you can find on your charts, if you chose to trade them and make money off of them too. Please do your own research of exact ranges of fib retracements and extensions which are needed for each individual harmonic patterns- Wish you best.
Education
by Anbat
Bullish Cypher PatternOn the AudJpy 4 hour chart example of a bullish cypher pattern. Yes, all harmonic patterns have their own Fib. Ret and extension percentages you need to look up and know, if you use harmonic patterns in your trading. Higher timeframes of 1 hour, 4 hour and daily work the best when using harmonic patterns, but can work on smaller timeframes- just less time for you to set up trades and react to candlesticks in real live time. Always wait for all harmonic patterns to 100% complete before you make a trade in opposite direction. Number one rule is wait for all harmonic patterns to complete before entering in any trades, related to being the safest times to get in and having the best risk reward setups with highest win percentages in trading, then to jump in too early because you are not patience, but have a need to trade rather then wait. Risk management is always #1, control what is in your hands to do like: What pair you trade, what price you get in, what session you trade and what time you are trading a certain pair. Also, entries, exits and/or targets, stop losses, etc... Stay healthy & get wealthy- Note: I will be looking at 1 hour charts on AJ for bullish trades to start this coming week off- r/t the completion of the bullish cypher pattern on example chart of 4 hours- there is around 70 pips to the upside to the target area of at least 50% on the fib. retracement tool (here on TV).
Education
by Anbat
1
Gartley Pattern (Bearish)With any harmonic pattern you want to let them completely finish before you make a trade at the PRZ (potential reverse zone) area. All harmonic patterns have there own Fib. retracement and extension range percentages, which you need to look up and know to verify that they what you think they are. This Bearish Gartley pattern stick out very easily, on this EurJpy daily chart, you can trade all harmonic patterns on any time frames, but higher the time frames the easier to recognize them and the easier you will be able to predict their key XABCD points, and PRZ areas to set up trades. They are fun to do on your charts, but harder to do in live/real times when scalping and/or day trading on smaller time frames. Do not only relay on harmonic patterns, but other confirming indicators, like RSI, angle trend lines, round psychological numbers and/or quarter numbers on chart you are trading on (.000, .250, .500 and/or .750). Big deal on charts is for the best Risk Reward set ups, always trade when the PRZ (potential reversal zone) is hit and you see Engulfing, Harami and/or Pinbars candlestick patterns reversing in the other way then the bullish CD leg, so look for bearish trading and/or bearish CD leg, so look for bullish trading. Wish all the best in forex trading and life. Always control risk management on all trades you do (lot sizes, stops, entry, exits/targets) you can do it.
Education
by Anbat
Bat Harmonic Pattern - Made Easy For EveryoneThe BAT pattern gets its name from the bat-shaped end product. Identified by Scott Carney in 2001, the BAT pattern is made up of precise elements that identify PRZs. The bat harmonic pattern follows different Fibonacci ratios. One of the major ways to differentiate it from a Cypher pattern is the B point which, if it doesn’t go above the 50 percent Fibonacci retracement of the XA leg then it is a bat, otherwise it can turn into a cypher structure. The market strategy of the pattern is suitable for all time frames and all markets types. Traders have to keep in mind that on lower time frames using the bat pattern market strategy has some challenges because the pattern tends to appear on less frequent on lower time frames. How to Draw a Bat Pattern : As mentioned earlier, the bat harmonic pattern looks very similar to the Gartley pattern. It has four different legs marked as X-A, A-B, B-C, and C-D. X-A: In its bullish version, the first leg appears when the price sharply increases from point X to point A. This is the longest leg of the pattern. A-B: The A-B leg then sees the price switching direction and retracing 38.2 to 50 percent using the Fibonacci retracement of the distance covered by the X-A leg. Have it in mind that the A-B leg can never retrace beyond point X. But if it does, the pattern is considered invalid. As you can see, if the price with a spike reaches a point under 50% but with the body above, this will be Valid. The candle Body's important. B-C: Here, the price changes direction for a second time and moves back up, retracing anything from 38.2 to 88.6 percent of the distance covered by the A-B leg. If it retraces up above the high of point A, the pattern is considered invalid.As you can see, if the price with a spike reaches a point above 88.6% but with the body is below, this will be Valid. The candle Body's important. C-D: This is the last and most significant aspect of the pattern. As with the Gartley pattern, this is where the bat harmonic pattern ends and traders place their long (buy) trade at point D. ( PRZ Potential Reversal Zone ) The 88.6% percent retracement of the X-A leg is our Entry Point. D POINT or PRZ Before trying and trading the pattern, confirm from this checklist that the pattern is real. It should include these vital elements: A-B : 38.2 to 50% max percent using the Fibonacci retracement B-C : An 38.2 to 88.6% max percent Fibonacci retracement of the X-A leg C-D : The 88.6% percent retracement of the X-A Market strategy: Step 1: Drawing the pattern Begin by clicking on the XABCD pattern indicator that is found on the right-hand side toolbar of Tradingview Identify the beginning point X, which can be any swing high or low point on the chart. You should get 4 points or 4 swings high/low points that join and form the harmonic bat pattern strategy as explained Above Step 2: Trading the pattern The 88.6 percent Fibonacci ratio provides traders a more reliable risk/reward ratio which is why the market strategy of the bat pattern is such a very popular as a market strategy. The best entry point is the 88.6 percent Fibonacci retracement which is a very accurate market turning point. It is recommended that traders should enter as soon as they touch the 88.6 percent figure. Oftentimes the harmonic bat pattern strategy doesn’t go much above this level. Step 3: Placing a stop-loss Usually, traders should place their protective stop-loss lower than the point X of a harmonic bat pattern. That is the only logical location to hide the stop-loss because any break below will automatically invalidate the pattern.We use as manual the 113% Fibo of X-A as a picture below. Step 4: Take-profits There can be several ways to manage your trades, but the best target for this pattern should be to use a multiple-take profit formula. For this pattern strategy, take the first partial profit once you hit wave-B level and the remaining half wave-C. Once the price reaches the first target you should move the Stop Loss at BE ( breakeven - entry point ) or close the position in profit. By doing this you will accomplish two things: first, you’ll ensure that you accumulate profits and secondly, if the markets reverse, you ensure you’re stopped at BE and don’t lose any money. There are many ways to calculate the Take profits Target, this is one of the most used and we suggest starting in this way. Identical rules to draw and set parameters like stop loss and take profits are for the Bearish version. Nothing changed. Please note this is an introduction to the BAT pattern, for beginners. I tried to make it more easy and simple as I can.
BITSTAMP:BTCUSDEducation
by FOREXN1
20
Lesson 2: Support & Resistance ZonesSupport an resistance zones are critical in the market. These are the juicy spots from which market-makers get to feed themselves immensely. Many traders get trapped in these zones. Buyers are trapped when the market-maker's intention is to SELL and sellers are trapped when the intention is to BUY. It very important for ordinary retail traders like you and I to be able to play the game the market-makers plays at SUPPORT AND RESISTANCE levels. This is how one can truly profit from the market. There's a lot of price manipulation going on at the S&R levels. Market-makers are also in this business to make money. Unfortunately it is the retail trader who fattens their pockets. The good news is that this can be avoided through PATIENCE, PROPER RISK MANAGEMENT ANN HIGH LEVEL OF TRADING PSYCHOLOGY. Things to avoid doing at SUPPORT & RESISTANCE levels: 1. Trading BREAK-OUTS instantly (a sure way to be caught in the opposite side) 2. Placing STOP LOSSES right on the zone (whipsaws will destroy you) -------------------------------------------------------------------------------------------------------------------------------------- I hope this bit of education will help you trade carefully at critical SUPPORT AND RESISTANCE ZONES. HAPPY TRADING!!
TVC:USOILEducation
by SMCSmartSniper1
PRICE CHANNELS: A simple but very important trading tool1. WHAT IS A PRICE CHANNEL? On any chart, you can see that the price is moving in a trading range bounded from above and below, and this range is a price channel. They can be ascending, descending or sideways (ranges). Ascending channels are formed with an uptrend, Descending channels are formed with a downtrend, Lateral channels are formed at intervals when the price moves in a horizontal range. 2. WHICH CHANNELS ARE MORE RELIABLE AND EFFICIENT? If the price has touched the channel boundaries more than two or three times, it is considered confirmed. If he touched it up to two or three times, the channel is unconfirmed and weak. In fact, the channel is a derivative of the trend line. The channel boundaries are drawn based on the upper and lower maximum price values (extremes). To create a connecting price channel, both lines must be parallel, and the number of points must not be less than indicated above. The more often the price touches the channel boundaries, the stronger and more effective the channel will be. 3. WHAT TO DO WITH THE PRICE CHANNEL? HOW TO TRADE IN IT? Use the bottom line of the uptrend channel to open long positions (to buy) - these are the most profitable signals. The resistance of the ascending channel in this case is the most important point of reference for short-term trades against the trend - from the upper limit of the ascending channel, you can open short positions (sales). In a falling market, the channel is descending, so a deal against the trend from its lower border will be a long position (buy), and from the upper border in the direction of a downward trend - short positions (sell). Crossing the channel boundaries may be a signal that the trend continues. This happens when the price breaks through and settles outside the channel boundaries, under or above the channel resistance. When it breaks through the upper limit of the ascending channel, it indicates that the trend is accelerating, and it may make sense for traders to activate purchases or open long positions. If it breaks through the lower boundary of the uptrend channel, it is a signal of a trend reversal, and it is better to open short positions. The approximate size of the falling price most often corresponds to the width of the range. The situation will be the opposite for a falling market with a descending corridor. 4. HOW TO BUILD A PRICE CHANNEL? To do this, you need at least three points on the chart. Two of them define a line of resistance or support, the third should be opposite to the first two. To build an uptrend channel, we need to understand where the trend movement begins. Determine from two local gradually ascending minimum points where the trend line should be drawn. These two local points will be the reference points, and the constructed line will be the base support line for the channel. Then draw another line parallel to the obtained line, which should pass through the highest point of the maximum - the very point opposite to the first two, which is located between the polls. We do the same for descending price channels - only in this case we draw resistance instead of support, the main line should pass through the highs, and the second trend line should pass through the minimum. The way to determine if you are dealing with a range is to allow the price to touch both levels, resistance and support, at least twice, and the levels should be horizontal. 5. HOW TO TRADE IN THE PRICE CHANNEL Trading in a price channel reveals a variety of strategies - trade either inside the channel, buy or sell from resistance or support. Or a breakout of the price channel. Intra-Channel Trading: Traders are pushed away from the channel boundaries. There is too high a probability that the price will move inside the channel and push off from its borders. Therefore, it makes sense to sell when the price reaches the upper limit, and buy when it reaches the lower limit. Trading on breakouts You need to understand that any channel, depending on the time, will be broken - and at this time there will be a strong price movement, on which the trader can make a big profit. It is convenient to use pending orders placed above the channel border for trading on a breakout. As soon as the price breaks through the channel boundary and reaches the pending order, it is triggered automatically. Let's summarize: Price channels are an excellent basis for trading strategies, as they are based on support and resistance lines. All channels end with a breakdown depending on the time, so you should not trade without a stop loss when trading inside the channel. You should not perceive the boundaries of the channel as something indestructible. The price can easily skip the channel boundary or, conversely, make a false breakthrough. You can trade inside or outside the channel, and both strategies can be combined. And most importantly : technical analysis will allow you to always stay on the right side of the market! Regards! R.Linda!
Education
by RLinda
64
Lesson 1: The Market-Maker's GameLet's look at how market-makers succeed in trapping you and I in the market to make billions. These techniques, when grasped, can have an immense positive influence in your trading. Market-Makers use areas of support and resistance to accumulate/distribute order blocks. This creates massive liquidity for them to be able extract big profits, leaving the ordinary retail trader holding an empty bag. ---------------------------------------------------------------------------------------------------------------------------------- 1. Support was broken at the 0.79000 zone. They break support zones like this to trap all the SELLERS. those who placed STOP LOSSES at 0.77400 anticipating price to go down are kicked out of the market before price starts to climb higher and higher. This is the biggest reason why traders wonder why the market kicks them out before it moves in their desired direction. It's as if someone is watching your trades. Well, market-maker can see where most STOP LOSS orders are placed. They push the price to those levels to wipe traders' positions. 2. The maker-maker's intention is to take the price up without being too transparent. Their intention is to make you believe that price is headed downwards when in fact it's going up. Their first target in this case is the 0.98000 zone. When price gets to that zone both BUYERS and SELLERS will be shaken off the market so that they can take the price up some more to the 1.2500 zone (3). 3. At 1.25000 more manipulation will take place. At that price level a lot of amateur retail traders will be thinking that price is still going up. What ensues then is a big drop. Maker-makers would have now trapped BUYERS to create liquidity for taking the price down. This is critical to understand. If you can trade how MARKET-MAKERS are trading you'd be able to extract profits off the markets on a consistent basis. --------------------------------------------------------------------------------------------------------------------------------------- Do drop questions in the comments section. I will be ready to answer.
Education
by SMCSmartSniper1
Smart Money Manipulation 🥊Alkaline is back baby! 💣 As smart money concepts gain popularity, liquidity increases. I have taken a month away from trading to study the new forms of market manipulation and have been pleasantly surprised by what I have found. Here is my discovery: 1) The market is currently focusing on taking liquidity from breakeven positions over fixed stop losses. This is because emotional traders put their stops to BE quickly to avoid pain, especially during indecisive markets. 2) Order blocks are the perfect manipulation areas. If you take time out to backtest significant order blocks, you will notice price will tap and lure or simply sweep above/below the zone before going in the intended direction. 3) That tight stop loss you are using is doing more damage than good. Scale into your positions, trust me when I say this will reduce your emotions and give you a more relaxed trading style. 4) Use your brain, even if you are in denial. If the majority of traders lose money, and the majority of traders now use smart money concepts, do the maths. It feels good to be back after a long month of studying, I have lots of new things to teach and share. I will be taking on new students shortly, have a great weekend everyone 👋
Education
by AlkalineFX
24
MarketMaking and MarketMaker. What is it and who is it?All participants in financial exchanges can be divided into two categories - market makers, who set the mood in the market, and market makers, private investors with small capital. Market makers ( they are in minority ) will always manipulate market makers ( they are in majority ). What is a market maker, who he is, what he does at the exchange and why he is needed? WHO IS A MARKET MAKER AT THE STOCK EXCHANGE? This is a professional in the market with very large money, without whom trading is impossible - because this figure is considered a key player in the market and moves the price. Most often, this is the whole financial organization. MARKETMAKER is the one who creates and maintains the liquidity level of exchange , currency , cryptocurrency , futures instruments , etc. It is only possible to make transactions on the market through the market maker, who regulates the processes so that the exchange is not dominated by only sellers or buyers. The MARKETMAKER is obliged to buy even if the market is dominated by sellers and even if it leads to losses. And when the market is dominated by buyers, the market maker must sell in order to balance the market. The main purpose of the market maker is not to make money, but to regulate supply and demand, to maintain liquidity. CATEGORIES OF MARKETMAKERS Large commercial banks, but not by themselves, but united in groups: they are called institutional market makers. Brokerage companies Dealing centers Investment funds Private investors with significant capital. WHY DO WE NEED A MARKETMAKER? It stabilizes the market, controls price movements, satisfies traders' demand. And since large financial institutions take on this role, they can be both sellers and buyers. The market maker makes a huge number of deals every day and ensures the liquidity of assets. The peculiarity of their work is that market makers can support the quote both in the buy and sell direction simultaneously on the same financial instrument, which makes the price move more smoothly and price gaps disappear. TASKS OF MARKET MAKERS Ensure profitable deals for all participants To maintain sufficient liquidity for any instrument throughout the trading session To accumulate orders within the instrument being traded Find and consolidate the best price offers and record them in the price book Provide all participants with information on current quotes as soon as possible WHAT AND HOW DO MARKET MAKERS MAKE MONEY? The best way to make money on the exchange is to be able to correctly predict large price movements and timely open positions in this direction. No market maker can do it on a large scale, but a small impulse is enough to start the process of a large price movement. And for this market maker first forms a trend in the direction he needs, after which he acts in the opposite direction. Thus, the market maker makes a profit, while other participants lose more or less. Since market makers are the first to review current orders, they are the first to find out about the emergence of a trend in one direction or another and do everything necessary to balance the market and not allow a large surge of volatility. For the fact that he keeps the market price of the instrument in the predetermined limits, the market maker receives a significant discount on the commissions. And his profit is the difference between the bid and ask prices, which is called the dealing spread. Because the exchange is interested in maintaining the liquidity of assets, it encourages healthy competition and advocates the presence of several market makers on one floor. It reduces the cost of transactions, increases the speed of transactions and makes pricing transparent. Even the exchange rules often contain a clause that a deal is legal if a market maker is involved, i.e. it is quite a significant and influential market player. HOW DOES THE MARKET MAKER WORK? He establishes a connection with his clients through a program, analyzes the market and executes orders of his broker's clients. Often he prefers to work with mid-sized brokers to have the necessary volume of transactions to make money. Marketmaking. Order-Making and Order-Making. The function of Order-Making is to watch a particular company's stock and make predictions. Order-taking is to execute traders' orders and take additional profits. HOW DOES PROFIT TAKING TAKE PLACE? Like other market participants, market makers can also incur losses, which occurs if a position is chosen incorrectly. But due to the fact that market makers work with large volumes of trades and a large number of clients, they always have an opportunity to cover their losses. Regards! R.Linda!
Education
by RLinda
30
LEARN HARMONIC PATTERNS TRADING | ABCD PATTERN 🔰 Hey traders, Harmonic ABCD pattern is a classic reversal pattern. This pattern is composed of 3 main elements (based on wicks of the candles): 1️⃣ AB leg 2️⃣ BC leg 3️⃣ CD leg The pattern is considered to be bullish if AB leg is bearish. The pattern is considered to be bearish if AB leg is bullish. AB leg must be a strong movement without corrections within. A is its initial point and B is its completion point. BC leg is a correctional movement from B point after a completion of AB leg. The price may fluctuate within that. B is its initial point and C is its completion point. CD leg must be a strong movement without corrections within. C is its initial point and D is its completion point. ❗️ABCD movement is harmonic if the length and the time horizon of AB and CD legs are equal. By the length, I mean a price change from A to B point and from C to D point. By the time, I mean a time ranges of AB leg and CD leg. If the time and length of AB and CD legs are equal, the pattern is considered to be harmonic, and a reversal will be expected from D point at least to B point. 🛑If the pattern is bullish, stop loss must be placed below D point. 🛑If the pattern is bearish, stop loss is placed above D point. Initial target level is B point. Usually, after reaching a B point the market returns to a global trend. What pattern do you want to learn in the next post? ❤️If you have any questions, please, ask me in the comment section. Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
10
LUNA/USDT ----> TUTORIAL (when and why take position ) HI guys we have some questions and now answer that. if you have any idea , you can comment . answers: 1 and 2 : if we had a strong sell movement it couldn't brake it without any react !! and now if it had broken it would pullback on that level. (caution : the price goes everywhere finally it has to ( again i repeat it : it has to) pullback that level. and why it has to pull back you must find answer on supply and demand orders. 3: when you have strong movement it hasn't enough time to settled price level but anyway it settle on another time. 4:thats joking if you think Russian or Ukraine people buy and price grows whenever other currency were approximately constant. the answer is exchanger and market makers. but why? they are take profit with 2 strategy. one ,take profit with liquid novice trader with raising unexpected price for many times . two ,they bought on 40$ level and now price is above 90$ so they need time to sell. and they may make another trap for trader they brake the highest historical price and when novice traders were trapped exchanger and professional trader take sell position. conclusion : when you see enough reasons for take buy position or sell position and price have enough distance from your levels find entry situation and DONT FORGET MONEYMANAGEMENT then take a your position that's not important after that price go where you just need money management and wait. be profitable.
Education
by rabinateghi
19
[Candlestick Patterns] Just need to know these three!#Candlestick #CandlePattern #Tocademy #Tutorial Hello traders from all over the world, this is HAMZA_ZDH=) I was unexpectedly surprised by many of you who liked and supported my last post about the basic concept of TA( Technical Analysis ). Today I prepared a brief lecture about the Candlestick Pattern, one of the most fundamental phenomenon and behaviors that traders must be well-informed. In fact, we should be very familiar with these textbook contents and interpret it in a glimpse on the technical chart unconsciously. Just like we don't pay direct attention about each breathes when breathing, like we don't care each and all of the alphabets when we speak, or like we don’t perceive location of each keyboards every moment as we type, this very technique should be performed automatically and quickly by observing dominant formations of candlestick bars. As a matter of fact, comprehending market trends and price actions only by referring to the candlesticks is yet too spurious. It should be used in such a way to weight on certain scenarios in a macroscopic view, rather than deriving precise and specific PRZ(Potential Reversal Zone)s and distinguish the accurate market trend. It’s never like ‘The price must go up because this pattern just appeared’. Furthermore, I strongly believe that the reliability of the candlestick pattern strategy is declining especially in recent financial market, where we encounter countless non-traditional and abnormal situations that were not very common in the past. Hence among the existing ‘Textbook’ candlestick pattern strategies that can easily be found on Google , there are particular patterns that are still very reliable on current market and there are ones that are not as reliable as it used to be. So here, I will organize everything very clearly for you guys.
BITSTAMP:BTCUSDEducation
by Mr_HaMza_
A Investor Story That Nobody Heard AboutThis is a fictionalized story about a lady who enjoyed great success throughout her life, investing in the stock market using a simple “Buy and Hold” approach. This article not only tells us how and why she succeeded but how you too can easily master and exploit this truly amazing strategy . Many of us have known or at least heard about someone like Aunt Betsey (if you dont know its ok) She was a kind, good natured person of somewhat eccentric character who, for reasons best known to herself, had never married or entered into any kind of committed relationship. She lived her life alone, comfortably but modestly. When she retired at the mandatory age of 65, she owned a 2 bedroom apartment in what had become a fashionable inner suburb plus a significant portfolio of shares in a dozen or so “substantial” companies. Betsey simply saved some of her wages each week and every few years, when her bank account had built up to a sizable amount, went out and bought another parcel of shares in a company of her choosing. Betsey never sold any of her shares. She simply filled them away with any correspondence under “S” in the small filling cabinet that stood beside a well-crafted oak writing desk in her fussy living room. When dividend cheques arrived she deposited them into her savings account which in the course of time found their way back into further share purchases. Betsey didn’t really know much about the share market, in fact she wasn’t even really interested in it. Her sole motivation for this lifelong habit was that her father had once told her that putting her surplus money into shares was a prudent thing to do. One of the qualities that Betsey valued highly was prudence. When it came time to buy another share parcel, she simply browsed through a couple of stock market magazines during her lunch break at one of the news agencies that provided her long term employment. She jotted down the names of any shares that caught her attention in the small notebook she always carried in her handbag. Most of the stock market jargon in the magazine went way above her head, but that didn’t really faze Betsey. Her final solitary selection on each occasion was made after a judicious reading of the tea leaves at the completion of her evening meal. Betsey passed away at the respectable age of 87, bequeathing a worthwhile inheritance to several nieces and nephews together with a substantial sum to a long favored charity. The accountant who helped finalise her affairs was impressed by Betsey’s financial achievements. He commented to the executor of the estate that she had done far better than if she had just left her money sitting in her bank savings account. Like the accountant, a casual observer may have concluded that Betsy had a knack for successful stock picking or if s/he had known the real truth, that reading tea leaves did in fact have some scientific basis to it after all. If nothing else, Betsey’s efforts surely proved the wisdom of having a well balanced portfolio. Sadly, none of these things are true, although reading tea leaves are probably just as good an indicator for stock picking as input from the majority of expert or professional advisors. A handful of professionals do over time do better than random, while others do far worse. Numerous studies have shown, time and again, that the net results of professional advisers are about the same as tossing a coin. Another thing that may have attributed to Betsey’s success was her market timing. Her entry signal that triggered a stock purchase occurred only when her bank account had reached a certain level. By being totally oblivious to what the markets were doing she inadvertently insulated herself from the generally losing game of trying to pick the tops and bottoms that both amateurs and professionals tend to get caught up in. Many people, who think they understand randomness, are often very surprised by the way it often pans out in practice. A typical response to encountering a proven random result for the first time is “I didn’t think that luck could be responsible for such a wide range of outcomes” . For example it would have been perfectly reasonable for Aunt Betsey to have finished up with a portfolio of 9 losing stocks and 3 winners with just one of those winners responsible for nearly all her profits. If that is so, people will then often ask how one goes about picking these big winners. The answer is you can’t. It is just a matter of luck. Many however, struggle to accept that explanation and attempt to attribute other supposedly rational causes to essentially random events and outcomes. There is a mathematical law in statistics known as the Law of Large Numbers. This law is frequently broken, not just in financial markets but in many other areas of life where statistics are used or quoted in an attempt to make sense of numerical data. The breaking of this law leads to the heinous Crime of Small Samples, committed frequently by traders and investors. In simple terms it means attempting to draw conclusions from inadequate sized data samples. This in turn leads to misleading or incorrect conclusions. Aunt Betsey’s 12 stocks are a very small sample indeed and no explanation, other than a run of good luck, could be rationally drawn from her results. For every person like Betsy who did well, there is another untold story about someone who would have been better off simply leaving their money in the bank. Nobody tells these stories because nobody wants to hear about those who lose. This results is a steady source of “good news” informational bias which is passed on ad nauseam by market professionals and others. This leads to people developing unrealistic beliefs, hopes and aspirations.
NYSE:VSCOEducation
by Zestiria
8
How to calculate a trading lot. Why is it worth knowing?Many traders, beginners and not only do not know how to calculate the lot and act in practice not selectively and illiterately Let's examine what a lot is, how much it costs and how to calculate it: We will calculate by the old quotation system (four decimal places). The cost of lots in forex: The size of each position opened by a trader is measured in lots Standard 1.0 lot = $100,000 Mini lot 0.10 = $10,000 Micro lot 0.01 = $1,000 *This size is always a constant value, independent of currency rates. *Leverage does not affect the calculation of the lot High leverage will only allow more lots to be opened. How to calculate the lot: Calculating the lot by yourself will give the trader a conscious understanding of possible losses, which is necessary for evaluating the situation, strategy and risks. This requires to know the pip value in any lot size Then, a trader won't care about the leverage size and won't need to know the number of currency units in a lot at all. Let's look at calculation of lot size as an example: Let's assume that the EURUSD chart shows a long entry price of 1.0251 . The trader needs to place a stop-loss, but he must know the amount of possible future losses on this trade, if a protective order triggers. As we know from theory, a stop-loss order should be placed Below the minimum/maximums; A fixed value using indicators or Expert Advisors. We measure the size from the current position to the lower tail of the candle, we get 25 points. We add a small reserve of 7 points to prevent the downward breakout from accidentally catching the stop loss and obtain 32 points. This stop loss should be subtracted from the current price. We multiply the quote by 10000 for convenience and obtain 10251 - 32 = 10219 . We divide it back by 10000 and get 1.0219 (this is the stop-loss quote) and set our stop-loss at 1.0219 For ease of risk calculation we should always take the lot size 0.1 . For a 0.1 lot one pip of price movement is approximately worth $ 1 , for a micro lot 0.01 the cost per pip would be 10 cents, for a whole 1.0 lot it would be $ 10 Why is it easier to start with 0.1 lot? It is very easy for a trader to calculate that 32 points of stop loss in our example would cost him $ 32 in losses. This is quite reasonable for a $ 1000 deposit. It is easy to think how much his potential loss will be worth, for example at 0.07 lots: 32 points at 0.1 lot costs $ 32 , at 0.01 lot ten times less - $ 3.2 . At lot 0.07 : 3.2 x 7 = $ 22.4 .
Education
by RLinda
12