What is Technical Analysis In Simple Words Technical Analysis is about study order flow the interpretation of transactions between buyers and seller's.
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X-indicator
The key to starting a trade is support and resistance points
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As you study candles, you will learn about trend reversal sections.
Therefore, rather than learning the shapes or patterns of candles, when you study them, you will be able to see the support and resistance points and sections made up of the selling area and trend reversal sections in a big picture.
Therefore, rather than trying to memorize the shapes or arrangements of candles, it is important to see whether support and resistance points and sections are formed when such shapes, arrangements, and patterns appear.
The same goes for other studies related to charts.
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As you study candles, you will find that what you have studied appears in the sections where candles are gathered.
These areas are drawn as horizontal lines to indicate support and resistance points.
However, objective information is needed to conduct trading on the horizontal lines drawn like this.
Otherwise, even the support and resistance points you drew will likely become useless lines if you conduct barrack trading because you don't trust them.
Be careful because your psychological state will interfere with analyzing the chart.
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The easiest way to obtain this objective information is the Heikin Ashi chart and the Renko chart.
The Heikin Ashi chart and the Renko chart help you check the trend because they show fewer fakes and sweeps.
(Heikin Ashi chart)
(Renko chart)
Among these, you can immediately see that the Renko chart is a bit easier to find support and resistance points.
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You can think of the points near the end of the blocks on the Renko chart as having strong support and resistance points.
Therefore, among the horizontal lines drawn on the chart above, the 2800.0 and 4000.0 points are the end points of three blocks, so they can be seen as strong support and resistance points.
If you change the Renko chart to a regular candle chart, you can clearly see that it will form support and resistance points or sections.
However, since the Renko chart changes the price in blocks, it is difficult to trade at this point.
Therefore, the Heikin Ashi chart or Renko chart is good to use when analyzing the chart, but it is difficult to trade.
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To compensate for this, we created a horizontal line at the price position using indicators (StochRSI, OBV, CCI, RSI) that have been used for a long time.
The horizontal line connected to the current candle position plays the role of the current support and resistance point.
And, since the longer the horizontal line, the stronger the support and resistance role, you can see that it plays the role of support and resistance even if it is not connected to the current candle.
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The support and resistance points drawn on the Heikin Ashi chart or Renko chart are difficult to use for trading, but you can easily check the support and resistance section by looking at only the 1D chart.
However, in order to display support and resistance points with a general candle chart, support and resistance points must be displayed on the 1M, 1W, and 1D charts.
And, the order of charts with strong support and resistance is 1M > 1W > 1D charts.
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When you look at the 1M, 1W, and 1D charts using the HA-MS indicator, horizontal lines like the above are displayed.
You can display them by changing the line type or line thickness to make them easier to see and then proceed with trading.
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The above content corresponds to the method of finding support and resistance points included in general chart-related books.
Of course, it is different from the explanation in the chart-related book, but I explained how to use indicators to more clearly indicate support and resistance points.
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Even if you trade with the support and resistance points above, it will not work well when you actually trade.
This is because you are not familiar with the most important trading strategy in trading.
In conclusion, the most important thing is to create a trading strategy, rather than finding the support and resistance points explained above, looking at the trend line, or looking at indicators.
However, it is very difficult to create a trading strategy that fits your investment style from the beginning.
So, you should practice creating a trading strategy that suits you while trading based on the information of the objective chart.
In order to trade, you need to decide on the following three things:
1. Investment period
2. Investment size
3. Trading method and profit realization method
The above three things must be determined.
No. 1 and 2 are determined according to your investment style.
Therefore, it is recommended not to change No. 1 and 2 after you start trading.
3. Based on the information of the actual chart, the buy section, sell section, and stop loss point are determined.
In addition, the profit realization method can be determined according to the investment period.
The profit realization method is:
1. How to get cash profit
2. How to increase the coin (token) corresponding to the profit
There are methods 1 and 2 above.
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In order to create a trading strategy, it is important to display all the information you want on the chart before starting the transaction.
If you do not, and then display lines on the chart after starting the transaction, psychological factors will be added and displayed, so the possibility of not trusting the lines drawn after starting the transaction increases.
To prevent this, it does not matter if you use the indicator added to the HA-MS indicator.
The reason is because it is objective information.
You should increase profits or reduce losses by adjusting the investment ratio while conducting the transaction using this objective information.
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Have a good time.
Thank you.
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Basic example of starting a trade
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This is an example of starting a trade, explaining that you should objectively define the basics that are right for you.
Therefore, I hope that this will be an opportunity to reexamine your trading judgment criteria rather than judging it as right or wrong.
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It is showing a downward trend without breaking through the sell line of the superTrend indicator.
Accordingly, the key is whether it can receive support near the M-Signal indicator (approximately 59953.52) on the 1W chart and rise above 60672.0-61099.25.
If not, you should check whether it is supported near the MS-Signal (M-Signal on the 1D chart).
Therefore,
1st: 59053.55
2nd: 57889.10
You should check whether it is supported near the 1st and 2nd above.
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Usually, there are many cases where you trade impulsively based on your psychological state.
To prevent this, it is good to have an objective trading method according to your investment style.
This objectification is best done at the support and resistance points drawn on the 1M, 1W, and 1D charts.
Therefore, it is good to trade based on whether it is supported near 59053.55 or 60720.0-61099.25.
However, judging whether it is supported only by sight can lead to an incorrect judgment depending on psychological factors that occur during trading, so it is good to have objective information as the basis for judgment.
It refers to indicators added to the chart as objective information.
The MS-Signal indicator is used as a trend-related indicator, which is the M-Signal indicator of the 1M, 1W, and 1D charts.
As a trading-related indicator, the HA-Low, HA-High indicators and their corresponding box sections, superTend, and volume profile are used.
As a trading-related reference auxiliary indicator, the BW indicator and StochRSI indicator are used.
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If we explain the current movement by referring to these indicators,
- The superTrend indicator, which is passing around 60672.0-61099.25, has failed to rise above the sell line,
- It is showing a downward trend below the M-Signal indicator of the 1W chart,
- The StochRSI indicator is showing a trend of changing from an upward to a downward slope in the overbought section. However, since the StochRSI indicator has not yet fallen from the overbought zone and is not in a state where StochRSI < StochRSI EMA, it is difficult to see it as a downward turn.
Therefore, an aggressive sell (SHORT) is possible between the M-Signal indicator of the 1W chart and the 60672.0-61099.25 range.
Afterwards, when the StochRSI indicator falls from the overbought zone and becomes a state where StochRSI < StochRSI EMA, if it shows resistance near 59053.55 or the MS-Signal (M-Signal on the 1D chart) indicator, you can sell (SHORT).
If it is supported at the point mentioned above, you can buy (LONG).
However, it is recommended to check whether the state has been changed to StochRSI > StochRSI EMA.
If not, it can pretend to rise and fall right away.
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Have a good time. Thank you.
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- Big picture
It is expected that the real uptrend will start after rising above 29K.
The section expected to be touched in the next bull market is 81K-95K.
#BTCUSD 12M
1st: 44234.54
2nd: 61383.23
3rd: 89126.41
101875.70-106275.10 (overshooting)
4th: 134018.28
151166.97-157451.83 (overshooting)
5th: 178910.15
These are the points where resistance is likely to be encountered in the future. We need to see if we can break through these points.
We need to see the movement when we touch this section because I think we can create a new trend in the overshooting section.
#BTCUSD 1M
If the major uptrend continues until 2025, it is expected to start by creating a pull back pattern after rising to around 57014.33.
1st: 43833.05
2nd: 32992.55
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Trend lines - how to build them and how to use them?Before we dive into the world of trend lines, I recommend familiarizing yourself with the support and resistance zone
Here we go:
Trend lines are one of the most universal tools for trading in any market, used in intraday, swing and position trading strategies. Properly drawn on charts, they help to predict the direction of price movement and identify trend reversals.
In addition, trend lines help you to accurately determine the optimal entry and exit points, as well as set a stop loss.
It is recommended not to rely on trend lines alone, but to integrate them with other methods of technical analysis, expanding your trading arsenal.
Often many traders draw too many lines, it is uninformative and useless
How to place trend lines on a chart?
An uptrend is a combination of at least two pullbacks
Similar in a downtrend:
Instructions for markings:
Find at least two points on the chart
Connect them with a line
But, let's remember the Axiom:
1. Randomness
2. Coincidence.
3. Regularity
Until a trendline is pushed back a third time - it is considered unconfirmed...
Once the third bounce has occurred, the line can be considered valid, but does not guarantee that it will necessarily bounce the fourth time!
Like all patterns in the market, trend patterns can be drawn on any timeframe, also - they are more effective on older ones (as well as all others)
How to use trend lines in your trading?
Frequent trades from a trend line are rebound or breakout trades
Example:
Trendline confirmed (bounced three times) - on the fourth approach we can pay attention - what happens next? Price will either bounce from our trendline again or there will be a breakout
Next example:
How can we determine whether there will be a breakout or a bounce? As I said before, you need to take into account the context: indicators, price action, nearby levels and so on (it all depends on your psychology)
How do trend lines fit together?
Support and resistance levels are areas on a chart that indicate potential pressure (on a side)
The same principle applies to trend lines. The only difference is that trend lines are sloped rather than horizontal.
How to properly label/draw trend lines?
Which trend lines are important and which ones should be ignored?
Focus only on the major pivot points
Connect at least two major pivot points.
Adjust the slope of the line to get the most amount of price touching the line, whether it is the shadows of candles or their bodies.
Important clarification - trend lines represent a support zone, not specific levels.
How can you use trend lines?
The trend is our friend. Where the trend goes, so goes we. Trading against the trend is foolish. If you do decide to do it, it must be justified!
Trend lines are the direction of the current market.
Also the trend line itself can be divided into two positions:
If the trend becomes flatter, it means that the market is moving into a state of consolidation
If the trend is becoming steeper, it means that the trend is getting stronger (or perhaps it is reaching its climax and is approaching its final stage).
Trend Lines Entry Point:
Like all other patterns in technical analysis or price action - trend lines can help you find a more favorable entry point in terms of risk-to-reward ratio
How to use a trend line to identify a market reversal?
Chances are you have encountered this before. There is a trend line breakout, you are already expecting a trend reversal, but the market continues its original movement
Like all indicators/patterns - not a panacea. Each strategy has its own risks, just when we add other osnovnopologologayuschih signs to one strategy, the chance of risking a loss - decreases!
Technique for determining a trend reversal:
Wait for a trend breakout
Wait for a lower low/maximum to form.
If the price breaks the previous minimum/maximum, most likely the trend will go in the direction of the breakdown...
Chart Analysis: Establishing Trading Strategies
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When you start studying charts, the first thing you learn is about candles.
However, you start studying about the Open, Close, High, and Low of candles.
When you start studying about the Moving Average, you start to think that you understand the charts.
However, when you actually start trading with the Moving Average, you realize that nothing works properly.
So, you start studying other indicators.
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The above is based on my experience. When you study various charts, you may think you know them, but when you actually start trading, you realize that they don't apply at all.
Where on earth did I go wrong?... What I learned after a long time is that I was wrong from the very beginning.
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In other words, I realized that my subsequent chart studies were not done properly because I lacked understanding of candles.
When you start studying candles, you study candles of various shapes and patterns.
At this time, you should not be too obsessed with the names of candle shapes or patterns or the conditions that occur and try to memorize them.
It is important to read it repeatedly several times until you can grasp the concept of the arrangements formed by the combination of candle shapes or patterns, that is, the support and resistance points.
Eventually, when the candle shapes or patterns are combined, you can find the volume profile section formed around it, that is, the section where trading volume occurs.
By drawing and marking the support and resistance points you find in this way on 1M, 1W, and 1D charts, you can create a trading strategy on the charts you mainly trade.
That's all the experts in chart analysis say.
In the end, everything is about looking at the combination of candles that make up the chart, finding the corresponding support and resistance points, and trading according to your trading strategy.
A trading strategy is to create a response strategy at the corresponding support and resistance points based on the three things above:
1. Investment period
2. Investment size
3. Trading method and profit realization method
However, since most books do not include trading strategies, you will only learn about the timing of trading and closing of trading using various indicators.
Because of this, there are many cases where you cannot respond to the volatility that occurs after starting trading and end up losing money.
Even so, it is difficult to specifically define the contents of trading strategies.
This is because the investment period, investment size, and trading method are different depending on the individual's investment style.
Therefore, what I can tell you is that you need to set the buy, sell, and stop loss points according to the support and resistance points obtained through chart analysis and wait for a while.
Due to price volatility, you may not touch the buy, sell, and stop loss points or may move past them.
You should learn how to create a trading strategy by modifying the way you respond to these things according to your investment style.
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One important thing here is that you should mark the support and resistance points in advance through chart analysis before starting trading.
Otherwise, if you start trading and then mark support and resistance points, psychological factors will come into play, which will likely lead to an unexpected transaction.
Don't forget this, and you should practice marking support and resistance points in advance before starting a transaction.
Also, you should avoid analyzing charts after listening to various articles, news, or community content.
The reason is that psychological factors can come into play.
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I think trading is a response to the movement of prices that fluctuate in real time.
Therefore, waiting and determination are necessary.
If you wait too long or do not make a decision and pass it by, there is a high possibility that you will suffer losses or make little profit, so you need something to refer to when waiting or making a decision.
That is the support and resistance points I mentioned above.
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However, support and resistance points alone do not solve everything.
Therefore, you should add trend lines and various indicators to ask for a method of responding to price fluctuations.
However, since the trend line is formed by a diagonal line, there is a lack of countermeasure strategies using the trend line.
Therefore, the trend line is used to literally find out what the current trend is.
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Therefore, when it deviates from the trend line, the movement at the support and resistance points is checked and the corresponding response is made.
When trading with a chart consisting of the above two support and resistance points or only the trend line, there are often cases where the transaction cannot be properly conducted due to fakes or sweeps.
Therefore, in order to counter these fakes or sweeps, various indicators are added to the chart.
The most commonly used of these is the price moving average.
Even if you add the price moving average, you realize that it is a curve, just like the trend line, and is therefore not suitable for countermeasure strategies.
So, the price moving average is also used to check the trend, just like the trend line.
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In that regard, the indicator I recommend is the StochRSI indicator.
The default settings for the StochRSI indicator are 14, 7, 3, 3 (RSI, Stoch, K, D).
The value of the Signal line (EMA) of the StochRSI indicator is 7.
If the StochRSI indicator rises in the oversold zone and maintains the state of StochRSI > StochRSI EMA, it is a buying period.
On the other hand, if the StochRSI indicator falls in the overbought zone and maintains the state of StochRSI < StochRSI EMA, it is a selling period.
However, you should trade depending on whether there is support or resistance at the support and resistance points formed at that location.
Even if there is movement in the StochRSI indicator, it is recommended not to trade if you do not have support and resistance points drawn on the 1M, 1W, and 1D charts.
The reason is that you may feel psychologically anxious, so there is a possibility that the trade will proceed incorrectly.
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If you can trade with only what I mentioned above and make an average profit, it is because you have established a trading strategy according to your investment style.
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We need objective information to establish a trading strategy according to your investment style.
We think that this is the only way to minimize the psychological factors that arise when starting a trade.
If you can add various indicators to the chart to obtain objective information and receive support and resistance point information according to them, you can create a trading strategy according to them at any time.
To do this, we used the StochRSI, OBV, CCI, and RSI indicators to display support and resistance points on the price candle part.
And, we added the StochRSI and BW indicators as auxiliary indicators.
The StochRSI indicator added as an auxiliary indicator is not the StochRSI indicator provided by default, but an indicator with a modified formula, so you can share the chart and use it or copy and paste the TS-BW UP indicator to your own chart and use it.
There is no problem using the basic StochRSI indicator.
However, there is a slight difference from what I said, so there may be a slight problem in understanding.
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As above, since the support and resistance points of the 1M, 1W, and 1D charts are drawn on the chart to create a trading strategy, my chart is very confusing and not easy to understand when you first look at it.
And, since there are many indicators that I have not explained, it may be even more difficult to see the chart.
Therefore, to resolve the difficult parts, share the chart, hide the indicators added to the chart, and activate them one by one while looking at them, and you will be able to understand the chart.
If you share the chart, you can use it normally, so you can check the chart from various angles.
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Have a good time.
Thank you.
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Boost your trading with Naked Point of ControlsLearn how to identify and use Naked Points of Control (nPOCs) in your trading sessions. This video explains the concept of nPOCs, their significance on the chart, and practical applications for thesis generation, entries, and trade management. Based on James Dalton's concepts from "Mind Over Markets," this strategy provides a strong edge for traders.
Gold Trading Strategy: A Professional Approach to XAUUSD 👀 👉 This comprehensive video presents a sophisticated trading plan for the XAUUSD (Gold/US Dollar) market, designed to maximize profitability through a structured approach. We delve into crucial aspects of technical analysis and leverage TradingView's advanced tools to gain a competitive edge in the markets.
Key topics covered include:
1. Trend identification and analysis
2. Entry and exit criteria
3. Market overextension assessment
4. Discount entry strategies aligned with institutional positioning
5. Higher timeframe trend analysis combined with 4-hour chart entry points
6. Price action and market structure interpretation
Our methodology emphasizes the importance of avoiding premium entries in bullish markets and instead focuses on identifying optimal discount entry opportunities. By aligning our strategy with institutional movements, we aim to enhance the probability of successful trades.
The video provides a detailed exploration of various technical analysis components, including:
- Trend analysis techniques
- Market structure interpretation
- Price action patterns
- Overextension indicators
- Traded Volume indicators
- Multi-timeframe analysis (higher timeframe trend combined with 4-hour chart entries)
This comprehensive approach to XAUUSD trading is designed to equip traders with the tools and knowledge necessary to navigate the gold market effectively and potentially increase their trading success.
Disclaimer: Trading in financial markets carries a high level of risk and may not be suitable for all investors. The information provided in this video is for educational purposes only and should not be construed as financial advice. Past performance is not indicative of future results. Always conduct your own research and consider your financial situation before making any investment decisions. Trade responsibly and use proper risk management techniques. 📉✅
The “Fan Principle” is a powerful techniqueThe “Fan Principle” is a powerful technique in trading, using trendlines to predict price movements.
Highlights
📈 Powerful Technique: The Fan Principle is formidable in technical analysis.
📉 Identifying Points: Drawing trendlines from three key points.
🔴 Trading Signals: Buy or sell signals can be identified depending on the pattern.
📊 Practical Examples: Analyzing price movements on charts to illustrate the technique.
💰 Profit Opportunities: Strategies can result in significant gains, up to 22%.
🛑 Risk Management: Importance of placing stop-losses to protect investments.
🔍 Additional Resources: Detailed information and charts will be shared to deepen understanding.
Key Insights
📈 Technique Effectiveness: The Fan Principle helps identify clear trends using reference points, making the strategy both simple and effective.
📉 Importance of Confirmation: Validating trendlines with a third point builds confidence in trading signals, increasing the chances of success.
🔴 Warning Signals: Sell or buy signals, as shown in the video, can lead to strategic decisions based on historical analysis.
📊 Visual Analysis: Visualizing data on charts helps understand market movements, which is essential for technical analysis.
💰 Profit Potential: Trades based on the Fan Principle can provide significant profit opportunities, highlighting its effectiveness.
🛑 Protection Strategies: Placing stop-losses above resistance points is crucial to limit losses in the event of adverse market movements.
🔍 Access to resources: The information shared in the description and on other platforms offers ways to deepen the understanding of the technique and improve trading skills.
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The fan principle in trading is a strategy that consists of opening several positions on the same asset at different price levels. Here are the main aspects of this approach:
How it works
The idea is to open several positions (or "lots") on the same financial asset at different price levels, thus forming a "fan" of positions.
These positions are opened at points considered as potential market reversals.
The objective is to let these positions unfold like a fan or to close them gradually according to the evolution of the market.
Advantages
Risk diversification: By entering the market at different levels, the trader reduces the impact of a single bad entry.
Movement capture: This approach allows to take advantage of different phases of a price movement.
Flexibility: The trader can adjust his strategy by closing some positions while keeping others open.
Complementary Tools
The fan principle can be combined with other technical analysis tools to improve its effectiveness:
Fibonacci Fan: This tool automatically draws trendlines at key levels (38.2%, 50%, 61.8%) that can serve as entry points for fan positions.
Gann Angles: These lines, drawn at different angles (82.5°, 75°, 71.25°, etc.), can also help identify potential levels to open positions.
RSI (Relative Strength Index): Some traders combine the fan principle with the RSI to confirm entry points.
Important Considerations
This strategy requires good risk management, as it involves opening multiple positions.
It is crucial to set stop-loss and take-profit levels for each position in the range.
Using this approach requires a thorough understanding of the market and significant trading experience.
Nifty - Is it about to TOP OUT?This article will concentrate on the fundamental aspects of identifying the conclusion of Wave 5 within the framework of the Elliott Wave Principle.
According to established guidelines:
1) Wave 5 typically projects to 61.8% of the distance covered by Waves 1 to 3.
2) The minimum extension is set at 38.2% of Waves 1 to 3.
3) In instances of extensions in the fifth wave, projections can reach as high as 100%.
Upon analyzing the Nifty index using these criteria, we observe that the primary wave has extended, with a projection of 100% estimated at approximately 26,339. The next degree wave, comprising (1), (2), (3), (4), and (5), has a standard projection of around 26,385. Meanwhile, the lowest degree wave, represented as 1-2-3-4-5, has a typical projection of 61.8% at about 26,252. By integrating these figures, we identify a potential zone between 26,252 and 26,339 that may signify the conclusion of Wave 5.
Examining the indicators for additional insights, we note that the monthly RSI is around 82, marking the highest level since the 2008 financial crisis.
Considering all the aforementioned factors, it is plausible to suggest that the Nifty index may experience a reversal within this identified zone. However, i t is essential to remain aware that we are currently in a bull market, and we should await price action and candlestick patterns for confirmation before making any trading decisions. All wave counts are illustrated on the accompanying chart.
For a detailed explanation on Elliot waves basics, please refer to the following link:https://www.investopedia.com/terms/e/elliottwavetheory.asp
DISCLAIMER: It is important to note that the information provided in this analysis is intended solely for educational purposes. It is strongly advised to consult with a financial advisor prior to making any investment decisions. I cannot be held responsible for any financial losses that may occur.
Trading Near the Bells Part 1: The OpenWelcome to our 2-part series on how to trade the two most intense, liquid, and volatile periods of the trading day: the open and the close. These moments bookend the trading session and are critical for traders who thrive on fast-paced environments.
In Part 1, we’ll focus on the open—the first hour after the market bell rings. We will explore why this period offers unique trading opportunities, examine key price patterns, and discuss proven strategies for capturing profit while managing risk during this high-volatility window. From gap trading to opening range breakouts, understanding the open is essential for those looking to capitalise on the rush of liquidity and order flow at the start of each session.
The Significance of the Open
The open is often the most critical time of the trading day. It sets the tone for the session as market participants react to overnight developments, including earnings reports, geopolitical events, and economic data releases. The first hour of trading typically sees a surge in volume as traders place orders based on these new inputs, creating significant liquidity and volatility. This influx of activity can result in sharp price moves, offering traders the chance to capture quick profits.
Additionally, the open provides vital clues about market sentiment. The price action within the first 30-60 minutes can hint at whether the market will experience a trend day or a range-bound session. Understanding how to interpret and trade this period effectively can give traders a strategic edge, allowing them to capitalise on these early movements while managing risk appropriately.
Three Strategies for Trading the Open
1. Gap and Go
The "Gap and Go" strategy focuses on stocks or index’s that gap up or down significantly at the open and continue to move in the same direction. This strategy works best when the gap is backed by a fundamental catalyst, such as a strong earnings report, positive economic data, or a major news announcement. Gaps that are supported by solid news or events tend to continue in the same direction as they attract significant buying or selling pressure.
Additionally, this strategy is most effective when the price is breaking out of a period of compression or a key level of resistance. For instance, if a stock has been consolidating under a major resistance level and gaps up on strong earnings, it is likely to trigger further buying as traders who were waiting for the breakout jump into the trade.
• Key Setup: Look for gaps backed by a catalyst and breaking out of key technical levels.
• Entry: Enter in the direction of the gap if the price holds above or below the opening range.
• Stop-Loss: Set your stop near the gap level or below the opening range to protect against a quick reversal.
Example Gap and Go:
In this example, the S&P 500 gaps above both a descending trendline and a key resistance area at the open – backed by inflation data that had come in lower than expected. The gap holds within the first hour and continues to rise throughout the session, demonstrating how the early price action set the stage for the rest of the day.
S&P 500 5min Candle Chart
Past performance is not a reliable indicator of future results
2. Opening Range Breakout (ORB)
The Opening Range Breakout strategy involves identifying the high and low of the first 15-30 minutes of trading and looking for a breakout beyond this range. This strategy works best when the breakout aligns with the broader market trend. If the larger trend is bullish and the stock or currency pair breaks above its opening range, it indicates that the market is continuing in the direction of the prevailing trend, providing a higher probability trade.
• Key Setup: Works well when the breakout is in line with the bigger picture trend.
• Entry: Enter long if the price breaks above the opening range with strong volume, or enter short if it breaks below.
• Stop-Loss: Place stops just inside the opening range to protect against false breakouts.
Example ORB:
In this scenario, the S&P 500 establishes a clear range within the first hour. A decisive break below this range leads to a cascade of selling pressure, indicating how the breakout set the tone for the rest of the session.
S&P 500 5min Candle Chart
Past performance is not a reliable indicator of future results
3. Gap Fade
The Gap Fade strategy involves trading against the initial gap, assuming the move is overextended or lacks a fundamental catalyst. This strategy works particularly well when the gap occurs without significant news or events to justify the price movement. Traders using this approach bet that the market has overreacted to the gap and that the price will reverse and "fill" the gap by moving back toward the previous day's close.
Additionally, this strategy is effective when the gap coincides with a trend that has become extended on higher timeframes, suggesting that the market is due for a correction or reversal. For example, if a stock gaps up but has been in a prolonged uptrend and appears overbought on the daily chart, it may be primed for a pullback.
• Key Setup: Best used when there is no significant catalyst behind the gap and when the trend is extended.
• Entry: Short-sell if the gap appears overextended and lacks momentum, aiming to catch the reversal.
• Stop-Loss: Set your stop above the high of the opening range for shorts (or below the low for longs) to limit losses in case the move continues.
Example Gap Fade:
In this example, the S&P 500 gaps higher but stalls at a key resistance area. The market fails to continue higher during the first hour, leading to a break below resistance and a downtrend for the rest of the session.
S&P 500 5min Candle Chart
Past performance is not a reliable indicator of future results
Conclusion
The market open is a dynamic period full of opportunity for traders who are prepared to act quickly. Whether you prefer trading with the momentum of a Gap and Go, riding the trend with an Opening Range Breakout, or fading an overextended Gap, understanding the unique characteristics of the open is a crucial element of short-term trading. By using these strategies and adjusting them to the day's market conditions, you can navigate the volatility of the open with confidence and precision.
In Part 2 we’ll dive into trading the close—the other bookend of the trading day with its own set of challenges and opportunities.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Master Trading with Heiken Ashi Candles in 11.32 minutes Let’s talk about how to DOMINATE the market using Heiken Ashi candles for perfect entries and exits! This is where your trading game levels up.
First, when those candles start turning smooth and green with no wicks at the bottom, that's your entry signal! It’s like the market saying, "Hop on, this train is about to take off!" You ride those green candles as long as they stay strong and wick-free at the bottom.
Now, here’s the key – watch for red candles starting to form with wicks on top! That’s your signal to EXIT! Don’t get greedy, secure those gains, and get out before the market turns against you.
With Heiken Ashi, you get smoother trends, cleaner signals, and better trades! Enter with confidence, exit with precision, and OWN the market!
That's it, fast and powerful! Now go crush those trades!
Thesis Generation for mutitimeframe SB Style Trading explainedIn this video, I guide you through the complete process of generating a trading thesis and selecting pairs for my shortlist. We'll begin with a theoretical explanation and then apply it to today's NAS situation. My analysis incorporates the Stacey Burke trading style alongside a mechanical multi-timeframe bias analysis. A consistent and clear analysis process, repeated daily, is crucial for continuous improvement. I hope you find this helpful!
Why Large Language Models Struggle with Financial Analysis.Large language models revolutionized areas where text generation, analysis, and interpretation were applied. They perform fabulously with volumes of textual data by drawing logical and interesting inferences from such data. But it is precisely when these models are tasked with the analysis of numerical, or any other, more-complex mathematical relationships that are inevitable in the world of financial analysis that obvious limitations start to appear.
Let's break it down in simpler terms.
Problem in Math and Numerical Data Now, imagine a very complicated mathematical formula, with hundreds of variables involved. All ChatGPT would actually do, if you asked it to solve this, is not really a calculation in the truest sense; it would be an educated guess based on the patterns it learned from training.
That could be used to predict, for example, after reading through several thousand symbols, that the most probable digit after the equals sign is 4, based on statistical probability, but not because there's a good deal of serious mathematical reason for it. This, in short, is a consequence of the fact indicated above, namely that LLMs are created to predict patterns in a language rather than solve equations or carry out logical reasoning through problems. To put it better, consider the difference between an English major and a math major: the English major can read and understand text very well, but if you hand him a complicated derivative problem, he's likely to make an educated guess and check it with a numerical solver, rather than actually solve it step by step.
That is precisely how ChatGPT and similar models tackle a math problem. They just haven't had the underlying training in how to reason through numbers in the way a mathematics major would do.
Financial Analysis and Applying It
Okay, so why does this matter for financial analysis? Suppose you were engaging in some financial analytics on the performance of a stock based on two major data sets: 1) a corpus of tweets about the company and 2) movements of the stock. ChatGPT would be great at doing some sentiment analysis on tweets.
This is able to scan through thousands of tweets and provide a sentiment score, telling if the public opinion about the company is positive, negative, or neutral. Since text understanding is one of the major functionalities of LLMs, it is possible to effectively conduct the latter task.
It gets a bit more challenging when you want it to take a decision based on numerical data. For example, you might ask, "Given the above sentiment scores across tweets and additional data on stock prices, should I buy or sell the stock at this point in time?" It's for this that ChatGPT lets you down. Interpreting raw numbers in the form of something like price data or sentiment score correlations just isn't what LLMs were originally built for.
In this case, ChatGPT will not be able to judge the estimation of relationship between the sentiment scores and prices. If it guesses, the answer could just be entirely random. Such unreliable prediction would be not only of no help but actually dangerous, given that in financial markets, real monetary decisions might be based on the data decisions.
Why Causation and Correlation are Problematic for LLMs More than a math problem, a lot of financial analysis is really trying to figure out which way the correlation runs—between one set of data and another. Say, for example, market sentiment vs. stock prices. But then again, if A and B move together, that does not automatically mean that A causes B to do so because correlation is not causation. Determination of causality requires orders of logical reasoning that LLMs are absolutely incapable of.
One recent paper asked whether LLMs can separate causation from correlation. The researchers developed a data set of 400,000 samples and injected known causal relationships to it. They also tested 17 other pre-trained language models, including ChatGPT, on whether it can be told to determine what is cause and what is effect. The results were shocking: the LLMs performed close to random in their ability to infer causation, meaning they often couldn't distinguish mere correlation from true cause-and-effect relationships. Translated back into our example with the stock market, one might see much more clearly why that would be a problem. If sentiment towards a stock is bullish and the price of a stock does go up, LLM simply wouldn't understand what the two things have to do with each other—let alone if it knew a stock was going to continue to go up. The model may as well say "sell the stock" as give a better answer than flipping a coin would provide.
Will Fine-Tuning Be the Answer
Fine-tuning might be a one-time way out. It will let the model be better at handling such datasets through retraining on the given data. The fine-tuned model for sentiment analysis of textual stock prices should, in fact, be made to pick up the trend between those latter two features.
However, there's a catch.
While this is also supported by the same research, this capability is refined to support only similar operating data on which the models train. The immediate effect of the model on completely new data, which involves sentiment sources or new market conditions, will always put its performance down.
In other words, even fine-tuned models are not generalizable; thus, they can work with data which they have already seen, but they cannot adapt to new or evolving datasets.
Plug-ins and External Tools: One Potential Answer Integration of such systems with domain-specific tooling is one way to overcome this weakness. This is quite akin to the way that ChatGPT now integrates Wolfram Alpha for maths problems. Since ChatGPT is incapable of solving a math problem, it sends the problem further to Wolfram Alpha—a system set up and put in place exclusively for complex calculations—and then relays the answer back to them.
The exact same approach could be replicated in the case of financial analysis: Once the LLM realizes it's working with numerical data or that it has had to infer causality, then work on the general problem can be outsourced to those prepared models or algorithms that have been developed for those particular tasks. Once these analyses are done, the LLM will be able to synthesize and lastly provide an enhanced recommendation or insight. Such a hybrid approach of combining LLMs with specialized analytical tools holds the key to better performance in financial decision-making contexts. What does that mean for a financial analyst and a trader? Thus, if you plan to use ChatGPT or other LLMs in your financial flow of analysis, such limitations shall not be left unattended. Powerful the models may be for sentiment analysis, news analysis, or any type of textual data analysis, numerical analysis should not be relayed on by such models, nor correlational or causality inference-at least not without additional tools or techniques. If you want to do quantitative analysis using LLMs or trading strategies, be prepared to carry out a lot of fine-tuning and many integrations of third-party tools that will surely be able to process numerical data and more sophisticated logical reasoning. That said, one of the most exciting challenges for the future is perhaps that as research continues to sharpen their capability with numbers, causality, and correlation, the ability to use LLMs robustly within financial analysis may improve.
Build Confidence with Heikin-Ashi Candle Patternow to Trade Using Heikin Ashi Candles on the NDX Chart
Heikin Ashi candles are a powerful tool for filtering out market noise and identifying trends more clearly than traditional candlesticks. By smoothing out price action, they allow traders to focus on the overall direction of the market, helping you make more informed trading decisions. Here’s a breakdown of how to use Heikin Ashi candles effectively, specifically on the NDX chart.
1. How to Read Heikin Ashi Candles
The primary difference between Heikin Ashi and traditional candlesticks is in how they are calculated. Heikin Ashi uses a modified formula that incorporates the open, close, high, and low prices of the previous candle, which results in a smoother appearance. This smoothing effect allows traders to more easily spot trends:
Bullish Trends: A series of green candles with no lower wicks typically indicates a strong uptrend. These are the times to consider long trades.
Bearish Trends: A series of red candles with no upper wicks signals a strong downtrend. These are great opportunities for short positions.
Consolidation: Mixed green and red candles with wicks on both ends often indicate consolidation or indecision in the market.
The Heikin Ashi chart reduces the noise from minor price fluctuations, allowing you to focus on the trend itself rather than the short-term volatility.
2. Entry and Exit Points
The beauty of Heikin Ashi candles lies in their ability to simplify entries and exits. Here’s how to use them:
Entry Points: You want to enter a trade when a new trend is confirmed. For a long position, wait for the first few green Heikin Ashi candles after a period of red ones, signaling a reversal to the upside. For a short position, look for a sequence of red candles after a bullish period has ended.
Exit Points: Exit your trade when you start seeing signs of reversal. For long trades, this would be the appearance of the first red Heikin Ashi candle after a series of green ones. For short trades, exit when the first green candle appears after a bearish sequence.
Waiting for these clear signals helps avoid premature exits and ensures that you’re riding the trend for as long as possible.
3. Key Support and Resistance Levels
Heikin Ashi works even better when combined with key support and resistance levels. On the NDX chart, identifying these levels provides context for your trades:
Support Levels: If the price is approaching a key support level, and you start to see bullish Heikin Ashi candles, it’s a potential buy signal.
Resistance Levels: If the price is approaching resistance and bearish Heikin Ashi candles begin forming, that could signal a good time to sell or short.
Using Heikin Ashi in conjunction with these levels increases the probability of success by ensuring you are trading within important zones where price action tends to react.
By mastering the use of Heikin Ashi candles and combining them with support and resistance, you can significantly improve your ability to spot and act on high-probability trading opportunities, especially on volatile instruments like NDX.
New Features For Dynamic Pivot Levels - Percentage indicatorIn our latest update, we’ve packed in some exciting new features and enhancements that will elevate your analysis experience to the next level:
Exciting New Features: We’ve added additional Exponential Moving Averages (EMAs), allowing you to track five different EMAs tailored to your needs. But that’s not all – we’ve introduced smiley indicators that give you instant feedback on whether the price is above or below the moving average. Now you can analyze with a clean, clutter-free chart!
Fibonacci Level Enhancements: We’ve upgraded the logic behind Fibonacci levels to give you more accurate insights. The improved Fibonacci calculations provide a clearer, more precise visual representation, helping you make better-informed decisions.
A Sleek, Streamlined User Interface: We know how important it is to work with a smart, efficient tool, so we’ve revamped the user interface! Settings are now neatly organized into categories, allowing you to quickly and easily customize everything you need. This makes your workflow smoother and faster.
This update doesn’t just bring new capabilities – it makes the tool more accessible and user-friendly than ever. It’s your key to staying focused on precision analysis, without the distractions!
Relative Strength (Not RSI)For a serious trader Relative Strength (Not RSI) is a very important component. A careful study of RS will tell you your are on which stage.
There are 4 stages in a stock's life Stage:
Stage 1 - This is the stage of consolidation, usually happens at bottom after a fall.
Stage 2 - This when stock breaks out from Stage 1 and price moves away from stage 1.
Stage 3 - This is again a consolidation phase but this will be at top or after stage 2.
Stage 4 - This is the break down of stage 3 and price falls quickly .
As a Trader we usually enter at Stage 2 to go long or Stage 4 to either book out our stock or to short a stock.
Relative Strength or RS is a stocks performance against bench mark index. This tool is freely available in TV community. Which is a great tool to take or avoid a trade.
In this case RS is in red or falling which means the stock is under performing bench mark index NIFTY500. Now look the chart, stock is in consolidation after a up move. So RS is advising us against any further buy a stock is underperforming even though moved up and rightly so the eventual broken down.
Simple charts and methods can make money!It's a late summer Saturday afternoon and I am writing this so you don't have to! Lot's of people don't have time to watch the market all day and night. Here is a bare bones daily chart that you can easily construct from default configured Trading View community indicators and even more easily discern the correct market position. ONLY BE IN THE MARKET WHEN THE PRICE IS ABOVE OR BELOW BOTH INDICATORS. Configure TV Alerts from the SPX price cross of the indicators and be on your way. I position in pre and post SPX ETF markets off this chart Happy Trades! And now I'm going fishing. DAP
GOLDEN ZONE TRADINGFibonacci retracements and extensions are technical analysis tools that use the Fibonacci sequence to identify potential support and resistance levels in financial markets. They are based on the mathematical concept that the ratio between any two consecutive numbers in the Fibonacci sequence approaches the golden ratio (approximately 1.618) as the numbers get larger.
Fibonacci Retracements:
Calculate levels: Fibonacci retracements are calculated by dividing the price difference between a high and a low by the Fibonacci ratios (0.000%, 23.6%, 38.2%, 50.0%, 61.8%, 100.0%).
Identify support and resistance: The resulting levels are plotted on the chart to identify potential support and resistance areas.
Trading strategy: Traders can use Fibonacci retracements to enter trades at support levels and exit trades at resistance levels.
Fibonacci Extensions:
Calculate levels: Fibonacci extensions are calculated by extending the price movement beyond a high or low by the Fibonacci ratios (1.618, 2.618, 4.236).
Identify potential targets: The resulting levels are plotted on the chart to identify potential price targets for a move.
Trading strategy: Traders can use Fibonacci extensions to set profit targets for their trades.
Golden Zone Trading:
The term "golden zone" is often used in conjunction with Fibonacci retracements and extensions. It refers to the area between the 38.2% and 61.8% retracement levels, which is considered to be a high-probability zone for price reversals or continuations.
Trading Strategies:
Buy at 38.2% retracement: If the price retraces to the 38.2% level and shows signs of bullish reversal (e.g., a higher low), traders can consider buying with a target at the 61.8% extension level.
Sell at 61.8% retracement: If the price retraces to the 61.8% level and shows signs of bearish reversal (e.g., a lower high), traders can consider selling with a target at the 61.8% extension level on the downside.
Use in combination with other indicators: Fibonacci retracements and extensions can be used in combination with other technical indicators (e.g., moving averages, RSI) to improve the accuracy of trading signals.
Important Considerations:
Subjectivity: Fibonacci analysis is a subjective tool, and the exact levels used may vary among traders.
Market conditions: The effectiveness of Fibonacci tools can vary depending on market conditions and the specific asset being traded.
Risk management: As with any trading strategy, it is important to use proper risk management techniques to protect your capital.
Additional Tips:
Practice: The best way to learn how to use Fibonacci tools effectively is to practice on historical data.
Combine with other analysis: Consider using Fibonacci tools in combination with other forms of technical analysis, such as chart patterns or support and resistance levels.
Be patient: Trading using Fibonacci tools often requires patience, as it may take time for price to reach the desired levels.
Remember: While Fibonacci retracements and extensions can be a valuable tool for traders, they are not infallible. It is important to use them in conjunction with other forms of analysis and to always practice good risk management.
The Art of Candlestick Trading: How to Spot Market Turns EarlyBuckle up, TradingViewers! It's time to unravel the ancient secrets of candlestick patterns. Originating from an 18th-century Japanese rice trader, these patterns aren't simply red and green elements on your trading charts—they are the Rosetta Stone of market sentiment, offering insights into the highs and lows and the middle ground of buyers and sellers’ dealmaking.
If you’re ready to crack the code of the market from a technical standpoint and go inside the minds of bulls and bears, let’s light this candle!
Understanding the Basics: The Candlestick Construction
First things first, let’s get the basics hammered out. A candlestick (or Candle in your TradingView Supercharts panel) displays four key pieces of information: the open, close, high, and low prices for a particular trading period. It might be 1 minute, 4 hours, a day or a week — candlesticks are available on every time frame. Here’s the breakdown:
The Body : This is the chunky part of the candle. If the close is above the open, the body is usually colored in white or green, representing a bullish session. If the close is below the open, the color is usually black or red, indicating a bearish session.
The Wicks (or Shadows) : These are the thin lines poking out of the body, showing the high and low prices during the session. They tell tales of price extremes and rejections.
Understanding the interplay between the body and the wicks will give you insight into market dynamics. It’s like watching a mini-drama play out over the trading day.
Key Candlestick Patterns and What They Mean
Now onto the fun part — candlestick formations and patterns may help you spot market turns (or continuations) early in the cycle.
The Doji : This little guy is like the market’s way of throwing up its hands and declaring a truce between buyers and sellers. The open and close are virtually the same, painting a cross or plus sign shape. It signals indecision, which could mean a reversal or a continuation, depending on the context. See a Doji after a long uptrend? Might be time to brace for a downturn.
The Hammer and the Hanging Man : These candles have small bodies, little to no upper wick, and long lower wicks. A Hammer usually forms during a downtrend, suggesting a potential reversal to the upside. The Hanging Man, its evil twin, appears during an uptrend and warns of a potential drop.
Bullish and Bearish Engulfing: These are the bullies of candlestick patterns. A Bullish Engulfing pattern happens when a small bearish candle is followed by a large bullish candle that completely engulfs the prior candle's body — suggesting a strong turn to the bulls. Bearish Engulfing is the opposite, with a small bullish candle followed by a big bearish one, hinting that bears might be taking control of the wheel.
The Morning Star and the Evening Star : These are three-candle patterns signaling major shifts. The Morning Star — a bullish reversal pattern — consists of a bearish candle, a small-bodied middle candle, and a long bullish candle. Think the dawn of new bullish momentum. The Evening Star, the bearish counterpart, indicates the onset of bearish momentum, as if the sun is setting on bullish prices.
The Shooting Star and the Inverted Hammer : Last but not least, these candles indicate rejection of higher prices (Shooting Star) or lower prices (Inverted Hammer). Both feature small bodies, long upper wicks, and little to no lower wick. They flag price exhaustion and potential reversals.
Trading Candlestick Patterns: Tips for Profitable Entries
Context is King : Always interpret candlestick patterns within the larger market context. A Bullish Engulfing pattern at a key support level is more likely to pan out than one in no-man’s-land.
Volume Validates : A candlestick pattern with high trading volume gives a stronger signal. It’s like the market shouting, “Hey, I really mean this move!”
Confirm with Other Indicators : Don’t rely solely on candlesticks, though. Use them in conjunction with other technical tools like RSI, MACD, or moving averages to confirm signals.
Wrapping It Up
Candlestick patterns give you a sense for the market’s pulse and offer insights into its moment-to-moment sentiment — is it overreacting or staying too tight-lipped. Mastering candlesticks can elevate your trading by helping you spot trend reversals and continuations. These patterns aren’t foolproof — they are powerful tools in your trading toolkit but require additional work, knowledge and context to give them a higher probability of confirmation.
It’s time to light up those charts and let the candlesticks illuminate your trading path to some good profits!
OHLC Statistical Mapping + Average Range Levels-Manipulation from OHLC Statistical Mapping was my entry
SL was above 1/3AWR- and I targeted AWR-
Simple model
ADX — Or The 1-Minute Hack For Better Trading ResultsEvery trader dreams about that magic trick that delivers better trading results—this one little thing that miraculously turns their strategy into a bullet-proof winner, striking a 100% success rate.
Unfortunately, this article doesn't provide that magic trick. If you are looking for it, you must continue searching (but remember to hit me up if you find it).
However, this article provides a simple trick to improve your trading results. They won't hit a success rate of 100% but should definitely improve.
The best part is that it is a super easy trick to implement or utilize within minutes.
You may already expect what this trick is about: It's about a technical indicator. Drum-roll: Introducing the Average Directional Index (ADX).
What Is The ADX About?
I know it's boring, but let's do some theory first! It will help you understand the indicators and why using them will improve your trading results.
The Average Directional Index (ADX) is an indicator used to measure the trend strength.
The indicator was developed by J. Welles Wilder in 1978. Over the years, the ADX has become a reliable tool for traders looking to identify strong market trends.
Here's the part you should understand: The power of the ADX lies in its ability to filter out noise. Subsequently, it provides a clear view of whether a market is trending or ranging.
Here's How The ADX Helps To Achieve Better Trading Results
Here's what I experienced when using the ADX in my trading strategies.
1—The ADX Helped Me To Understand Trends (Easily)
The ADX has really simplified how I analyze trends by quantifying their strength. It's been a game changer for me, helping to gauge market momentum and enabling me to make more informed decisions.
2—Versatile Usage
Especially recently, I trade different timeframes. In this context, the ADX fits into my diverse trading strategies. It's versatile across various markets and timeframes.
3—Making More Confident Decisions
Incorporating the ADX into my trading approach has added a crucial layer of confirmation. This boost in confidence has significantly improved my decision-making process, making me feel more secure about the trades I place.
By integrating the ADX into your trading strategy (we will discuss how to do that in a second), you can filter out "false alerts." In other words, you filter out trade signals unsupported or driven by a trending market. Ultimately, the number of entry signals you get is lower; however, the quality will be significantly better.
How To Use The ADX?
Integrating the ADX into your trading strategy is easier than easy. Here's how I use it:
I always turn to the ADX for that extra assurance before making any trades.
Therefore, in my trading strategy, an ADX value above 30 is my green light for a strong trend. Even reading around 25 catches my eye, signaling a trend building up and potentially worth my investment.
Whenever the ADX is below 25, it's my cue to hit the brakes. It usually means the trend is weak or the market's just moving sideways. I've learned patience pays off here, waiting for clearer signs of a solid trend before jumping back in.
Putting The 1-Minute Hack To Test
Here's what you can do: Integrate the ADX into your trading strategy for at least a month. This period allows you enough time to see how the ADX can change your approach to identifying trade opportunities and avoiding potential pitfalls.
Alternatively, you can backtest your strategies after including the ADX to check how they would have performed.
Wrapping It Up
The ADX is a powerful yet straightforward tool that can clarify trend strength, helping you make more confident trading decisions.
By incorporating it into your trading strategy, you're not just adding another indicator but adopting a strategy for more precise, more informed trading. Give it a go, and you may find that the ADX becomes an indispensable part of your trading arsenal.
BREAKDOWN & FREE TIPS FROM A PRO FOR ALL *TOWARDS BOTTOM*
Simple trade I flowed with market structure based on a transition that occured on july 8th 2024 that is evident per daily and weekly timeframe which is the momentum timeframe. (thats huge)
After this occured I utilized fibs and my understanding of candlestick structure and supp/res zones and awaited a certain area to break and retest and a beautiful lower high was created and we flowed to tp! brought sl into profit after 20 pips as usual to ensure this would be risk free but not too deep into profit to get stopped out and miss the overall move. IF YOU HAVE ANY QUESTIONS ABOUT ANYTHING ASK BELOW I GOT U! NOW FOR THE TIPS:
* THE MOST CONSISTENT ISSUE I'VE SEEN FROM TRADERS ARE THE FOLLOWING:
1. MARRYING PARTICULARLY TIMEFRAMES (ROBBING URSELF OF THE WHOLE PICTURE)
2. NOT BEING DETAILED AND LAZY. LAZY EFFORT = LAZY RESULTS.
3. NOT UNDERSTANDING WHERE THEY ARE IN MARKET STRUCTURE OR KNOWING PROPER BIAS AT ANY GIVEN POINT
4. TRADING MORE THAN (1 OR 2) PAIRS.
5. BEING UNADAPTABLE TO WHAT HAPPENS AND/OR ALWAYS GUESSING INSTEAD OF USING ACTUAL DATA PRESENTED IN REAL TIME
Forex Day Trading: Setting a Bias for the DayWhen day trading forex, it’s easy for traders to get caught up in the ebb and flow of intraday volatility. This is where setting a daily bias becomes crucial. Having a clear directional bias forms the bedrock of your trading plan, providing a compass to guide your trading decisions throughout the day. It helps maintain focus, reduce emotional trading, and improve consistency. However, it's essential to remember that no bias is infallible. There will be times when the market defies expectations, and recognising when your bias may be wrong is a critical skill for successful trading.
In this article, we’ll explore how to set a bullish or bearish bias for the day, particularly for traders focusing on European trading hours. We’ll use the 5-minute candle chart at 7 a.m. (GMT) as our reference point. By considering factors like prior day's price action, Asian session dynamics, and other technical indicators, you can form a well-rounded view of the market and make more informed trading decisions.
The Importance of Having a Daily Bias
A daily bias provides a structured approach to trading. It acts as a filter, helping you focus only on setups that align with your bias, thus avoiding unnecessary trades. For instance, if your bias is bullish, you’ll primarily look for buying opportunities and vice versa for a bearish bias. This focused approach not only helps in capitalising on the most promising trades but also minimizes losses by avoiding trades that go against your established bias.
Having a bias doesn’t mean sticking to it rigidly. Markets are dynamic, and price action can change quickly. The key is to have systems and checkpoints in place that help you recognise when your bias might be wrong, allowing you to adjust your strategy accordingly. Reassessing your bias before the start of key trading sessions, such as the US open, can also be a good practice to ensure you're aligned with the latest market developments.
Factors to Consider When Setting a Bias
1. Prior Day’s Price Action
Understanding the previous day’s price action provides context for today’s trading. Analyse the following factors:
• Predominant Trend: Was the trend bullish, bearish, or sideways? Identifying the trend helps you align your bias with the existing market momentum.
• Close in Relation to High and Low: Did the market close near the high or low of the day? A close near the high suggests buying strength, while a close near the low indicates selling pressure.
• Point of Control (POC): Using tools like the SVP HD indicator, observe the POC (the price level with the highest traded volume) of the prior day. Is it higher or lower than the previous day’s POC? A higher POC suggests bullish sentiment, while a lower POC indicates bearish sentiment.
2. Asian Session Price Action
The Asian trading session often sets the tone for the early European session. Monitoring the overnight price action provides insights into how market sentiment may have shifted. Consider the following:
• Price Relation to Prior Day’s High/Low: Did the price defend the prior day’s low (bullish) or break above the prior day’s high (bullish)? Conversely, did it reject the prior day’s high or break below the prior day’s low (bearish)?
• Asian Session Range: Identify the high and low of the Asian session. Has a range formed, and if so, is the current price above, below, or within this range? A price above the Asian range suggests bullish momentum, while below suggests bearish momentum.
• VWAP Position: The Volume Weighted Average Price (VWAP) is a key indicator for intraday bias. If the price is holding above the VWAP, it’s a bullish signal. If below, it’s bearish.
3. Bigger Picture Context
While day trading focuses on the short-term, it’s important to consider the broader market context:
• Daily Trend: Is there an established uptrend, downtrend, or sideways market in the daily time frame? While your intraday bias doesn’t need to align with the bigger picture, being aware of the overall market structure helps in making informed decisions.
• Market Structure: Are there key support and resistance levels nearby? Is the market in a breakout or consolidation phase?
Examples of Setting a Bias
Bullish Bias:
If, at the start of the European trading session, the EUR/USD shows a clear bullish trend from the prior day—holding above VWAP and closing near the intraday highs—this can suggest a bullish bias. Further confirmation might come from the Asian session price action showing prices holding above the prior day's high and maintaining a position above VWAP.
EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
Bearish Bias:
Conversely, if the EUR/USD exhibited a consistent bearish trend during the prior day—remaining below VWAP and closing near the lows—this indicates bearish sentiment. If the Asian session showed a brief retracement followed by a break below a key retracement line and VWAP, it would further reinforce a bearish bias.
EUR/USD 5min Candle Chart
Past performance is not a reliable indicator of future results
News Events and Economic Calendar
News events can dramatically affect market sentiment and price action, often causing volatility spikes. Always check the economic calendar before forming your bias. High-impact news, such as central bank announcements, employment data, or geopolitical events, can override technical signals. Be prepared for increased volatility around these times, and consider adjusting your bias or staying on the sidelines to avoid unnecessary risk.
Reassessing Your Bias During the Trading Day
Markets are continuously evolving, and a bias set early in the day may not hold as new information becomes available. It’s a good idea to reassess your bias before the start of the US trading session. The US session often brings a fresh wave of liquidity and can change the market’s direction. By reviewing price action, key levels, and any news events that have occurred, you can decide whether to stick with your initial bias or make adjustments to your trading plan.
Balancing Creativity and Discipline
Setting a daily bias is not an exact science; it’s a blend of art and strategy. Over time, experience will improve your ability to interpret market signals and adjust your bias. Thinking creatively within a structured framework and remaining flexible is a great mindset for day trading. Use your bias as a guide, but be ready to adapt when the market tells you otherwise.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83.51% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
