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The BEST Trading IndicatorWith the ever increasing number of indicators, it makes sense that beginner traders’ wish to cut the steep learning curve by trying to find which indicator is the best and the most profitable to choose from. It’s overwhelming to start trading with so many jargon terms like, the MACD, RSI, Stochastics, ADX, Bollinger Bands and so on… Luckily, you won’t ever have to worry about any of these indicators. Here’s why… The quest to find the perfect trading indicator There is a big misconception when it comes to learning how to trade. Most new people start by going onto Google to search for the ‘best trading strategy’ or the ‘best trading indicator’ to speed up their success. Everybody wants to find that perfect trading indicator that will help them profit 80% to 100% of the time. Yet, at most, there are only 5% of traders’ out there who are able to make a consistent income with trading. I have two main reasons on this matter, which I’ve gathered since 2003. Reason 1: All indicators are history With local and international markets such as the stock market, Forex and even with crypto-currencies, there are billions of rands traded every day. With the ongoing economic, socio and political events taking place, every transaction from either a company, private individual or even a bot is entirely unique and UNEXPECTED. So which indicator is the best to choose from? Well before you go and do research on each indicator there is to trade with, let me spare you the time and tell you this… Every technical indicator and oscillator out there, is based on one thing. HISTORICAL DATA. When you add an indicator onto a chart, it can only show one of three things which are either the: Current momentum. Current trend direction or the. Demand and supply based on buying and selling volume. Not one indicator has any form of predictive qualities. Even with the dawn of Artificial Intelligence and Quantum Computing, there will most likely never be that one indicator that will be able to predict the future with accuracy and certainty every time. However, let’s say there is that one Quantum Computer that is able to take every news event, internal and external factor into account. The information assembled and collected, will still be based on past data. By now you may be feeling like your life has been a lie with all the marketing fluff out there with the 100% win-rate and get rich quick scams, but I assure you there is one legit way to succeed from trading. Reason 2: Each element is essential It doesn’t take just one trading strategy to bank a consistent income. It doesn’t take just a few rules to follow and, It doesn’t take a whole lot of money to fund your account to make it as a trader. No, in actual fact it takes four equally important elements namely: MARKETS: You need to find the best markets that are out there to trade and when to trade them. METHOD: You need to create or adopt a proven trading strategy that will fit your personality. (Price action with a few patterns is all that's needed to spot probability trades). MONEY: You need to have just a couple of money management rules, to follow every time you take a trade. MIND: You need to find a way to develop trading self-confidence as well as a strong mindset throughout your career. This is where so many different trading companies, publications and even education institutions seem to miss the mark. They either specialise ONLY in psychology, trading analysis or just on money management. Unfortunately, this is one hobby or lifestyle where being an expert in ONE field will not guarantee your success.
JSE:J200Education
by Timonrosso
2
2% Rule with CFDs versus Spread TradingThe rule is very easy to understand. Whether you trade using CFDs or Spread Betting, the rule is the same. Never risk more than 2% of your portfolio on any one trade. It’s one rule that you can use whether you have a R1,000 account or a R10,000,000 account. You see, trading is a forever business. This means, as a trader you should risk as little of your portfolio as possible in order to stay in the game longer. We’ll now go straight into how you to enter your CFDs and Spread Betting trades using the 2% rule. How to enter your CFD trade using the 2% Rule Here are the specifics for the trade CFD of the underlying Company: TIM Ltd CFDs Portfolio value: R100,000 2% Max risk per CFD trade: R2,000 Entry price: R400.00 Stop loss price: R380.00 To calculate the no. of CFDs you’ll buy per trade, you’ll need the: ~ Max risk per trade ~ Entry Price and ~ Stop loss price Next, you’ll need to follow two steps: Step #1: Calculate the risk in trade The ‘risk in trade’ is the price difference between where you enter and where your stop loss is: Risk in trade = (Entry price – Stop loss price) = (R400 – R380) = R20 Step #2: Calculate the no. of CFDs to buy No. of CFDs to buy = (2% Risk ÷ Risk in trade) = (R2,000 ÷ R20) = 100 CFDs In your platform you’ll type in 100 TIM CFDs to buy, place your entry price at R400 and your stop loss price at R380 to risk only 2% of your portfolio. Note: 1 CFD = 1 Share exposure 100 CFDs = 100 Shares exposure How to enter your Spread Trade using the 2% Rule With spread trading you trade on a ‘value per 1 point’ basis. You’ll choose either: R0.01, R0.10, R1 or any other amount per 1 cent movement in the underlying market. If you choose R0.10 value per 1 cent movement, for every 10 cents the market moves against or for you, you’ll lose or gain 100 cents (10 cents value per point X 10 cents movement). Here are the specifics for the spread trade. Contract of the underlying Company: TIM Ltd Portfolio value: R100,000 2% Max risk per Spread trade: 200,000c (R2,000) Entry price: 40,000c (R400.00) Stop loss price: 38,000c (R380.00) To calculate the ‘Value Per Point’ to enter your long (buy) trade, you’ll need the: ~ Max risk per trade ~ Entry Price ~ Stop loss price Next, you’ll need to follow two steps: Step #1: Calculate the risk in trade Risk in trade = (Entry price – Stop loss price) = (40,000c – R38,000c) = 2,000c (R20.00) Step #2: Value per 1 cent movement Value per 1 cent movement = (2% Risk ÷ Risk in trade) = (200,000c ÷ 2,000c) = 100c (R1.00) This means, with a ‘Value per point of 100c’ every 1 cent the TIM Ltd share price moves, you’ll make or lose 100 cents. Every 2,000c the market moves, you’ll make or lose 200,000c or R2,000 of your portfolio (100c Value per 1 cent movement X 2,000c movement). Note: 1 Cent per 1 cent movement = 1 Share exposure 100 Cents per 1 cent movement = 100 Shares exposure
JSE:J200Education
by Timonrosso
EXPLAINED: How Gearing Works with CFDs and Spread TradingNot sure what happened but the image didn't show. Here it is again... This is the most important concept you’ll need to understand to accelerate your account. During your trading experience, with gearing, you’ll learn how to multiply your profits. But you can also multiply your losses, if you don’t know what you’re doing. So listen up. What Gearing is in a nutshell… Gearing also known as leverage or margin trading, is the function that allows you to pay a small amount of money, in order to gain control and be exposed to a larger sum of money. There is a very simple calculation you’ll use calculate the gearing for both CFDs and Spread Trading. Exposure Initial margin In order to understand this formula, let’s use three gearing examples with shares versus CFDs and Spread Trading. We’ll break it up into three steps for CFDs and Spread Trading: 1. Calculate the entry market exposure 2. Calculate the initial margin (Deposit) 3. Calculate the gearing We’ll also exclude costs to help simplify the gearing concept better. EXAMPLE 1: Buying AAS Ltd shares Portfolio value: R100,000 Company: AAS Ltd Share price: R109.00 No. shares to buy: 100 If you buy one share at R109 per share, you’ll be exposed to R109 worth of one share. If you buy 100 shares at R109 per share, you’ll be exposed to R10,900 worth of shares (100 shares X R109 per share). We know that to be exposed to the full R10,900 worth of shares, we needed to pay an initial margin (deposit) of R10,900. If we plug in values into the gearing formula, we get. Gearing = (Exposure ÷ Initial Margin) = (R10,900 ÷ R10,900) = 1:1 This means, there is NO gearing or a gearing of 1 times, with the share example as, what we paid is exactly as what we are exposed to. Easy enough? Let’s move onto CFDs. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 CFD of the underlying Company: AAS Ltd CFD Share price: R109.00 Margin % per CFD: 10% (NOTE: Find out on your trading platform or ask your broker for the margin % per CFD) No. CFDs to buy: 100 Step #1: Calculate the entry exposure of the CFD Entry exposure = (Share price X No. CFDs) = (R109.00 X 100 CFDs) = R10,900 NOTE: 1 CFD per trade, you’ll be exposed to the value of one share. 100 CFDs per trade, you’ll be exposed to the value of 100 shares. Step #2: Calculate the initial margin of the CFD trade Initial margin = (Exposure X Margin % per CFD) = (R10,900 X 0.10) = R1,090 This means to buy 100 CFDs, you’ll need to pay an initial margin (deposit) of R1,090. Step #3: Calculate the gearing of the CFD trade Gearing = (Exposure ÷ Initial margin) = (R10,900 ÷ R1,090) = 10 times With a gearing of 10 times, this means two things… #1: For every one CFD you buy for R10.90 per CFD, you’ll be exposed to 10 times more or the value of one AAS Ltd share. #2: For every one cent the share price rises or falls, you’ll gain or lose 10 cents. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 Underlying Company: AAS Ltd Share price: 10,900c Value per point: 100c (R1.00) Margin % per Spread Trading contract: 7.50% (NOTE: Find out on your trading platform or ask your broker for the margin % per share contract) Step #1: Calculate the entry exposure of the spread trade Entry exposure = (Share price X Value per point) = (10,900c X 100c) = 1,090,000 (R10,900) Note: 1c value per point per spread trade– you’ll be exposed to one AAS share 100c value per point per spread trade – you’ll be exposed to 100 AAS shares Step #2: Calculate the initial margin of the spread trade Initial margin = (Exposure X Initial margin) = (1,090,000c X 0.075) = 81,750c (R817.50) This means, you’ll need to pay an initial margin (deposit) of R817.50 to be exposed to R10,900 worth of AAS Ltd shares. Step #3: Calculate the gearing of the spread trade Gearing = (Exposure ÷ Initial margin) = (1,090,000 ÷ 81,750c) = 13.33 times This means, by depositing R817.50 you’ll be exposed to 13.33 times more or R10,900 (R817.50 X 13.33 times) worth of AAS Ltd shares. You now know how gearing works with CFDs and Spread Trading, in the next lesson we’ll cover how to never risk more than 2% of your portfolio for each CFD and Spread Trade you take. Did you enjoy this article? Trade well, live free. Timon Rossolimos Feel free to follow our socials below for more.
JSE:J200Education
by Timonrosso
How Gearing Works with CFDs and Spread TradingThis is the most important concept you’ll need to understand to accelerate your account. During your trading experience, with gearing, you’ll learn how to multiply your profits. But you can also multiply your losses, if you don’t know what you’re doing. So listen up. What Gearing is in a nutshell… Gearing also known as leverage or margin trading, is the function that allows you to pay a small amount of money, in order to gain control and be exposed to a larger sum of money. There is a very simple calculation you’ll use calculate the gearing for both CFDs and Spread Trading. Exposure Initial margin In order to understand this formula, let’s use three gearing examples with shares versus CFDs and Spread Trading. We’ll break it up into three steps for CFDs and Spread Trading: 1. Calculate the entry market exposure 2. Calculate the initial margin (Deposit) 3. Calculate the gearing We’ll also exclude costs to help simplify the gearing concept better. EXAMPLE 1: Buying AAS Ltd shares Portfolio value: R100,000 Company: AAS Ltd Share price: R109.00 No. shares to buy: 100 If you buy one share at R109 per share, you’ll be exposed to R109 worth of one share. If you buy 100 shares at R109 per share, you’ll be exposed to R10,900 worth of shares (100 shares X R109 per share). We know that to be exposed to the full R10,900 worth of shares, we needed to pay an initial margin (deposit) of R10,900. If we plug in values into the gearing formula, we get. Gearing = (Exposure ÷ Initial Margin) = (R10,900 ÷ R10,900) = 1:1 This means, there is NO gearing or a gearing of 1 times, with the share example as, what we paid is exactly as what we are exposed to. Easy enough? Let’s move onto CFDs. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 CFD of the underlying Company: AAS Ltd CFD Share price: R109.00 Margin % per CFD: 10% (NOTE: Find out on your trading platform or ask your broker for the margin % per CFD) No. CFDs to buy: 100 Step #1: Calculate the entry exposure of the CFD Entry exposure = (Share price X No. CFDs) = (R109.00 X 100 CFDs) = R10,900 NOTE: 1 CFD per trade, you’ll be exposed to the value of one share. 100 CFDs per trade, you’ll be exposed to the value of 100 shares. Step #2: Calculate the initial margin of the CFD trade Initial margin = (Exposure X Margin % per CFD) = (R10,900 X 0.10) = R1,090 This means to buy 100 CFDs, you’ll need to pay an initial margin (deposit) of R1,090. Step #3: Calculate the gearing of the CFD trade Gearing = (Exposure ÷ Initial margin) = (R10,900 ÷ R1,090) = 10 times With a gearing of 10 times, this means two things… #1: For every one CFD you buy for R10.90 per CFD, you’ll be exposed to 10 times more or the value of one AAS Ltd share. #2: For every one cent the share price rises or falls, you’ll gain or lose 10 cents. EXAMPLE 2: Buying AAS Ltd CFDs Portfolio value: R100,000 Underlying Company: AAS Ltd Share price: 10,900c Value per point: 100c (R1.00) Margin % per Spread Trading contract: 7.50% (NOTE: Find out on your trading platform or ask your broker for the margin % per share contract) Step #1: Calculate the entry exposure of the spread trade Entry exposure = (Share price X Value per point) = (10,900c X 100c) = 1,090,000 (R10,900) Note: 1c value per point per spread trade– you’ll be exposed to one AAS share 100c value per point per spread trade – you’ll be exposed to 100 AAS shares Step #2: Calculate the initial margin of the spread trade Initial margin = (Exposure X Initial margin) = (1,090,000c X 0.075) = 81,750c (R817.50) This means, you’ll need to pay an initial margin (deposit) of R817.50 to be exposed to R10,900 worth of AAS Ltd shares. Step #3: Calculate the gearing of the spread trade Gearing = (Exposure ÷ Initial margin) = (1,090,000 ÷ 81,750c) = 13.33 times This means, by depositing R817.50 you’ll be exposed to 13.33 times more or R10,900 (R817.50 X 13.33 times) worth of AAS Ltd shares. You now know how gearing works with CFDs and Spread Trading, in the next lesson we’ll cover how to never risk more than 2% of your portfolio for each CFD and Spread Trade you take.
JSE:J200Education
by Timonrosso
EXPLAINED: CFDs versus Spread Trading 101What are CFDs and Spread Trading? Spread Trading (betting) and CFDs are financial instruments that allow us to do one thing. To place a bet on whether a market will go up or down in price – without owning the underlying asset. If we are correct, we stand a chance to make magnified profits and vice versa if wrong. Both CFDs and Spread Trading, allow us to buy or sell a huge variety of markets including: • Stocks • Currencies • Commodities • Crypto-currencies and • Indices. When you have chosen a market to trade, there are two types of CFD or Spread Trading positions you can take. You can buy (go long) a market at a lower price as you expect the price to go up where you’ll sell your position at a higher price for a profit. You can sell (go short) a market at a higher price as you expect the price to go down where you’ll buy your position at a lower price for a profit. EXPLAINED: CFDs for Dummies DEFINITION: A CFD is an unlisted over-the-counter financial derivative contract between two parties to exchange the price difference between the opening and closing price of the underlying asset. Let’s break that down into an easy-to-understand definition. EASIER DEFINITION: A CFD (Contract For Difference) is an: • Unlisted (You don’t trade through an exchange) • Over The Counter (Via a private dealer or market maker) • Financial derivative contract (Value from the underlying market) • Between two parties (The buyer and seller) to • Exchange the • Price difference (Of the opening and closing price) of the • Underlying asset (Instrument the CFD price is based on) EASIEST DEFINITION Essentially, you’ll enter into a CONTRACT at one price, close it at another price FOR a profit or a loss depending on the price DIFFERENCE (between your entry and exit). Moving onto Spread Trading. EXPLAINED: Spread Trading for Dummies DEFINITION: Spread Trading is a derivative method to place a trade with a chosen bet size per point on the movement of a market’s price. EASIER DEFINITION: Spread Trading is a: Derivative method (Exposed to an underlying asset) to Place a trade (Buy or sell) with a chosen Bet size per point on where you expect a Market price will Move (Up or down) In value EASIEST DEFINITION: Spread Betting allows you to place a BET size on where you expect a market to move in price. Each point the market moves against or for you, you’ll win or lose money based on their chosen TRADING bet size (a.k.a Risk per point or cent movement). The higher the bet size (value per point), the higher your risk and reward. The costs you WILL pay with Spread Trading and CFDs Both Spread Trading and CFDs are geared-based derivative financial instruments. As their values derive from an underlying asset, when you trade using Spread Trading or CFDs, you never actually own any of the assets. You’re just making a simple bet on whether you expect a market price to rise or fall in the future. If you decide to go with the broker or market maker who offers CFDs or Spread Trading, there are certain costs you’ll need to pay. Costs with Spread Trading With Spread Trading, you’ll only have one cost to pay – which are all included in – the spread. The spread is the price difference between the bid (buying price) and the offer (selling price). EXAMPLE: Let’s say you enter a trade and the bid and offer prices is 5,550c – 5,610c. The spread, in this case, is 60c (5,610c – 5,550c). This means your trade has to move 60c to cross the spread in order for you to be in the money-making territory. Also, if the trade goes against you, the spread will also add to your losses. Why the spread you ask? The spread is where the brokers (market makers’) make their money. Costs with CFDs Brokerage With CFDs, it can be different. Depending on who you choose to trade CFDs with, you may need to cover both the spread as well as the brokerage fees – when you trade. These brokerage fees can range from 0.2% – 0.60% for when you enter (leg in) and exit (leg out) a trade. NOTE: If the minimum brokerage per trade is R100, you’ll have to pay R100 to enter your trade. Daily Interest Finance Charge The other (negligible) cost, you’ll need to cover is the daily financing charges. If you buy (go long) a trade, you’ll have to pay this negligible charge (0.02% per day) to hold a trade overnight. However, if you sell (go short) a CFD trade, you’ll then receive this negligible amount (0.009%) to hold a short trade overnight. The costs you WON’T pay as a Spread Trader With spread trading (betting), you don’t own anything physical. When you take a spread bet, you’re simply making a financial bet on where you expect the price to move and nothing else. This means, there will be no costs to pay as you would with shares including: NO Daily Interest Finance charges NO Stamp Duty costs NO Capital Gains Tax NO Securities Transfer Tax NO Strate NO VAT NO Brokerage (all wrapped in the spread). The costs you WON’T pay as a CFD trader With CFDs, you’ll notice that there are similar costs with Spread Trading that you won’t have to pay including: NO Stamp Duty costs NO Securities Transfer Tax NO Settlement and clearing fees NO VAT NO Strate 24-Hour Dealings The great thing about Spread Betting or CFD trading is that, you can trade markets trade 24/5. I’m talking about currencies, commodities and indices. And with Crypto-currencies you can trade them 24 hours a day seven days a week. I have left out a very important difference between CFDs and Spread Trading… Gearing and how it works in real life…
JSE:J200Education
by Timonrosso
1
Trading 101 - What is a Derivative & why are they revolutionary?Derivatives trading! What I believe has been the absolute market revolution since shares. Derivatives might sound complicated and something you would hear from a professor or a know-it-all businessman – but they’re really not. I am no academic or even remotely one of the smartest guy’s in the world. And if I can grasp the idea and understanding of derivatives, I pretty much guarantee you will too. Also, if you want to take trading seriously and really make a living with it, you’ll need to understand derivatives trading sometime in your career. Let’s start at the very beginning. What is a derivative? – Collins English Dictionary – ‘A derivative is an investment that depends on the value of something else’ When it comes to trading, a derivative is a financial contract between two parties whose value is ‘derived’ from another (underlying) asset. Let’s break that down more simply: A derivative is a financial contract (CFDs, Spread Trading, Futures, Forwards, Options &Warrants) Between two parties (the buyer and seller) Whose value (the market’s price) Is derived (depends on or comes from) Another underlying asset (Share, index, commodity, currency, bond, interest-rate, crypto-currency etc…) You’ll find that the derivative’s market price mirrors that of the underlying asset’s price. Why trade using derivatives? The absolute beauty about trading derivatives is that they are a cheaper and a more profitable way to speculate on the future price movements of a market without buying the asset itself. You don’t get all the benefits with derivatives What’s probably important to note with derivatives, is this. When you buy a derivative’s contract, you’re not actually buying the physical asset. You’re simply making a bet on where you expect the price to go. EXAMPLE: When you buy actual shares of a company, means you’ll be able to attend AGMs (Annual General Meetings), Vote and claim dividends from a company. When you trade derivatives on the underlying share, means you’ll be exposed to the value of the shares and the price movements – and that’s it! As a trader, when you buy or sell a derivative, you’re not actually investing in the underlying asset but rather just making a bet (speculation) on where you believe the market’s price will head. This gives you the advantage and opportunity to: Buy low (go long) a derivative of the underlying asset and sell it at a higher price for a profit or Sell high (go short) a derivative of the underlying asset and buy it back at a lower price for a profit Remember when I said it was cheaper and more profitable? You can thank margin With derivatives, you’ll normally pay a fraction of the price of the total sum and still be exposed to the full value of the asset (share, index, currency etc…) The fraction of the price paid is called ‘margin’. EXAMPLE: To buy and own 10 Anglo shares at R390 per share will cost you R3,900 (R390 per share X 10 shares). To buy and be exposed to 10 Anglo shares using derivatives, and the margin of the contract is 10% per share, means you’ll only pay R390 (R390 per share X 10% margin per derivative X 10 shares). I’m sure you can see that with derivatives, you’ll be exposed to more and pay less which will gear up your potential profits or losses versus when trading shares. This is why we call derivatives, geared financial instruments. Enjoyed the article comment below and follow for more... Trade well, Live free Timon MATI Trader Also my socials are below thanks to Trading View.
JSE:J200Education
by Timonrosso
BACK TO THE FUTURE VS TRADINGI watched the Oscars recently and saw Michael J. Fox receive his humanitarian award. This brought me back to my childhood with the legendary Back to the Futures movie... Also this year we saw The Back to the Future stars Doc Brown (Christopher Lloyd) and Marty McFly (Michael J. Fox) reunited and shared the stage at the New York Comicon 2022. This is where they reminisced over their iconic roles in the beloved film trilogy. There were a bunch of mixed emotions but mostly the feeling of nostalgia and childhood memories… And so, I watched the trilogy and I found it was super interesting to watch a movie when at the time, they were trying to predict the future by making a number of predictions about 2015… They certainly got a few spot ons such as: • Smart watches • Hover boards • Virtual reality headsets (which we use Quest, PlayStation and even HTC) • Talking from TV to TV (Instead we use tablets and smart phones, but close enough) • Donald Trump like figure as president They also made a few wrong predictions like: • People wearing their pockets inside out • Dogs having drones walk them (but we do have drones though) • Mechanical car fuel attendants • Pizza hydrators But overall, there is a very big lesson we can learn from this… If scientists, businessmen, producers, directors and actors can’t accurately predict the future, nobody can. And trading the financial markets are similar to “Back to the Future” movies. It’s unpredictable and normally plays out differently to what we think… Thing about the future is… When you know what is going to happen and you act according, the future changes… Let’s say you know what’s going to happen at a certain point in the future. If you act according to what will happen in the future, then your action will change the future. So, if the future is so unpredictable, how can anyone ever make money from trading? Simple. You don’t need to know the future when you trade When you take a trade, you should never try to predict where the market will go. Instead, we should base the future predictions and decisions on one word. Probability. If the market is moving up, there is a higher chance it will continue to move up. (It’s going up for a reason). If the market consolidates in a sideways formation and then the price breaks down, there is a higher chance the price will continue to move down. We say, go with the trend rather than against it… Our job is not to predict every turn and bank a profit from every point move. Our job is to anticipate a change in the market, wait for confirmation and then act accordingly to follow the MORE likely scenario… You might not get it right 30% to 40% of the time, but you can get it right 50% - 70% of the time during certain market environments… That’s all I do when I do trades and analyses… I base probabilities on where a market is more likely to go at a certain time… If I’m wrong, I adjust – rather than deny… This was a short reminder of why you don’t need to predict the markets to make it as a trader. Did you enjoy this short piece? Let me know in the comments. It's a passion to help share the knowledge I've gained over the last 20 years as a trader. Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
2
FOREX 101 - 4 TYPES OF LOT SIZES.What is a lot? A ‘lot’ is a measure of a transaction amount. It’s the minimum number of units of the base currency that you can buy or sell. This gives traders more control over the exposure per trade. There are four main types of Lot Sizes. Lot size #1: Standard lot = 100,000 units of base currency Risk per pip =$10 per pip Lot size #2: Mini-lot = 10,000 units of base currency Risk per pip = $1 per pip Lot size #3: Micro-lot = 1,000 units of base currency Risk per pip = $0.10 per pip Lot size #4: Nano-lot = 100 units of base currency Risk per pip = $0.01 per pip Did you find this helpful? Let me know in the comments so I can do more Forex 101 tips. Ask any trading questions too :) Trade well, live free. Timon MATI Trader
Education
by Timonrosso
2
Is Trading Like Playing Poker? Is trading a form of gambling? With hesitance, I would say yes. However, I would rather call trading a form of strategic gambling as both require elements of risk, reward, strategy and decision making. In the next two weeks or so, I’m planning to publish a new online FREE book called “Poker Vs Trading”. Who knows, by the end of it all you may take up professional poker playing as well as trading… Let’s start with the similarities. SIMILARITY #1: We can choose when to play (Strategy) Traders and poker players don’t play every hand that is dealt to them. With poker, when a hand is dealt, we can choose to either play the hand, based on how strong it is, or we can choose to fold and wait for the next hand… With trading, we wait for a trading setup based on the criteria of our strategy i.e. MATI Trader System. You’ll then have the exact criteria and money management rules to follow in order to take a trade or wait for the next trade. SIMILARITY #2: Amateur poker players and traders tend to go the ‘tilt’ (Emotional roller-coaster) Emotions are a main driver which leads to traders losing their cash in their account or poker players losing their chips very quickly. With poker, you get players who let their emotions take over where they start betting high with an irrational frame of mind. These emotions lead them to losing their chips very quickly. This is when they enter the state of what is called ‘going the tilt’. With trading, amateur traders also tend to act on impulse and play on gut, instinct, fear and greed after they’ve undergone a losing streak or a winning streak. This often leads them to: ~ Taking a series of losses. ~ Losing huge portions of their portfolio. ~ Holding onto losing trades longer than they should. ~ Entering a mindset of revenge trading. SIMILARITY #3: We know when to hold ‘em and when to fold ‘em (Cut losses quick) We have the choice to reduce our losses when it comes to betting a hand or taking a trade. With poker, if the players start upping the stakes and you believe you have a weaker hand in the round, you can choose to ‘fold’ and lose only the cost of playing the ‘ante’. With trading, if you’ve taken a trade and it turns against you, you have a stop loss which will get you out at the amount of money you were willing to risk of your portfolio… SIMILARITY #4: We know the rake (Costs involved) There are always costs associated with each trade we take or each hand we play, which eats into our winnings. With poker, it’s the portion of the pot that is taken by the house i.e. the blinds and the antes. With trading, it’s the fees charged by your broker or market maker, in order to take your trade. These fees can be either the tax, spread and/or the brokerage. SIMILARITY #5: Aggressive trading and betting before the flop (High volatility) There will always be a time of strong market moves and high betting. With poker, you get times where players like to bet aggressively and blindly before the flop is revealed. It’s these times that lead to the amateur poker players losing their chips very quickly. With trading, you get economic data i.e. Non-Farm-Payrolls, black swan events and Interest Rate decisions when big investors and traders like to drive the market up or down before the news even comes out. NOTE: I ignore both forms of hype as it is can lead to a catastrophic situation. SIMILARITY #6: We bet and trade based on the unknown Every bet and trade we take and play is based on incomplete information of the future. With poker, we are dealt hands then bet on decisions based on not knowing what cards our opponents have and/or what is shown on the river. We then have the options to call, bet, raise or fold during the process.With trading, we take trades based on probability predictions without knowing where the price will end up at. This is due to new information which comes into the market including (demand, supply, news, economic indicators, micro and macro aspects). SIMILARITY #7: We lose A LOT! (Losses are inevitable) Taking small losses are part of the game with both poker and trading. With poker, it is important to wait patiently until you have a hand with a high probability of success. Some of the best poker players in the world, fold 90% of the starting hands, they receive. Some professional poker players can go through weeks and months without a win. With trading, we can lose over 40% to 50% of the time. In general, I expect around two losing quarters a year. I know that when there are better market conditions, it will make up for the small losses. SIMILARITY #8: You must learn to earn (Education is vital) You need to understand and gain as much knowledge as you can about poker and trading before you commit any money. With poker, you need to understand: • The rules of the game. • The risk per move. • The amount of money you should play per hand. Once you know these points, you’ll be able to develop some kind of game plan with each hand you play. With trading, you need to understand: • The MARKET (What, why, where are how?)NB* • The METHOD (What system to follow before taking a trade). • The MONEY (Risk management rules to follow with each trade) • The MIND (The frame of mind you must develop to succeed) SIMILARITY #9: Perseverance is the key ingredient to success You need to take the time and have the determination to become a successful trader and poker player. With poker, you’ll need to keep at it and apply strict money management rules with each hand played. With trading, you’ll need to know your trading personality, know which trading method best works you and understand your risk profile… I’ll leave you with a quote from Vince Lombardi (American football player, coach, and executive): “Practice does not make perfect. Only perfect practice makes perfect” Do you think trading is like poker? If you enjoyed this daily lesson follow fore more! Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
24
Q. How do you work out CFD Interest Swaps with an example?Q. How do you work out CFD Interest Swaps with an example? Answer: CFDs is an instrument where you pay a small amount of money to be exposed to the full value of the share. With CFDs, there are daily charges when you buy and daily income interest that you receive when you sell (go short). The charge is known as a ‘daily swap’ or ‘daily interest charge’. You can ask your broker what the annual interest swap rate is or you’ll most likely be able to find it on your platform… With my broker for example, the long swap (for when you buy) is -9.47% per year. And the short swap (for when you sell) is 2.71%. With your Shoprite trade, because you’re buying CFDs (which is a geared instrument), you’re essentially borrowing the money from the bank. This means, you have to pay interest on the borrowed funds (in order to be exposed to the full value). Those are the ‘swaps’ we’re talking about. Let’s say the Shoprite share is trading at R223.19 and the margin (initial deposit) to buy 1 CFD is 9.7% (R21.70). This means, when you buy 1 CFD for R21.70, you’ll be exposed to the full R223.19 worth of the share. If you buy 100 CFDs and pay R2,170 (100 CFDs X R21.70) you’ll be exposed to the full R22,319 worth of shares (100 shares X 223.19). And if you sold the 100 CFDs at R236.00, you would have been exposed to R23,600. On that R22,319 exposure, you’ll pay 9.47% (R2,113.60) interest (swap) per year. But luckily as traders, you don’t need to worry about paying the full amount, as we like to hold only for a short period of time. This means, each day you hold the CFD with exposure of R22,319 – you’ll only pay R5.49. (Exposure of your trade X 9.47%) ÷ 365 days. If the exposure never changed and you held onto your trade at the same share price you would pay R54.90 (after 10 days). However, we know that share prices move up and down each day. The higher the market goes up, the higher your exposure where you’ll pay slightly more. If the market price drops, you will pay slightly less. However, as traders we don’t tend to hold for more than a couple of days or weeks to curb the daily interest charges. If you have any other questions please ask in the comments :) Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
When you should feel THRILL as a traderThrill is a dangerous emotion to have as a trader. Especially, when you bank a winning trade, when you lock in profits during a favourable environment and when you count your profits at the end of the week. You are only as good as your last trade. Which means, you need to forget about the past and focus on the future. However, this doesn't mean you can't enjoy the journey during the trading day. I've been in the markets since 2003 and yes I do get thrill and enjoyment but NOT when I bank a winning trade. Here are 6 elements I get thrill from... 1. When analysing the markets and seeing what opportunities lie up. 2. When optimising strategies and seeing how to improve by finding new markets, removing old markets that don't work and possibly tweaking the system according to the current market environment. 3. Searching for trades always feels like somewhat a treasure hunt. When X marks the spot, we know to take action. 4. Monitoring results. This isn't monitoring daily or weekly results but rather looking at your journal over an extended period of time. Look at your drawdowns, look at where you are in terms of having your portfolio at ATH and seeing what market environment your system is in. 5 Adapting new markets and instruments...There are always new high liquid and low volatile markets that will suit your system. It's our jobs to look, analyse and adapt into the new. 6. Reading new developments. Are there better trading platforms, new indicators to help with your current system and maybe even new calculations to manage your drawdowns better? What about the instruments. I've gone from trading shares, warrants, ETFs, Futures, Spread Trading to CFDs. You never know when the next instrument will come... I hope this helps give some enlightenment on when you should feel thrill as a trader. Cut the ego, cut the instant gratification of today's performance and focus on the marathon. Follow for more daily trading lessons :) Trade well, live free... Timon
JSE:J200Education
by Timonrosso
REVEALED: 14 Ways to Spot a Trading ScamIf you’re new to trading, listen up. There are serpent companies and individuals out there, with only one goal. To make profits and money for themselves and NO one else. They do this by exploiting the newbie trader’s optimism, greed and fear by tricking them into what I call “Easy-Money-Traps”. As a savvy trader, you need to know how to spot and avoid these scams, before you fall victim to one of them. I’m going to kick you off with 15 of the most common trading scams you may find nowadays. SCAM #1: Flaunting money and posing in flashy cars WARNING: When you see an advert with a fake ‘guru’ posing in a Lamborghini holding stacks of cash, this manipulates people into thinking they’re rich. REALITY: Most times the cash notes are fake and worthless, which is prop money that is usually used in movies. It’s also been proven that 90% of these companies or individuals usually rent the car, borrow it from their rich friend or they take selfies in front of a stranger’s car. WHAT TO DO: Don’t believe everything you see online. Scam #2: They chase after your contact number WARNING: When a fake “guru” begs for your contact number and persuades you to buy a trading course or ticket to their seminar. The more aggressive they are trying to get your money, means that their primary income is mostly likely from what they’re trying to sell rather than the money they make when trading. REALITY: A true trader with a product or service to offer, will not pester you, sound desperate and bully you with tons of marketing and promises. Their main goals are to offer you value, help and develop a relationship over time. WHAT TO DO: Never share your contact number just to “Learn More”, “Book A Free Consultation” or “Check Out” information on what the product is about. You will have marketers call you on a weekly basis trying to suck you into buying their products. Scam #3: There is NO background information WARNING: When a scam artist has little to no background or legal information. Whether it’s a trader, broker, money manager or an educator – Never work with anyone who doesn’t have the following: • A website • A proven track record (at least 5 years) • Valuable content • An “About Us” page (To learn more about them) • Contact information • Customer reviews and testimonials (Ask people!) • A company registration number • Tax registration details• Financial regulation • A website that isn’t secured (When it starts with HTTP and not HTTPS) REALITY: Most times these non-regulated individuals will try their luck to get you to deposit money into their account and then will disappear. WHAT TO DO: Always do a full check-up on the person or company through Google, Facebook, websites and reviews and take notes with the bullet points above to see if the person or company is licensed, legit and regulated by independent organisations. Scam #4: You can’t withdraw your money WARNING: Your broker or money maker, doesn’t allow you or limits your ability to withdraw funds or profits. Whenever there are delays to withdraw your money, chances are you’re dealing with illegitimate trading companies. It should never take more than a few days for your money to be returned… WHAT TO DO: Don’t invest a single cent more into the company, until you have received your funds. Use your rights and speak to a lawyer about your options, in order to find a way to get your money back. NOTE: This does not apply to fixed-term securities such as, hedge funds, bonds, retirement funds with periodic redemption rights and other constraints. Scam #5: Failure to prove their BOGUS trading results WARNING: When you see someone bragging about their winning trades or money they made for the day and how they can help you – but not willing to prove their results. Watch out with Facebook and Instagram posts on traders posting fake trading results on Telegram, MyFxBook, WhatsApp and other groups. REALITY: If they are not willing to prove their results, chances are they have been Photoshopped and are only trading with a demo account. Also you’ll see them posting their gains and winnings only and never their losses. This is a big red-flag for me which screams out – SCAM! WHAT TO DO: Avoid any person who is not willing to share their broker statements or trading results which have been verified by a reputable and licensed firm. Scam #6: When they urge you to buy immediately WARNING: When someone tries one of their high-pressure sales techniques to get you to invest or buy a product or service on the spot. If ever you get one of those sleazy salesperson’s try to intimidate you, make you feel stupid for not making a decision – warnings bells should ring. Many con artists, will pressure you with limited time offers or tell you to buy on the phone or you’ll lose the deal. REALITY: A legit and ethical company will never create such urgency. They will in fact, want you to do your own research, consider your options and take your time to see if their product or service offered will benefit you or not. They will NEVER force you to buy anything on the spot. WHAT TO DO: Do your own research before you make a decision, and make sure you leave those high-pressure salesmen charlatans. Scam #7: You hear bad investment advice or too-good-to-be-true deals WARNING: When you hear bogus advice or too-good-to-be-true statements from an individual or company that is contrary to anything you’ve ever been told. As soon as you hear any of these messages, they are most likely scams: • “You can put your life savings into our brokerage firm.” • “Follow our +80% win rate trading system.” • “Do you want GUARANTEED returns?” • “Take out a loan and invest with us.” • “You’ll bank over 10% a month.” • “We don’t use stop losses.” • “100% accurate signals.” • “Get rich quickly.” • “Easy money.” WHAT TO DO: Don’t run away just yet. Do the full check up on the company and with their track record and then decide for yourself. Most times it’s just the marketing agency, rather than the actual trader, who’s trying to hype up the copy through their copywriting, Click Funnels, Value Ladders etc… Scam #8: They ask for your personal information WARNING: When someone asks you for unnecessary personal information to make a transaction. There are salesperson’s out there that will ask you for a bunch of unnecessary personal information including: • Bank card details • Facebook account details • Phone number • Income per month • Trading account password • Home address REALITY: If you’re looking to invest in a trading product or service or open an account with an institution, then no trusted and legit company will ever ask for the above details. WHAT TO DO: Never give any details to an individual or company that you don’t trust. You can also ask for their Terms & Conditions and Privacy Policy statements, to read each detail of their security and privacy matters. Scam #9: You get a call from a stranger WARNING: You may get an unexpected and unsolicited local or international phone call “cold call”, email, letter or personal visit from a stranger offering you a deal. REALITY: These are most times marketers or customer services trying to sell you something, in order to make a sale. WHAT TO DO: Kindly tell them to remove your number off their data-base and that you will do your own research and will call them back if you are interested in what they have to offer. Scam #9: Watch out for bad wording WARNING: When the company or individual is packed with bad wording. Bad wording includes: • Misspellings • Incorrect dates (Look at the footer of a website where it says ©) • Badly written content • Unprofessional content i.e. emoticons, !!!, ??? and swearing • Typos everywhere • URL website has spelling mistakes e.g. (Foerxtrading.com) WHAT TO DO: This should be your judgement… NOTE: I personally am sceptical whenever I see any of the above, even though I may make a typo or grammar mistake with my own content every now and then. Scam #10: The never-ending Facebook scams WARNING: When you see posts that offer you free signals, tools, get rich quick messages or advertising ploys that direct you to deposit money. You’ll see countless scams on a daily basis in Facebook groups and pages that will direct you away from them by sending messages such as: • “Inbox me” • “Ask how” • “Join our Telegram” • “100% accurate signals” • “Reply add” • “Do you know you can make XXX amount of money” • “Click this link” • “Ask for more info” • “Daily free signals” • “Daily 200 – 500 pips” • “Guaranteed results” • “No scam” WHAT TO DO: Do your thorough research and follow the above #3 step before making your decision. EXTRA TRADING SCAMS TO WATCH OUT FOR: #11: Trading software, robot or EA that guarantees a +70% win rate system. #12: Fake Facebook profile name, picture with dodgy friends. #13: Any product or service that promises “Zero-Risk”. #14: Any notion that promises you riches quickly and tells you to trust them or take their word for it. If you enjoyed this trading lesson of the day let me know in the comments and follow me for more daily tips. Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
1 Rule to STOP a portfolio CRASH I guess my number one rule to prevent a portfolio going bust is my 20% Rule… The rule is simple. If my portfolio ever drops below 20%, due to a losing streak, I halt trading… Notice the word halt instead of STOP. When a portfolio is down 20%, this is where you’ll halt your trading but you’ll KEEP following your trading strategy. So, you’ll simply demo trade your system and continue journaling your entries and exits… And only once the equity curve (your portfolio) goes back to all-time highs (on paper of course) then you can resume trading live… Do you have a trading question? Ask in the comments and I'll fully answer it in one of these posts on TradingView... Trade well, live free Timon MATI Trader
JSE:J200Education
by Timonrosso
Why you should LOVE your losses 5 REASONSWe are brought up in society to WIN, WIN, WIN! Throughout our upbringing we must either: Achieve top grades Drive the fanciest cars Wear and own the best brands In other words, we are raised to win with everything we do in life, until you get welcomed into the world of trading. Today I’m going to be the contrarian and share with you why you should love, embrace and own your losses in order to ensure you grow your portfolio on a consistent basis. Let’s start with: What happens after a winning streak? There will be a time during your trading career, where you’re going to endure a magical time where you end up taking sometimes 6, 8 to even 10 winning trades in a row. Your portfolio will be smiling at a new all-time-high and, you’ll feel invincible. You may think that you’ve cracked the holy-grail of trading where you can quit your job and just make a living with the markets. Research shows that individuals tend to invest and trade more actively when their most recent trading performance was successful. In fact, here are: 4 DANGEROUS Actions Traders Take During A Winning Streak: They take on more trades. They upper their trading positions. They start to go against their trading strategy. Their self-confidence and greed levels pick up. Winning streaks are normal and INEVITABLE, but eventually they’ll end and the losing streak will begin. No matter how good you believe you are as a trader or how perfect your trading execution skills are, there will be a time when the honey-moon phase for your trading strategy will be over and the markets will stop acting in your favour every time. The reason is that due to the conditions of supply and demand, the markets environment will eventually change. A market that was trending up or down, could enter into a 3-months sideways phase very easily. When this happens, you will enter into a drawdown (downside) phase. The problem is not the downside for the next three months. The problem is how you’ll treat your trading going forward, based on the DANGEROUS actions you would have taken during your winning streak. Let’s bring them back, to see what will happen to ‘invincible traders’ portfolios and minds with their unexpected losing streak… They start to take on more trades – THIS MEANS MORE LOSSES They upper their trading positions – THIS MEANS BIGGER LOSSES. They start to go against their trading strategy – THIS MEANS UNEXPECTED LOSSES. Their self-confidence and greed levels pick up – THIS MEANS DEPRESSION MAY KICK IN WHICH WILL LEAD TO QUITTING. Now going back to what we said in the beginning. When a winning streak ends, you should love, embrace and own your losses because of these five reasons. 5 Reasons To Love Your Trading Losses Reason #1: Losses are part of your trading success journey Once you have a winning and proven trading strategy, you’ll need to go back to your trading journal to remind you of the flow of winning streaks, losing streaks, average gain & loss per trade and other historical statistics. I’ve back, forward and real-tested the MATI Trader System strategy for over two decades and so I know exactly what kind of winning and losing streaks are to come and that I’ll end up profitable in the medium to long term. Reason #2: Losses help keep your emotions in check Knowing there are inevitable losses to come, this should curb the ego, greed and fear emotions. Reason #3: Losses should keep your risk low With a losing streak that is inevitable to enter your trading results, this alone should be a reason to keep your losses low. I personally never risk more than 2% or my portfolio in any one trade, no matter how many winning trades I take in a row. You can read more about the timeless money management rules in lesson three of the MATI Trader System programme. Reason #4: Losses stop the “Hot Hand Fallacy” Another reason that I love losses when trading is that it reminds me that the winning streak will come to an end. This keeps me humbled and grounded to know that there will be a time where I’ll need to give back to the market, when the trading environment is less conducive to the trading strategy. Reason #5: Losses don’t take me back to the drawing board After a winning streak ends, you’ll find new traders will then quit trading and look for another system to find that will work for them during the changing market environment. The thing is they don’t realise and accept that losses come with the trading territory and that one should never throw a profitable system away because a market enters into a drawdown phase. Let me know what you thought about today's trading tutorial. I'm just sharing information I've learnt over the last 20 years as a trader. Trade well, Live Free... Timon MATI Trader
JSE:J200Education
by Timonrosso
4
QA WHAT is a Margin Call? QA: What is a Margin Call? You don't want this. It's an automatic instruction to close out your trade/s when you have insufficient funds in your portfolio. This is a safety mechanism for both you and your broker. It's also where either your trading platform, your broker or an automatic message via email will tell you to either deposit more funds into your account, close your trades or will warn you that your positions will be automatically closed. *DO YOU HAVE ANY TRADING QUESTION? Comment below or LIKE this post if you found it helpful. I've been trading for the last 20 years and it's my hobby to help provide analyses and help traders get on the right foot. I'm happy to have a platform like TradingView to do it :) Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
Why you should never HOLD a boring trade - Rule I followGet in and get out in the shortest time possible. This is the science of successful trading. But what happens when a trade turns out to be more like a non-performing investment? When you hold a long-term trade, there are a few issues that will follow including the: Opportunity cost You can find other higher probability trades, instead of having your money tied up aimlessly in a sluggish market. Unnecessary impatience You’ll eventually feel rather anxious and frustrated holding onto a long-term trade, when you are better off trading in a market that is moving. The fake-out With an ongoing trade, the breakout pattern may fizzle out into a low probability fake-out trade (a trade that turns against you). I created a rule to avoid this situation from ever occurring again. I call it a time stop loss... After 7 weeks of holding a trade, exit the trade and look for a better opportunity. Worst case you take a smaller loss than you thought. Best case you take a smaller profit than you expected. But you'll stop holding trades that aren't performing and stop paying daily costs with trading.... Sound good? Trade well, live free. Timon MATI Trader
JSE:J200Education
by Timonrosso
2
5 Laws of Trading Success - EXPLAINED E=MC² Everything you need to know about the Universe, can be condensed into this tiny equation. What if there was a formula that unlocked the laws of trading the markets? I believe, there is… I call them the 5 Laws To Trading Success… 1. Markets You’ll need to be able to find and trade the best markets, at anytime and anywhere in the world with CFDs or through Spread Trading. 2. Method You’ll need to create and adopt proven, mechanical and consistently profitable trading strategies with a few entry and exit rules. 3. Money You’ll need to learn how to use essential money management rules in order to boost your winners, cut your losses and never blow your trading account. 4. Mind You’ll need to be able to improve your self-confidence and develop a successful trading mindset, in order to trade effortlessly with little worry and with less stress. 5. Miscellaneous You’ll need to adopt extra tips and tricks in order to boost your win rate, cut your trading holding time and preserve your portfolio. Once you incorporate all five equally important elements – around your personality, lifestyle and risk appetite – you’ll be able to create a timeless and profitable trading plan for the rest of your trading career. Trade well live free. MATI Trader
JSE:J200Education
by Timonrosso
1
BASIC MONEY MANAGEMENT - LOT SIZE VS REVERSAL AND ACCOUNT SIZEWe see too many new traders trade with random lot sizes with no understanding on the impact it has on account sizes, which result in not only losses but BLOWN accounts. This post is by no means a risk or money management strategy but more so just basics on the movement of reversals and how the lot sizes impact the value of your account during this reversal. Trading with the right lot sizes allows a trader to manage their account/money when the trade goes against them. The right size allows a trader to move a range without blowing their account and without seeing their account reverse to the point of no equity. This type of trading gives traders anxiety and in return this anxiety impacts trading psychology. This then has a ripple effect and impacts your trading decisions and analysis. The example we show on the chart is an entry of SELL that reverses by 380 PIPs. This movement happened in literally 2 candles (1hour candles) , so in two hours the price from entry reversed by 380 pips. This example then shows what this equates to in monetary value dependent on lot sizes. The example shows that anyone with a £500 account trading this movement with a lot size of 0.20 would have blown their account. Lot size usage should be based on the size of your account for example; £500 size account - we will only use 0.01 size lot sizes with maximum deployed total no more than 0.05. This will allow an account to survive volatile movements. Also using stop losses ontop of this setup further strengthens the risk management. £1000 size account - we will use 0.02 lot sizes with maximum deployed total no more then 0.10 any given time. £2000 size account - we will use 0.03 lot sizes with maximum deployed total no more then 0.30 any given time. £5000 size account - we will use 0.06 sizes with maximum deployed total no more then 0.50 any given time. Basically 0.10 for every £!000, as the total deployed usage allows us enough flexibility of movement on the chart and then using stop losses ontop of this, gives us further control of our money management. We hope this quick basic insight helps some of the newbies better manage their lot size usage. Please like, comment and follow us to support our work, we really appreciate it! GoldView
OANDA:XAUUSDEducation
by Goldviewfx
16
How to draw Support and Resistance for GoldAs promised alongside our analysis and reports we will also be posting basic educational posts to help newcomers. Today we show how to draw support and resistance lines the GoldView way. There are so many ways to draw and establish support and resistance lines. Typically this is an area where price stabilizes and fails tp break. Visually this can be represented by drawing a line to identify those areas. This can be drawn and identified in different ways. The 3 ways we draw support and resistance are as follows; Firstly we identify where price is stabilized, this is likely to show a collection of candles side by side or by a candle or wick touch to a price and then a big retracement. 1 - We draw a line on the top or bottom of the candle body close of an area price fails to break. Typically the highest or lowest wick from the collection of candles. 2 - We draw a line on the top or bottom of the candle body close of an area price fails to break. Typically the highest candle from collection of candles. 3 - We identify the turning point of our moving average line (EMA5 IN OUR CASE). We then draw a line on the top or bottom of this turn. Please support us with your likes, comments and do follow us for upto date analysis on the gold market. Goldview
OANDA:XAUUSDEducation
by Goldviewfx
13
ma5 breakout trading setup - Earlier last week we posted some basic MA5 setup action and how effective it is in gold setups. Today we show you how a simple trading setup that you can use to draw strong levels and how to trade with them. Support and resistance can be drawn in many ways and often traders find what works for them and use that method. This is a method we use to create strong levels of support and resistance lines that get respected well in trading gold. We draw a line where the MA5 average creates a turn angle. We then wait to see how this level is challenged and broken. When the ma5 average line breaks this level, we wait for a 1H candle to close after, as confirmation of the challenge being broken. We can then place an entry on the next candle opening or from a reversal and target a capture of 200 pips or some of our experienced traders will target exit at the next level. If this is over 1000 pips then we use strong money management techniques to baby sit the trade. As the weeks go by we will start to build on these trading setups. Please support my team here to provide more knowledge on this platform. We have a strong reputation in the trading world but new to sharing on this platform. support us with follows and likes so we can build on sharing our setups with you.
OANDA:XAUUSDEducation
by Goldviewfx
3
Learn how to use the head and shoulder pattern in TradingViewIntroduction of Head and Shoulders Pattern Technical analysis is a necessary thing to select the positions of perfect entry and exit. For that, There are many patterns available for trading, the head and shoulders pattern is one of them. This article is all about the head and shoulders pattern. In simple words, this pattern includes three triangles. The first triangle is on the left side, and the second one is on the right side, the last one is in between these two. This, the last triangle is the highest in the height, which is called the head, the other two are called the shoulders. What’s Head and Shoulders? There will be three vertices or bottom points in a certain price area, but the second apex or bottom point is higher or lower than the other two vertices or bottom points. This type is called the head and shoulders type. One with top and two shoulders is head and shoulder top; one with two shoulders is head and shoulder bottom type. However, sometimes there may be more than three vertices or bottoms. If there are one or two heads (or bottoms), two left and right shoulders, it is called a compound head and shoulder top (or compound head and shoulder bottom). The W bottom pattern is an important pattern in morphology, and its trend looks like the English letter "W". The W bottom pattern is a mid-term bottom pattern. It usually occurs at the end of a swing downtrend, and generally does not appear in the middle of a market trend. A mid-term short market must correspond to a mid-term bottom, that is, a W The brewing time of the bottom has its minimum period rule, so the shaping period of the bottom W is a necessary condition for judging the authenticity of the shape. The components of the bottom W have the following two conditions: There must be at least a relatively long distance between the first low point and the second low point of the bottom of W. Sometimes there will be short-term double bottoms in the market. This cannot be regarded as a bottom of W, but only a small market. Rebound at the end, and it is often a trap. The transactions at the first low point are relatively active, while the transactions at the second low point are extremely dull. Moreover, the appearance of the second low point is usually slightly arc-shaped. Therefore, the W bottom pattern has the characteristics of a left-pointed right circle. The formation of the bottom W pattern is due to the fact that after the long-term price decline, some investors who are optimistic about the market outlook believe that the price is already very low and has investment value, and the anticipatory buying is active, and the price will naturally rise, but this will affect the large investment institutions to absorb low-cost chips. Therefore, under the pressure of large investment institutions, the price has returned to the first low point, forming support. The fall this time hurt the enthusiasm of investors, and the shape was arc-shaped. There are two low points and two rebounds in the bottom W pattern. From the first high point, horizontal neckline pressure can be drawn. When the price breaks upward again, it must be accompanied by active transactions before the bottom W is officially established. If the upward breakthrough is unsuccessful, the exchange rate must continue to be adjusted horizontally. After the exchange rate breaks through the neckline, the neckline pressure becomes the neckline support, and the exchange rate will retreat at this time. The exchange rate temporarily retreats to the vicinity of the neckline. After the retreat ends, the exchange rate begins to rise in waves. Generally speaking, the second low point of the W bottom pattern is better than the first low point, which can create a bottom-breaking atmosphere and let retail investors out, thus forming a relatively concentrated bottom of chips to facilitate the pull of large investment institutions. Head and shoulders are the reversal patterns. That includes the concept of the bearish and bullish trend. In this pattern, there would be a one trend line, reacts as support, all three triangles are connected with that, called a neckline. If the trend crosses the neckline, there will be a change in the trend. By this, we can decide the trend (upward or downward). The next is the bearish head and shoulders (top reversal) and the bullish head and shoulders (bottom reversal). Bullish Head and Shoulders (Figure B): In this, the trend enters by falling. And makes the head and shoulders pattern by breaking the neckline. Then it will jump and make an uptrend by crossing the neckline in an incremental way. Bearish Head and Shoulders (Figure A): The trend initials in the uptrend further it crosses the neckline and makes the Head and Shoulders pattern and then after, by breaking the neckline, it will fall. It calls Top reversal, too. In-depth Description of Head and Shoulders Pattern: ============================================== The reversal pattern refers to the pattern formed by the reversal of the stock price trend, that is, the signal that the stock price turns from an uptrend to a downtrend, or from a downtrend to an uptrend. 1. The pattern analysis The head and shoulders trend can be divided into the following different parts: (i) The left shoulder part-lasts a period of ascending time, the trading volume is very large, in the past, people who bought at any time were profitable, so they started to get Profit-selling caused a short-term decline in the stock price, and the turnover was significantly reduced when it reached its peak. (ii) Top, After a short period of time, the stock price rose again strongly, and the transaction also increased. However, compared with the left shoulder part, the highest point of trading volume has significantly decreased. The stock price rose above the previous high and then fell again. The trading volume also decreased during this down period. (iii) The right shoulder part-the stock price fell to close to the last down low point and then gained support to rebound. However, the market investment sentiment was significantly weakened, and the turnover was significantly reduced compared with the left shoulder and the head, and the stock price could not reach the head high The point fell back, and the right shoulder part was formed. (iv) Breakthrough, Fall from the top of the right shoulder and break through the bottom neckline connected by the bottom of the left shoulder and the bottom of the head. The extent of the breakthrough of the neckline must exceed 3% of the market price. Simply put, the shape of the top of the head and shoulders presents three distinct peaks, one of which is in the middle is slightly higher than the other two peaks. As for trading volume, there was a cascading decline. 2. Market meaning The head and shoulders is a technical trend that cannot be ignored. From this pattern, we can observe the fierce competition between the poor and the weak. At the beginning, the optimistic forces continued to push the stock price up, the market investment sentiment was high, and a large number of transactions occurred. After a short-term downturn adjustment, those who had experienced the last uptrend of germanium bought during the adjustment period, and the stock price continued to rise. At the second high point, the market appears to be healthy and optimistic on the surface, but the transaction has been much lower than before, reflecting the weakening of the buyer's power. Those who did not have confidence in the prospects and missed the last high point and profit-taking, or those who bought at the falling low point for short-term speculation all sold, and the stock price fell again. The third rise provides an opportunity for those investors who later realized that they missed the opportunity of the last rise, but the stock price is unable to rise above the previous high, and when the trading volume drops further, it is almost certain that the past bullish optimism is almost certain The mood has been completely reversed. The future market will be weak and weak, and a sharp drop is about to come. The analysis of this pattern is: (i) This is a turning pattern of a long-term trend, which usually appears at the end of a bull market. (ii) When the trading volume of the most recent high is lower than the previous high, it implies the possibility of head and shoulders; when the stock price cannot rise to the previous high for the third time, trading will continue When it drops, experienced investors will seize the opportunity to sell. (iii) When the head-shoulders-top-neckline breaks, it is a real sell signal. Although the stock price has fallen by a considerable amount from the highest point, the decline has only just begun. Investors who have not shipped yet continue to sell. (iv) When the neckline breaks below, we can predict which level the stock price will fall to according to this type of measurement method of least drop. The method of this measurement is to draw a vertical line one by one from the highest point of the head to the neckline, and then start at the point where the right shoulder breaks through the neckline, and measure the same length downwards. The price thus measured is the stock price. The smallest drop. 3. Tips (i) Generally speaking, the height of the left shoulder and the right shoulder are roughly equal, and the right shoulder on the top of the head and shoulders is lower than the left shoulder. But if the height of the right shoulder is higher than the head, the pattern cannot be established. (ii) If its neckline slopes downward, it indicates that the market is very weak. (iii) In terms of trading volume, the left shoulder is the largest, followed by the head, and the right shoulder is the smallest. However, according to some statistics, about one-third of the head and shoulders have more turnover on the left shoulder than the head, one-third of the turnover is roughly equal, and the remaining one-third have more turnover on the head than the left shoulder. . (iv) When the neckline breaks, there is no need to increase the turnover. If the turnover increases sharply when the break, it shows that the selling power of the market is very strong, and the stock price will decline more rapidly as the turnover increases. (v) After breaking the neckline, there may be a temporary rebound (post-draw). This situation usually occurs when a break of low volume occurs. However, the temporary recovery should not exceed the neckline level. (vi) The head-and-shoulders top is a very lethal form, and its drop is usually greater than the smallest drop measured. (vii) If the stock price finally rebounds at the neckline level and is higher than the head, or if the stock price drops below the neckline and then rises above the neckline, this may be a failed head and shoulders and should not be trusted. Reversal pattern-head and shoulders bottom =+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+= 1. The shape analysis [ Figure B ] is the same as the shape of the head and shoulders, except that the whole shape is reversed, also known as "inverted head and shoulders". When the left shoulder is formed, the stock price drops and the trading volume increases, followed by a secondary increase with a small volume. Then the stock price fell again and fell below the lowest point of the last time, and the trading volume increased again with the decline, which was more than the trading volume during the rebound phase of the left shoulder-forming a head; when it rebounded from the lowest point of the head, the trading volume was May increase. The volume of the entire head is more than that of the left shoulder. When the stock price rebounded to the last rebound high, there was a third fall. At this time, the trading volume was obviously less than that of the left shoulder and head. When the stock price fell to the level of the left shoulder, the decline stabilized, forming the right shoulder. . Finally, the stock price formally instigated an upward trend, and accompanied by a large increase in transactions, when the neckline resistance broke through, the transaction increased significantly, and the whole pattern was established. 2. Market meaning The analytical significance of the head and shoulders bottom is no different from that of the head and shoulders top. It tells us that the past long-term trend has been reversed. Stock prices have fallen again and again, and the second low (head) is obviously lower than the previous one. The price was low, but it quickly turned around and bounced back. The next fall, the stock price fell to the last low level and has gained support and rebounded, reflecting the optimistic forces that are gradually changing the market’s past weakening situation. When the high resistance line (neckline) of the two rebounds breaks, it shows that the optimistic side has completely knocked down the weak side, and the buyer replaces the seller to completely control the entire market. 3. Tips (i) The shape of the top of the head and shoulders is similar to that of the bottom of the head and shoulders. The main difference lies in the volume. (ii) When the head-shoulders-bottom-neckline breaks, it is a real buy signal. Although the stock price has risen by a certain amount compared with the lowest point, the upward trend is only just beginning. Investors who still suggest buying should continue to chase. The method of measuring the least increase is to draw a vertical line from the lowest point of the head to intersect the neckline, and then start at the point where the right shoulder breaks through the neckline, and measure the same height upwards. The measured price is that the stock will rise. The smallest amplitude. In addition, when the neckline resistance breaks, there must be a surge in volume, otherwise it may be a wrong break. However, if the transaction gradually increases after the breakthrough, the pattern can also be confirmed. (iii) Generally speaking, the head and shoulders pattern is relatively flat, so it takes a longer time to complete. (iv) After breaking through the neckline, there may be a temporary fall back, but it should not fall below the line. If it falls below the neckline, or if the stock price falls back at the neckline level, the neckline resistance cannot be broken, and it falls below the head, this may be a failed head and shoulders pattern. (v) Head-and-shoulders bottom is one of the most predictive patterns. Once confirmed, the increase will mostly exceed the minimum increase. Reversal pattern-compound head and shoulders =+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+= 1. [ Figure A & B ] Shape analysis The compound head and shoulders type is the deformation trend of the head and shoulders (head and shoulders top or head and shoulders bottom), and its shape is very similar to the head and shoulders, except that the shoulder, head, or both appear more than once at the same time, roughly It can be divided into the following categories: (i) One-head and two-shoulder style: One head has two left and right shoulders of the same size, and the left and right shoulders are roughly balanced. More often is a pair of right shoulders. When the first right shoulder is formed, the stock price does not immediately fall below the neckline, but instead turns to rebound, but the rebound stops below the right shoulder height, and finally the stock price continues to follow the original The trend is down. (ii) One-head and multiple-shoulder style: The general head-and-shoulder style tends to be symmetrical, so when two left shoulders are formed, it is likely that one shoulder will also be formed. Except for the volume, the left and right half of the graph is almost identical. (iii) Long-headed and multi-shouldered pattern: During the formation of the head, the stock price has risen again and again, and it has risen to the same high level as last time before falling back down, forming two obvious heads. Trend. One thing must be noted: the volume of the second head tends to decrease compared to the first one. 2. Meaning market analysis significance complex head and shoulders patterns and common type of head and shoulders patterns as when appears at the bottom, it means that a longer-term rising market around the corner; if appear at the top, that the market will become more fall. In the initial stage of forming a compound head and shoulders pattern, the volume may be irregular, making the pattern difficult to identify, but after a while, it is easy to see that it is exactly the same as the head and shoulders pattern. Many people overestimate the expected rise (or fall) power of the compound head and shoulders pattern. In fact, the power of the compound head and shoulders pattern is often weaker than the ordinary head and shoulders pattern. When a mid-term trend appears, the compound head-and-shoulders pattern completes its minimum increase (or decline) and then no longer continues, while the increase (or decline) of the ordinary head-and-shoulders pattern is often the most measured big. 3. Key points (i) The minimum increase/decrease measurement method of the composite head and shoulders pattern is the same as that of the ordinary head and shoulders pattern. (ii) It is difficult to draw the neckline of the composite head-and-shoulders pattern, because each shoulder and the falling part of the head (the bottom of the composite head and shoulders is the rising part), not all fall on the same line. Therefore, the two most obvious short-term lows (compound head and shoulders are short-term rebound highs) should be connected to form a neckline. In addition, it may be connected to the neckline at the level where the price has fallen (or rebounded) the most times. Reversal pattern-single-day (double-day) reversal =+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+=+ 1. Pattern analysis [ Figure B ] When a stock continues to rise for a period of time, the stock price is suddenly and unusually pushed up on a certain trading day, but it is immediately under strong selling pressure, and all the gains of the day are completely reduced. If you fall more and close at the lowest price of the day (or close to the lowest price of the day), this trading day is called the top one-day reversal. Also when it fell, the stock price suddenly fell sharply on a certain trading day, but it was immediately supported by strong buying. All the declines of the day may be increased, and the highest price of the day (or close to the highest price of the day) Price) closes, this is the bottom one-day reversal. The two-day reversal is a deformation of this pattern. In the process of rising, the stock price of the stock rose sharply on a certain trading day and closed at the highest price of the day. However, after the stock price opened at yesterday’s closing price on the next day, the price continued to fall throughout the day. It is the closing of the lowest price of the previous day, and the performance of this trend is called the top two-day counter. Also when it fell, the stock price suddenly fell sharply on a certain trading day, but the following trading day completely recovered the lost ground and closed at the highest price of the day, which is the bottom two-day reversal. 2. Market implications Let us take the bottom one-day reversal as an example to explain the cause of this phenomenon. During the downward phase, as the stock price continued to fall, more and more investors were unable to bear greater losses, so they stopped loss and sold. Their selling further pushed down the stock price, and the lower price made them more eager to sell, which caused the price to fall sharply that day. When they finished selling, the selling pressure suddenly disappeared. Other investors tried to buy because of the lure of new low prices and immediately made profits. Therefore, more investors joined the ranks of buying. The order has been completely digested, so the buying order quickly pushed up the stock price, bringing back all the prices that fell that day. The market meaning of the one-day reversal pattern has at least two points: (i) The market temporarily peaks (when the top one-day reversal occurs) or bottoms (when the bottom one-day reversal occurs). The top one-day reversal usually occurs in the late period of a consumable rise; the bottom one-day reversal occurs at the end of the panic selling. (ii) This is not a signal of a long-term trend reversal. It usually appears at the top of the consolidation pattern, although it may also appear at the peak (or bottom) of the long-term trend. 3. Key points revealed (i) On the day of the single-day reversal, the transaction volume suddenly increased, and the price fluctuation range was very large, both of which were significantly larger than usual. If the trading volume is not high or the price volatility throughout the day is not large, the pattern cannot be confirmed. (ii) The volatility of the stock price within one or two hours may be greater than the volatility of the usual three or four trading days. When the top one-day reversal, the stock price opened a lot higher than the previous trading day, but the situation quickly reversed, the price quickly moved in the opposite direction, and the closing price of the last day was almost nothing compared to the previous trading day Variety. The bottom one-day reversal situation is exactly the opposite. (iii) Generally, 15 minutes before the market closes, there is a sudden increase in trading and the price quickly moves in the opposite direction. (iv) The volatility of the two-day reversal of the transaction and price is also huge. The top two-day reversal completely falls back to the previous trading day's gain on the second trading day; while the bottom two-day reversal fully returns to the previous trading day's decline. IF YOU LIKE MY ARTICLES, PLEASE SHOW YOUR LOVE TOWARDS MY ARTICLES BY GIVING LIKES AND COMMENTS. The analysis and discussion provided are for your education and entertainment only. If you have any concerns or questions, DM me.
CME_MINI:ES1!Education
by forextidings