H4 OHLC Statistical Mapping Text Book Short SetupFor the OHLC Statistical Mapping when you are bearish you use -M as a entry point and target -Distribution and that's it... don't overcomplicate it.
X-indicator
Buybacks vs. Dark Pool RotationThis lesson is about understanding the dynamics behind corporate buybacks. Sell-Side Institutions, aka the Banks of Record, have their floor traders do the actual buying of shares on behalf of the corporation. However, the Dark Pools, meaning the Buy-Side Institutions, start selling as the buybacks are going on.
This training will help you enter a buyback sooner and exit with higher profits for swing trading. We'll study the NASDAQ:AAPL chart to identify buyback candlestick patterns and how to see when the Dark Pools are selling to lower inventory, which is called "rotation." You will also see how the TTAccum/Dist indicator works, and how I use this excellent, leading Hybrid Indicator to aid in my analysis.
My Most Used TradingView Hotkeys!Just wanted to highlight a few of my most-used TradingView hotkeys:
ALT + H: Horizontal line – Ideal for marking round numbers or mark tight support/resistance areas. For broader S&R zones, I often use the rectangle tool.
ALT + V: Vertical line – Rarely use it, it’s handy for highlighting specific dates below the chart.
ALT + T: Trendline – Provides quick access to one of the most essential tools for analyzing long-term stock movements.
[* ]ALT + I: Invert the chart – Probably the most interesting hotkey! If you find it challenging to take "SELL" setups or tend to prefer "BUY" ideas, flipping the chart can reveal a fresh perspective. If your bias remains unchanged after inverting, it may be a solid setup for you. This can help reduce psychological biases; sometimes, just viewing it from another angle makes all the difference.
ALT + S: Take a screenshot – An easy way to share your chart with friends or colleagues.
ALT + F: Fibonacci tool – I’m using it less often lately, but it’s still there when needed.
ALT + W: Add to watchlist – Quickly adds interesting charts to your watchlist.
ALT + A: Set an alert
SHIFT + CLICK: Measure tool – Instant access to measure distances or changes on the chart.
Hopefully, this helps save you a bit of time hunting for these tools. After all, time is money!
Regards,
Vaido
MA Trading Strategies for Experienced TradersMA Trading Strategies for Experienced Traders
Despite their simplicity, moving average (MA) trading strategies remain popular with experienced traders looking to refine their market analysis. This article delves into various MA types and four advanced MA strategies, including moving average ribbons, envelopes, and channels, providing actionable insights to potentially boost trading performance.
Moving Average Indicators: Advanced Types
This is a short overview of moving averages (MAs). If you already know this, please scroll down and learn advanced types of MAs and comprehensive trading strategies.
Moving averages are fundamental tools used by traders to smooth out price data and identify trends. By averaging the price over a specified period, MAs help traders filter out the noise from random price fluctuations, providing a clearer picture of the underlying market direction.
Traders use moving averages in various ways, such as determining trend direction, identifying potential support and resistance levels, and confirming other technical indicators. They can also help in spotting reversals and momentum changes. Below are the most notable moving averages that traders can use to construct a strategy.
To see how each works, head over to FXOpen’s free TickTrader trading platform to explore every tool described here and a world of more than 1,200 trading tools.
Types of Moving Averages
Simple Moving Average (SMA)
- Overview: The SMA calculates the average of a selected range of prices, typically closing prices, over a specific period.
- Usage: SMA trading is straightforward. The Simple Moving Average helps traders identify the direction of the trend by smoothing out short-term fluctuations.
Exponential Moving Average (EMA)
- Overview: The EMA gives more weight to recent prices, making it more responsive to new information.
- Usage: It reacts more quickly to price changes than the SMA, which can be beneficial in fast-moving markets.
Weighted Moving Average (WMA)
- Overview: The WMA assigns different weights to data points, with the most recent prices typically given more importance.
- Usage: Like the EMA, it reduces lag but in a slightly different manner by linearly increasing the weight of each successive data point.
Volume-Weighted Moving Average (VWMA)
- Overview: The VWMA takes volume into account, giving more weight to price points with higher trading volumes.
- Usage: Useful in identifying price moves that are supported by high trading volumes, which can indicate stronger trends.
Hull Moving Average (HMA)
- Overview: The HMA aims to improve smoothness and responsiveness to the latest data. It’s calculated using a combination of WMAs.
- Usage: Known for its responsiveness and reduced lag, making it a favourite for trend analysis.
Arnaud Legoux Moving Average (ALMA)
- Overview: The ALMA uses a Gaussian distribution to smooth data, reducing lag and improving the reliability of signals.
- Usage: It's designed to provide a balance between smoothness and responsiveness.
Volume-Weighted Average Price (VWAP)
- Overview: The VWAP calculation is based on volume and price. The indicator reflects the average price a security has traded at throughout the day.
- Usage: Widely used by institutional traders, VWAP helps determine the true average price of a security over a given period. It is crucial for understanding the market's intraday trend and for executing large orders efficiently without distorting the price.
Advanced Moving Average Indicators
Moving Average Ribbons
- Overview: This involves plotting multiple moving averages of different lengths on the same chart. The Guppy Multiple Moving Average (GMMA) is a popular example, using short-term and long-term MAs to analyse market behaviour.
- Usage: The spacing and interaction between these ribbons can indicate the strength and direction of a trend. Converging/tightening ribbons may signal a trend reversal while diverging/widening ribbons indicate a strong trend.
Moving Average Envelopes
- Overview: Envelopes consist of two bands plotted at a fixed percentage distance above and below a moving average (e.g., 2%).
- Usage: They help identify overbought and oversold conditions. Price movement outside the envelopes can indicate potential reversal points or the start of strong trends.
Moving Average Channels
- Overview: Channels are created by plotting a moving average of the highs and a moving average of the lows over a specified period.
- Usage: Traders use these channels to identify breakouts and confirm trends. Breakouts beyond the channel may signal the beginning of a new trend.
Four Advanced Moving Average Trading Strategies
Here are four advanced moving average trading strategies. You can test other settings to make the strategies more suitable for your trading approach and the timeframe you trade on.
Moving Average Ribbon Strategy
The Moving Average Ribbon Strategy leverages the Guppy Multiple Moving Averages (GMMA) alongside the ADX to identify potential breakout points. This strategy works by observing the convergence and divergence of multiple MAs to pinpoint moments of price compression and subsequent breakout, enhanced by confirming the trend strength with the ADX.
Indicators Used
- Guppy Multiple Moving Averages (GMMA): This indicator uses a series of short-term and long-term moving averages. The short-term MAs are sensitive to recent price changes, while the long-term MAs help identify the overall trend.
- Average Directional Index (ADX): This measures the strength of a trend, with values above 20 indicating a strong trend.
Entry
- Traders typically look for the long-term MAs in the GMMA (red) to converge and tighten, indicating a compressed range.
- Then they look for the price to break away from the long-term MAs with a series of closes beyond the short-term MAs - below in the downturn and above in the uptrend. Ideally, these are strong closes with minimal wicks, but a series of candles in the projected direction suffice.
-The price should remain beyond both the short-term and long-term MAs.
- The ADX should be above 20 and rising, indicating strong trending conditions. It shouldn’t be stalling or declining. Sometimes, the ADX crosses above 20 after the price has moved beyond the long-term/short-term MAs; this is also valid.
- Once these criteria are met, traders enter with a market order.
Stop Loss
- Stop loss is commonly set beyond the long-term MAs. This provides a buffer against minor fluctuations and potentially protects against false breakouts.
Take Profit
- Profits might be taken at key support or resistance levels.
- Alternatively, traders might look for the price to close beyond the short-term MAs in the opposite direction (e.g., a bullish close above the MAs in a short trade).
- A trailing stop loss positioned beyond the long-term MAs can also be used to capture sustained trends while potentially protecting gains.
Moving Average Envelopes Strategy
The Moving Average Envelopes Strategy leverages the EMA envelopes to identify potential reversal points by examining price interactions with the upper and lower bands. When combined with RSI, this stock and forex moving average strategy helps traders pinpoint overbought and oversold conditions, offering a robust method for trading reversals.
Indicators Used:
- Moving Average Envelopes: Uses an exponential moving average (EMA) set to a length of 20. The envelope percentage is adjusted based on asset volatility: 0.25%-0.5% for forex and 1%-2% for stocks might be good starting points, with a lower percentage creating more frequent opportunities but with greater false signals and vice versa. It forms an upper and lower band alongside a central EMA, similar to Bollinger Bands.
- Relative Strength Index (RSI): Set to a standard length of 14, indicating overbought conditions above 70 and oversold conditions below 30.
Entry
- Traders typically observe when the price crosses the moving average envelope bands, either upper or lower. Ideally, the price wicks through and then closes back inside the boundary, but sustained price action beyond these levels is also considered valid.
- The RSI should be above 70 for a potential short entry, indicating overbought conditions, or below 30 for a potential long entry, indicating oversold conditions.
- An entry might be made once the RSI crosses back into the normal range (between 70 and 30) and the price closes back inside of the bands.
Stop Loss
- Stop losses are generally set beyond the most recent swing point to potentially provide a buffer against minor fluctuations.
Take Profit
Profits might be taken at multiple points:
- The centerline EMA, which acts as a mean reversion target. This is the smallest target, which may be insufficient when considering the risk/reward ratio.
- The opposite envelope bound, capitalising on the price's full range movement.
- Significant support or resistance levels, providing predefined exit points.
- When the RSI crosses into the opposite territory (e.g., from overbought to oversold), indicating a potential reversal in the opposite direction.
Strategy with Three MAs
The strategy with three MAs combines the Hull Moving Averages (HMA) with the Commodity Channel Index (CCI) to identify potential trading opportunities. This strategy leverages the smoothness and responsiveness of the HMA and the momentum indications provided by the CCI to capture effective trade entries and exits.
Indicators Used
- Hull Moving Averages (HMA): Three HMAs with lengths of 13, 36, and 100.
- Commodity Channel Index (CCI): A momentum-based oscillator set to a standard length of 20. The CCI measures the difference between the current price and its average over a given period.
Entry
- Traders look for the price to be above the 100-period HMA for long positions and below it for short positions.
- Simultaneously, the CCI should be above 100 for long entries, indicating strong upward momentum, and below -100 for short entries, indicating strong downward momentum.
- Traders then watch for the 13-period HMA to cross above the 36-period HMA for long positions or below it for short positions. It should ideally be the first crossover after the price moves above or below the 100-period HMA. Occasionally, the CCI may move above 100 or below -100 shortly after this crossover occurs rather than before.
- Once these criteria are met, they enter with a market order.
Stop Loss
- Stop losses are typically set just beyond the 36-period HMA.
- Alternatively, traders may choose the 100-period EMA or a recent swing point.
Take Profit
- Profits might be taken once the price crosses back over the 100-period HMA, signalling a potential end to the current trend.
- Alternatively, traders may choose to take profits at significant support or resistance levels, providing predefined exit points based on market structure.
Moving Average Channel Strategy
The Moving Average Channel Strategy utilises the Moving Average Channel along with the Parabolic SAR and ADX to identify potential trading opportunities. This strategy helps traders capture breakouts by confirming trend strength and potential reversals, offering a robust approach to trading trending markets.
Indicators Used
- Moving Average Channel: Set to a length of 50, this channel uses the moving averages of the highs and lows to create two lines, forming a channel around the price.
- Parabolic SAR: An indicator that plots dots above or below the price to signal potential reversals.
- Average Directional Index (ADX): Measures the strength of a trend, with values above 20 indicating a strong trend.
Entry
- Traders look for the price to trade through the Moving Average Channel, either breaking from above to below (for a downtrend) or from below to above (for an uptrend), ideally with a series of strong candles.
- Simultaneously, the Parabolic SAR should plot dots above the price, indicating a bearish signal, and vice versa.
- The ADX should be above 20 and rising, not stalling or declining, confirming a strong and growing trend.
- All three signals (price breaking through the channel, Parabolic SAR, and ADX above 20 and rising) should occur relatively close to each other, typically within a few candles.
- Once all criteria are met, traders enter.
Stop Loss
- Stop losses are typically set just beyond the Moving Average Channel or at a nearby swing point.
Take Profit
- Profits might be taken when the price closes back through the other side of the Moving Average Channel, signalling a potential trend reversal. In this scenario, there is a risk of missing a part of potential profits in the solid trend.
- Alternatively, traders might choose to take profits at significant support or resistance levels, providing predefined exit points based on market structure.
Best Practices for Using Moving Average Indicators
Moving average indicators are essential tools in technical analysis. Here are some best practices to maximise their effectiveness:
Choosing the Right Type
Selecting the appropriate type of moving average is crucial. For example, an EMA is more responsive to recent price changes, making it suitable for short-term trading, while an SMA may be better for long-term trend analysis.
Choosing Suitable Lengths
It’s best to use a combination of short-term and long-term moving averages to get a comprehensive view of the market. For instance, combining a 20-day, 50-day, and 200-day moving average can help in identifying both short-term fluctuations and long-term trends.
Experimenting
There are various moving average types beyond the well-known SMA and EMA, such as the Hull Moving Average (HMA), Volume Weighted Moving Average (VWMA), and more. Experimenting with different types can help you find the best fit for your MA strategy.
Combining with Other Analysis
You can potentially enhance your moving average strategy by combining it with other forms of analysis and indicators, such as those described in the strategies above. This will allow you to confirm signals and get a more comprehensive market picture.
Backtesting and Forward Testing
Before deploying any moving average strategy in real-time, traders typically backtest it with historical data to understand its performance under different market conditions. Then, when transitioning from backtesting to live trading, they forward test with a demo account to refine their strategy without risking real money.
Beware of False Signals
Moving average crossovers in choppy markets can generate false signals. Consider additional filters, such as trend confirmation from the ADX, to avoid whipsaws.
Following these best practices can help you effectively incorporate moving averages into your trading strategies, whether you're using a moving average crossover strategy or an EMA trading strategy.
The Bottom Line
Advanced moving average strategies can offer a route to potentially enhance your trading analysis and performance. As always, it’s best to experiment with different indicators and backtest strategies to find what works best. To start implementing these strategies, consider opening an FXOpen account. Use our robust tools and enjoy low commissions and tight spreads from 0.0 pips.
FAQs
How to Use Moving Averages?
Moving averages smooth out price data, helping to identify trends and potential support/resistance levels. Traders often use moving averages to determine trend direction, confirm breakouts, and identify reversals. Combining short-term and long-term moving averages provides a well-rounded market overview. For instance, a simple SMA strategy might see a trader watch for a crossover between a pair of long and short-term SMAs before entering.
What Is the Simple Moving Average?
The Simple Moving Average represents an asset’s average price over a specified period. It's a fundamental tool in trading, smoothing out fluctuations to highlight the underlying trend. An SMA trading strategy typically involves comparing SMAs of different lengths to identify crossovers and trend changes.
What Does EMA Stand For in Trading?
The EMA stands for the Exponential Moving Average. Unlike the SMA, the EMA gives more weight to recent prices, making it more responsive to price changes. This responsiveness makes the EMA popular in strategies that require quick reaction to market movements, such as an EMA crossover strategy.
What Moving Average Should Be Used for Day Trading?
In moving averages for day trading, shorter periods like the 9 or 21 are often used due to their responsiveness to recent price changes. These shorter EMAs help day traders quickly identify trend direction and potential entry/exit points.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Trust is Earned: My Journey Toward Becoming a Responsible VendorIntroduction: Learning from Setbacks (and Sharing for Others on the Same Journey)
Everyone makes mistakes, and I have certainly made my fair share. I want to share my personal journey of learning from my past missteps on TradingView, my efforts to deeply understand the platform's guidelines, and my aspiration to become a responsible vendor, in the hope that others on the same journey can learn from it. This story is about the importance of compliance, transparency, and what it means to genuinely add value to a community of traders.
Disclaimer: I am a provider of technical indicators (all free at this point, but some will be paid in the future), This article is purely for informational & educational purposes for the greater community.
Mistakes and Realizations
I won’t shy away from admitting that I've faced temporary bans on TradingView. At first, I saw these bans as setbacks that were challenging and frustrating. But over time, I realized they were valuable opportunities to understand what it really means to contribute responsibly to this incredible platform. Those experiences prompted me to reflect on my actions and invest time in learning the rules that govern this community— not just to avoid future bans, but to truly align with the values of TradingView.
Areas of Growth and Mastery
To ensure my growth as both a script publisher and a prospective vendor, I focused on mastering three key areas that are critical for contributing meaningfully to TradingView:
Clear Communication and Respect for Moderators: One of the first things I learned was the importance of making my content clear and accessible to all traders. While I have always strived for originality and avoided plagiarism, I realized that clarity is just as crucial. Ensuring that my work is understandable helps others fully appreciate and benefit from the ideas I share. Additionally, I learned to respect and comply with moderator feedback, which has been instrumental in improving my content.
Creating Impactful and Original Contributions: I have always aimed to provide original and valuable content, but through my journey, I further educated myself on how to better meet community needs. Rather than simply reiterating existing ideas, it's essential to focus on creating content that directly helps traders understand or solve a specific issue. Ensuring that descriptions are clear and straightforward, offering immediate insights that traders can act upon, is critical to creating impactful content. Charts should be presented in a clean and informative manner, without making unrealistic claims about performance. Run away if someone promises to turn $500 into 5k overnight.
Building Trust Through Ethical and Transparent Practices: Unfortunately, there are many scammers out there, and many traders fall into traps buying so-called 'holy grail' tools that promise unrealistic returns. It's crucial to be aware of these pitfalls and ensure transparency and ethical practices are at the forefront. Although I’m not yet a vendor, I aspire to be one. This means understanding the expectations for providing quality tools and services. Honesty and ethical business practices are fundamental—it's not about making sales, but about building trust with the community. Being transparent and ensuring the tools are genuinely helpful to traders and investors without overpromising results goes a long way in building trust. Although I’m not yet a vendor, I aspire to be one. This means understanding the expectations for providing quality tools and services. Honesty and ethical business practices are fundamental—it's not about making sales, but about building trust with the community. Being transparent and ensuring the tools are genuinely helpful to traders and investors without overpromising results goes a long way in building trust. It is essential for every indicator and strategy, whether paid or free, to provide real value to traders and investors.
❖ Adding Value: Insights from Community Feedback
Through my journey, I also received feedback from moderators, which helped me understand how to align my contributions better with the expectations of TradingView. One key takeaway was that adding value to traders must be actionable, realistic, and grounded in the community's needs. It’s not enough to simply share insights or predictions; it’s about helping others make informed decisions, understanding the risks involved, and learning together.
It is crucial to emphasize honesty, respect for users, and the importance of providing value before expecting anything in return. This principle must become a core part of how contributions should be approached. Many of my scripts are available for free, and seeing traders use them and benefit from them has been incredibly rewarding.
✹ My Aspiration to Become a Responsible Vendor
Every vendor's goal must be to genuinely support traders by improving their strategies and decision-making through transparency, ethical practices, and adherence to guidelines. Building trust takes time, and I strive to align my offerings with TradingView's core values: respect for traders, adding true value, and fostering collaboration. My current focus is on refining my skills, publishing original content, and ensuring that every tool I create serves an educational purpose, genuinely helping traders navigate market complexities.
Conclusion: Earning Trust, One Step at a Time
The journey to becoming a responsible vendor is about more than just meeting requirements—it's about contributing to a community in a way that is genuine, transparent, and respectful. I am committed to continuing this journey, learning from past mistakes, and striving to add value every step of the way. Trust is earned, not given, and I’m ready to keep earning it.
Watch Me Make $600,642 Backtesting in 20 MinutesMastering Backtesting with TradingView's Replay Feature: Your Target Practice for Trading Success
In the world of trading, practice makes perfect, and one of the best ways to hone your skills is through backtesting. TradingView’s replay feature serves as an invaluable tool for traders looking to test strategies, refine their skills, and improve their overall performance. Think of it as target practice—a way to simulate real market conditions without the pressure of live trading. This article will delve into how to effectively use the replay feature, challenge yourself, and why practice is essential for every trader.
The Power of Backtesting
Backtesting is the process of testing a trading strategy on historical data to determine its viability. It’s like a dress rehearsal for traders, allowing you to assess how a strategy would have performed in different market conditions. With TradingView’s replay feature, you can step back in time and play out the price movements of any market you choose.
Using TradingView's Replay Feature
Setting Up the Replay Feature:
Open TradingView and select the asset you want to backtest.
On the chart, locate the “Replay” button in the toolbar (usually represented by a play icon).
Click the button and select the date from which you want to start your replay. You can drag the slider to move through the historical data at your own pace.
Simulating Live Trading Conditions:
As the replay plays out, you can apply your trading strategy just as you would in real-time. Take note of price action, support and resistance levels, and your entry and exit points.
Use this opportunity to test different indicators and strategies, adjusting parameters as you see fit.
Documenting Your Trades:
Keep a journal of your trades during the replay. Note what worked, what didn’t, and any adjustments you made. This reflection is crucial for developing your trading skills.
Target Practice: Challenging Yourself
To truly benefit from backtesting with the replay feature, consider implementing challenges that simulate the pressure of live trading. Here are some ways to push yourself:
1. Risk Management Challenges:
Decide on a specific risk amount for each trade—say $1,000. After reaching a target profit, like $15,000, challenge yourself to avoid losing a predetermined amount, such as $2,500.
This mimics real-life scenarios where maintaining profits can be just as challenging as making them. It forces you to practice discipline and stick to your risk management rules.
2. Trade Frequency Goals:
Set a target for the number of trades you want to execute during the replay. For example, aim to make 10 trades in a single session. This encourages you to be decisive and consistent with your strategy.
3. Time Constraints:
Limit yourself to a specific time frame when executing trades. For instance, challenge yourself to make all trades within a 30-minute window during the replay. This helps you practice decision-making under pressure, enhancing your ability to react quickly in real-market situations.
The Importance of Practice for Traders
As traders, we must remember that consistent practice is key to mastery. The replay feature allows you to simulate different scenarios without the risk of real money, giving you the freedom to learn from your mistakes. Here’s why practice is crucial:
Building Confidence:
The more you practice your strategy in a controlled environment, the more confident you’ll become in your abilities. This confidence translates into more decisive actions when trading live.
Identifying Strengths and Weaknesses:
Regularly backtesting enables you to pinpoint areas where your strategy excels and where it falters. This awareness allows you to adapt and evolve your approach over time.
Understanding Market Dynamics:
Each market behaves differently. By practicing across various assets and timeframes, you’ll develop a deeper understanding of market dynamics, helping you make better-informed decisions.
TradingView’s replay feature is a powerful tool for backtesting and honing your trading strategies. By treating this process as target practice, you can simulate real trading scenarios, test your strategies, and build the skills necessary for successful trading. Don’t shy away from challenging yourself with risk management goals, trade frequency targets, and time constraints. Remember, consistent practice is the pathway to mastery, and with the right tools and mindset, you can elevate your trading game to new heights. So dive into that replay feature, test your strategies, and watch your trading skills flourish!
The Symmetrical Triangle: Real Success Rates + Breakout.The Symmetrical Triangle: Real Success Rates + Breakout.
The symmetrical triangle is an important chart pattern in technical analysis, deserving special attention from professional traders.
This formation is characterized by a convergence of prices between two trendlines, one descending and the other ascending, creating a consolidation zone where indecision between buyers and sellers is palpable.
Statistical Analysis
Empirical data reveals that the success rate of the symmetrical triangle for a trend continuation is approximately 54%. This percentage, although higher than 50%, underlines the importance of a cautious approach and rigorous risk management in using this pattern.
Breakout Point
The breakout of the symmetrical triangle usually occurs when the price has traveled approximately 75% of the distance to the apex. This point is crucial for traders, as it often represents the moment when volatility increases and a new trend can be established.
Risks and False Exits
It is essential to note that the symmetrical triangle has a relatively high rate of false exits. Statistics indicate that approximately 13% of cases in a bear market can result in a false exit to the bottom. This phenomenon underlines the need for additional confirmation before entering a position.
Strategy of use
To effectively exploit the symmetrical triangle, professional traders must:
-Identify the formation accurately.
-Wait for the breakout near the point of convergence of the trendlines.
-Confirm the breakout with other technical indicators or an increase in volume.
-Put in place strict risk management to protect against false exits.
In conclusion, the symmetrical triangle, although being a valuable tool in the trader's arsenal, requires a methodical approach and a thorough understanding of its characteristics to be used effectively in a trading strategy.
What Is a Falling Knife in Trading? What Is a Falling Knife in Trading?
It’s often repeated that traders should ‘never catch a falling knife.’ This phrase highlights the risks of buying into a rapidly declining asset. Understanding what a falling knife is, its causes, and strategies for trading it may help traders navigate these sharp declines more effectively. This article delves into the intricacies of falling knives and offers insights on how to approach them with caution.
Understanding the Falling Knife Pattern
A falling knife consists of candlesticks that depict a significant rapid drop in an asset’s price, including stocks, commodities, forex pairs, indices, cryptocurrencies*, and more. This situation is often driven by negative news, poor earnings reports, or broader market sell-offs.
Identifying a falling knife involves recognising several key characteristics. Firstly, the decline is steep and sudden, typically marked by large red candlesticks on a price chart. The volume often increases as the price falls, indicating panic selling. Technical indicators such as the Relative Strength Index (RSI) might show oversold conditions, suggesting the asset is undervalued in the short term.
Common tools used to identify falling knives include:
- Moving Averages: When short-term moving averages cross below long-term moving averages, it signals bearish market sentiment.
- Bollinger Bands: Prices breaking below the lower band can indicate a falling knife.
- Volume Analysis: Spikes in trading volume often accompany these sharp declines, confirming the intensity of the sell-off.
In terms of candlesticks, a falling knife typically produces several bearish candles with long bodies and small wicks. They may appear as a large engulfing candle on a higher timeframe.
Recognising these patterns is crucial for traders. Misinterpreting a falling knife can lead to significant losses, as attempting to catch a falling knife—buying during the steep decline—without proper analysis can be risky. Instead, many traders wait for signs of stabilisation or reversal before considering an entry point.
Causes of Falling Knives
A falling knife generally occurs due to several specific catalysts, each capable of triggering a rapid and substantial decline in an asset's price. Understanding these causes, including technical factors, is essential for traders aiming to navigate such volatile situations effectively.
Economic Events and News Releases
One primary cause of falling knives is significant economic news. For instance, announcements of interest rate hikes by central banks can lead to widespread stock market sell-offs. Similarly, unexpected changes in economic indicators like unemployment rates, inflation, or GDP growth can trigger sharp declines. Traders react swiftly to such news, often leading to panic selling and steep price drops.
Earnings Reports and Company-Specific Issues
A falling knife stock pattern can be triggered by poor earnings reports or disappointing financial results from a company. When a company misses earnings expectations or issues negative guidance, investors may lose confidence, resulting in a rapidly falling stock. Additionally, company-specific problems such as legal issues, management scandals, or product recalls can lead to rapid price declines as investors reassess the company's prospects.
Broader Market Conditions and Trends
Broader market trends and conditions play a significant role in causing a falling knife in stocks and other assets. During periods of market volatility or bear markets, negative sentiment can spread quickly, leading to sharp declines in asset prices. For example, during the financial crisis of 2008, widespread fear and uncertainty led to massive sell-offs across various sectors. Similarly, market corrections or crashes can create environments where falling knife patterns are more likely to occur.
Geopolitical Events
Geopolitical events such as wars, political instability, or trade tensions can cause abrupt market reactions. For instance, escalating trade disputes between major economies can lead to uncertainty and fear, causing investors and traders to exit positions rapidly.
Technical Factors
Technical analysis also plays a crucial role in falling knife patterns. Key technical factors include:
- Breaking Support Levels: When an asset's price falls below critical support levels, it can trigger further selling as traders perceive a lack of price stability.
- Overbought/Oversold Conditions: Oscillators like the Relative Strength Index (RSI) showing overbought conditions can precede a falling knife as prices correct sharply. At the same time, the RSI may enter the oversold area during the falling knife pattern.
- Bearish Chart Patterns: Patterns such as head and shoulders, double tops, or descending triangles can signal potential sharp declines, leading to falling knife scenarios.
Risks Associated with Falling Knife
Trading falling knives carries significant risks, primarily due to the rapid nature of the price declines. Understanding these risks is crucial for traders aiming to navigate such volatile situations.
Potential for Significant Losses
The most apparent risk is the potential for substantial financial losses. When an asset's price plummets, catching the falling knife can result in buying at prices that continue to drop, leading to immediate and severe losses.
False Bottoms and Dead Cat Bounces
Traders may mistakenly interpret temporary price stabilisations or minor recoveries as the end of the decline, only to face further drops. These false bottoms and dead cat bounces can trap traders in losing positions.
Increased Volatility
Falling knives are often accompanied by heightened market volatility, making it challenging to analyse short-term price movements. This volatility can result in rapid and unexpected changes in asset prices, complicating risk management.
Psychological Challenges
The psychological impact of trading falling knives should not be underestimated. The stress and emotional strain of dealing with sharp losses can lead to irrational decision-making, such as holding onto losing positions for too long or making impulsive trades.
Technical Analysis Limitations
While technical indicators can help identify potential entry points, they are not foolproof. The rapid and severe nature of falling knives can render technical analysis less reliable, as price movements may not follow traditional patterns.
Liquidity Issues
During sharp declines, liquidity can dry up, leading to wider spreads and slippage. This makes it harder to execute trades at desired prices, potentially exacerbating losses.
Examples of Falling Knife Events
Now, let’s take a look at a couple of falling knife examples. To start identifying your own falling knives, head over to FXOpen’s free TickTrader platform to explore real-time charts across different asset classes.
Onset of the Coronavirus Pandemic and the Nasdaq 100
In early 2020, the onset of the coronavirus pandemic triggered a dramatic fall in global financial markets. The Nasdaq 100, heavily weighted with speculative tech stocks, experienced a sharp decline as investors reacted to the uncertainty and potential economic impact of the pandemic.
From mid-February to late March 2020, the Nasdaq 100 dropped by over 30%. This steep decline represented a classic falling knife pattern, characterised by rapid sell-offs and increased market volatility over the course of several weeks. Traders who attempted to buy into the market too early faced significant losses as the market continued to fall before eventually stabilising and recovering later in the year.
EUR/USD After Strong US Inflation Data
On April 10, 2024, the release of March US inflation data led to a falling knife event in the EUR/USD currency pair. Traders had been closely monitoring the Consumer Price Index (CPI) report, anticipating that a lower-than-forecast reading would prompt the Federal Reserve to lower interest rates later in the year.
The forecast was set at 3.4%, with a lower or at-forecast figure expected to weaken the dollar. Instead, the headline CPI YoY reading came in exactly at 3.5%, defying expectations. This unexpected data triggered a rally in the dollar and a sharp sell-off in EUR/USD. The pair plummeted rapidly, and the decline persisted until the end of the trading week, illustrating how sudden economic data releases can lead to sharp and sustained price drops.
Strategies for Trading Falling Knives
Understanding the catalyst behind a falling knife is crucial for determining whether it’s likely to rebound soon or persist as a trend. Events that cause fundamental repricing, such as poor earnings data, significant or unexpected news/economic releases, or unique risk events like currency intervention or financial crises, often lead to prolonged falling knives.
In contrast, temporary sharp corrections might be due to overreactions to already priced-in news or transient market fears. Recognising these catalysts helps traders decide whether to take a position or wait for volatility to subside.
Additionally, the timeframe of the falling knife provides valuable context. A falling knife on a 5-minute chart could indicate a sharp intraday decline, potentially recovering before the trading day ends. Conversely, on a 4-hour or daily chart, a sharp decline may suggest a continued downtrend over several days or weeks. Traders can use this information to look for short opportunities on lower timeframes or prepare for longer-term moves.
Common Strategies Traders Use
The insights gained from analysing market conditions can help traders to decide whether to short the falling knife or stay out of the market and wait for a bottom.
Shorting the Falling Knife
Traders looking to short a falling knife should exercise caution. Increased volatility during sharp declines can make it difficult to set appropriate stop-loss levels without a sub-par risk/reward ratio.
The best entry can potentially be found during a pullback. As some traders think the price is bottoming out, their stop losses being triggered as the price continues to decline can fuel another leg lower. Traders can look for breakouts from bearish chart patterns like rising wedges, bear flags, or bear pennants.
Alternatively, waiting for the bullish structure of the pullback (higher highs and higher lows) to break down into a lower low and lower high can indicate the next leg lower is underway. This approach offers traders confirmation that the knife is continuing to fall and an appropriate place to set a stop loss above the pullback’s high.
Buying After a Falling Knife
For those looking to catch the bottom, confirmation is essential. Using a pair of moving averages, such as 20-period and 50-period EMAs, can help. When the 20-period EMA crosses above the 50-period EMA, and the price closes above both, it suggests the downtrend might be over. However, momentum indicators like RSI and MACD can falsely signal market turns during steep declines, but they may have some value on higher timeframes.
Generally speaking, one of the potentially effective strategies for catching a falling knife is to wait for the price to break above the previous lower high of the downtrend. This would demonstrate that the market has been able to break above a point at which it previously found resistance, allowing traders to potentially switch their bias to bullish and seek entry points.
The Role of Patience and Discipline in Trading Falling Knives
Patience and discipline are paramount when trading falling knives. Impulsive trades driven by the fear of missing out can lead to significant losses. Traders are required to wait for clear signs of trend reversal or continuation before entering a trade. This involves adhering to predefined strategies and not deviating due to emotional reactions to volatile market movements.
Likewise, maintaining discipline in setting and following stop-loss levels, adhering to risk management principles, and avoiding premature entries can potentially enhance trading effectiveness.
The Bottom Line
Navigating falling knives requires careful analysis and disciplined trading strategies. By understanding the causes and employing effective techniques, traders can potentially better manage these volatile situations. To explore these strategies further and enhance your trading skills, consider opening an FXOpen account. With the right tools and knowledge, you can approach falling knives with greater confidence and precision.
FAQ
What Is a Falling Knife in Trading?
A falling knife in trading refers to a rapid and significant decline in an asset's price, often triggered by negative news, poor earnings reports, or broader market sell-offs. This sharp drop can be volatile and difficult to analyse, making it challenging for traders to time their entries and exits.
Should You Ever Try to Catch a Falling Knife?
Catching a falling knife is highly risky. Therefore, the theory states it’s not recommended for most traders. The rapid decline in price can continue further than anticipated, leading to significant losses. To minimise risk, traders wait for signs of stabilisation or reversal before considering an entry.
How to Catch a Falling Knife?
Catching a falling knife involves identifying potential reversal points through technical analysis. Traders often wait for confirmation, such as a break above previous resistance levels or a moving average crossover. Patience and strict risk management, including setting tight stop-loss orders, are essential when attempting this strategy.
What Is a Falling Knife in Crypto*?
In the crypto* market, a falling knife refers to a sudden and steep decline in the price of a cryptocurrency*. This can be triggered by regulatory news, security breaches, or market sentiment shifts. Due to cryptocurrencies*' high volatility, falling knives can be particularly severe and difficult to analyse.
*At FXOpen UK, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rule. They are not available for trading by Retail clients.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Panic or Common Sense?This is not a recommendation but rather a possibility based on the following:
1. We may see an upward opening gap at start of the market later.
2. There are circumspect views that there is collusion between Iran, Israel and the USA pertaining to the recent escalation. Non of Iran's Oil or Nuclear installations were targeted.
3. US Election race is neck to neck with Trump has a perceived lead in swing states.
4. Rising bond yields and DXY also bullish
5. Possible formation of Bear Flag Chart pattern, which looks highly logical because of severe overbought conditions.
Please remember this coming week has a plethora of news culminating with the NFP news!
I will be looking to sell at the upper Fib level and with buy stop above the ATH.
Please leave your comments if you have any ideas!
Happy and safe trading!
How to avoid being emotional in trading?Avoiding emotional trading is a key skill in successful investing and trading, as it helps minimize impulsive decisions that can lead to losses. Here are some strategies and insights to help maintain a disciplined approach to trading and avoid being swayed by emotions like fear, greed, or overconfidence:
🔸 Create and Stick to a Trading Plan
▪️Set Clear Goals: Define your profit goals, risk tolerance, and entry/exit points in advance.
▪️Follow Predefined Rules: A trading plan provides structure, guiding you to make logical decisions rather than impulsive ones.
▪️Limit Exposure: Decide on position sizes beforehand to avoid overcommitting and feeling compelled to make irrational moves if markets turn volatile.
🔸 Use Stop-Loss and Take-Profit Orders
▪️Automate Exit Points: Setting up stop-loss and take-profit orders allows you to exit trades at predefined points, limiting the need to make quick, emotion-driven decisions during market fluctuations.
▪️Reduce Monitoring: Knowing your trades will automatically exit at specific points reduces the need for constant checking, which can often lead to stress and emotional reactivity.
🔸 Practice Patience and Avoid Overtrading
▪️Avoid Excessive Monitoring: Watching the market closely can lead to impulsive reactions to small fluctuations. Stick to reviewing your trades periodically rather than minute-by-minute.
▪️Limit Trade Frequency: Overtrading, driven by the need to “make back” losses or maximize gains, often leads to poorly thought-out decisions. Trade only when your trading plan calls for it.
🔸 Develop a Balanced Mindset
▪️Stay Neutral to Wins and Losses: Emotional attachment to individual trades can make it harder to accept losses and lead to revenge trading, where you try to make up losses through risky moves.
▪️Accept Losses as Part of the Process: Even the best traders face losses. Accepting this and moving on helps maintain perspective and discipline, which are essential for long-term success.
🔸 Utilize Data and Analysis Over Intuition
▪️Focus on Objective Indicators: Base decisions on data, such as price charts, moving averages, and technical indicators, rather than “gut feelings.”
▪️Avoid Confirmation Bias: Seeking only information that supports your existing beliefs can lead to one-sided and often poor decisions. Stay open to all relevant information.
🔸 Take Breaks and Manage Stress
▪️Step Away After a Major Loss or Win: Strong emotional responses often follow big losses or gains. Taking a break gives you time to reset your mindset before your next trade.
▪️Practice Relaxation Techniques: Techniques like deep breathing, meditation, or even short exercises can reduce stress and improve focus, reducing emotional reactions.
🔸 Build Self-Awareness
▪️Reflect on Your Emotions: Keeping a trading journal can help you understand emotional triggers and patterns in your decision-making.
▪️Work with a Trading Coach or Join a Community: Having accountability, whether through a mentor or a trading group, can help you stay grounded and receive objective feedback on your trading behavior.
🔸 Set Realistic Expectations
▪️Don’t Chase Unrealistic Returns: Expecting massive returns can lead to risky, emotion-fueled decisions. Focus on sustainable, gradual growth.
▪️Acknowledge Market Unpredictability: Markets are often unpredictable, and not every trade will go as planned. Accepting this helps lower emotional stakes with each trade.
🔸 Consider Using Algorithmic or Automated Trading
▪️Remove Emotion from Execution: Algorithmic trading allows traders to set parameters and let algorithms execute trades, effectively reducing emotional interference.
▪️Define Rules for Entry and Exit: Predefined rules, when followed strictly by algorithms, allow for a structured and emotion-free approach to trading.
Adopting these practices helps build discipline, patience, and resilience, which are essential for minimizing the negative impact of emotional trading on your overall financial success.
Using Renko Charts to Uncover SECRET Bank LevelsRenko charting has a unique way of displaying price data by filtering out smaller fluctuations and focusing only on substantial price moves. With a setting of Average True Range (ATR) 13, Renko charts become even more powerful for finding key institutional levels—what many traders call "secret bank levels." These are the levels where large institutional traders place their orders, often leading to significant price moves. In this tutorial, we’ll dive into how you can use Renko charts with an ATR setting of 13 to identify these bank levels and improve your trading strategy.
What Are Secret Bank Levels?
Institutional or bank levels are price points where big players—like banks and hedge funds—are likely to buy or sell in large quantities. Retail traders can leverage these levels by understanding where the big money is moving, aligning their trades accordingly. Renko charts, with their clarity in price movement, help identify these areas by smoothing out noise and highlighting essential support and resistance zones.
Why Renko Charts?
Renko charts are designed to filter out minor price movements, providing a cleaner view of market trends by focusing solely on significant price changes. Unlike time-based charts, Renko charts print a new "brick" only when price moves by a specified amount, determined here by the ATR 13 setting. This brick-by-brick approach can reveal clear levels where price repeatedly finds support or resistance, often signaling where major institutions are setting up their positions.
Setting Up Renko with ATR (13)
Choose Your Charting Platform: Most charting software, including TradingView and MetaTrader, offers Renko charting. Make sure your platform supports Renko and ATR-based calculations.
Configure Renko with ATR (13):
Open the Renko chart on your selected asset (e.g., EUR/USD, GBP/USD).
In your settings, set the brick size to use the ATR indicator and specify an ATR length of 13. This setting is designed to adjust the brick size based on the recent average true range, capturing a balanced view of price movement.
This 13-period setting adapts to recent market volatility, allowing Renko bricks to reveal significant price movements that matter to large institutional players.
Adjust Timeframes:
Since Renko charts don’t follow traditional time-based intervals, switch between higher and lower timeframes (like the 1-hour or 4-hour charts) to observe different levels of institutional interest. Higher timeframes generally provide more reliable secret bank levels, but you can switch to lower timeframes for refined entry points.
Identifying Bank Levels with Renko and ATR (13)
Now that your chart is set up, let's move on to the process of identifying institutional levels.
1. Look for Brick Clusters at Key Levels
Renko bricks tend to form clusters at significant institutional levels. When you see several bricks stacked horizontally with little movement, it often indicates a zone where price is struggling to break through, either as strong support or resistance.
Use these clusters as potential entry or exit points, aligning with the institutional flow.
2. Identify Breakouts and Rejections
When price breaks out of a cluster or encounters rejection (where bricks reverse direction after hitting a level), you may be witnessing bank-level reactions.
Watch for bricks that quickly shift direction after hitting a level—these can signal that institutions have stepped in to either push price further or halt its momentum.
3. Note Patterns and Reversals at Round Numbers
Banks and institutions often place orders at round numbers, which are psychologically significant levels (like 1.2000, 1.2500).
As Renko charts with ATR (13) are sensitive to significant price changes, they can help highlight when price respects or bounces off these round numbers, offering clues to potential institutional zones.
Practical Example: Trading Secret Bank Levels with Renko
Let’s say you’re analyzing EUR/USD on a Renko chart with an ATR 13 setting.
Identify Clusters at 1.2000: After setting up your chart, you observe a cluster of Renko bricks at 1.2000, indicating a strong support zone. This level has held multiple times, suggesting institutional buying interest.
Wait for a Brick Breakout: You then see price breaking out with consecutive Renko bricks closing above 1.2000. This breakout suggests that the buying pressure might push prices higher.
Enter and Manage Your Position:
Take a buy position after confirming the breakout. Set your stop loss just below the cluster at 1.1980 to minimize risk.
If you’re looking for a shorter-term position, aim for profit at the next round number, like 1.2100.
For a longer-term trade, follow Renko’s direction, adjusting your stop as the bricks move.
Tips for Trading Bank Levels with Renko and ATR (13)
Trust Your Levels: Renko charts can simplify your analysis, but it’s easy to second-guess your levels. If you’ve identified strong clusters or patterns at certain price points, trust your analysis.
Use Alerts to Avoid Over-Trading: TradingView and other platforms allow you to set alerts at specific price levels. This way, you won’t need to stare at charts all day.
Thank you for watching and feel free to leave a comment to let me know your thoughts on Renko and if you see yourself using this chart type.
-TL Turner
AI Algo Trading Intro/OverviewAI ALGO TRADING INTRO/OVERVIEW
🔹AI algorithmic trading, often referred to as AI algo trading, is a sophisticated approach to financial trading that uses artificial intelligence (AI) algorithms to make trading decisions. It combines finance, statistics, and computer science to analyze vast amounts of data and execute trades in real-time, often at speeds impossible for human traders. Here's a closer look at how it works, its benefits, and the key components:
1. How AI Algo Trading Works
AI algo trading employs machine learning, deep learning, and other advanced data analysis techniques to create models that can predict stock prices or detect trading patterns. These AI models are designed to identify patterns or anomalies in historical and real-time data, which helps them make predictions about price movements. The algorithms can process huge datasets from multiple sources, including stock prices, news, sentiment data from social media, and even macroeconomic indicators.
Typical steps involved in AI algo trading include:
🔹Data Collection: Gathering historical price data, technical indicators, financial reports, and alternative data (e.g., news, social media sentiment).
Model Training: Training machine learning models on historical data to predict asset price movements or specific trading signals.
🔹Backtesting: Testing the model on historical data to see how it would have performed in the past, adjusting for any biases or errors.
🔹Execution: Implementing the model in live markets to execute trades automatically when certain conditions are met.
2. Key Components of AI Algo Trading
Several key components work together in AI-driven trading systems, including:
🔹Data Management: Collecting, cleaning, and storing large volumes of financial and alternative data.
🔹Feature Engineering: Selecting or creating specific data features that improve the model's accuracy, such as moving averages, volatility measures, or sentiment scores.
🔹Machine Learning Models: Models like neural networks, decision trees, or support vector machines (SVMs) are common in AI trading. More advanced models use deep learning and reinforcement learning.
🔹Risk Management: Ensuring trades meet certain risk parameters to prevent excessive losses. Many AI algorithms have built-in risk management measures, like stop-loss limits or position size restrictions.
🔹Execution Algorithms: After generating trade signals, execution algorithms place trades in the market. These can include smart order routing and algorithms for optimizing trade timing.
3. Advantages of AI Algo Trading
🔹Speed and Efficiency: AI algorithms can execute trades within milliseconds, reacting instantly to market movements.
🔹Data-Driven Decisions: AI algo trading relies on empirical data rather than emotions, leading to potentially more consistent decision-making.
🔹Pattern Recognition: Advanced AI models can identify complex patterns in large datasets, uncovering trading opportunities that may be invisible to human traders.
🔹24/7 Operation: AI systems can monitor markets continuously, which is especially valuable in global markets that operate around the clock.
🔹Customization: AI-driven strategies can be tailored to specific asset classes, trading goals, and risk tolerances.
4. Popular AI Techniques in Trading
AI algo trading employs several popular techniques:
🔹Supervised Learning: This includes models like regression, classification, and neural networks, often used to predict price changes or determine trading signals.
🔹Unsupervised Learning: Clustering and anomaly detection models help identify unusual trading patterns or group similar assets.
🔹Reinforcement Learning: This is where AI learns to optimize strategies through trial and error, which can be particularly useful for adaptive, evolving trading strategies.
🔹Sentiment Analysis: AI can analyze text data (e.g., news articles, tweets) to gauge market sentiment, adding a qualitative dimension to trading models.
5. Risks and Challenges
While AI algo trading offers numerous advantages, it also comes with certain risks:
🔹Model Overfitting: Overfitting to historical data can result in poor performance in live markets if the model is too specific to past conditions.
Market Volatility: AI algorithms may struggle to adapt to sudden market changes, like unexpected geopolitical events or economic crises.
🔹Technical Failures: Infrastructure and connectivity issues can disrupt AI trading systems, leading to missed opportunities or unwanted positions.
🔹Regulatory Concerns: Regulatory bodies often scrutinize algorithmic trading for issues like market manipulation, requiring firms to ensure their algorithms are compliant.
6. Future of AI Algo Trading
🔹The future of AI algo trading looks promising, with ongoing advancements in AI and access to even more diverse data sources. Innovations in quantum computing, natural language processing (NLP) for deeper sentiment analysis, and reinforcement learning for adaptive strategies are likely to further enhance AI-driven trading.
🔹As AI trading models continue to evolve, they may also become more accessible to individual investors and retail traders, allowing a broader range of market participants to benefit from data-driven trading strategies. However, regulatory agencies may also implement stricter controls to manage the risks associated with autonomous AI trading.
Understanding The Basics Of AI/Inference Engine ConstructionRecently, there has been a lot of discussion related to my SPY Cycle Patterns and how they work.
In short, without disclosing proprietary code/quants, I built an inference engine based on Fibonacci, GANN, and Tesla theories.
Part of this inference engine is to identify the highest probable outcome related to the patterns.
This is not rocket-science. This is the same process your brain does when determining when and what to trade.
The only difference is I'm doing a bunch of proprietary calculations/quants related to data and price theory in the background, then the inference engine determines the best, most likely outcome.
Take a few minutes to watch this video and try to understand the difference between static and dynamic modeling.
Again, my objective is to help as many traders as possible. My Plan Your Trade videos are my opinions based on my skills, knowledge, and proprietary modeling systems/tools.
None of my tools are 100% accurate all the time - nothing is. But, I do believe the quality of information and instructional information I provide is invaluable to most traders.
Get some.
#trading #research #investing #tradingalgos #tradingsignals #cycles #fibonacci #elliotwave #modelingsystems #stocks #bitcoin #btcusd #cryptos #spy #es #nq #gold
How to Read a Forex Quote: Bid, Ask, and Spread ExplainedSo, you’ve decided to jump into the forex markets and stumbled upon your first quote. Now you're staring at numbers like EUR/USD 1.0987/1.0990, wondering what these flashing digits mean. Don’t worry—we’ve all been there. Let’s break it down, TradingView style, and get you up to speed on forex quotes, bid-ask spreads, and why these tiny decimal points matter more than you might think.
The Basics: What’s a Forex Quote?
At its core, a forex quote tells you the exchange rate between two currencies. Think of it like a price tag for the money you want to buy or sell. In any quote, you’ve got two currencies: the base currency and the quote currency. For example, in EUR/USD , the euro (EUR) is the base currency, and the US dollar (USD) is the quote currency. This quote tells you how many US dollars it costs to buy one euro.
Now the fun part: You’ll notice two prices next to that quote—the bid and the ask.
Bid vs. Ask: What’s the Difference?
When you see a forex quote like EUR/USD 1.0987/1.0990, you’re actually looking at two prices:
Bid Price (1.0987): This is the price a buyer (broker or trader) is willing to pay for the base currency. In simpler terms, this is the price you sell at.
Ask Price (1.0990): This is the price the seller (broker or trader) is willing to sell you the base currency for. In other words, this is the price you buy at.
So, if you’re buying EUR/USD , you’ll pay the ask price (1.0990), and if you’re selling, you’ll receive the bid price (1.0987). Notice how the ask is always higher than the bid? That’s where brokers make their money. Which brings us to…
The Spread: The Broker’s Cut
The spread is the difference between the bid and the ask. In this case, it’s 1.0990 - 1.0987 = 0.0003 or 3 pips (percentage in points). Think of the spread as the broker’s fee for facilitating the trade, essentially acting as the middleman. The tighter the spread, the less you’re paying to execute a trade.
For major currency pairs like EUR/USD , the spread is often pretty small (like 1-3 pips), but for exotic pairs (think USD/ZAR or USD/TRY ), spreads can get wider than your Uncle Bob’s waistband after Thanksgiving dinner.
Why the Spread Matters for Traders
Here’s the thing: spreads eat into your profits. Whether you’re a day trader or holding a longer-term position, the spread is something you need to bake into your strategy.
Scalpers and day traders need tight spreads. If you’re making a bunch of small, quick trades throughout the day, every pip counts. Wide spreads can kill your profit margins faster than a rogue tweet from Elon Musk.
Swing traders and position traders are less sensitive to spreads. If you’re in it for the long haul, a few pips won’t make or break your trade. But it’s still something to keep an eye on, especially when trading less liquid currency pairs.
Market Conditions and Spreads
Spreads aren’t fixed — ideally, they should be floating around in real-time dealmaking. They widen and tighten based on market conditions. During high volatility (like, say, a major economic announcement or a surprise central bank rate cut), spreads can widen. Conversely, during quiet market hours, spreads tend to tighten.
To avoid getting fleeced by wide spreads, keep an eye on liquidity. Major pairs like EUR/USD , GBP/USD , or USD/JPY have higher liquidity, meaning tighter spreads. Exotic pairs? Not so much. You’ll pay more to play in the less popular markets.
How to Use the Bid-Ask Spread to Your Advantage
Here’s a pro tip: If you’re in a tight spread market, like EUR/USD during peak trading hours, you can place tighter stop-loss and take-profit orders, maximizing your profits with minimal slippage. In volatile markets with wider spreads, give yourself more breathing room, or wait until liquidity returns.
How TradingView Does It
On TradingView, forex pairs are displayed with a single price quote rather than separate bid and ask prices. This single price quote represents the midpoint between the bid and the ask. TradingView uses this midpoint, also called the last trade price , to better display price flow and make it simpler to analyze price trends without the fluctuation that would come from constantly updating bid and ask prices.
For traders using TradingView to monitor forex prices, this single price quote allows them to focus more on price movements and technical analysis rather than factoring in the spread between bid and ask, which as we mentioned, is available with brokers since it's their bread and butter. So factor this in.
The Bottom Line
Going expert-level at bid, ask, and spread isn’t just forex surviving — it’s forex thriving. These tiny details can be the difference between making bank or watching your profits trickle away. Always factor in the spread when setting up trades, especially if you're trading lower-volume currency pairs or during off-hours.
Ready to flex your new bid-ask spread skills? And win some prizes at the same time? Join our paper trading competition "The Leap" , starting November 1, and show everyone what you've got. $25,000 are up for grabs.
BIG POST! | How To Beat SP500?
S&P 500 Performance: +35% since 2022.
My Selected Portfolio Performance: +62%, with an 82% hit rate.
Top Performing Stocks: NVDA (+735%), ANET (+343%), META (+209%), and more.
Technical Analysis Tools Used: Price action, trendlines, Fibonacci levels, round numbers, and more.
It’s been nearly three years since I posted my analysis of S&P 500 stocks on February 23, 2022. Back then, I reviewed all 500 stocks, applied some quick technical analysis, and identified 75 stocks that stood out for me. Importantly, I relied solely on technical analysis to make my picks. Fast forward to today, and the results speak for themselves. Most of these selections have significantly outperformed the broader market, proving the power and importance of technical analysis.
While many investors rely solely on fundamentals, technical analysis brings a dynamic edge that’s often underestimated. By focusing on price action and market behavior, technical analysis allows us to spot opportunities that others might miss, especially it gives a massive psychological edge while the markets are making corrections. The market doesn't care what you know, the market cares what you do!
Here’s what I used for my analysis:
It's kind of pure price action - previous yearly highs, trendlines, a 50% retracement from the top, round numbers, Fibonacci levels, equal waves, and channel projections. For breakout trades, determined strong and waited for confirmation before pulling the trigger.
The Results
While the S&P 500 has gained around 35% over this period , my selected stocks from the same list have made +62%! Out of the 75 stocks I picked, 67 have hit my target zones and 54 are currently in the green. That’s an 82% hit rate, and for me, that’s a good number!
Now, for those who favor fundamental analysis, don’t get me wrong, it has its place. But remember, fundamentals tell you what to buy, while technicals tell you when to buy - to be a perfect investor, you need them both. You could hold a fundamentally strong stock for years, waiting for it to catch up to its "true value," while a technical analyst might ride multiple trends and capture far superior returns during that same time. Also, the opposite can happen – you may see a great technical setup, but if the fundamental factors are against it, you could end up with your money stuck in a bad trade.
To put these ideas in perspective, starting with a simulated portfolio of $76,000, where each stock had an equal investment of around $1,000–$1,100, the portfolio is now worth around $124,000. The results are based on buying at marked zones and holding until today. I calculated entries from the middle of the target zone, as it’s a more realistic and optimal approach compared to aiming for perfect lows (which, frankly, feels a bit scammy) to get much(!) higher returns. This method reflects real-world trading.
Before we dive in, here are the current Top 5 stocks from My Picks:
NVDA: +735%
ANET: +343%
TT: +227%
META: +209%
LEN: +164%
These numbers demonstrate the effectiveness of a solid technical strategy. Many say it's tough to beat the market with individual stock picks, but these results show it’s not just possible, it’s absolutely achievable with the right tools and approach.
Now, let's dive into the charts!
1. Apple (AAPL) - a load-it-up type of setup has worked out nicely. Used previously worked resistance levels. If the stocks performing well and the market cap is big enough then these levels can help you to get on board.
Current profit 65%
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2. Adobe (ADBE) - came down sharply, but the price reached the optimal area and reversed.
Current profi 38%.
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3. Advanced Micro Devices (AMD) - round number, strong resistance level becomes support and the climb can continue.
Current profit 101%
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4. Amazon (AMZN) - came down from high prices to the marked levels and those who were patient enough got rewarded nicely.
Current profit 66%
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5. Arista Networks (ANET) - retest of the round nr. worked perfectly, as a momentum price level, after the strong breakout.
Current profit 343%
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6. Aptiv PLC (APTV): Came down quite sharply and it will take some time to start growing from here, if at all. The setup was quite solid but probably fundamentals got weaker after the all-time high.
Current loss -24%
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7. American Express (AXP) - firstly the round nr. 200 worked as a strong resistance level. Another example is to avoid buying if the stock price approaches bigger round numbers the first time. Came to a previous resistance level and rejection from there…
Current profit 104%
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8. Bio-Rad Laboratories (BIO) - in general I like the price action, kind of smoothly to the optimal zone. It might take some time to start growing from here but also fundamentals need to look over.
Current loss 6%
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9. BlackRock (BLK) - kind of flawless. All criteria are in place and worked perfectly.
Current profit 81%
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10. Ball Corporation (BALL) - a perfect example of why you should wait for a breakout to get a confirmed move. No trade.
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11) Berkshire Hathaway (BRK.B) - Buy the dip. Again, as Apple, a big and well-known company - all you need to do is to determine the round numbers, and small previous resistances that act as support levels, and you should be good.
Current avg. profit from two purchases 64%
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12) Cardinal Health (CAH) - the retest isn't as deep as wanted but still a confirmed breakout and rally afterward. Still, the bias was correct!
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13) Ceridian HCM Holding (DAY) - found support from the shown area but not much momentum.
Current profit 20%
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14) Charter Communications (CHTR) - technically speaking it is a quite good price action but kind of slow momentum from the shown area. Probably came too sharply and did not have enough previous yearly highs to support the fall.
Current loss -10%
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15) Comcast Corp. (CMCSA) - got liquidity from new lows, pumped up quickly, and is currently fairly solid.
Current profit 10%
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16) Cummins (CMI) - got rejected from 2028 and 2019 clear highs, fairly hot stock, and off it goes.
Current profit 80%
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17) Salesforce.com (CRM) - perfect. 50% drop, strong horizontal area, and mid-round nr did the work.
Current profit 83%
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18) Cisco Systems (CSCO) - worked and slow grind upwards can continue.
Current profit 30%
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19) Caesars Entertainment (CZR) - not in good shape imo. It has taken too much time and the majority of that is sideways movement. Again, came too sharply to the optimal entry area.
Current loss -16%
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20) Devon Energy (DVN) - inside the area and actually active atm. Still, now I’m seeing a bit deeper correction than shown.
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21) Electric Arts (EA) - 6 years of failed attempts to get a monthly close above $150 have ended here. It got it and we are ready to ride with it to the higher levels.
Current profit: kind of BE
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22) eBay (EBAY) - it took some time but again, worked nicely.
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23) Enphase Energy (ENPH) - got a breakout, got a retest, and did a ~76% rally after that! If you still hold it, as I do statistics, then…
Current loss -59%
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24) Expeditors International of Washington (EXPD) - kind of worked but didn't reach. No trade.
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25) Meta Platforms (META) - the bottom rejection from the round number $100 is like a goddamn textbook :D At that time 160 and 200 were also a good area to enter. Here are several examples of the sharp falls/drops/declines - watch out for that, everything should come fairly smoothly. Still, it ended up nicely and we have a massive winner here...
Current profit 209%
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26) FedEx (FDX) - I love the outcome of this. Very solid price action and multiple criteria worked as they should. Perfect.
Current profit 60%
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27) First Republic Bank (FRC) - firstly got a solid 30 to 35% gain from the shown area but...we cannot fight with the fundamentals.
Current loss 99%
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28) General Motors (GM) - finally found some liquidity between strong areas and we are moving up.
Current profit 47%
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29) Alphabet (GOOG) - load it up 3.0, a good and strong company, and use every previous historical resistance level to jump in.
Current avg. profit after three different price level purchases 63%
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30) Genuine Parts (GPC) - coming and it looks solid.
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31) Goldman Sachs (GS) - really close one.
Current profit 86%
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32) Hormel Foods (HRL) - quite bad performance here. Two trades, two losses.
The current loss combined these two together is 35%
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33) Intel (INTC) - at first perfect area from where it found liquidity, peaked at 65%. Still, I make statistics if you still holding it then…
Current loss -21%
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34) Ingersoll Rand (IR) - beautiful!
Current profit 144%
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35) Intuitive Surgical (ISRG) - the trendline, 50% drop, strong horizontal area. Ready, set, go!
Current profit 157%
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36) Johnson Controls International (JCI) - second rest of the area and then it started to move finally..
Current profit 55%
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37) Johnson & Johnson (JNJ) - Buy the dip and we had only one dip :)
Current profit 13%
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38) CarMax (KMX) - the area is strong but not enough momentum in it so I take it as a weakness.
Current profit kind of BE
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39) Kroger Company (KR) - without that peak it is like walking on my lines
Current profit 15%
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40) Lennar Corp. (LEN) - strong resistance level becomes strong support. Beautiful!
Current profit 164%
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41) LKQ Corp. (LKQ) - just reached and it should be solid. Probably takes some time, not the strongest setup but still valid I would say.
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42) Southwest Airlines (LUV) - no breakout = no trade! Don’t cheat! Your money can be stuck forever but in the meantime, other stocks are flying as you also see in this post. If there is a solid resistance, wait for the breakout and possibly retest afterward! Currently only lower lows and lower highs.
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43) Las Vegas Sands (LVS) - channel inside a channel projection ;) TA its own goodness!
Current profit 70%
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44) Microchip Technology Incorporated (MCHP) - worked!
Current profit 37%
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45) Altria Group (MO) - got a bit deeper retest, liquidity from lower areas, and probably a second try..
Currently kind of BE
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46) Moderna (MRNA) - "seasonal stocks", again too sharp and we are at a loss…
Current loss -37%
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47) Morgan Stanley (MS) - the first stop has worked, and got some nice movements.
Current profit 62%
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48) Microsoft (MSFT) - Load it up 4.0, buy the dip has worked again with well-known stock.
Three purchases and avg. return from these are amazing 70%
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49) Match Group (MTCH) - it happens..
Current loss -53%
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50) Netflix (NFLX) - almost the same as Meta. Came quite sharply but the recovery has been also quick. Another proof is that technical analysis should give you a psychological advantage to buy these big stocks on deep corrections.
Current profit 153%
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51) NRG Energy (NRG) - Perfect weekly close, perfect retest…
Current profit 90%
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52) NVIDIA (NVDA) lol - let this speak for itself!
Current profit 735%
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53) NXP Semiconductors (NXPI) - usually the sweet spot stays in the middle of the box, and also as I look over these ideas quite a few have started to climb from the first half of the box. Touched the previous highs.
Current profit 74%
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54) Pfizer (PFE) - actually quite ugly, TA is not the strongest. Probably results-oriented but yeah..
Current loss -25%
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55) PerkinElmer - “after” is EUR chart but you get the point.
Current profit 25%
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56) Pentair (PNR) - worked correctly, 50% drop combined with the horizontal area, easily recognizable, and the results speak for themselves.
Current profit 124%
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57) Public Storage (PSA) - again, previous yearly highs and the trendline did the job.
Current profit 36%
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58) PayPal (PYPL) - the area just lowers the speed of dropping, but slowly has started to recover.
Current loss -14%
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59) Qorvo (QRVO) - slow, no momentum.
Current profit 10%
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60) Rockwell Automation (ROK) - previous yearly high again, plus some confluence factors.
Current profit 32%
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61) Rollins (ROL) - after posting it didn’t come to retest the shown area. Being late for a couple of weeks. Worked but cannot count it in, the only thing I can count is that my bias was correct ;)
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62) Snap-On Incorporated (SNA) - same story!
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63) Seagate Technology (STX) - firstly it came there! Look how far it was, the technical levels are like magnets, the price needs to find some liquidity for further growth and these areas can offer it. I like this a lot, almost all the criteria are in place there.
Current profit 73%
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64) Skyworks Solutions (SWKS) - one of the textbook examples of how trendline, 50% drop, round nr. and strong horizontal price zone should match. Still a bit slow and it will decrease the changes a bit.
Kind of BE
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65) TE Connectivity (TEL) - came down, and got a rejection. “Simple” as that.
Current profit 37%
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66) Thermo Fisher Scientific (TMO) - mister Ranging Market.
Current profit 19%
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67) Trimble (TRMB) - finally has started to move a bit. Got liquidity from previous highs again and..
Current profit 45%
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68) Tesla (TSLA) - made a split. Have been successfully recommended many times after that here and there but two years ago we traded in these price levels and..
Current profit 19%
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69) Train Technologies (TT) - dipped the box and off it goes! Epic!
Current profit 227%
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70) Take-Two Interactive Software (TTWO) - I like this analysis a lot. Worked as a clockwork.
Current profit 60%
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71) United Rentals (URI) - WHYY you didn’t reach there :D Cannot count it.
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72) Waters Corp. (WAT) - came to the box as it should be slow and steady. As the plane came to the runway.
Current profit 41%
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73) Exxon Mobil Corp. (XOM) - another escaped winner. Didn’t come down to retest my retest area so, missed it.
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74) Xylem (XYL) - perfect trendline, good previous highs, 50% drop from the peak and..
Current profit 76%
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75) Autodesk (ADSK) - took a bit of time to start climbing but everything looks perfect. Nice trendline, 50% drop from ATH, previous yearly highs - quite clean!
Current profit 66%
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The strategies above show how useful price action, key levels, and psychology can be for investing. By spotting breakouts, and pullbacks, or focusing on round numbers and past highs, technical analysis helps give traders an edge in understanding the market.
Regards,
Vaido
What is liquidityLiquidity is the market's fuel to run the market further market drives from internal liquidity to external liquidity which is also called ERLIRL in short form it's the place where most of the stop loss get hunts and market shift to opposite direction
Take a look at this strategy"Video Idea: A complete beginner-to-pro guide on using TradingView's advanced charting tools, technical indicators, and customizable features for market analysis. The video will cover setting up your workspace, reading charts, creating trading strategies, and navigating the social community. Perfect for traders looking to maximize their TradingView experience!"
"Video Idea: A complete beginner-to-pro guide on using TradingView's advanced charting tools, technical indicators, and customizable features for market analysis. The video will cover setting up your workspace, reading charts, creating trading strategies, and navigating the social community. Perfect for traders looking to maximize their TradingView experience!"
Stacey Burke ID Setup taken on WTI, and Silver reversal shortIn this video, I walk you through my entire thought process during today's trading session. You'll learn how I selected the pairs and executed three key trades:
- Silver Reversal Short
- WTI inside day , first red day, short
Inside days are a key best trade setup of Stacey Burke. Don't miss out on these valuable insights and tips!
For details on the Stacey Burke style trading approach see his site and playbook: https://stacey-burke-trading.thinkifi...
Working To Unlock The 3-6-9 Secrets Of The MarketRecently, there have been a lot of questions related to my SPY Cycle Patterns and how they work.
I've often stated that these patterns are based on Gann, Tesla, and Fibonacci's price theory.
However, underlying all that is a core component related to the 3-6-9 (secrets of the universe) theory.
This video tries to introduce you to the concepts of the 3-6-9 theory and how it overlays with Gann, Tesla, Fibonacci, Japanese Candlesticks, and more.
My focus for the past 24+ months has been to unlock this theory's secrets and develop a practical use component (code) that attempts to provide very clear future trading/price predictions.
Spend some time watching this video. See what you think and open your mind to the concept that price moves through construction and destruction phases (likely based on the 3-6-9 concepts).
At the end of this video, I share some practical knowledge/examples showing why I believe the 3-6-9 theory is critical to unlocking the true secrets of market price action.
I may never be able to unlock all of it, but I'm dedicated to trying to unlock as much as I can within my lifetime.
This drives me to build code solutions and attempt to improve my skills.
Get some.
#trading #research #investing #tradingalgos #tradingsignals #cycles #fibonacci #elliotwave #modelingsystems #stocks #bitcoin #btcusd #cryptos #spy #es #nq #gold
Why Buying High and Selling Low Hurts Your PortfolioStock trading can be a pathway to wealth, but it requires a disciplined approach and a deep understanding of market dynamics. One of the most common errors traders make is buying high and selling low. This mistake, driven by emotions like greed and fear, occurs when traders buy stocks at peak prices due to hype, only to sell them later at a loss when panic sets in. This fundamental error not only undermines trading performance but also runs counter to the basic principle of buying low and selling high.
Understanding the Classic Mistake
"Buying high and selling low" refers to purchasing stocks at elevated prices, often driven by market euphoria, and selling them at lower prices out of panic during a downturn. For example, consider a trader who buys tech stocks during a strong rally, expecting continued gains. When the market corrects and prices drop, the trader panics and sells at a loss, embodying the classic mistake.
SPX Chart Daily with RSI Indicator
Psychological and Emotional Triggers
The root cause of buying high and selling low often lies in emotional and psychological triggers:
--Greed: This can push traders to chase rising stocks, leading to buying at inflated prices.
--Fear: Panic can set in during downturns, prompting traders to sell prematurely to avoid further losses.
--Cognitive Biases: FOMO (fear of missing out) and loss aversion further exacerbate this behavior, clouding judgment and increasing the likelihood of impulsive trading decisions.
Trading with divergences is a powerful tool for identifying potential reversals.
Why It’s a Problem
The impact of buying high and selling low can be devastating. Repeated losses from this mistake can erode capital, reduce recovery potential, and derail long-term financial goals.
--Market Timing Issues: Poor timing, especially in volatile markets, often leads to buying during uptrends and selling during downtrends.
--Profitability Impact: The repeated pattern of trading against the trend limits profitability, making it harder to grow wealth over time.
Identifying the Mistake in Practice
Recognizing this mistake early is crucial. Common scenarios include:
--Bull Markets: FOMO can drive traders to buy during rallies, often at inflated prices.
--Market Corrections: Panic selling during downturns leads to locking in losses, even if the stock rebounds soon after.
Warning Signs include overbought/oversold conditions, excessive market hype, and impulsive decisions based on emotional reactions.
Strategies to Avoid Buying High and Selling Low
To avoid this mistake, traders must employ a disciplined approach:
--Develop a Trading Plan: Set clear entry/exit criteria, define risk management rules, and commit to the plan even during volatility.
--Use Technical Analysis: Tools like Moving Averages and RSI help identify overbought/oversold conditions, guiding better entry/exit decisions.
RSI as Technical Tool on Nasdaq NQ1!
--Set Stop Loss and Take Profit Levels: These predefined levels limit potential losses and lock in gains, preventing emotional decisions.
Psychological and Behavioral Adjustments
Improving trading performance involves managing emotions and making rational decisions:
--Managing Emotions: Techniques like journaling and mindfulness can help traders remain calm and focused.
--Improving Decision-Making: Objective analysis, regular review of trades, and checklists can ensure systematic, data-driven decision-making.
Conclusion
The mistake of buying high and selling low is a common pitfall in stock trading, driven by emotional biases and poor timing. By understanding this mistake, developing a solid trading plan, using technical tools, and setting Stop Loss/Take Profit levels, traders can significantly reduce losses and enhance profitability. Implementing disciplined practices and improving decision-making processes are key to overcoming this classic error and achieving long-term trading success.
4 of the Best Day Trading Strategies4 of the Best Day Trading Strategies
Day trading is one of the most challenging approaches as it requires traders to make decisions quickly. Therefore, many traders like using established trading strategies. Explore the intricacies of day trading strategies in this article. For those keen on hands-on experience, consider using FXOpen's free TickTrader platform to follow along and enhance your trading insights.
1. Bollinger Bands & RSI Strategy
Bollinger Bands and the Relative Strength Index (RSI) are potent tools that, when combined, can offer one of the best strategies for day trading, capitalising on both volatility and momentum.
Entry/Exit Criteria
Entries
Buy Entry:
- Price touches or exceeds the lower Bollinger Band.
- RSI dips below 30 (indicating oversold conditions).
Sell Entry:
- Price touches or exceeds the upper Bollinger Band.
- RSI rises above 70 (indicating overbought conditions).
Stop Losses
Buy Trades:
- Slightly below the low point where the price touched the lower Bollinger Band.
Sell Trades:
- Slightly above the high point where the price touched the upper Bollinger Band.
Take Profits
Buy Trades:
- Price touches the middle Bollinger Band line or
- RSI rises towards 50-60, indicating diminishing bearish momentum.
Sell Trades:
- Price touches the middle Bollinger Band line or
- RSI drops towards 40-50, showing fading bullish momentum.
How/Why the Strategy Works
Bollinger Bands measure an asset's volatility. The outer bands expand during high volatility and contract during low volatility. The asset prices tend to revert to the mean, so a touch or breach of an outer band often indicates a short-term price extreme.
On the other hand, the RSI measures the magnitude and persistence of price movements. Values below 30 or above 70 denote oversold or overbought conditions, respectively.
By combining these tools, traders get a two-fold verification system. The Bollinger Bands hint at price extremes through volatility, while the RSI confirms it through momentum. This dual filter helps in improving the strategy's reliability, capturing reversals with a higher degree of accuracy.
2. Moving Average Crossover with MACD Confirmation
Combining the simplicity of Moving Averages (MA) with the insights from the Moving Average Convergence Divergence (MACD), this is one of the day trading strategies. When the two MAs crossover, it indicates a potential change in trend. The MACD serves as a filter to ensure the trend has momentum and is not a false signal. It’s a good idea to set the MACD’s fast and slow lengths to the same as your Fast and Slow MAs.
Entry/Exit Criteria
Entries
Bullish Entry:
- Fast MA (e.g., 20-period, blue in chart) crosses above the Slow MA (e.g., 50-period, red in chart).
- MACD line moves above the signal line.
Bearish Entry:
- Fast MA crosses below the Slow MA.
- MACD line moves below the signal line.
Stop Losses
Stop Loss for Bullish Entry:
- Slightly below the Slow MA at the point where the Fast MA crossed above the Slow MA.
Stop Loss for Bearish Entry:
- Slightly above the Slow MA at the point where the Fast MA crossed below the Slow MA.
Take Profits
Bullish Trades:
- Fast MA crosses below the Slow MA or
- MACD line descends below the signal line.
Bearish Trades:
- Fast MA crosses above the Slow MA or
- MACD line ascends above the signal line.
Why/How the Strategy Works
Moving Average crossovers indicate trend shifts. If the fast MA surpasses the slow MA, it implies rising momentum; if it drops below, it indicates a potential decline. However, these signals can be misleading. The MACD, reflecting the relationship between two MAs, validates momentum. A MACD line crossing its signal line confirms the MA's direction.
3. Fibonacci Retracement with Stochastic Oscillator
Marrying the predictive power of Fibonacci retracements with the momentum sensitivity of the Stochastic oscillator, this strategy aims to identify potential reversals within major trends. Fibonacci retracements are horizontal lines that indicate potential support and resistance levels, while the Stochastic oscillator measures the speed and change of price movements.
Entry/Exit Criteria
Entries
Bullish Reversal:
- Price retraces to a significant Fibonacci level (commonly 38.2%, 50%, or 61.8%).
- The Stochastic oscillator goes below 20 (oversold territory) and then crosses back above, indicating gaining bullish momentum.
Bearish Reversal:
- Price retraces to a major Fibonacci level.
- The Stochastic oscillator exceeds 80 (overbought territory) and then crosses back below, signalling growing bearish momentum.
Stop Losses
Stop Loss for Bullish Reversal:
- Slightly below the Fibonacci level where the entry was made.
Stop Loss for Bearish Reversal:
- Slightly above the Fibonacci level where the entry occurred.
Take Profits
Exit for Bullish Trades:
- Price reaches the next Fibonacci resistance level or
- The Stochastic oscillator surpasses 80.
Exit for Bearish Trades:
- Price hits the next Fibonacci support level or
- The Stochastic oscillator drops below 20.
Why/How the Strategy Works
Fibonacci retracement levels are grounded in the belief that markets often retrace a predictable portion of a move. When prices pull back to these levels, they often find support or resistance, creating potential trading opportunities.
However, solely relying on Fibonacci can lead to false signals. To mitigate this, the Stochastic oscillator is employed. By determining if an asset is overbought or oversold relative to its recent price action, the oscillator adds a layer of momentum-based confirmation.
4. VWAP and Moving Average Confluence
The Volume Weighted Average Price (VWAP) is a trading benchmark used by traders to determine the average price an asset has traded throughout the day based on both volume and price. When combined with a simple moving average (SMA), traders can pinpoint high-probability trade entries based on confluence and deviations. It’s one of the preferred day trading stock strategies.
Entry/Exit Criteria
Entries
Bullish Entry:
- Price is above both the VWAP (blue in chart) and the chosen SMA (e.g., 20-period, red in chart).
- A pullback occurs, where the price tests the SMA without closing below it.
Bearish Entry:
- The Price is below both the VWAP and the chosen SMA.
- A pullback occurs, where the price tests the SMA without closing above it.
Stop Losses
Stop Loss for Bullish Entry:
- Slightly below the entry point.
Stop Loss for Bearish Entry:
-Just above the entry point.
Take Profits
Exit for Bullish Trades:
- Price crosses below the VWAP or SMA.
- A predetermined risk-reward ratio is reached.
Exit for Bearish Trades:
- Price crosses above the VWAP or SMA.
- A predetermined risk-reward ratio is achieved.
Why/How the Strategy Works
The VWAP adjusts the day's price action for volume, indicating an average price. If the price is above the VWAP, it's seen as bullish, and the opposite for bearish. Paired with the SMA, it reinforces trend identification. When both align and serve as support/resistance, they signal market sentiment. By waiting for the price to respect both the VWAP and SMA during pullbacks, traders can achieve a higher probability of successful trade outcomes.
The Bottom Line
Whether trading forex, commodities, or stocks, these day trading strategies can help you find your feet and get started in the markets. Still, you should remember that they don’t guarantee 100% success. Markets are dynamic, therefore, each strategy should be used as a model that transforms depending on market conditions and your trading approach. Once you’ve got some experience under your belt, consider opening an FXOpen account. When you do, you’ll gain access to a broad range of markets to put your skills to the test, while benefiting from lightning-fast execution and competitive trading costs. Good luck!
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
TOP DOWN ANALYSIS OF US DOLLAR - Watch n´Learn Hi everyone!
So If you were to look back at my previous education video on the DXY you would have seen that we have continued to go higher.
And right we are in the third zone without a pullback. What does it mean?
Well for me, it means its definitely time for a serious pullback, where I would make back all my sell losses.
This a little bit too manipulatory for me, and it does not make much sense, but gotta keep going and make that living.
Thanks for watching!
Swing vs. Scalping: Who Really Wins?In the world of trading, data from industry sources often paints a picture that can be misleading for individual traders. Brokers and trading platforms promote high success rates, particularly for more frequent traders like scalpers, but the reality is often far more complex. In this post, we'll break down some of the numbers presented by industry sources and contrast them with independent research to give you a clearer perspective.
Industry-Sourced Success Rates
According to various industry sources, here’s what the reported success rates look like:
Scalper (Under 5-minute operator):
Success Rate: 50-70%
Reasoning:
High trade frequency.
Small price movements.
Greater liquidity.
Short-term trend strategies.
Swing Trader:
Success Rate: 30-50%
Reasoning:
Lower trade frequency.
Larger price movements.
Greater exposure to risk.
Medium to long-term trend strategies.
At first glance, it seems like scalping offers a better chance of success. More frequent trades, combined with the liquidity of short-term moves, are presented as reasons why scalpers may be more successful. But should you trust these numbers at face value?
Conflicts of Interest in Industry Data
These industry-reported numbers may not be as reliable as they seem. Several potential conflicts of interest come into play when brokers and trading platforms promote certain types of trading:
Platform Promotion: Platforms often highlight strategies that lead to more frequent trades, as these generate higher commissions for brokers.
Attracting Active Traders: Scalpers tend to make more trades, and brokers benefit from the higher transaction volume.
Risk Policies: Some platforms may structure their risk management tools and incentives to favor short-term trading.
What Independent Sources Say
When we look at independent, non-conflicted sources, a different picture starts to emerge. Independent academic studies suggest that swing traders may actually perform better than scalpers, for several reasons:
Lower Trade Frequency: Swing traders typically make fewer trades, which reduces the impact of commission fees and spreads on their returns.
Focus on Trends and Fundamentals: Swing traders often use technical analysis and fundamental factors to capture larger price moves, improving their potential for larger gains.
Better Risk Management: With more time between trades, swing traders tend to employ more disciplined risk management practices.
Less Stress and Fatigue: Scalping requires constant focus, which can lead to poor decision-making due to stress or fatigue.
Independent Studies: Swing Traders vs. Scalpers
Let’s take a look at some independent studies that tell a different story from the industry narrative:
University of California Study (2019): Found that swing traders had an average annual return of 12.6%, compared to 6.8% for scalpers.
Journal of Trading Report (2018): Showed a success rate of 55.6% for swing traders, compared to 41.4% for scalpers.
QuantConnect Report (2020): Strategies based on swing trading delivered an average annual return of 15.6%, outperforming scalping strategies.
These studies highlight how swing trading can offer better risk-reward profiles compared to the fast-paced, high-stress world of scalping.
Key Takeaways for Individual Traders
The key lesson here is not to fall for marketing hype or industry reports that may push you towards a specific style of trading, especially one that benefits the platforms you trade on. Here’s what you should keep in mind:
Be Critical: Always question the sources of information. Industry success rates might be skewed by conflicts of interest.
Independent Research: Seek out independent studies, academic journals, and unbiased platforms to get a clearer picture.
Understand Your Goals: Both swing trading and scalping come with risks. Choose a trading style that fits your goals, risk tolerance, and lifestyle.
Focus on Long-Term Growth: While scalping may seem exciting, swing trading tends to offer better long-term results by focusing on fewer, higher-quality trades with disciplined risk management.
Recommended Resources for Objective Information
Academic Journals: Journal of Trading, Journal of Financial Markets.
University Studies: Seek out financial studies from universities like Stanford or Berkeley.
Independent Platforms: QuantConnect, Backtrader.
Specialized Blogs: TradingView, Investopedia.
In conclusion, while the industry may promote fast-paced trading with promises of high success rates, the reality for individual traders is often quite different. Take the time to educate yourself and base your decisions on unbiased, independent information to improve your chances of success.
P.S. Stay tuned for my next post, where I'll dive deeper into the topic, going beyond the potential use of misleading advertising. I'll demonstrate, using statistical methods—specifically, a covariance analysis—why larger time frames, like those used in swing trading, are mathematically more favorable for individual traders. Don't miss it!
Disclaimer: This post is for informational purposes only and does not constitute financial advice. Trading is risky, and you should always conduct thorough research or consult a financial professional before making any investment decisions.
