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Technical Analysis

How to approach a pair during its consolidation period!-When there is a consolidation happening on a pair, this would be an excellent opportunity to look for a breakout and a reversal of the support/resistance of the consolidation box. -For these types of setups we need be patient and see how price will move to either the upside or downside. -Once we see a breakout of the consolidation box then it is essential to wait for a retest and enter when we see a strong candle stick confirmation depending on which way price breakout the box. -Make sure to do loads of backtesting and forward testing this strategy to become more confident in the strategy. -Make sure to journal all the trades to see how well you perform and look back to see what you can improve on. If you need any more advice, support or mentoring then give me a message to see how best I can help you. Please make sure to follow, leave a like and a comment on your opinion/ideas on how to approach these types of strategy. In the near future, I will be hoping to post more educational posts to help my followers or anyone who wants to learn and get a better understanding on how to approach markets.
Education
by LDForex_
1
How Momentum In Markets Effect Price PredictabilityWithout algo-assisted buy/sell signal trading tools, you have a few difficult choices... You either trade far less often, based on longer term swing trades, with an emphasis on accumulation... or you develop the skill of a professional trader and keep an eye on the markets for short-term timeframe opportunities. Most people getting into the markets, especially the crypto market, trade with the skill of a long-term swing trader, but do so using short-term timeframes for entry/exits. And that's how they continue to get their dreams of financial success decapitated by the more sophisticated market makers. After learning candle stick formations... and after learning the basic indicators of MACD, Ichimoku Cloud, RSI... and support/resistance levels and trendlines... the next skill level is to appreciate momentum. No, not the 'momentum indicator' per se, but an appreciation for how momentum has to be clearly on your side at higher time-frames, before exit and entry positions can be taken seriously. Only yesterday we published a chart on the 2 day time frame for LINKUSD that was a SELL, where as another trader published a chart on a 12 hour time frame for LINKUSD that was a BUY. The market cratered soon after and his chart looks like one of those memes of despair. The very simple difference, we believe, is that we checked the higher time frames for overall market momentum, where as he apparently did not. It's a more common mistake than you might think. And an easy one to fix. Remember, long-time frames trump short-time frames. Why? Because of momentum. Imagine an oil tanker in the ocean (representing high time frame). It takes time to turn but it does so with power. Imagine a tiny little speed boat (representing short time frame). It can change direction in the blink of an eye, and it does so with light agility. Imagine a jet ski (representing a 15 minute chart). It may be fun and you get to see a lot of action, but there is zero reliability of where that thing is going from one minute to the next. Which of those 3 types of boat would you place your bets on for the direction and position it may be in, in the near future? Easier to predict the oil tanker direction and location right? Same with higher time frame charts. Once you establish your view of market momentum based on higher time frames, then you can drop down into lower time frames to get a better sense of the short-term direction, looking for various styles of trading opportunity, such as entry/exit for swing trading, or scalp opportunities with clear Take Profit targets. Happy trading. Team Sparkster for SparksterSignals
Education
by Sparkster
Trading Engulfing bars or Outside barsDefinition: An engulfing bar is a bar whose trading range totally encompasses or engulfs that of its predecessor such that it has a higher high and lower low. They develop after both down- and uptrends and represent exhaustion. They could be bullish engulfing bars which close higher than the open, or bearish engulfing bars which close lower than the open. A bullish engulfing bar forms at bottoms while a bearish engulfing bar forms at tops. Below is a gold chart illustrating a bullish engulfing bar. Notice how it has a higher high and lower low. Determining the significance of engulfing bars: The following factors are used to determine the significance of an engulfing bar. If at least 3 points are satisfied, I consider the setup a high probability one. 1. The wider the engulfing bar is relative to the preceding ones, the stronger the signal: This arises from that fact that the engulfing bar or outside bar is supposed to reflect a change in the balance between buyers and sellers. 2. The sharper the trend preceding the engulfing bar, the more significant the bar: This is because the engulfing bar represents change, therefore there must be something to change. Therefore, the stronger the preceding trend, the stronger the implied sentiment dominating that trend. 3. The more bars encompassed, the better the signal: In most situation, only one bar is encompassed. However, when it encompasses several bars, the signal that the balance has shifted from buyers to sellers at a top, or from sellers to buyers at a bottom, becomes that much stronger. The encompassed bars become a small price pattern in themselves. 4. The nearer the price closes to the extreme point of the bar that is away from the direction of the previous trend, the better: For example, if the previous trend was down and the price closes near the high, this is more favorable than if it closes near the low, and vice versa. This is because the engulfing bar is supposed to signal a reversal in the sentiment and a change in trend. The fact that the closing in this example develops near the high emphasizes the strength of the buyers, thereby adding to the validity of the signal. Note: If the close develops near the high in a rising trend or near the low in a falling trend, then the engulfing bar is not consistent with a change in psychology. In this case, it has become a consolidation, and not a reversal pattern. Notice the same gold chart that had a huge rally. See how it closed near its high. 5. The engulfing candle should be of the opposite color from the candle it engulfs. An important question to ask yourself when considering any bar pattern is: “What is the price action of this bar telling me about the underlying psychology?” Note: Not all engulfing patterns result in a reversal in trend. Some, for example, may be followed by a change in trend which can be seen after a pullback as price consolidates or has a correction. In this case, the engulfing pattern becomes a continuation pattern. Sometimes, after an engulfing bar is signaled, price can do a retracement before continuing in the direction indicated by the engulfing bar. This usually gives low risk and higher risk:reward ratio but this occasions are rare and if the retracement is more than 50%, then it is a case for concern. How to trade engulfing bars: Use pending orders. 1. Place a pending order a few pips above the high of the bullish engulfing bar and a few pips below the low of a bearish engulfing bar. 2. Stop Loss (SL) is safely a few pips beyond the opposite end of the engulfing bar. That means, if a bullish engulfing bar, a few pips below the low of the bar, and if bearish engulfing bar, a few pips above the high of the bar. This strategy gives the trade room to breathe. 3. The take profit (TP) should be on the next key level of support and resistance, or when a candlestick reversal pattern opposing the position is found. Example 1: Where to set entry parameters for a bullish engulfing bar. Example: Where to set entry parameters for a bearish engulfing bar.
Education
by Emekadavid
2
The reason why trading IS gambling (Why it's important)Hello everybody and welcome, First of all, thank you for the interest you show. The goal of this content, is to empower you with the tools you need to shift your psychology and level up your trading. ---------------------------------------------------------------------------------------------------------------------------------------------- Before we start, let me just say that I do not have any product to sell. My content is free and my only goal is to provide valuable information to help traders being more successful and consistent when trading. ------------------------------------------------------------------------------------------------------------------------------------------------ Some explanation regarding the introduction above : What I want to emphasize through that example, is that often times, when trading, you will face losing streaks . It is inevitable and we can also assume that it is recurrent . It is important to note what happens in the mind of a trader : doubt . Why ? Because of not accepting the fact that trading is gambling. I know ... It might be hard to "accept" because people often times think that trading is all about skills, but it is not. Let me explain : When you trade, whether you are long or short, you rely on nothing else than other people to make profits. The problem is, you do not know if these people have the same convictions and beliefs as you do regarding what the market is going to do in the future. So there's randomness involved in trading because every moment is unique, i.e. it involves different people. But, if you have an edge, meaning a "strategy" that puts the odds in your favor (whatever it might be, trading pullbacks, momentum trading, morning panics, gap strategies, etc...) : YOU ARE THE HOUSE . You win over a LONG period of time no matter the outcome on a trade-to-trade basis. Now, considering what we just said, should we care about what is going to happens to the trade I highlighted above ? Absolutely not. Why ? Because we have accepted the fact that the distribution between wins and losses is RANDOM in the market . Therefore, whatever the outcome is, we know, that we will be profitable in the long run. Why does that actually matter ? Well, it matters, because as I stated above, traders doubt when they encounter a losing streak. They question their edges, their skills, they start questioning their rules and strategies. What is likely to happen ? They blow their account. Fear, the biggest enemy in trading Apart from doubt, the trader that just has gone through 4,5,6,7 or more losses in a row, is afraid. He is afraid to put on that next trade, even though that trade could be a homerun and wipe all his losses. Fear paralyzes us, it reduces our focus and narrows our attention to what we fear the most. You probably recall the time when you put on a trade and you kept bagholding a loser, you were paralyzed, you just couldn't sell. There's a funny thing that happens everytime when you hold on to a loser, whenever you decide to sell, the market bounces back. This is because you are not alone on that boat and human psychology is universal. Once you have accepted that, you will be able to focus 100% on your actual trading errors, which are related to your knowledge and your skills. You will never doubt or have a moment of indecision if your edge appear on the chart. You will take the trade and don't care at all what happens next, because you know that trying to figure out if it's going to work or not has no sense. Thank you for taking the time to read me. I really appreciate that. Make sure you comment below if you have questions or just wanna add something. Thanks a lot, MyTradingJournal
BITSTAMP:BTCUSDEducation
by UnknownUnicorn6734025
4
An introduction to Bar or Candlestick patternsBar patterns consist of one, two or few bars. Their usefulness lies in the fact that they can trigger signals at a relatively early stage in the development of a new trend and usually offer good benchmarks for traders to place low-risk stops. Overall, when considering these patterns, one key factor in determining their significance is the size of the pattern. Note this please because it is very important. Among other characteristics, this helps one to distinguish a high probability from low probability pattern. But size is measured relative to the preceding bars. These patterns are quite impressive to study because although they act short-term in influencing or moving price, they are quite reliable in their ability to signal short-term trend reversals. Even when a trend is long-term, they can develop at the final points in the trend just when it wants to reverse. One fact you should note is that not all of these patterns are created equal. By evaluating the criteria for the validity of these patterns, you should be able to distinguish between high probability signals from low probability ones. Only take high probability valid signals when you see them on a chart. General principles of bar pattern interpretation: Some of the general principles for interpreting these patterns are outlined below: 1. For these formations to be effective there must be something for them to reverse. That means top reversals should be preceded by a meaningful rally, and bottom formations should be preceded by a sharp selloff. As a general rule, the stronger the preceding trend, the more powerful the effect of the bar price pattern. This chart, a EURGBP chart, shows an example. 2. The formations generally reflect an exhaustion point. In the case of an uptrend, such patterns develop when buyers have temporarily pushed prices up too far and need a rest. In the case of a downtrend, there is little if any supply because sellers have liquidated their positions. That is why these patterns are always associated with a reversal in the prevailing trend. In the EURGBP chart above, notice how the momentum of the sell-off has dropped significantly and each bar had low volatility before the pattern appeared. 3. Not all patterns are created equal. The presence of one of these patterns on a chart does not necessarily guarantee a quick, profitable price reversal. Some patterns show some of the characteristics in a very strong way while others in a mild way. Therefore, you need to apply common sense to their interpretation. Take only patterns that show a high probability which some have called 5-star patterns. The USDCHF chart below shows a bullish pin bar that failed because it was trading into a barrier, resistance, when it should be trading away from a barrier. 4. Occasionally, it is possible to observe some form of confirmation closely following or even during the development of these patterns. Some examples could be the pattern being a large pattern, the violation of a trendline, or its formation at a support and resistance zone. These increases the odds that the pattern is a valid signal as well as significant. Relationship to Japanese candlestick patterns: Although these patterns were discovered when bar charts were widely used and hence the name, you could use candlestick charts for their analysis since bar charts and candlesticks share the same data presentation which is the same open, high, low, and close (OHLC) of price within a specified time. They also share a relationship to traditional Japanese candlestick patterns that are widely used for centuries. Anyone familiar with Japanese candlestick patterns would readily see the similarities and be able to use these bar patterns quickly. If you want an overview of Japanese candlesticks patterns you can read the classic book by Steve Nison on the subject titled “Japanese candlestick charting techniques.” So, when you see bar in subsequent notes, you can replace it with candlestick. Note: Make sure these patterns form tops and bottoms, that is, swing highs and swing lows, before trading them.
Education
by Emekadavid
3
Understanding the Significance of a TrendlineWe want to trade trendlines, but not all trendlines have equal importance. Whether price has touched a trendline or violated it, we should act based on whether the trendline is significant or not. The following three factors are usually considered when evaluating the significance of a trendline: the length of the line, the number of times it has been touched, and the angle of ascent or descent. 1. The length of the line: Since a trendline measures a trend, the longer the line the longer the trend it is monitoring and the more significant the trendline. 2. Number of times the trendline has been touched or approached: The larger the number of touches or approach to a trendline, the more significant is the trendline. Note that because a trendline represents a dynamic area of support and resistance, each touch or approach increases the significance of that trendline because it better represents the underlying trend. Some traders tend to ignore a move close to the line, that is, an approach, but this is as significant as the actual touch. This USDZAR trendline has two factors working for it. One, it is long, extending from March 13 to April 2 and has a good number of touches. 3. Angle of ascent or descent: A very sharp trend is difficult to sustain and liable to be easily broken by a short sideways movement. Flatter trendlines or lines with smaller angles of ascent or descent then are better in reflecting price. Since steep trendlines are likely to be violated much easily, the violation of a particularly steep trend is not as significant as the violation of a more gradual one. That is why the penetration of a steep trendline usually represents a continuation rather than a reversal break. The following chart shows a steep USDTRY (dollar Turkish lira) trend that resulted in a continuation of the prevailing trend. Measuring implications: Trendlines have measuring implications when they are broken. The measurement is calculated as the maximum vertical distance between the price and the trendline. The distance is then projected in the direction of the new trend from the point of penetration. This is known as the measuring objective. It should be noted that measuring objectives in trendlines are sometimes misleading because when a trendline violation turns out to be a reversal, objectives are usually reached and exceeded. Therefore, you should take the measuring objective as more of a minimum expectation. The chart below shows how the measuring objective can be calculated for a GBPUSD uptrend, taken from the maximum vertical distance between the price and the trendline.
Education
by Emekadavid
Trendline breaks can signal reversals or consolidationEarlier, we noted that the completion of a price pattern can signify either a reversal in the previous trend, called a reversal pattern, or a resumption of the previous trend called a consolidation or continuation pattern. Similarly, a break or violation of a trendline will result in either a reversal of that trend or its continuation. First, USDZAR chart showing a violation of an upward trendline that changed the predominant trend to a downtrend. Next , a EURUSD chart that shows the resumption of the prevailing trend after the break of the trendline. Generally, whenever a trendline is broken or violated, the odds strongly favor a change in trend which change can be an actual reversal or a sideways trading range following the preceding trend. Take note of the angle of ascent or descent of a trendline when it is violated. Since sharp-angled trendlines are less sustainable, their violation has a tendency to be followed by a consolidation rather than a reversal. The EURUSD chart above illustrates this well. Also, a trendline violation may occur at the time or just before the successful completion of a reversal price pattern. Extended trendlines: Most people will assume that when a trendline is violated that the trend has changed and eventually forget about the line. Sometimes, price will move back to that line making it an extended trendline. When price moves back to a trendline that has been violated, this movement is called a throwback move. In a throwback move, a trendline that has been acting as support will reverse its role to resistance and for a downtrend, a downward trendline that has been acting as resistance will reverse its role to support from the throwback move.
Education
by Emekadavid
Trendlines and how to trade themTrendlines are one of the simplest tools in technical analysis and about one of the most effective for price patterns since they form the building block for pattern identification and interpretations. What is a trendline? – A trendline is a straight line connecting a series of ascending swing lows in a rising market or the top of descending series of swing highs in a falling market. The trendlines that are constructed by joining swing lows are called upward trendlines and those connecting swing highs are called downward trendlines. How to draw trendlines: A downward trendline is constructed by joining the first swing high in a downtrend with another swing high. When price breaks above the trendline, a trend change signal is given. The upward trendline is drawn by joining the first swing low in an uptrend to another swing low. When the trendline is broken, a trend reversal signal is given. Notice how the trend reversed when the trendline above was broken. We have said that in order to be a true trendline a line must connect two or more swing highs or lows, otherwise it is not significant. This is a fundamental point because a true trendline is a graphic way of representing the underlying trend. Trendlines can be primary trendlines or secondary trendlines. The primary trendline connects the first top or bottom with the next swing point. If price then moves sharply, this could create a second trend within the primary trendline. Then we connect the first two swing points again to form the secondary trendline. Trendlines can alert you to changing market conditions. How? By paying attention to the steepness of the trendline. If the trendline is getting flatter, it means the market is moving into a range condition. If the trendline is getting steeper, it means that the trend is getting stronger (or possibly going into a climax). Thus, you can be able to adjust your trading strategy accordingly. Also, note that trendlines are not always diagonal. There are also horizontal trendlines and these are seen in the case of some price patterns such as head-and-shoulders pattern or the upper and lower boundaries of rectangles. When these lines are penetrated, they usually warn of a change in the trend as would the violation of upward or downward trendlines.
Education
by Emekadavid
How to determine if a support or resistance will holdWhen price goes to a key level, that is, a support or resistance level, it will either hold and reverse price or it will break and be violated. There are no hard and fast rules for determining if a key level will hold and reverse price but I can give you some guidelines on what to look out for that would increase the odds that a support or resistance would hold. 1. The greater the speed and extent of the previous move, the more significant the support or resistance will be. In this case, watch out for big candles leading up to the key level. Consecutive big green candles in an uptrend or consecutive big red candles in a downtrend shows that the move has speed or momentum. Also, the candles have high volatility or the ranges are large. This big move towards the key level shows that the buyers or sellers in the previous move are overextended and they might be getting exhausted, and so would be lacking enthusiasm to continue their move at that key level. 2. Examine the amount of time elapsed. By looking at when the market touched that key level in the past and the general market conditions, it could tell you whether the market is likely to regard that key level as important. The longer the price has been away from that key level, the more significant it is that the level would hold as support or resistance because other traders who trade in higher time frames would be attracted to that level. 3. Look for strong price rejection. The presence of rejection candlesticks at a key level, like pin bars and also rejection patterns like two bar reversals, three bar reversals and engulfing bar patterns is a high probability sign that the level will hold. When you see strong price rejection at a key level, you should be confident that the level would hold as support or resistance. Some reversal strategies are based on this effect.
Education
by Emekadavid
8