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Meanreversion

When the Yen Fell Out of Bed — And Time Picked It Up1. Yen Drama at the Open 🎭 The Japanese Yen Futures (6J) woke up after the weekend and immediately faceplanted into the lower Bollinger Band®. Big gap, lots of noise — the classic “what just happened?” moment. Now, that gap around 0.0068 might just invite a mean reversion, because markets love to clean up after their weekend messes. Instead of chasing direction, we’ll let time do the heavy lifting. 2. The Strategy — A Time-Based Power Nap 😴 We’re running a Horizontal Call Spread (Calendar Spread) — same strike, different expiration dates: Buy Nov 7 Call @ 0.00680 Sell Oct 24 Call @ 0.00680 You’re basically saying: “Hey, Yen, take your time — but drift a little upward, okay?” If price chills near 0.0068, theta decay works for us. If it crashes again, we lose just our debit. Simple, elegant, zen. 3. Quick Specs (Because You’re Smart) 💡 Contract size: 12,500,000 Yen Tick value: $6.25 (0.0000005) Margin: ≈ $2,800 (outright futures) Calendar Spread Risk = $237.50 debit Setup target: gap-fill near 0.0068+ Risk is capped, reward potential roughly 3:1, and all you need is a calm market — not a hero move. 4. The Trader’s Zen Moment 🧘 This setup wins if price stabilizes and time passes — that’s it. You’re not fighting the market; you’re getting paid for waiting. While others panic, you’re sipping tea, letting theta do the work. 5. Takeaway 🍵 Gaps often fill. Time spreads love calm markets. Less stress, more logic. Sometimes, the best move in trading is to stop anticipating — and start aging gracefully with your positions. Want More Depth? If you’d like to go deeper into the building blocks of trading, check out our From Mystery to Mastery trilogy, three cornerstone articles that complement this one: 🔗 From Mystery to Mastery: Trading Essentials 🔗 From Mystery to Mastery: Futures Explained 🔗 From Mystery to Mastery: Options Explained 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:6J1!Long
by traddictiv
BTC “Blow-off” confirmed, what’s next?Newest chart (H&S with RS near 118.7k, high 124.5k, supports 110.9k / 108.7k / 95.1k / 96.5k / 77.3–74.5k) shows we did get the blow-off extension I had at 13%. We now re-weight the next path conditional on a completed blow-off. 🎯 Short to $73K — plan, gates, and guardrails It’s feasible only after losing: $110.9K → $108.7K → $103–101K → $96–95K Risk guardrails (objective invalidations) 🚧 Primary invalidation: Daily close > 118.7K (your RS/supply). Hard invalidation: Momentum HH > 120.5K and sustained bid above; expect squeeze back to 123–125K. Trailing logic: After 110.9K breaks → trail to entry. After 108.7K breaks → trail to 111.0–111.5K. After 101K breaks → trail to 105–106K. After 95K breaks → trail to 99–100K. Position management 🔧 Scale targets: 108.7K, 103–101K, 96–95K, 90–88K, 83–78K, 75–73K. What would help the $73K path 📉 Clean acceptance below 95K (no immediate reclaim). ETF flow cool-off (you’ve been tracking this) + weak spot bid during futures-led dumps. CME term structure flattening/inversion into breakdowns. OBV / CVD making lower lows as price ranges (distribution tells). What would hurt it 📈 Swift 118.7K reclaim on strong spot-led buying. Persistent positive ETF net inflows on down days. Perp funding resetting positive while price refuses to break 108.7K. Aligned with the post–blow-off distribution thesis. Hold the short only as long as 118.7K isn’t reclaimed and the market accepts below 110.9K → 108.7K. The hinge zone is 96–95K; lose it cleanly and $83–78K → $75–73K opens up. Manage via staged profits and a rising trailing stop so the trade can breathe on the way to $73K objective.
Short
by JavierXBT
Options Blueprint Series [Advanced]: Gap Fill Time Spread Play1. The Market Context — Yen’s Weekend Gap and Mean Reversion Setup The Japanese Yen futures (6J) reopened after the weekend with an aggressive downside gap, immediately catching the eye of volatility traders. Gaps of this nature are often emotional reactions to global macro news or overnight FX shifts — yet, when structural levels like the Bollinger Band lower boundary are involved, traders begin to anticipate a mean reversion rather than continued momentum. This is exactly what we see on 6J: Price plunged into the lower Bollinger Band, finding temporary balance near 0.0067+, while the middle band — representing the 20-period mean — sits around 0.0068+. The gap above remains open, and that area coincides with the Bollinger mean, creating a convergence between technical equilibrium and market memory. Historically, the Yen tends to exhibit mean reversion behavior after outsized weekend gaps, as liquidity normalizes. That statistical tendency does not guarantee results, but it provides the foundation for a non-directional strategy applied with a slight directional bias — exactly where options on futures can shine. 2. Strategy Rationale — A Non-Directional Tool Used Directionally Instead of a pure directional play (like buying calls), we opt for a Horizontal Call Spread — also known as a Calendar Spread or Time Spread — positioned around the 0.00680 strike. This structure allows us to express a view on time and volatility, rather than raw price movement. Objective: capture a modest recovery or stabilization near 0.0068 Approach: profit from time decay and implied volatility behavior as the front option (short leg) loses value faster than the back month (long leg) Outcome: defined risk, limited exposure to violent swings, and a smoother equity curve In essence, we’re using a non-directional strategy (time-based) in a slightly directional context (mean reversion target) — a powerful way to let the clock, not the market, do most of the work. 3. Constructing the 6J Horizontal Call Spread Let’s break it down with specific contracts: Buy Nov 7 Call (0.00680 strike) Sell Oct 24 Call (0.00680 strike) This combination forms a calendar spread, where both options share the same strike but different expirations. The trade is initiated for a net debit, meaning we pay a small premium upfront for the position. Mechanics As time passes, the shorter-dated Oct 24 call decays faster. If price drifts toward the 0.0068 area by the front expiry, the short leg expires near-the-money (or worthless), while the back-month call retains time value. The spread expands — producing the ideal outcome. The position benefits from stabilization, controlled volatility, and time decay alignment — instead of needing a directional surge. Greeks behave in a nuanced way: Theta: positive near the target zone Vega: long volatility — the position gains if implied volatility rises in the back month Delta: small positive exposure (mild bullish tilt) That’s the “slightly directional” essence of this setup — time-sensitive, but gently leaning toward a gap-fill move. 4. Chart Perspective — The Technical Catalyst The Bollinger Bands® tell the story clearly. Lower band: 0.00672 → recent test zone Mean (20-period average): 0.00681 → target Upper band: 0.00690 → secondary resistance The weekend gap remains unfilled, overlapping perfectly with the Bollinger mean. Should price gravitate back toward equilibrium, the spread reaches its best reward zone as Oct 24 time decay accelerates. 5. Risk Management — Structuring Control, Not Hope Every options trade begins with a cost — the net debit — which defines maximum risk. This makes the horizontal spread particularly appealing in uncertain environments. Here’s the structured approach: Entry zone: 0.0067+ area or below the lower Bollinger Band Target zone: 0.0068+ (Bollinger mean & partial gap fill) Stop: below 0.0066575 (recent intraday swing), or no stop at all since the options strategy provides a limited risk natively. That defines a maximum reward-to-risk ratio of roughly 3:1 when measured against time decay and expected mean reversion distance. It’s also crucial to track macro catalysts. The Yen can react sharply to U.S. yields or Bank of Japan policy headlines. Avoid holding this position through major FX events if volatility spikes uncontrollably — horizontal spreads work best in stable-to-moderate volatility environments. Lastly, avoid scaling without liquidity awareness. 6J options are institutionally liquid, but ensure bid–ask stability during execution. 6. CME Context — Contract Specs Understanding contract size and margin requirements is essential before structuring any options-on-futures strategy. Contract size: 12,500,000 Japanese Yen Minimum tick: 0.0000005 USD per JPY Tick value: $6.25 per contract Trading hours: Nearly 24-hour access Sunday–Friday As of recent CME data, the initial margin for the standard 6J futures contract is around $2,800, though this varies with volatility. Traders using options on futures generally post the premium paid as margin (for debit spreads), which in this case is $237.5 (0.000019/0.0000005 x $6.25). 7. Risk, Reward & Realistic Expectations The goal here is not to “predict” a direction — it’s to position intelligently around time. A well-constructed calendar spread lets traders participate in short-term stabilization moves with predefined exposure. If 6J consolidates and slowly lifts toward 0.0068: The short Oct call decays, The long Nov retains premium, The spread widens — success. If the Yen collapses further or volatility implodes across the curve, losses remain contained to the initial debit — no margin calls, no open-ended risk. For advanced traders, layering such spreads across correlated expirations can create calendar ladders, offering continuous time exposure while recycling theta — but that’s a topic for another Blueprint. 8. Key Takeaways Directional calendar spreads can be powerful after emotional gaps. 6J’s gap down plus Bollinger reversion potential creates an interesting time-based setup. Using non-directional tools directionally provides precision control over risk and exposure. Proper risk management defines the edge — not prediction accuracy. This approach emphasizes professional-grade thinking: controlling variables (time, volatility, strike) rather than chasing price movement. 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:6J1!Education
by traddictiv
AUDNZD at Historical Levels - Layer ShortsAUDNZD at Historical Levels - Layer Shorts Every once in a while, markets reach extreme levels that can be taken advantage of. This is one of those times. 📊 Technical Analysis: AUD/NZD D1 RSI is currently trading at its highest daily levels ever. We have only seen this once before, in August 2020. What followed then was a 630-pip downside move over the next 4 months. Could this happen again, and should you short it? Let’s discuss: 🌍 Fundamental Perspective: The move higher in AUD/NZD has been largely driven by NZD weakness. This stems from deteriorating economic data for the New Zealand economy. Currently, forward markets are pricing in a 0.5% rate cut at the October 8, 2025 RBNZ meeting. This is VERY dovish, and naturally, banks have been selling NZD heavily (as also reflected in EUR/NZD and NZD/CHF). However, pricing in a double rate cut at the upcoming RBNZ meeting may already be as dovish as it gets. Yes, another cut later this year is possible, but often currencies show their largest moves around key events like rate decisions. The RBA (Australia’s central bank) is also due to announce policy this coming week. So we have two fundamental catalysts in play. 💡 Potential Trade How can you take advantage of this setup? I would not short it outright. Instead, I would begin layering in small short positions (maximum of 0.2% per 1 ADR). If the market moves 1 ADR against you, you can add another very small position. This way, your average short entry remains close to current levels. Eventually, we are likely to see a mean-reversion move. This may take time, but history shows that at these RSI levels (and even lower), we have often seen significant pullbacks to the downside. Keep this pair on your radar—it may pay off nicely with patience. Best, Meikel
Short
by WSICapital
34
Gold Futures (GC) – “Top Is In” Schematic ReviewExecutive Snapshot 🧭 Primary stance: Bearish swing/top-in thesis (Wyckoff Distribution complete via UTAD). Bias strength: High, while price remains below 3,825–3,860 and fails to accept above. Game plan: Fade strength into supply; look for Phase D → E breakdown confirmation → target 3,534/3,509 → 3,209 → 3,123 then extended 2,970–2,795 if momentum accelerates. Multi-Framework Confluence: A) Wyckoff (your schematic) ♟️ Phases: A/B: BC/ST established range highs; AR/SOW tagged mid/low of range. C: UT → UTAD (new high on diminishing relative spread & mixed volume). D (now): Throwback rallies holding beneath UTAD; look for LPSY near 3,760–3,825; failure → Phase E markdown. Validation: Lower highs after the UTAD and repeated rejections of the supply shelf 3,760–3,825. Confirmation trigger: Break and accept below ICE/Creek = 3,534–3,509 (your pink band) → distribution confirmed. Macro Frame 🌐 Gold’s cyclical up-leg is extended; near-term macro supports a pause/reversion: Real yields/beta & USD shocks can catalyze a value-seeking dip. COMEX time-and-price run suggests heat above without equivalent build in value → mean-revert first, trend later. Invalidation & Risk: Hard invalidation (swing): Weekly close > 3,860 and acceptance above for 2–3 sessions (no swift rejection). Soft invalidation (tactical): Daily close back inside 3,760–3,825 after a breakdown → step aside, wait for next LPSY. Position/Risk Template: Initial risk: above 3,825 (or 3,860 for wider swing). Size: start ½–⅔ unit at first tag/reject; complete size on breakdown retest of 3,534–3,509. Trailing: swing stop > last LPSY high once 3,534 is lost. Momentum & Internals (Quick Read) ⚙️ RSI/ultimate RSI (your panels): persistent bearish divergence into UTAD zone. MACD: high, curling; ripe for signal cross on daily if price slips under 3,600s → 3,534. Squeeze/Momentum: elevated; release down would align with the distribution thesis. Execution Checklist ✅ Pre-break: Fade 3,760–3,825 on rejection candles/footprint absorption. Track delta & volume—no expansion = stronger distribution read. Break event: Daily close < 3,534 → reduce discretion, execute plan; seek retest → LPSY to add. Manage: Cover +30–50 handles into 3,209–3,180; roll runner. Data to watch: USD DXY spikes, GLD OI/put skew, dealer GEX flips around GLD 300. One-Page Risk Map 🗺️ Bearish while: < 3,825–3,860. Confirmation: < 3,534–3,509 (close/accept). Targets: 3,209 → 3,123 → 2,970 → 2,795 → 2,541. Stop/Invalid: > 3,860 w/ acceptance. Marked UTAD and supply stack 3,760–3,825 present a clean risk-defined top. Until the market accepts above 3,860, the probabilistic path favors Phase E markdown back toward 3,2xx value and possibly the 2,9xx–2,795 extension if momentum breaks loose.
COMEX:GC1!Short
by JavierXBT
ETH Tactical Long: Laddered Bounce from Absorption ZoneCOINBASE:ETHUSD has been in a steady 1H downtrend, but key support at $3,440 is showing signs of absorption. Volume is thinning on sell-offs, and we're seeing early reversion signals. This is my over the weekend analysis, not a final recommendation. Setup Type: Mean Reversion / Absorption Bounce - Trend: Still bearish on 1H (below 50/100/150 MAs), but slope compression hints at weakening momentum - RVI: Below 50, but curling up → early bounce bias - Volume: Sellers fading into $3,440 = buyer absorption zone 📊 1hr Quant Entry Levels & Laddered Plan Zone Type Action $3,440–3,435 Primary Entry Base long entry zone 🔄 $3,420–3,410 Add-on Entry Optional bid stack 🧱 $3,320 Soft Invalidation Trend continuation if lost 🚫 $3,150 Deep Value Wick Low-prob, high-juice trap 💎 🎯 Targets: T1: $3,515 → EMA cluster rejection zone T2: $3,600–3,638 → Range midpoint T3: $3,800 → Trend reversal if reclaimed ⚖️ Risk/Reward: 1:2.5+ (depends on fill ladder) We are starting entries here, but be cautious if we break through our support levels and you don't have the appetite for the deep value range it may be wiser to wait for a confirming trend or post.
COINBASE:ETHUSD
by crypticwaves
5
Gold Range-Bound and Ripe for Mean Reversion Plays?Gold has been locked in a sideways, range-bound regime for months, largely oscillating between the 3400 and 3160 levels. This lack of clear directional trend stems from conflicting fundamental forces: on one hand, sticky inflation and resilient U.S. data have bolstered the U.S. dollar and yields, weighing on gold. On the other, global growth concerns and geopolitical tensions continue to underpin demand for the metal as a safe haven. The push and pull of these opposing themes has created an environment of indecision and choppy price action. While long-term investors may find this frustrating, range traders and mean reversion strategies are thriving. With technical boundaries so well-defined, short-term oscillations within the range are offering repeated opportunities for disciplined entry and exit. Currently, XAUUSD is trading just under the 3296 level after a recent rejection from the 3350s. The bearish structure suggests a potential leg down toward the 3160–3180 support zone. However, absent any major economic surprises or geopolitical shocks, this could merely be another deviation from the mean rather than a true breakdown. Indicators like RSI and Stochastic Oscillator are already hinting at early signs of bullish divergence. If price holds above or near 3160, the setup for another mean-reversion trade back toward the mid-range (around 3296 or higher) could unfold. In the current environment, fading extremes rather than chasing trends remains a strategy of edge, as depicted by the 14 period RSI.
COMEX:GC1!
by Jacques1000
UCAD Bulls Look for 3rd Test After Sept. '24 Highs TouchOANDA:USDCAD Bulls were able to find support at the Sept. 2024 Highs after having traveled down a Falling Support for the past 2 months! Now we see Bulls pushing price higher creating a Rising Support with 2 tests having been successful and currently coming down for a 3rd test! Now Price has already broken a Previous Level of Structure which was a Past Resistance on June 4th. This level also lands right at the 34 EMA and based on the Bollinger Bands, this test will also be a Mean Reversion where Price after having traveled in one direction will revert back to the mean of the Bollinger Bands for Continuation, which in this case will be Bullish! After the 2nd Test of the Rising Support, we can see a Massive amount of Volume enters. Price also is trading Above the 50 on the RSI and is currently coming down to test that level. I am looking for Price to test the 1.3683 area and if Price shows support for a 3rd Test, this will be a great opportunity for Long Positions! Fundamentally, USD will be bombarded heavy news being CPI numbers with analysts forecasting a .2% Increase in Inflation! Also PPI, Unemployment Claims and Prelim UoM Consumer Sentiment & Inflation Expectations.
Long
by Novi_Fibonacci
EURGBP Analysis: Two Daily POIsHello traders! EURGBP is offering two trading scenarios on the daily timeframe. The first scenario suggests the pair may react bullishly from the next zone, setting up a bounce opportunity that could drive price higher toward the 0.84400 area. The second scenario anticipates a bounce toward the 0.83800 area, where a mean reversion setup may come into play (if buyers step in and price action confirms bullish intent near that support). Discretionary Trading: Where Experience Becomes the Edge Discretionary trading is all about making decisions based on what you see, what you feel, and what you've learned through experience. Unlike systematic strategies that rely on fixed rules or algorithms, discretionary traders use their judgment to read the market in real time. It's a skill that can't be rushed, because it's built on screen time, pattern recognition, and the ability to stay calm under pressure. There's no shortcut here. You need to see enough market conditions, wins, and losses to build that intuition—the kind that tells you when to pull the trigger or sit on your hands. Charts might look the same, but context changes everything, and that's something only experience can teach you. At the end of the day, discretionary trading is an art, refined over time, sharpened through mistakes, and driven by instinct. It's not for everyone, but for those who've put in the work, it can be a powerful way to trade.
Long
by davidavasalcai
54
USDCHF Analysis: Break & Retest or Mean Reversion?Hello traders! USDCHF is offering two trading scenarios on the daily timeframe. The first scenario suggests the pair may react bearishly from the resistance zone, setting up a break-and-retest opportunity that could drive price lower toward the 0.80001 area. The second scenario anticipates a bounce toward the 0.89100 region, where a mean reversion setup may come into play (if sellers step in and price action confirms bearish intent near that resistance). Discretionary Trading: Where Experience Becomes the Edge Discretionary trading is all about making decisions based on what you see, what you feel, and what you've learned through experience. Unlike systematic strategies that rely on fixed rules or algorithms, discretionary traders use their judgment to read the market in real time. It's a skill that can't be rushed, because it's built on screen time, pattern recognition, and the ability to stay calm under pressure. There's no shortcut here. You need to see enough market conditions, wins, and losses to build that intuition—the kind that tells you when to pull the trigger or sit on your hands. Charts might look the same, but context changes everything, and that's something only experience can teach you. At the end of the day, discretionary trading is an art, refined over time, sharpened through mistakes, and driven by instinct. It's not for everyone, but for those who've put in the work, it can be a powerful way to trade.
Short
by davidavasalcai
55
USDCAD Analysis: Three Bounce ScenariosHello traders! USDCAD is offering three trading scenarios on the daily timeframe. The first scenario suggests the pair may react bullishly from the currently approached zone, setting up a bounce opportunity that could drive price higher toward the 1.41600 area. The second scenario anticipates a bounce toward the 1.37586 region, where a mean reversion setup may come into play (if buyers step in and price action confirms bullish intent near that support). The third scenario anticipates a bounce toward the 1.34150 region, where a mean reversion setup may come into play (if buyers step in and price action confirms bullish intent near that support). Discretionary Trading: Where Experience Becomes the Edge Discretionary trading is all about making decisions based on what you see, what you feel, and what you've learned through experience. Unlike systematic strategies that rely on fixed rules or algorithms, discretionary traders use their judgment to read the market in real time. It's a skill that can't be rushed, because it's built on screen time, pattern recognition, and the ability to stay calm under pressure. There's no shortcut here. You need to see enough market conditions, wins, and losses to build that intuition—the kind that tells you when to pull the trigger or sit on your hands. Charts might look the same, but context changes everything, and that's something only experience can teach you. At the end of the day, discretionary trading is an art, refined over time, sharpened through mistakes, and driven by instinct. It's not for everyone, but for those who've put in the work, it can be a powerful way to trade.
Long
by davidavasalcai
37
The bear trap of TardFiMicroStrategy (MSTR): Locked & Loaded for a Breakout Trump just put David Sacks in charge of crypto policy—a massive win for the industry. This signals clear regulations, institutional confidence, and a green light for Bitcoin adoption. The crypto space is buzzing, with major players vying for a seat at the table. The recent trade war FUD triggered a classic bear trap, shaking out weak hands before the real move. Bitcoin briefly dipped but held strong, showing resilience. MSTR is tightening into a textbook bullish wedge—coiling up for what looks like an explosive breakout. With macro winds shifting in crypto’s favor, MSTR is primed to rip higher. The question isn’t if—it’s when. NASDAQ:MSTR BITSTAMP:BTCUSD
NASDAQ:MSTRLong
by choycekotori
1
Trade Review - BYONWhen SAGE showed up in screener there was a bullish continuation pattern on the daily timeframe and a potential exhaustion on the higher timeframe. The higher timeframe is in a downtrend, have made a measured move down (volatility projection) and is extended from the mean, thus we observe for potential reversion. The lower timeframe provided a bullish continuation setup, which allows us to enter with a more structured approach. The target was a measured move up, as this is a projection of the current volatility.
NYSE:BBBYLong
by StockLeave
Trade Review - SAGEWhen SAGE showed up in screener there was a bullish continuation pattern on the daily timeframe and a potential overextension on the higher timeframe downtrend. The higher timeframe is in a downtrend, have made a measured move down (volatility projection) and is extended from the mean, thus we observe for potential reversion. The lower timeframe provides a bullish continuation setup, which allows us to enter with a more structured approach. There was a failure test entry earlier, but since this was missed we look for a more clear range expansion as a confirmation. The target is a measured move up, as this is a projection of the current volatility. In this chart you can observe the actual expansion / breakout, since there was a noticeable contraction 2 bars prior the move could be entered quicker. The stop is located 1-2 ATR from the entry point, which allows for a 1.5 to 2 R trade.
SLong
by StockLeave
Technical Review - BTCThere are lots of confident predictions about where markets will head next. However, at its core, trading is about speculation and taking calculated risks—not about certainty. In this post, I'll share some technical trades in BTC from recent price action. While hindsight bias will naturally come into play, I did take several of these setups in real time. Higher Timeframe Context (1-Month) In terms of the higher timeframe context, there has been a clear uptrend with two distinct continuation setups (noticeable move up, followed by a contraction towards the mean price which then sets up for a continuation). At the current time there has been an attempt for a third move. These could have been entered on the range expansion from the contractive state, however when prices become extended towards the outer boundaries we better be cautious due to risk of mean reversion. At such extremes, its better to scale out or look for better opportunities. These locations are often reached as measured moves (assumed average price volatility is sustained, as seen on the right side of the chart). This does not meant the move is over, but rather where the risk of mean reversion is increased, price can deviate from average volatility all the time. This analysis is not a prediction of future behavior, but rather a review of recent events and how they could have been traded in technical terms. There is also a component of discretion, which occur in in real time, but is not relevant to asses at this point. Before we take a trade we want to consider: What is the current structure in play, is it a trend or a range? Where is price located within that structure, are we at or near extremes? In case above conditions are met, is there a setup or an entry trigger? This all boils down to the search for imbalance. Daily Timeframe: Range-Bound Trading Opportunities In terms of my trading timeframe, which is the daily, BTC has spent the past months within a distinct range. When such a structure is in play, the locations of interest are at or near the extremes (upper and lower boundaries) where imbalances tend to occur. Efficient trades at these extremes typically arise when there’s a failure test (also known as a failed breakout or 2B pattern). In these cases, price pushes outside the boundary, fails to follow through, and reverses back inside—often trapping participants and can fuel a move in the opposite direction. This dynamic tend to hold until there is an actual breakout, there is no bulletproof way to know what will happened, but most of the time it can be helpful to reference the higher timeframe. For example, in case breakout happen in opposite to the trend we can treat them as potential failures, while with trend (as in this case with BTC to the upside) we can either treat them as breakouts or at least not fade the move. There are however exceptions and nuances to these type of plays. On the chart, I’ve marked all failure tests where price moved back into the range and formed bullish continuation structures. These setups offered opportunities to enter and take profits. In my case, I typically targeted 1R trades on these setups, with some extending into full measured moves. In conclusion, its probably a decent idea to have a structured framework to locate imbalance, but it must be combined with discretion so we can adapt to different conditions. Its not about confident predictions, but rather probabilities and calculated risks. Don't become attached to positions, let the cumulative effect drive results.
BITSTAMP:BTCUSD
by StockLeave
Mean Reversion CME GAP at FOMC -> Pump until BOJ Rate DecissionHello guys! I will share a mean reversion idea on Bitcoin with you today. I expect Bitcoin to close the CME Gap, that got made at the beginning of the week. Currently we are very close to starting the recovery process. The CME Gap closing aligns very good with a mean reversion to the 50EMA on the 4hr timeframe. This could be an indication for a trend continuation of Bitcoin to the upside until friday when the Bank of Japan (BOJ) will decide their rate policy. We will look into the chart from a new perspective on friday so take this trade idea as a short term one. I mentioned in the chart that we have an unrecovered pink vector candle at the top. This could be an good area to aim for in the reversal process to take profit. With good execution this could be an good trade from 102k to 108k. Me personal, I don't think we will see a rate cut and if so only a small one. So nothing that will shake the markets to hard. I hope. Trade SAFE!
CME:BTC1!Long
by trading-journal-20neTrade
Measured Moves: A Guide to Finding TargetsMeasured Moves: A Guide to Finding Targets Visualizing the boundaries of price movement helps anticipate potential swing points. The concept of measured moves offers a structured framework to estimate future price behavior, based on the observation that each swing move often mirrors the size of the previous one, assuming average price volatility remains consistent. While not exact, this approach provides a practical method to approximate the extension of a swing move. Background Determining profit targets across various methods and timeframes can be challenging. To address this, I reviewed the tactics of experienced traders and market research, noting key similarities and differences. Some traders relied more on discretion, while others used technical targets or predetermined risk-to-reward ratios. Levels of support and resistance (S/R) and the Fibonacci tool frequently appeared, though their application varied by trader. Based on current evidence, levels appear most relevant when tied to the highest and lowest swing points within the current price structure, for example in a range-bound market. In contrast, sporadic or subtle levels from historical movements seem no more significant than random points. The Fibonacci tool can provide value since measurements are based on actual price range; however, the related values have limited evidence to support them. To explore these ideas, I conducted measurements on over a thousand continuation setups to identify inherent or consistent patterns in swing moves. It’s important to emphasize that tools and indicators should never be used blindly. Trading requires self-leadership and critical thinking. The application of ideas without understanding their context or validity undermines the decision-making process and leads to inconsistent results. This concept formed the foundation for my analysis, ensuring that methods were tested rather than taken at face value. Definitions Trending price movement advances in steps, either upward or downward. This includes a stronger move followed by a weaker corrective move, also known as a retracement. When the corrective move is done and prices seem to resume the prevailing trend, we can use the prior move to estimate targets; this is known as a projection. For example, if a stock moves up by 10%, pauses, and subsequently makes another move, we can utilize that value to estimate the potential outcome. Well thats the idea.. Data Through manual measurements across various timeframes, price structures, and stock categories, I have gathered data on retracements and projections. However, this information should not be considered precise due to market randomness and inherent volatility. In fact, deviations—such as a notable failure to reach a target or overextensions—can indicate a potential structural change. As this study was conducted with a manual approach, there is a high risk of selection bias, which raises concerns about the methodology's reliability. However, it allows for a more discretionary perspective, enabling observations and discretion that might be overlooked in a purely automated analysis. To simplify the findings, the presented values below represent a combination of all the data. Retracement Tool In the context of price movements within a trend, specifically continuation setups, retracements typically fall between 20% and 50% of the prior move. While retracements beyond 50% are less common, this does not necessarily invalidate the setup. From my observations, two distinct patterns emerge. First, a shallow retracement where the stock consolidates within a narrow range, typically pulling back no more than 10% to 20% before continuing its trend. Second, a deeper retracement, often around 50%, followed by a nested move higher before a continuation. For those referencing commonly mentioned values (though not validated), levels such as 23.6%, 38.2%, 44.7%, and 50% align with this range. Additionally, 18% frequently appears as a notable breakout point. However, I strongly advise against relying on precise numbers with conviction due to the natural volatility and randomness inherent in the market. Instead, a more reliable approach is to maintain a broad perspective—for example, recognizing that retracements in the 20% to 50% range are common before a continuation. This approach allows flexibility and helps account for the variability in price action. Projection Tool When there is a swing move either upward or downward, we can utilize the preceding one of the same type for estimation. This approach can be used exclusively since it is applicable for retracements, projections, and range-bound markets as long as there has been a similar price event in recent time. In terms of projection, the most common range is between 60% and 120% of the prior move, with 70% to 100% being more prevalent. It is uncommon for a stock to exceed 130% of the preceding move. Frequently mentioned values in this context include 61.8% and 78.6% as one area, although these values are frequently surpassed. The next two commonly mentioned values are 88.6% and 100%, which are the most frequent and can be used effectively on their own. These values represent a complete measured move, as they closely mimic the magnitude of the prior move with some buffer. The last value, 127%, is also notable, but exceeding this level is less common. Application The simplest application of this information is to input the range of 80% to 100% into the projection tool. Then, measure a similar prior move to estimate the subsequent one. This is known as the measured move. There are no strict rules to follow—it’s more of an art. The key is to measure the most similar move in recent times. If the levels appear unclear or overly complicated, they likely are. The process should remain simple and combined with a discretionary perspective. Interestingly, using parallel channels follows the same principle, as they measure the range per swing and project average volatility. This can provide an alternative yet similar way to estimate price movement based on historical swings. The advantage of this method is its universal and adaptable nature for setting estimates. However, it requires a prior swing move and is most effective in continuation setups. Challenges arise when applying it to the start of a new move, exhaustion points, or structural changes, as these can distort short-term price action. For instance, referencing a prior uptrend to project a downtrend is unlikely to be effective due to the opposing asymmetry in swing moves. In some cases, measured moves from earlier periods can be referenced if the current range is similar. Additionally, higher timeframes take precedence over lower ones when determining projections. This is nothing more than a tool and should be used with a discretionary perspective, as with all indicators and drawing tools. The true edge lies elsewhere. Example Use 1. Structure: Identify an established trend or range and measure a clear swing move. 2. Measured Move: Apply the measurement to the subsequent move by duplicating the line to the next point or using a trend-based Fibonacci extension tool set to 100% of the prior swing. The first two points define the swing move. The third point is placed at the deepest part of the subsequent pullback or at the start of the new move. 3. Interpretation: While this is a simple tool, its effective use and contextual application require experience and practice. Remember, this process relies on approximation and discretionary judgment.
NASDAQ:QQQEducation
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Trade Review - ALGS When stock showed up in screener showed a bullish continuation pattern on daily timeframe and a potential failure test / pullback on the higher timeframe downtrend, a bit near mean but was added to watchlist. Execution chart. Trade Overview • Structure: Bullish Continuation (D) • Position: Near Mean (D) • Entry Trigger: Breakout (D) Entry Details • Entry Price: 11.13 • Stop Price: 9.38 • Target Price: 12.96 • Expected Risk/Reward: 1.05R Exit Strategy • Exit Price: 14.47 / 1.91R
NASDAQ:ALGSLong
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Trade Review - LUNR When found in the screener, the stock showed a decent continuation pattern on the weekly chart. It was added to the watchlist to track a potential move, still were some distance to prior swing high. Execution Chart. Trade Overview • Structure: Bullish Continuation • Position: Near Mean • Entry Trigger: Range Expansion Entry Details • Entry Price: 9.38 • Stop Price: 8.30 • Target Price: 12.36 • Expected Risk/Reward: 2.65 R Exit Strategy • Exit Price: Closed 50% into 1R and rest at 12.18.
NASDAQ:LUNRLong
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