All About the Flag Pattern (Beginner-Friendly)Hello everyone,
Today, I’ve prepared an educational guide on chart patterns, specifically focusing on the Flag Pattern.
This content is designed to be easy for beginners to follow, so I hope you find it engaging and informative. :)
Below is the outline I’ll be using for this post:
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✔️ Outline
1. What is a Flag Pattern?
Definition
Key Components
Characteristics
2. Bullish Flag Pattern
Basic Characteristics
Examples
3. Bearish Flag Pattern
Basic Characteristics
Examples
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1. What is a Flag Pattern?
1) Definition
A Flag Pattern forms during a brief consolidation phase after a strong price movement, often signaling the continuation of a trend. It typically appears when prices make a sharp move, either up or down, followed by a period of sideways or slightly counter-trend movement.
Flag Patterns can occur in both uptrends and downtrends, named for their resemblance to an actual flag. After a strong price move, the market consolidates briefly before continuing in the original trend direction.
2) Key Components
Flagpole: The initial strong price movement that sets the overall trend direction before the consolidation phase.
Flag: The consolidation period where prices move sideways or slightly counter to the trend, often forming a rectangle or parallelogram. This phase typically occurs with a decrease in trading volume.
Breakout: The moment when the price resumes its original trend direction. In an uptrend, this is an upward breakout, and in a downtrend, a downward breakout, confirming the continuation of the trend.
3) Characteristics
Duration: The Flag Pattern typically lasts longer than the Flagpole but varies depending on the timeframe.
Volume: Volume usually decreases during the Flag’s formation and increases once the breakout occurs.
Reliability: The Flag Pattern is considered a reliable indicator of trend continuation, making it a favorite among traders using trend-based strategies.
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2. Bullish Flag Pattern
1) Basic Characteristics
A Bullish Flag forms after a strong upward price movement, signaling a temporary consolidation phase. During this consolidation, volume typically decreases, suggesting that the market is pausing rather than reversing. After this phase, the price often continues its upward trend, accompanied by an increase in volume. Bullish Flag Patterns also help relieve overbought conditions in technical indicators, providing the market with a chance to prepare for another move up.
2-1) Example 1
This chart from May 2023 shows a strong Flagpole followed by a long consolidation phase (Flag). The volume then increased as the price broke out, completing the Bullish Flag Pattern.
2-2) Example 2
In this chart from March 2021, we see a similar setup: a strong Flagpole, followed by a consolidation phase, leading to a breakout that continued the upward trend.
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3. Bearish Flag Pattern
1) Basic Characteristics
The Bearish Flag Pattern is the inverse of the Bullish Flag. It follows a strong downward move (Flagpole) and is followed by a period of consolidation (Flag) with decreasing volume. Like its bullish counterpart, the Bearish Flag can relieve oversold conditions, leading to a continuation of the downtrend after a breakout.
2-1) Example 1
This chart from May 2022 displays a Bearish Flag Pattern: a strong downward Flagpole, followed by a Flag consolidation phase. After the consolidation, a breakout occurred, continuing the downtrend.
2-2) Example 2
This chart from February 2022 also illustrates a strong downward Flagpole, followed by a consolidation phase (Flag), leading to a breakout that completed the Bearish Flag Pattern.
This guide will help you better understand the Flag Pattern and how it can be used in your trading strategy effectively!
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✔️ Conclusion
I hope the various Flag Patterns and market analysis techniques covered in this post prove helpful in your investment journey. Chart analysis is not merely a technical skill but also a deeper understanding of market psychology and movement. Flag Patterns, along with other chart patterns, visually reflect the psychological dynamics of the market. Mastering their use can greatly contribute to successful trading.
That being said, the crypto market is inherently unpredictable and fast-moving. While technical analysis is a valuable tool, it’s important to adopt a comprehensive approach that considers broader market trends and external factors. I encourage you to apply the insights gained from this post with a balanced and cautious perspective when making investment decisions.
New opportunities are constantly emerging, and those who are prepared to seize them will find success. The chart represents the market’s voice. Listening to it, interpreting it, and making informed decisions based on that interpretation is "the essence" of chart analysis.
I sincerely hope that, through continuous learning and experience, you’ll evolve into a more confident and successful investor.
Beginner
Identifying Key Support and Resistance Levels: Beginner’s GuideWelcome to the market’s game of zig-zag. On the one side, we’ve got the bulls pulling prices up (doing the zigging), and on the other, the bears dragging them down (doing the zagging). Somewhere in there lies a delicate balance—where prices pause, reverse, or break through. These are support and resistance levels, and if you want to play in the big league and run shoulders with big sho(r)ts, you need to know how to spot them. Let’s dive in.
Support and Resistance: The Basics
Imagine the market as a ping-pong ball bouncing between two invisible walls. These invisible walls are called support and resistance . The floor is support—where buyers step in to catch the fall. The ceiling? That’s resistance, where sellers say, “Not so fast,” and push the price back down. Your job? Figure out where these walls are and use them to your advantage.
Support is the price level where a downtrend could pause due to strong enough demand, or buying momentum. Think of it as a safety net—a level where the price stops its freefall, cushioned by determined buyers.
Resistance is the opposite. It’s the price level where an uptrend might stall because sellers step in, seeing the price as overbought. It’s the market’s ceiling, and breaking through it can be tough.
How to Spot Support and Resistance
Here’s the good news: spotting these levels is easier than you think. Start by zooming out on your chart and identifying where price reversals have occurred. Where has the market consistently bounced up from? That’s your support. Where has it been smacked down? That’s your resistance.
That’s also when everyone becomes a chartist and technical analyst—draw horizontal lines at these levels. And boom, you’ve just identified key support and resistance zones. But there’s more to it than just connecting the dots.
Horizontal Levels: The Classics
The classic way to identify support and resistance is to look for horizontal levels. These are price levels where the market has historically reversed multiple times. If the price has bounced off $50 three times, you’ve got yourself a solid support level. Likewise, if $75 has been a brick wall for the price, it’s a clear resistance level.
Trendlines: The Dynamic Duo
Horizontal lines are great, but what if the market’s trending? That’s where trendlines come in. Draw a line connecting the higher lows in an uptrend or the lower highs in a downtrend. These lines can act as moving support or resistance levels. They’re not just lines—they’re the market’s roadmap. Want to get things even more heated up? Look for channels by identifying the higher lows in the uptrend coupled with the higher highs. Apply the same but in reverse for downtrending markets—lower highs and lower lows is what makes up a channel.
The Role of Volume
Here’s where it gets a little spicy. You have to add volume in the mix. When you see a support or resistance level holding up with high volume, it’s like getting a thumbs-up from the market. If the price breaks through a level with high volume, it’s more likely to keep moving in that direction. Low volume? Don’t get too excited—it could be a fake-out.
Psychological Levels: The Round Numbers Game
Ever noticed how prices tend to stall at round numbers? That’s no accident. Humans love round numbers and the market is no different. Levels like $100, $1,000, or even $100,000 (did someone say Bitcoin BTC/USD ?) often act as psychological support or resistance. It’s not science—it’s market psychology.
How to Trade Support and Resistance
Now that you know where the walls are, or inflection points, let’s talk strategy. Trading support and resistance isn’t about guessing where the market will go—it’s about stacking the odds in your favor.
Buying at Support (DYOR, tho) : When the price pulls back to a support level, it’s a prime buying opportunity. Just remember, you’re not the only one watching this level—fellow retail traders, professional money spinners and lots of algorithms are trained to chase trends. Use additional confirmation, like a bunch of indicators stacked together , before you pull the trigger.
Selling at Resistance (DYOR, tho) : If the price rallies to a known resistance level, it’s time to think about selling. Again, wait for some confirmation—a rejection, bearish pattern, or a volume spike—to avoid getting caught in a breakout.
Breakout Trades (DYOR, tho) : If a price breaks through support or resistance with conviction (read: strong volume), it often leads to significant moves. You can trade these breakouts, but be cautious of false breakouts. Nobody likes getting trapped.
Final Thoughts
Support and resistance levels are like the market’s heartbeat. They reveal where the big players are making their moves and where the action is likely to heat up. Whether you’re looking to jump in or bail out, these levels are your go-to guide. So, the next time you’re analyzing a chart, remember—those lines aren’t just random. They’re the market’s battle lines, and now, you’ve got the intel to trade them.
Let’s wrap this up with some inspiration from legendary trend follower Paul Tudor Jones:
“I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.”
Do you trade with support and resistance levels? Let us know your thoughts in the comment section!
How to start Trading!We (the discord mods) are trying to get a document going where people can look for advice on how to get started in trading, its not an easy question and certainly not an easy answer, but here we go :)
Be prepared that to becoming a profitable trader you will need months (even years) of training and learning, but its worth the time!
The beauty of Tradingview and its tools (Paper trading) is that you can learn it all for free. (All you need is time). You can demo trade for free, learn and experiance how the market moves, learn what you want to do later in life and learn all the nessessary tools you will need!
We realize that certain information is maybe something that you dont agree first or you say "what? that cant be real?", but bear with us for the time being, go through this document and then decide!
So, lets start with the first question for you:
What lifestyle do you have at the moment?
Why is that important? well, for each trade you need a few hours of preparation, and if you are a daytrader (intraday trader or scalper) then you trade each day (even multiple times) and each time you need preparation, can you do that? can you sit 4-6h infront of the computer everyday to analyse a trade?
If not, we have other options for you.. for example swing trader or investor.
What type of person are you?
For example: if you decide to do scalping, be prepared to get more stressful situations then a daytrader.
So it's important to figure out how you want to trade and what you can actually handle (the psychology in trading has a HUGE impact of your trading life.)
If you go and test out some strategies and you realize that this is not for you, then you have a clear sign that you shouldnt explore this further.
What type of assets can you trade?
There are local laws that you have to follow in your country that may be restrictive to certain assets so you have to figure out what you can actually trade. There are plenty of assets outthere, you just have to explore them and search for a broker you can actually sign up with a KYC.
For this, the best option is to go to Brokers and check them out until you find one that is allowed in your country.
(Be careful with brokers not on tradingviews list, for example if you want to trade crypto but its not allowed in your country but you find some broker you can sign up, the problem comes once you want to withdraw and use the money in your country. your local bank is most likely not letting you do that.)
Basics of Trading
No matter what you decide to be (daytrader, scalper, investor..), you will need to learn the basics of all of them.
Learn all the basic Terms such as:
- Long / Short (Bullish / Bearish)
- Bid / Ask (combined with spread below)
- Crypto, Forex, CFD, Stocks, Options (Bonds, Shares, Indices...)
- Market Order / Limit Order (Stoploss (SL), Profit Target (TP), Trailing)
- Leverage
- Margin / Balance
- Spread / Slippage
- Gaps
- Ranges
- Timeframe / Sessions
And then there are the major Indicators:
- RSI
- MACD
- Stochastics
- Moving Averages (simple, exponential, smoothed, and so on..)
- Price trends
- Support and Resistance (Supply & Demand)
- Volume
I know, alot of you reading this go like "What? indicators are useless, price action is the real deal.." but thats not the point here, we are learning the basics of trading. The more you know the better you will be at trading. Knowledge is power.
Also i would advice you to study the math behind them too, while you do that you learn how and why they act the way they do!
Journal
Yes, we all hate it but we all know why its good to do! :)
The simplest method i find is to use the long/short tool of tradingview, write down the notes in a textfield and then hide it in the control-center of your drawings (rightclick into chart -> Object Tree)
Do it! you won't regret it!
Risk Reward
This topic is something so many of you ignore and its one of the most important part of trading.
You all heard the sentence "there is no trading without SL" and some of you may think "yeah, thats not true", but in the Risk Reward section you learn how and why this sentence is as true as it gets. you never, ever trade without SL because otherwise you cant calculate your risk.
There is also the golden rule "Never risk more then 1% of your Money" and with an SL you can manage this sentence, without it, how can you even begin to manage this? you can't.
(Yes, i know some of you risk 2-5%, but not me, im a firm believer you should never break this rule).
If you risk 1% and lose 10 times in a row, you lost 10%. if your RR is 1:3, you need 4 wins to regain your losses.
If you risk 2% and lose 10 times in a row, you lost 20%. if your RR is 1:3, you need 7 wins to regain your losses.
... you see where this goes, right?
For this, and any other topic above, the best thing to use is the Search function on tradingview, input the title and read it all. (yes, all, yes it will take weeks, yes tahts what its all about)
Psychology
Okey, this one is a big one. not gonna lie, that will take the most time because we are all humans.
you will experiance FOMO (fear of missing out), greed, rage, and so on... thats just normal.
Thats the biggest reason to start journaling your trades, write down what you felt, why did you take a trade that you realize you shouldnt have in the first place?
So, in psychology everyone needs to figure out how he/she is obviously, i can just tell you how i do it right now and what steps made the biggest impact:
I do only 1:2 RR trades.
- Yes, after 1:2 im out, i dont care if he goes to the moon, all i care is that im no longer in a trade (my mind plays all kinds of tricks while in a trade.)
- Big impact!
I only trade 1 asset.
- I trade EURUSD all day long for years now. No, i dont look at others while im actively trading.
- Big impact!
I set and forget.
- i put in my SL and TP and once im in the trade (or even set the limit order) im semi-afk from the charts.
- I have 2 alerts on my tradingview, one for the TP and one for the SL. thats it.
those few steps helped me a ton in my trading, and yes, they may not be for everyone but it is just a showcase of hwo you need to find something that works for you.
🔜RULE FOLLOWING CHALLENGE, join to improve your trading 💪Did you know that most beginner traders can't follow their rules for 7 days in a row? Unfortunately, they start overtrading or changing the rules of the system, entering random trades, overrisk, etc.
I've been there many many times myself, but then slowly started focusing on this part and made my first 7, then 10 days of rules following, broke with another tilt, started again, reached 17, 30 days, and failed again.
Each time it became better and better, and now I'm on my way to 50 days of rule-following.
I developed a routine and system that allows me to keep doing it, day after day. It includes mental technics, as well as simple EAs for Metatrader to help with over-risking and overtrading issues.
If you want to step out of your comfort zone and improve your trading, join this 7-day rule-following challenge by leaving a comment below.
It will be hosted here on TradingView, probably using the Stream feature, but I'll let you know later when we will gather up.
Demystifying Algo Trading: A Comprehensive Guide for Beginners
In the fast-evolving landscape of financial markets, algorithmic trading, commonly known as algo trading, has emerged as a powerful and accessible tool. Today we have created a comprehensive guide for beginners, breaking down the concept, exploring its benefits, and providing insights to facilitate a successful journey into algo trading. Are you ready? Let's dive in!
Understanding Algo Trading
The Role of Algorithms- Algo trading, at its core, involves using algorithms that have predefined sets of rules and instructions to automate the process of trading financial assets. Algorithms are the engines that drive trade decision-making. Trading algorithms execute trading entries and exits of varying complexity. Understanding how algorithms function and their role in the trading process is fundamental for beginners. If you are considering utilizing a trading algorithm, understand how it functions to the best of your abilities. Understanding how an algorithm will work can help limit downside risk or other unwanted results.
Key Components of an Algo Trading System- An algo trading system is a sophisticated ensemble of components. These include data sources, where information about financial instruments is gathered; the algorithm itself, which interprets data and makes decisions; and the execution platform, which translates decisions into actual trades. Knowing these components and their interplay provides a foundational understanding of algo trading systems.
Benefits and Advantages
Speed and Efficiency- The primary advantage of algo trading lies in its speed. Algorithms can execute trades at a pace impossible for humans, capitalizing on even the slightest market fluctuations. This speed is not just a luxury but a necessity in today's fast-paced market, where opportunities and risks can arise and vanish in milliseconds.
Complex Strategy Execution- Algorithms excel at handling intricate trading strategies involving multiple parameters and decision points. This complexity, which might overwhelm manual traders, is seamlessly managed by algorithms. They can simultaneously process vast amounts of data, identify patterns, and execute trades according to predefined criteria.
Error Minimization- Emotions and errors often go hand in hand in traditional trading. Algo trading removes the emotional component, ensuring that trades are executed based on logic and predefined criteria. This absence of emotional decision-making minimizes the risk of costly errors caused by fear, greed, or hesitation.
Access to Various Markets and Asset Classes- Algorithms can be set up to trade across different markets and asset classes simultaneously. This diversification is challenging for individual traders but is a strength of algo trading. By spreading trades across various instruments, traders can manage risk more effectively and seize opportunities in different financial arenas.
Choosing the Right Algo Trading Platform
Factors to Consider- Choosing the right platform involves more than just functionality. It encompasses factors like user-friendliness, asset coverage, and backtesting capabilities. A platform that aligns with your trading goals and preferences is essential for a seamless algo trading experience. TradingView is a notable platform. TradingView stands out for its social community and advanced analysis tools, providing a holistic trading experience. Trading algorithms can be launched from nearly any TradingView chart, and signals can be sent to various exchanges to execute trades via a third-party connector.
Risk Management in Algo Trading
The Importance of Risk Management- While the speed and precision of algo trading are advantageous, they can amplify losses if not managed properly. As a trader, we must remember that the algorithm will only do what it's told to do. Implementing risk management strategies, such as setting stop-loss and take-profit levels, is vital. This aspect of algo trading is not just about making profits; it's about safeguarding your capital and ensuring longevity in the market.
Diversification as a Risk Mitigation Strategy- Diversifying trading strategies and portfolios can spread risk and prevent overexposure to a single asset or market condition. While individual trades may carry inherent risks, a diversified portfolio minimizes the impact of adverse movements in a specific instrument or sector. Diversification is a fundamental principle for risk-conscious algo traders, and this is why it is important to have algorithms trading different assets.
Realizing Success in Algo Trading
Continuous Monitoring- Algo trading is a dynamic field and not a set-it-and-forget method of trading. Each algorithm a trader runs needs to be continuously monitored for performance and functionality. A runaway algorithm can easily hurt any trader's capital. Successful algo traders adapt their strategies to changing market conditions. Avoiding over-optimization and remaining flexible are keys to sustained success. The ability to tweak algorithms based on evolving market dynamics ensures that algo traders stay relevant and effective over the long term.
Conclusion
Algo trading is not reserved for financial experts. It's a realm open to anyone willing to learn and adapt. The journey begins with understanding the basics, choosing suitable strategies, and embracing continuous learning. As you embark on your algo trading adventure, remember: it's not about predicting the future but navigating the present while utilizing the past. Happy trading!
MOST THINGS SUCCESSFUL TRADERS DO AND THE SECRET BEHIND FOREX A single formula for success for trading in the financial markets. Think of the markets as being like the ocean and the trader as a surfer. Surfing requires talent, balance, patience, proper equipment, and mindfulness of your surroundings. Would you go into water that had dangerous rip tides or was shark-infested? Hopefully not.
The attitude to trading in the Forex markets is no different. By blending good analysis with effective implementation, your success rate will improve dramatically, and, like many skill sets, good trading comes from a combination of talent and hard work. Here are the four strategies to serve you well in all markets, but in this article, we will focus on the Forex markets.
Approaching Forex Trading
Before you trade, recognize the value of proper preparation. It's important to align your personal goals and temperament with relatable instruments and markets. For example, if you understand retail markets, then it makes sense to trade retail stocks rather than oil futures, about which you may know nothing. It also helps to begin by assessing the following three components:
Given its low commissions and fees, the Forex market is very accessible to individual investors. However, before you trade, make sure you have a solid understanding of what the Forex market is and the smart ways to navigate it. Learn the basics and see real-time examples of the approaches and strategies detailed in my youtube video
Time Frame
The time frame indicates the type of trading that is appropriate for your temperament. Trading off a fifteen-minute chart suggests that you are more comfortable taking a position without exposure to overnight risk. On the other hand, choosing weekly charts indicates comfort with overnight risk and a willingness to see some days go contrary to your position.
In addition, decide if you have the time and willingness to sit in front of a screen all day or if you prefer to do your research over the weekend and then make a trading decision for the week ahead based on your analysis. Remember that the opportunity to make substantial money in the Forex markets requires time. Short-term scalping, by definition, means small profits or losses. In this case, you will have to trade more frequently.
Methodology
Once you choose a time frame, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Some like to trade using indicators, such as MACD (moving average convergence divergence) and crossovers.
Once you choose a system or methodology, test it to see if it works on a consistent basis and provides an edge. If your system is reliable more than 60% of the time, you should consider that an edge, even if it's a small one. Test a few strategies, and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various time frames.
Market (Instrument)
You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system's "personality" matches the instrument being traded. For example, if you were trading the EUR/USD currency pair in the Forex market, you may find that Fibonacci support and resistance levels are more reliable.
Your Forex Trading Attitude
Behaviour is an integral part of the trading process, and thus your attitude and mindset should reflect the following four attributes:
Patience
Once you know what to expect from your system, have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade.
Discipline
Discipline is the ability to be patient—to sit on your hands until your system triggers an action point. Sometimes, the price action won't reach your anticipated price point. At this time, you must have the discipline to believe in your system and not second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true for stop losses.
Objectivity
Objectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you find reliable, you don't need to become emotional or allow yourself to be influenced by the opinion of pundits. Your system should be reliable enough so that you can be confident in acting on its signals.
Realistic Expectations
Even though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $100 in your trading account and make $1,000 each trade. Although there is no such thing as a "safe" trading time frame, a short-term mindset may involve smaller risks if the trader exercises discipline in picking trades. This is also known as the trade-off between risk and reward.
Motivating Forex Trading Factors
Instruments trade differently depending on the major players and their intent. For example, hedge funds vary in strategy and are motivated differently than mutual funds. Large banks that are trading in the spot currency markets usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players, you can often align that knowledge to your advantage.
Alignment
Pick a few currencies, stocks, or commodities, and chart them all in a variety of time frames. Then apply your particular methodology to all of them and see which time frame and instrument align with your system. This is how you discover alignment within your system. Repeat this exercise regularly to adapt to changing market conditions.
Implementing a Forex Trading Strategy
There is no such thing as only profitable trades, just as no system is a 100% sure thing. Even a profitable system, say with a 65% profit-to-loss ratio, still, has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade.
Risk Control
In the end, successful trading is all about risk control. Try to get your trade in the correct direction right out of the gate. Evaluate your trading system, make adjustments, and try again. Often, it is on the second or third attempt that your trade will move in the right direction. This practice requires patience and discipline to achieve success.
The Bottom Line
Trading is nuanced and requires as much art as science to execute successfully, which means that there is only a profit-making trade or a loss-making trade. Warren Buffet said that there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1.1 Stick a note on your computer that will remind you to take small losses often and quickly rather than wait for the big losses.
What's Risk and Reward ratio vs Profit factorWhat is Risk-Reward Ratio?
The risk-reward ratio is a ratio used in investing that compares the potential profit or gain of an investment to the potential loss or risk that it poses. This ratio is often used to determine whether an investment is worth pursuing or not, and can be a helpful tool in managing risk.
The risk-reward ratio is typically expressed as a ratio of potential profit to potential loss, with a higher ratio indicating a potentially more favorable investment opportunity. For example, if an investment has a potential reward of $10,000 and a potential risk of $5,000, the risk-reward ratio would be 2:1.
Examples of risk-reward ratios can be found in many different types of investments, such as stocks, bonds, mutual funds, and options. For example, a stock that has a potential upside of $20 per share and a potential downside of $10 per share would have a risk-reward ratio of 2:1. Similarly, a bond that offers a potential yield of 6% and carries a potential risk of default of 3% would have a risk-reward ratio of 2:1.
In general, a higher risk-reward ratio indicates a potentially more attractive investment opportunity, as the potential gains are greater than the potential losses. However, it is important to remember that higher potential gains also often come with higher levels of risk, and investors should carefully consider their risk tolerance before making any investment decisions.
What is profit factor?
The profit factor is a metric used in trading that measures the relationship between the profits generated by winning trades and the losses incurred by losing trades. It is calculated by dividing the gross profit of winning trades by the gross loss of losing trades.
A profit factor of greater than 1 indicates that the trading strategy is profitable, while a profit factor of less than 1 indicates that the trading strategy is not profitable. A profit factor of exactly 1 means that the trading strategy has breakeven results.
Some traders consider a profit factor of 2 or greater to be a good measure of a profitable trading strategy, as it indicates that the strategy generates twice as much profit as it incurs in losses.
However, it's important to note that the profit factor is just one metric and should not be used in isolation to evaluate the performance of a trading strategy. Other important metrics include the win rate, average profit per trade, and maximum drawdown.
In summary, the profit factor is a key metric used in trading to evaluate the profitability of a trading strategy, and it can help traders to assess the risk and reward potential of their trades.
Example:
Example 1 - Risk-Reward Ratio:
Let's say you're considering buying a stock at $50 per share, and you believe it has the potential to rise to $70 per share. However, you also recognize that there is a risk that the stock could fall to $40 per share.
In this scenario, the potential reward is $20 per share ($70 - $50), while the potential risk is $10 per share ($50 - $40). This gives us a risk-reward ratio of 2:1, which means that the potential reward is twice as high as the potential risk.
Example 2 - Profit Factor:
Let's say you have a trading strategy that involves making 10 trades over a period of time. Of those 10 trades, 6 are winning trades and 4 are losing trades. The gross profit generated by the winning trades is $6,000, while the gross loss incurred by the losing trades is $3,000.
To calculate the profit factor, we divide the gross profit by the gross loss, which gives us a profit factor of 2. This means that for every dollar you lose on losing trades, you earn $2 on winning trades.
By looking at both the risk-reward ratio and profit factor, you can evaluate the potential risk and reward of a trading opportunity and the profitability of a trading strategy. It's important to keep in mind that there are other factors to consider when making trading decisions, such as market conditions, technical analysis, and risk management strategies.
How to Be a Successful Beginner TraderWhen it comes to trading, many people think that it is an easy way to make quick money. However, the reality is that it takes time, effort, and patience to be a successful trader. In this blog post, we will discuss some of the key things that beginners need to do in order to be successful.
Set realistic goals
Setting realistic goals is important for any beginner trader. Without a plan and actionable steps, it can be easy to get discouraged or become overwhelmed. Trying to make too much money too quickly can also lead to losses.
It's important to start small and work your way up. Don't try to go for the big win right away. Set a goal that is achievable and focus on that. Do not strive for perfection. Remember that trading is not a get-rich-quick scheme and you need to be patient in order to be successful.
Keep things simple and defined
It's important to keep your trading strategy simple and defined. Too many indicators and too many rules can make your strategy too complicated and difficult to follow. Backtesting your strategy on historical data can help you optimize it, but don't over-optimize or you'll risk ruining your strategy. Paper trading is a good way to test your strategy before using real money.
When you're just starting out as a trader, it's tempting to try to find the perfect system. You might think that if you just use the right combination of indicators, you'll be able to beat the market. Unfortunately, it's not that easy.
There are two problems with trying to find the perfect system. First, the market is constantly changing and what worked yesterday might not work today. Second, even if you do find a system that works, there's a danger of over-optimizing it.
Over-optimization is when you keep tweaking your system, trying to get ever-better results. The problem is that when you do this, you're usually just fitting your system to past data. That means it will probably work well in the short term but not in the long term.
A better approach is to keep things simple and defined. That way, you're less likely to over-optimize and more likely to be able to adapt as the market changes.
One way to keep things simple is to use just a few indicators. It's often better to use fewer indicators that give clear signals than lots of indicators that give conflicting signals. You should also have well-defined rules for entry and exit points so that you know exactly when to buy and sell.
Backtesting can help you optimize your strategy by seeing how it would have performed in the past. However, it's important not to over-optimize or you'll end up with a system that only works on paper but not in real life. Once you've got a system that looks promising, paper trade it for a while before using real money.
Get a mentor
A mentor can play an integral role in your success as a beginner trader. A good mentor will provide guidance and support, help you learn from their own experiences, hold you accountable to your goals, and keep you motivated throughout your journey.
Finding a mentor can be tricky, but there are a few avenues you can explore. First, see if any of your friends or family members trade. If they do, ask if they would be willing to mentor you. If not, there are plenty of online resources available, like forums and chat rooms dedicated to trading. LinkedIn is also a great place to look for potential mentors.
Once you've found a potential mentor, set up a meeting to get to know them better and see if they're a good fit for you. Be sure to come prepared with questions about their experiences trading and what they think makes someone successful. Also, be sure to let them know what your goals are and what you're hoping to get out of the mentorship relationship.
If everything goes well, then congratulations! You've just taken an important step towards becoming a successful trader.
Trading is not a get-rich-quick scheme
Trading is not a get-rich-quick scheme. You will not become a millionaire overnight. You will have to be patient and handle a few losses along the way. Trading is a long-term game.
The key to success in trading is to set realistic goals and take them one step at a time. Trying to make too much money too quickly can lead to losses. Focus on achievable goals, and don't strive for perfection. Remember that trading is a long-term game and you need to be patient to be successful.
Another important key to success is to keep everything simple and defined. This has to do with your analysis, trading strategy, and trading plan. Over-optimizing your strategy can lead to ruined results. Backtesting can help you optimize your strategy, but don't over-do it. Paper trading is a good way to test your strategy before using real money.
In order to be successful, it is also important to find a mentor who can provide guidance, support, and advice based on their own experiences. A mentor can help you learn from their mistakes so that you don't have to make them yourself. You can find potential mentors through friends and family, online resources. When meeting with a potential mentor, come prepared with questions and let them know your goals.
Trading is not a get-rich-quick scheme - it takes time and patience to be successful. By following these tips, you'll be on your way to becoming a successful trader.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩💻
Is it your strategy or you???What is your strategy? If asked, could you explain it to one of your friends or family members? More importantly, does it make sense? Is it clear?
Teaching or Sharing your thoughts & methods leads to a deeper understanding of the content. If nothing else, speak aloud and hear your reasoning out of your own mouth before taking a trade.
My current strategy is to take a defined structure from Swing High to Swing Low or Swing Low to Swing High and use it as the basis for my analysis. Naturally, the structure will indicate a trend, and I would need to decide if that trend is in alignment with or contrary to the broader market. Either is fine, but this distinction is essential when assessing targets and risk.
I have to constantly remind myself that I don't know what the market will do. Since I don't know what the market will do, it follows that I should be open to changing my mind and also safeguarding against my ignorance. With this being said and firmly in mind, there are three levels that I like to pay attention to. They are:
Breakouts of previously established key levels.
The .618 Retracement & 1.618 Extension (current and previous structures)
Between the .786 & .886
Simple enough. I'm sure that your strategy for entry can be explained in layman's terms as well. The issue typically doesn't lie in the analysis it lies in the trader's ability to follow said analysis and follow it consistently.
Does this sound relatable?
You spend hours or maybe even days conducting your analysis, waiting for the market to make its move and give you some indication of what might happen in the near future. As time passes, things seem to become more clear, and you see your opportunity coming. Sure there are a few unexpected movements that happen along the way but that's just how markets move. Price approaches your entry but not yet. Hell, it may not actually reach the level at which you established as a good entry. So you enter early and let the candles fall where they may. If you have fixed stops, now your levels are thrown off. If you don't, then any concept of risk that you had in your mind has been altered and you now bear the task of making mental adjustments to compensate for a completely different trade. Because that's exactly what it is, a completely different trade, with new numbers, figures, distances, R&R ratios, and new implications of risk. The market moves in your favor, possibly even nearing your predetermined target. If it's a fixed number of pips, then that number has changed. If it was a fixed target then your projected profits have changed. This may not seem like a big deal but for beginning traders who are establishing their system, this means everything. Every decision you make against yourself has future implications on your equity curve, but also on your confidence and understanding of what you are doing in the market. In order to be consistent and profitable in the market we must learn to trade in a consistent manner with a strategy that will prove to be profitable over time. The market continues to move but it has taken a sudden turn against you, whatever profits you had are quickly erased and price action now edges toward your stop loss. You've been stopped out only to learn that if you had been patient at entry and kept your original strategy in place, you wouldn't have been stopped out, and price action would have ultimately gone in your favor reaching your target.
The point of all this is to illustrate that we unconsciously make changes to our strategies as we are deploying them. These changes have a compounding effect on the outcome of our trades. Even if you are made a winner by these changes you've made, you will have reinforced a bad habit that will undoubtedly lead to many losses in the future. There is power in understanding the unique set of tendencies and preferences that make you the type of trader you are. If you continue to ignore this, you will rightfully take your place amongst the other 90% of failing traders. When you start to pay attention to your own uniqueness and figure out what concepts, ideas, strategies, tools, and methods resonate with you, then you will be on your way to developing a system that you can trade consistently.
Losing is a part of the game. You may as well lose in a manner that produces feedback that can be learned from. Are you losing because your strategy needs adjusting or are you losing because your psychology needs adjusting?
It should be stated that any given trade, from start to finish, can be, and typically is, more nuanced than what I've just described. Its simplicity should not overshadow its intent. The chart attached to this post shows that there are multiple opportunities for entry for mine and, quite possibly, your strategy. All a trader needs to do is be patient and allow the market to tell you what it is doing. Along with entries are maintenance and exits. Targets are just as important as entries if not more so. Your unique perspective as a trader will heavily impact the decisions you make in all three phases of trading.
Levels of Development LLC is providing this material for this site and any other related sources (including newsletters, blog post, videos, social media and other communications) for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and may not represent specific trades or transactions that we have conducted. In fact, we may use examples that are different or the opposite of transactions we have conducted or positions we hold.
All investing and trading in the securities market involves risk. Any decisions to place trades in the financial markets, including trading in stock or options or other financial instruments, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extend you believe necessary.
Your Uniqueness in the MarketTake a look at this chart, or any chart of your choosing, and tell me what you see! Not just the technical terms and the direction of the market but explain what you are seeing, thinking and feeling as you read the market data from start to finish.
If you got the responses from twenty different people, you'd receive twenty different perspectives with twenty different interpretations. Some of them overlapping in their theories and explanations while others violently contradict and oppose each other. The beautiful thing about trading is that we all at one time or another are correct. "Correct" being that their was a legitimate opportunity to place a trade and make money based on your unique perspective of the information.
The difficult thing in trading is really understanding what we see and perceive in all of the market data. I want to emphasize... The difficult thing about trading is in truly understanding how we see and interpret market data in our own unique way. Some people see long, while others see short, and depending upon the system; on any particular trade, on any particular day, both sets of people are correct.
All systems have winners and losers, its an unavoidable fact. The acceptance of this fact will help you understand that you don't necessarily need to go searching for someone else's way of trading, you only to need gain a thorough understanding of how you view things. What resonates with you and your uniqueness? Maybe its moving averages and RSI, maybe its price action and support and resistance, or maybe its simply the day of the week at a specific time. When you start to unpack your way of making sense of the market you can find your unique way of operating in it.
If success in the market was primarily based on technical skills, and the use of tools, indicators, and spreadsheets. There would be a lot more profitable traders. Trading attracts some of the most brilliant minds, intellectual beasts, and academic rockstars, and yet over 90% of traders fail and are unsuccessful. You yourself, as you read this may realize you are a brilliant person yet you struggle to stay consistent with your trading. The answer to your problem is not solely in the technical skill, its likely hiding in the unexamined parts of your personality.
If you know this, then you also know that awareness and application are two totally different things. You can be aware that you have a personal problem with following a trading methodology but feel totally powerless in correcting it. My question to you would then be, how much time have you spent experiencing your own unique style of trading? Stop fighting your nature, and embrace your expression.
There are market fundamentals and market basics that every trader needs to understand.
Price Action
Structure
Trend
Risk
Beyond this your style of trading is likely a combination of many different skills that you've accumulated from various sources. The important thing for each trader is to understand which skills resonate most with them. Which skills fit your unique market perspective. Which skills can you use to build a system of trading that allows you to account for the mixture of wins and losses, while keeping you in an optimal mental space, so that you may execute on your level of understanding.
I think the challenge for every trader, is to take the time to identify a purpose in their trading. To understand why it is that you feel drawn to embark on such a challenging task. Those traders who stick with it, and generate some answers to these questions will have taken huge strides in understanding how the market serves as mirror. Reflecting back at you, the potential for you to fulfill your desires coupled with everything that you need to work on, and improve upon, on a very personal level.
If you don't come from a trading and investing background, either from family ties or academia, then all of this becomes even more important. Self- taught traders need to understand their uniqueness in the market. You are the most important part of your trading system. It would be crazy not to give yourself the time and attention you deserve.
Happy Trading!
MONEY MANAGEMENT: The MOST Important Aspect of TradingIf you are a professional trader or plan to become one, Money Management is your #1 job. You could be the best chart reader or statement analyzer in the world but if you have poor money management you will still fail. In order to succeed you first have to last, and to last in the trading business you must be able to handle risk and manage it accordingly.
How you handle Money Management comes down to a few simple things:
Risk limits
- This consist of knowing your risk per trade, your max drawdown, and buying power limitations.
○ Risk per trade: This is the amount you are willing to lose if the trade goes against you and stops out (remember to always have a stop loss). Many traders refer to this as Risk Units or simply 'R'. This should be a defined amount that does not vary based on emotion. If you do use different risk for different trades you should have that clearly defined in your trading plan otherwise each trade should be the same. Risk per trade should be around 1% for experienced traders and $10 for new traders as they work towards slowly raising risk with consistency.
○ Max drawdown: This is the max amount you are able to lose per timeframe. For example, a day trader may have a max drawdown of 3R per day, 7R per week, and 13R per month. Max drawdown demands that if you lose that amount in that timeframe you are to be done trading until the next one. This helps traders from spiraling out of control and blowing up a trading account.
○ Buying Power Limitations: Knowing how many trades you are able to take at one time will help define your strategy.
Expectations
- This consist of knowing your expectancy and timeline
○ Expectancy: Your trade expectancy is the most important stat in all of trading. It tells you what you expect to make per trade. In order to properly manage risk you have to be sure that the strategy is worth it. The expectancy stat is how you do just that. For more info about expectancy check out my post on it here
○ Timeline: Everything takes time. Trading is no different. Having a realistic expectation about your timeline and how much you are going to make is a critical element in helping traders stay focused on their goals and not fall into a get rich quick scheme. If you expect your trading career will take 3-5 years to become profitable you will manage your money much better than someone who expects full time profits in under 1 year.
Yourself
- This consist of knowing your personality and trading plan
○ Personality: What is your personality like? Are you a jittery person or are you robotic. Knowing this will help build a management that you can trust and are able to follow.
○ Trading Plan: Make sure your trading plan fits your trading style. You have to take many things into consideration here such as time constraints, goals, and personality. It takes time to figure out what works for you.
If you can determine how to handle these three factors then you will be well positioned to not struggle with money management. After you have the fundamentals written in your trading plan all it comes down to is staying disciplined and following the rules set for yourself. Clearly define your limits, have an expectation, know thyself.
Thanks for reading, follow @Jlaing for more educational post about Money Management, Trading Stats, and more. I also stream a stock day trading chat room every morning at 9:15 EST right here on TradingView, come check it out and say what's up.
EXPECTANCY: The Golden Key StatisticWhat is Expectancy?
Expectancy is the one of the most important statistics in trading. Expectancy is how much you expect to make per trade. If you have an expectancy of 0.3 that means you make 30% of your average risk per trade. If you risk $1000 per trade, then you would receive $300 on average for EVERY time you took a trade.
The baseline for a worthwhile & profitable strategy for most traders is an expectancy of 0.25 or higher. Anything more than 0.5 is outstanding.
How do you calculate expectancy?
A few different ways:
(gross profit/# of trades)/Avg. Risk
or
((Win%*Avg. Win)-(1-Win%*Avg. Loss))/Avg. Risk
The table on the chart breaks down the required Win% and Profit/Loss ratio needed for an expectancy greater than 0.25. As you can see there are multiple ways to build a profitable strategy.
What does Expectancy tell you?
Expectancy is a crucial stat for traders because it lets them know if their strategy is valuable. The only way to know your expectancy is to track your trades! Tracking your trades is an essential part of the job as a trader yet many fail to do so. It can be done for free with some simple spreadsheet formulas and a bit of time. Track your trades, review your stats, improves your trades. Rinse & repeat.
Thanks for reading, follow @Jlaing for more educational post about Money Management, Trading Stats, and more. I also stream a stock day trading chat room every morning at 9:15 EST right here on TradingView, come check it out and say what's up.
Simple Technical Analysis for BeginnersIdentifying the Support (lowest price), Resistance (highest price), and Key Levels (areas price gravitates to between Support and Resistance) one two or more timeframes. Today, I have them marked on the 4H and 1H Timeframes.
Identifying Support
Support is the lowest level a price will go before reversing. A support is created in two ways. The first way is when Sellers in the market close their existing positions and take their profit. The second way is when new Buyers enter the market by opening new positions.
Identify all historical Lows in a chart.
Circle these zones.
Connect as many as possible using straight horizontal lines. These are known as areas of Support.
Identifying Resistance
Resistance is the highest level a price will go before reversing. A Resistance is created in two ways. The first way is when Buyers in the market close their existing positions and take their profit. The second way is when new Sellers are entering the market by opening new positions.
Identify all historical Highs in a chart.
Circle these zones.
Connect as many as possible using straight horizontal lines. These are known as areas of Resistance.
Chart Made Using AlphaMind AM All-In-One Indicator
The basics of back-testing (HOW TO)Hey Traders,
Today I wanted to follow on from the fantastic amount of comments that we are receiving from the previous video, "stop strategy jumping." It seems that so many of you took a whole heap of value from that video and for that I am very thankful and to everyone who reached out and told their story or let me know that it really touched them.
As highly requested, I wanted to run through a basic way to start getting the grips with strategy back-testing. How can we go about back-testing our strategies to ensure that they are profitable for us in the long run? Take a look, have a listen and tune in. Set up an excel sheet the way I do and get back testing. There's only one way to do this, and it is to do the hard work.
Let me know what you guys find. I can go more in depth in the future, but for now. It seems like most people wanted to get to grips with the absolute basics, which is what I'm going to show you today.
If you have any questions at all, please the comment section is the place to be. As always, have a fantastic trading week and a fantastic weekend traders. I'll see you very soon.
The study of the prism of vision 🎓Here an open mind opinion which will be very usefull if you are a beginner, if you are at research of profitable and regular results, if you research something working for you in this game, and for many others. I will not develop any strategies or analysis here (it would be too long), just show exemple of some with, in the end, some advice that you MUST read to perform in this trading.
First I will explain why it came to my mind to make this post and secondly I will provide a deep speech for everyone of you.
If you follow me, you know I provide notably updates on Bitcoin for the moment, my analysis, some explanations about what happen inside the market and some expectations for the future (and signal / trades when there is). Yesterday when I wrote the LDTP #11 (you can find it related to this idea), I explained many technical things and during I was writing the post, market made exactly what I was explaning for and what I usually develop. It gave this masterpiece from market like I called it in the initial post 👇
Here showing most of the knowledge I use in my strategy, you will find on this chart Volume analysis, Volume Profile analysis, Wyckoff Pattern analysis, Resistance / Support analysis, Candlestick analysis, Supply / Demand analysis but it's not what I want to develop here.
When I cleared my chart, I said to myself : " How beginner cannot be lost when we see this obvious triangle that probably others people develop, exploit, trade for and claimed as THE solution in trading ? Which one say true, is it the Wyckoff pattern with the spring or is it the triangle ? " And so I developped this triangle, and others technics, always taking a blank chart arguying around differents technics. Here the result (I don't present it as working strategies, just as other setup, reading and visions) :
Using Support / Resistances, Chartism analysis, Volumes 👇
Using Supply / Demand, Candlestick analysis 👇
Using Harmonic pattern 👇
Using Fibonacci retracements & extensions 👇
Or just using the Tradingview Bollinger Bands strategy 👇
And so, looking to that, I was asking myself : "How peoples can determined which content could be usefull for them when everybody say differents things, claiming for differents technics / strategies, speaking of a same chart ? Who say the truth ? Is this game a big coin flip party ? ". I believe some beginners have already wondered about it. How don't think that when you start here and you see many traders, revendicating as professionnals, saying the exact opposite of the others for some reasons that all seams technically viable.
🔰 So here my answer that you need to read : 🔰
In trading, nobody say true but nobody say wrong also, because there will be always a moment where they will have reason. No strategy say true but no strategy say wrong too, because there will be always a moment where they will have reason. Same as indicators, same as technics, same as ... In the end only market have reason. Don't search to control the market, search to understand it. Don't search to be rich, search to be profitable. Don't search to always have reason / always win trades, but most of the time.
▶️ Don't believe others !
Find usefull content, learn from them, learn from you, but learn. You will never win money by following naively what someone say even more if you don't understand what he say and why he say that. Look at all technics, at all approch, at all strategies you can find in trading, search on these, learn on these, until you find one which will fit with you. You will never win money by applying painfully the strategy of another person. Your mind, your personnality have to show through your strategy. Like there is thousand of assets to trade on, there is thousand way to trade them.
▶️ Grind the market until you apply your strategy/knowledges unconsciously !
Here how your brain work or how you have to make it work : You are unconsciously incompetent, then you do research to experiment new approch of understanding. You find it so you become consciously incompetent, then you learn about it to become better. You force yourself to apply it so you become consciously competent, then you grind it everyday, everyweek, everymonth as long you need for integrate it. When you are finally able to do it naturally you become inconsciously competent, then you can restart with another unconsciously incompetent aspect of you.
▶️ Don't avoid failure, you will fail !
Every trader already failed, at different scales, but this is a fact. This is how work your brain, you learn, then you apply, then you fail, then you learn from it to apply better and to avoid future mistakes. And failure will became less important but you will continue to fail, and you will continue to learn from them. This is how you become profitable. You can block yourself in a state where you don't want to fail, but you will never progress. Failure help to question ourselves, it's an essential step to progress. If you are not able to take a step back from your results, from how you apply your strategy and your knowledges, you will run into a wall, you will loose time and failure will became harder than never.
▶️ Become mathematically reliable !
Today you have the opportunity to test strategies for free, abuse of it. Use virtual money accounts and train for days, weeks, months, years until your strategy became mathematically reliable. By using virtual money and not your own, it will able you to fail, as much you need it. But you will also work on your strategy out of any emotions. Because when you trade with real money you are impacted by emotions, and as you are, your strategy will, and is profitability with it. If you don't do that step of learning and applying far from real money you will lose your time to blame your emotions like the reason why you are loosing money but it's just that your strategy isn't' profitable on long term.
▶️ Work on yourself !
As you have to work on your knowledges to improve yourself, you will have to work on your personnality to win money in trading. You will experience emotions and you will have to learn to control them. If you cannot you will have to learn to don't trade when you feel emotions. Emotions will make you overtrade, deviate from your strategy and so from your profitability in trading. Emotions will blind yourself from your true value, making you better than you are or worse than you are. Emotions will cause moments of intense joy as well as moments of deep sorrow. Frustration, revenge, confidence, motivation, patience, mistakes, pain, sadness, happyness I could quote decades that you will have to deal with, you will fail because of them, you will tilt, and you will have to learn about it again. Speaking of pacience, this is the major mistake of beginner for me, if you are not able to put your ass in a chair and look at market without taking a single trade during a full day, you don't trade for the good reason : you trade to feel emotions and not to win money. You are not looking the market to find entry, you are waiting the market to give you an entry : weigh the meaning of these words. And if you had doubts about it, you won't be rich tomorrow from trading because you read this words, but it can give you answer to achieve your goals.
▶️ Open your mind !
Like I showed there is many technics in trading, explore them ! That don't mean that you have to use them but you have to understand what exist, why some can be usefull in some case and not in other ... Also open your mind to other's plans, admit that you could say wrong and that you could think wrong. Another mistake that some do : don't explore only one way, don't think because this indicator say "..." that market can go only here "...". Take a step back, create scenarios that the market could follow and search in these which one you could exploit. Market cannot surprise you if you do this job, become proactive and stop being reactive. You will see that the emotional charge will be less important. But don't confuse, that don't mean you anticipate the market, you just imagine what he can do. Never anticipate the market, or you will lose money.
⚠️ To finish,
I made a statement in one of my past ideas that I want to reiterate : "Whatever your strategy, whatever your indicators, whatever your amount of knowledges, if it is mathematically reliable it doesn't lie but premiums scams lie. Doesn't matter who you want to follow, who you want to support, who you want to believe, always verify that he doesn't provide public payable services where your person serv his own interest. That probably the best advice I can give you. You will need to surround yourself to progress in trading, that a fact, but don't be the food of this guys."
Saying all that, I hope you understand now that trading isn't a question of "this indicator is better than this one", or "this strategy is the best way to ...", no it's just how you use it, how much you trained for, how much you grind to handle it. If you had to remenber only a sentence, use this one :
"Making money in trading is math and respect of strategy, so never let your emotions guide you in uncomfortable positions"
If you arrived to these final words I think it's because you want to improve yourself and I promise you that you will succeed if you put the amount of work necessary. It will not be an easy path but nobody said that it will be simple, except those who earn money from you.
There was so much things to say that I probably forgot sometimes what I wanted to say, and there is always at least as much to say. Maybe one day I will do another chapter but for the moment :
Like, follow or comment* if you like, I need it to continue !
*Speaking of comments, come ask questions, come share your point of view, come debate, I need it to feel that my without counterpart work is usefull for some !
The Art of Technical Analysis for Beginners part 2Hey Traders so In my last video we discussed what is technical analysis and how the markets move in 3 ways. Today I want to go over some more basics about price action and one of the most important concepts in all of trading support and resistance.
Enjoy!
Trade Well,
Clifford
Aroon From ScratchHi traders!
Today we gonna tell you about one of the most interesting indicators. As you know, trend is based on price action. Everything on the market based on price action, LMAO. Thus, it’s considerably important to define and extract some hidden states, that can play a huge role in trend predicting. Aroon is one of this hidden-state finders.
The Aroon indicator is a technical indicator that is used to identify trend changes in the pric, as well as the strength of that trend. In essence, the indicator measures the time between highs and the time between lows over a time period. The idea is that strong uptrends will regularly see new highs, and strong downtrends will regularly see new lows. The indicator signals when this is happening, and when it isn't.
The indicator consists of the "Aroon up" line, which measures the strength of the uptrend, and the "Aroon down" line, which measures the strength of the downtrend.
Formulas for the Aroon Indicator
Aroon Up(orange)= (x-periods since last high in x period) /x*100 where x – number of periods.
Aroon Down(blue)= (x-periods since last low in x period)/x*100 where x – number of periods.
How to use it?
We use it in two ways: crossovers and parallel state. When Aroon Up and Aroon Down draw a parallel channel, we can make a conclusion that market is choppy and it would be better to avoid entering.
Crossovers can signal entry or exit points. Up crossing above Down can be a signal to buy. Down crossing below Up may be a signal to sell.
When both indicators are below 50 it can signal that the price is consolidating. New highs or lows are not being created. Traders can watch for breakouts as well as the next Aroon crossover to signal which direction price is going.
As for the parameters, we use on 15M timeframe Aroon with the length 10 on 4H. It gives us less signals, but they are very strong. You can tune it in depending on your purposes and goals of strategy.
MACD From ScratchHi, traders!
Today we gonna start the tutorial “Trading from scratch”. These short but very useful articles are intended for beginners who’s just started their way in trading. We hope you’ll enjoy.
Today’s article will give the full understanding of one the most popular, easy and very useful indicator - MAC. Moreover, we’ll show you how to apply it efficiently.
MACD (Moving Average Convergence/Divergence) is a trend indicator that shows the trend and its momentum. It consists of two lines: MACD line and signal line. Both of them are EMA with different periods. We got MACD line subtracting from EMA with less period (fast) EMA with longer period (slow). The signal line is MACD line smoothed by the very short EMA.
How to trade with MACD?
Divergence
The first very powerful signal is divergence. Divergence means the difference between slope of the trend line on chart and indicator. To learn about it properly you can read our Divergences Cheat Sheet .
Catching divergences is a good signal to buy or sell. As you can see on the screen, the first time we got bearish regular divergence. Thus, we are going to short. Then we can see bullish hidden divergence and it’s a good chance to execute a long position.
NOTE
We can draw divergence lines both on MACD line and histogram.
A Quick intro to Moving Averages (Beginners) I have recently had some questions on some of the basics such as moving averages. First of all, there is some great free content out there via sites such as Babypips
I wanted to share some simple info to at least explain what a moving average is. Where it is used and what are the types of.
Moving average is a simple, technical analysis tool. Moving averages are usually calculated to identify the trend direction of a stock or to determine its support and resistance levels. It is a trend-following—or lagging—indicator because it is based on past prices.
They also form the building blocks for many other technical indicators and overlays, such as Bollinger Bands, MACD and the McClellan Oscillator. The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).
Moving averages are a totally customizable indicator, which means you can freely choose whatever time frame they want when calculating an average. The most common time periods used in moving averages are 15, 20, 30, 50, 100, and 200 days. The shorter the time span used to create the average, the more sensitive it will be to price changes. The longer the time span, the less sensitive the average will be. @TradingView has many of these tools to use under the list of indicators.
A simple moving average is formed by computing the average price of a security over a specific number of periods. Most moving averages are based on closing prices; for example, a 5-day simple moving average is the five-day sum of closing prices divided by five. As its name implies, a moving average is an average that moves. Old data is dropped as new data becomes available, causing the average to move along the time scale.
Then you have an Exponential Moving Average (EMA).
reduce the lag by applying more weight to recent prices. The weighting applied to the most recent price depends on the number of periods in the moving average. EMAs differ from simple moving averages in that a given day's EMA calculation depends on the EMA calculations for all the days prior to that day. You need far more than 10 days of data to calculate a reasonably accurate 10-day EMA.
Highlighting the difference between an MA & an SMA - The Smoothed Moving Average (SMMA) is similar to the Simple Moving Average (SMA), in that it aims to reduce noise rather than reduce lag. The indicator takes all prices into account and uses a long lookback period.
Then how it can be used and applied, *** There are many strategies out there, the most basic starts with above or below a level (above = buy, below = sell) And then it steps into two moving averages crossing for example. Also as I mentioned above - other indicators use a form of moving average to calculate their plot.
Another simple strategy - Investopedia
This moving average trading strategy uses the EMA, because this type of average is designed to respond quickly to price changes. Here are the strategy steps.
🍒Plot three exponential moving averages—a five-period EMA, a 20-period EMA, and 50-period EMA—on a 15-minute chart.
🍒Buy when the five-period EMA crosses from below to above the 20-period EMA, and the price, five, and 20-period EMAs are above the 50 EMA.
🍒For a sell trade, sell when the five-period EMA crosses from above to below the 20-period EMA, and both EMAs and the price are below the 50-period EMA.
🍒Place the initial stop-loss order below the 20-period EMA (for a buy trade), or alternatively about 10 pips from the entry price.
🍒An optional step is to move the stop-loss to break even when the trade is 10 pips profitable.
🍒Consider placing a profit target of 20 pips, or alternatively exit when the five-period falls below the 20-period if long, or when the five moves above the 20 when short.
I hope this helps - Please feel free to add more info below. Any suggestions & comments to help new traders, always appreciated.
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
Technical Analysis 101: Support and Resistance In this video I cover the basics of the support and resistance levels and how to chart it out, If you enjoyed this video please like it and share it with your friends. Also please drop a comment, feedback, suggestion for me to cover or just to work on, and that would be much appreciated. Next video I'll cover the Fibonacci retracement and extension to plot targets. So we covered the trend lines and support and resistance levels, so please practice with those and send me charts if you need someone to look over it! As the main goal is for all of us to learn from each other and become better chartist and traders!
Candle AnatomyDecided to start posting content. Going from Basics to more advanced topics, little by little.
If you're just starting to learn how to trade, here's the first thing you should know. What's a candle?
A candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period.
-The candle has an open and close price point in time. If the movement is upwards, then the candle will close above its open price. Consequently, if the movement is downwards, the candle will close below its open price.
-The wicks will show the highest and lowest prices in the market at that moment.
-When looking at the market structure, it's important to look at the body of the candles, not the wick.
-For identifying liquidity, it is important to look at the wicks.
*The information I am sharing is mostly for new traders.
*I am not Certified to give out any information, but I enjoy trading and enjoy sharing what I know as well.
My response to a friend asked if she should start using BitcoinTLDR: I think Bitcoin is good for humanity, and it’s worth researching it to see if its right for you.
Disclaimer: This is not financial advice, this is my opinion.
I started out thinking this would be a quick, one or two short paragraph post but then I ended up writing nearly 2000 words. There’s no easy way to give a quick explanation of Bitcoin, and money is an important subject to weigh in on so my communication needs to be clear. I’m giving my opinion about an entirely different monetary system than we’ve had our entire lives. I wanted to spread some information that I’ve found through a couple years of research and trading. Above all I just want to live in a better world and I think there’s always room for improvement in all of our systems. I’m willing to experiment to find out how to do that. The text is footnoted to help you understand some of the jargon and facts.
I dedicate this to my brother who got me started with this. It’s his birthday today. Happy birthday Ty.
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By now I imagine most of you know what Bitcoin is or have at least heard of it, but still most of you haven’t thought to buy any and use it. I think it could make our world a much better place if we all adopted it as a means of paying each other. I’ve bought a few things online with Bitcoin. It can be spent in person too. I prefer to spend it instead of debit/credit if the vendor I’m purchasing from accepts it, but many still don’t. I feel safer using it, it is more secure than Fiat currencies1. I think if you’re a vendor, you should consider accepting it, because it gives you access to more customers (the Bitcoin spenders).
I can understand peoples hesitation to buy it and use it, or get involved in other parts of the Bitcoin ecosystem. The price paired to Fiat currency is extremely volatile. It has a reputation for being used to purchase illegal goods and services, and it’s an obscure thing. Money in general is obscure because it has no intrinsic value (you can’t eat it, drink it, smoke it, wear it etc). Worth noting, exceedingly more Fiat currency is spent on illegal goods and services than Bitcoin is.2 I’ve heard many other criticisms’ as well. The fact you could buy some today, and it could be worth two thirds as much in a just a week; the cause being that many average people (or a few very rich people) decided to sell it.3 However, since Bitcoin’s inception, it has proven over and over again that if you hold on to it, it will increase in value over a long period of time. By doing this, it incentivizes saving. People don’t want to spend as much because it’s consistently increasing in value, so they save it instead. It increases in value when new Fiat currency flows into it from the public, and less Bitcoin flows out, which has been normal through its history. When more people are seeing that it’s value is going up, it incentivizes them to buy in. In theory, the ‘saving incentive’ means that people would buy less goods and services and conserve earth’s natural resources better. It is still in a very early stage in terms of becoming a meaningful currency that average people use, so these observations are speculative. It may sound like a Ponzi Scheme to some, but then what is Fiat currency if you look from a broad perspective?
The main reasons it outperforms Fiat currencies is because it’s decentralized, and censorship resistant. No one entity controls it. It is not the property of the bank of any country. Each users holds their own unique keys to their money. It can’t be manipulated by any government, bank, or corporation. The creator of the software is anonymous.4 It can do cross border payments in a manner of seconds, and for a tiny fraction the cost of fiat, and make what were once inaccessible payments, accessible. There is no borders with Bitcoin.
Governments tend to print money on a fairly regular basis which can artificially inflate prices of goods and services. Some very corrupt governments have printed so much money that it hyper-inflates their currency and becomes nearly worthless.5 Bitcoin has a fixed supply which will be about 21 million coins once it has all been mined6, so it’s not possible for it to be inflated. It’s built into the software to continue slowing production of new coins until it ultimately stops producing them.
There is still a risk of the price of Bitcoin going to zero, everyone could decide to sell it and it would become worthless. However that risk theoretically exists with many currencies and part of my interest is what’s happening in the future for our children and grandchildren. Every Canadian could trade all their dollars for, say, US dollars, making Canadian dollars worthless. However unlikely, it’s a theoretical scenario.
Everything starts somewhere. Bitcoin is brand new, it has only been in use for 11 years, but it’s possible it could be in use for the next 100 years and beyond. It depends on humanity’s decisions.
This is a chart of the price of bitcoin over it's lifetime, relative to US Dollars. It has followed this parabolic curve it’s entire existence, and never fallen below it. One Bitcoin was worth a fraction of a penny when the software was first developed, to now over US $8000. It is, undoubtedly the best financial investment of all time for early adopters.7 If it continues to follow the parabolic curve, it will be worth US $1,000,000 around the year 2030. However, that’s a big if - no one knows precisely why it follows the parabolic curve, and if it will continue along it. There are only theories. One of them, the Stock to Flow model,8 is very plausible. It doesn’t explain the parabola per se, but gives evidence of what drives the price.
What I would recommend if you’re interested, is to first do as much research as possible, then if you still feel it’s a good idea, try buying a small amount and see how it goes. You would be helping grow the ecosystem. You can buy as a little amount as you want. It is infinitely divisible. Remember, this is not financial advice. You must be willing to lose what you put in. There are also security measures that you should be aware of before purchasing. I can help you with this if you ask me. Also, as I side note I’m trying to encourage that people never sell for Fiat, and instead hold or spend it. This is what is best for the ecosystem. However I understand the desire to exchange back to Fiat to make profits that you can spend at the grocery store, or wherever. I do this myself.
Technically, a trader is anyone who buys or sells. For those wondering what professional traders actually do, they provide liquidity9 for the market, so others can buy and sell easily. There is no get rich quick scheme. It takes just as much work, or more than the average job to make a living at it. In time you can get more efficient, and some people are able to master it and get rich from it, not unlike many other types of business. I am far from a master, but would be happy to teach what I know.
This only scratches the surface, there are still many questions to be answered such as: how does our society work with this, how are governments responding, how can you loan and borrow Bitcoin, how are taxes paid, where can you spend it right now, what’s the best time to buy, where do you buy and sell it, how do you store it, how does mining work, what about all the other crypto-currencies, what is the blockchain, what is cryptography, what do you do about slow transaction speeds, and many more. I’ll do my best to answer if you ask me, but some of the answers are just my opinion based on the different sources I’ve read throughout the past few years.
I don’t know if I’m right or wrong about the future of Bitcoin but my estimate is that it will be around for a long time to come. I’m doing the best I can to piece the puzzle together. Some of the facts I stated could have different interpretations. I did my best to fact check before posting because I think telling the most precise truth is most important, especially for something that could change everything we know about money. I might have got some facts wrong. If you see something please let me know.
Thanks for reading. Leave a comment, ask me questions. Ask your friends questions and please share this freely. Cheers
For similar content, find me on twitter @ aSongForThis
Footnotes:
1 Fiat Currencies are what most people use around the world right now, including USD, CAD, EUR, JPY etc.
2 Cryptocurrency research firm Chainalysis noted that dark web transactions now account for just one percent of Bitcoin transactions, down from 30 percent in 2012.
3 When the software was first introduced to the public, there wasn’t nearly as many people involved, so a small minority of people who hold Bitcoin, hold large stacks of coins from the very early stages of development. These coins are being distributed to the public as time goes on, so intra-day trading can be very volatile in part due to these people selling and buying large amounts whenever they want, and often at strategic times, and likely working together at times. They’re often referred to as Whales, along with whoever else has large stacks of coins.
4 There are several people who claim to be the creator of Bitcoin software, but there has never been verified proof. When the software was released, a paper explaining the purpose of it was released with it, called the “white paper,” and was authored by an anonymous person who went by Satoshi Nakamodo. Weather the name’s real or fake we don’t know, and we may never, and it may be more than one person. The paper can be seen at bitcoin dot org
5 Examples include Venezuela, Hungary, Yugoslavia, and Zimbabwe.
6 Miners run the Bitcoin software, it is free and open-source. Miners solve complex math equations to verify transactions, and get rewarded for it. The costs of mining are hardware and electricity. Anyone can mine Bitcoin. Miners get rewarded with freshly minted coins and transaction fees. After all 21 million coins built into the software are minted, there will be no more. Miners are still necessary to settle transactions, and will earn their Bitcoin solely from transaction fees. This wont happen until the year 2140.
7 If you invested US one hundred dollars in mid 2010, and sold in late 2017, you would have made between US 30 to 40 million dollars, depending on the exact timing.
8 A model created by an anonymous Bitcoin user that has garnished much attention. I can’t post a link so search “Stock to Flow Model medium”
9 Liquidity is a term used to describe the availability of an asset. Bitcoin has enough liquidity for most common investors.
Twitter @aSongForThis
TRADING TIME FRAMES COVERED!Hi all,
I know i am abit late with the video feature but better late than neverrrr!
In this video i have covered the key trading time frames and the things you should be looking out for.
What would you like me to cover? leave your comments below and i will get back to everyone! :)