GBPUSD Drawing And LearningJust drawing in a relaxed state can uncover new insights. I learn this decades ago, and it is very valuable to me.
Maybe it helps you too, when you do your Zen Chart Work §8-)
Learntotrade
End-of-Day Trading Reflection📊 "Have you reviewed your trades today?"
🔑 Key points to consider before closing your trading day:
Did I follow my trading plan without deviations?
Was my risk management on point?
What could I have done better, and what did I learn from today?
Trading is not just about placing orders; it's about constantly refining your process and mindset.
Remember, every day in the market is a lesson – embrace it!
Navigating High Volatility Periods in TradingMarket volatility is a critical aspect of trading, and during certain periods—particularly around significant news events—this volatility becomes more pronounced. The graphic titled *"The Cycle of Market Volatility"* effectively captures the stages involved in how markets react and stabilize after major news events. These events, such as red folder news releases, economic reports, and elections, are pivotal moments that traders need to approach with both caution and strategy.
The Cycle of Market Volatility
1. News Events Occur
High-impact news, known as *red folder news*, includes economic data releases such as the Non-Farm Payroll (NFP), central bank interest rate decisions, inflation reports, and major political developments like elections. These events are known for triggering swift market movements and increased volatility.
2. Market Reaction
Once the news breaks, markets tend to react swiftly. Prices may shoot up or down as traders digest the new information and position themselves accordingly. The initial reaction is often driven by the big institutional players, and retail traders are frequently caught up in the momentum.
3. Media Amplification
After the initial market response, the media plays a significant role in amplifying the event. Analysts, news outlets, and social media start discussing the potential ramifications, which often leads to further market movement. Speculation and public sentiment can magnify the volatility.
4. Trader Response
As traders react to both the news and the media coverage, there can be an increase in trading volumes. Some traders might attempt to capitalize on the price swings, while others might exit their positions to avoid losses. Emotions like fear and greed tend to dominate in this phase, making it essential for traders to stick to their strategies.
5. Market Stabilization
Eventually, after the initial surge in price movement and emotional trading subsides, the market begins to stabilize. Once the news has been fully priced in and the dust settles, the markets may find equilibrium, and normal trading conditions resume—until the next major event.
Trading During High Volatility: Pros and Cons
Trading during high volatility events such as red folder news releases and elections can be both rewarding and dangerous. Let's explore some of the **pros and cons** of trading during these periods:
Pros
Large Profit Opportunities
Volatility creates sharp price movements, and for traders who can accurately predict market direction, these swings can translate into significant profits in a short period. For example, interest rate announcements or jobs data releases can cause currencies to move hundreds of pips in minutes.
Increased Liquidity
High-impact events often bring more participants into the market, leading to increased liquidity. This means trades can be executed more quickly, and spreads (the difference between bid and ask prices) may narrow, offering better trading conditions for short-term traders.
Clear Trends
Often after a red folder event, markets establish clearer trends. Whether it’s a sharp bullish or bearish move, traders may find it easier to follow the trend and capitalize on the momentum rather than dealing with the choppier markets typically seen in low-volatility periods.
Cons
Whipsaw Risk
One of the biggest dangers of trading during high volatility is the potential for whipsaw movements. The market may initially react one way, only to reverse sharply after further analysis or new information comes to light. This can lead to traders being stopped out or suffering losses as prices swing unpredictably.
Wider Spreads
While liquidity can increase, the initial reaction to major news can cause spreads to widen dramatically. This can eat into potential profits and make it difficult for traders to enter or exit positions at favorable prices.
Emotional Trading
News events tend to stir up emotions in traders—especially fear and greed. These emotions can cloud judgment, causing traders to deviate from their trading plans, make impulsive decisions, or over-leverage themselves in pursuit of quick gains.
Gaps in the Market
High-impact news can cause gaps in the market, where price jumps from one level to another without trading in between. This can be hazardous for traders who are in open positions, as stop-loss orders may not be filled at the expected price, leading to larger losses than anticipated.
Key Red Folder Events and How to Approach Them
Central Bank Interest Rate Decisions
Perhaps the most influential news events, interest rate decisions by central banks like the Federal Reserve or the European Central Bank can cause massive volatility in Forex markets. Traders need to watch not just the decision itself but also the accompanying statements and guidance for future monetary policy.
Non-Farm Payrolls (NFP)
Released monthly, the U.S. NFP report often leads to sharp movements in the USD and related currency pairs. The NFP provides insights into the health of the U.S. economy and is closely watched by traders around the world.
Elections and Political Events
Elections, referendums, and major geopolitical developments (such as US elections last week) can cause sustained volatility in markets. Traders should be particularly cautious around these events as outcomes can be highly unpredictable, and market reactions may be extreme.
Inflation Reports
Inflation data can significantly impact market expectations for interest rates, which in turn influences currency values. Central banks tend to adjust their monetary policy based on inflation trends, making these reports crucial for traders.
How to Trade Volatile Events Safely
Have a Clear Plan
Don’t enter trades during volatile periods without a well-thought-out strategy. Make sure to set clear stop-loss and take-profit levels and be prepared for sudden market reversals.
Consider Waiting for the Dust to Settle
Instead of trading the immediate market reaction, some traders prefer to wait until the news has been fully digested. By waiting for clearer trends to form after the event, traders can reduce their risk of getting caught in whipsaw price movements.
Practice Proper Risk Management
With greater volatility comes greater risk, so it’s crucial to limit your exposure. Reduce your position sizes and avoid over-leveraging during these times. Risk management is vital to surviving and thriving in high-volatility environments.
Stay Informed
Understanding the context behind major news events is critical. Following economic calendars, staying updated on geopolitical developments, and listening to expert analysis can help traders navigate high-volatility markets more effectively.
Conclusion
Trading during high volatility periods can present both opportunities and risks. While the potential for quick profits is tempting, the unpredictability of the markets during these times requires discipline, a solid strategy, and strong risk management. Understanding the *Cycle of Market Volatility* can help traders better anticipate how markets react to red folder news and major events, allowing them to make more informed trading decisions.
Understanding Trading Leverage and Margin.When you first dive into trading, you’ll often hear about leverage and margin . These two concepts are powerful tools that can amplify your profits, but they also come with significant risks. The image you've provided lays out the essentials of leverage and margin: Leverage allows traders to control larger positions, Margin acts as a security deposit, Profit Amplification boosts potential gains, and Risk Amplification warns of increased losses.
In this article, we’ll break down these terms and explore how leverage and margin work, their advantages and risks, and what to consider before using them in your trading strategy.
What is Leverage in Trading?
Leverage is essentially a loan provided by your broker that allows you to open larger trading positions than your actual account balance would otherwise allow. It’s a tool that can multiply the value of your capital, giving you the potential to make more money from market movements without needing to invest large sums of your own money.
Think of leverage as “financial assistance.” With leverage, even a small amount of capital can control a larger position in the market. This can lead to amplified profits if the trade goes your way. However, it’s a double-edged sword; leverage can also lead to amplified losses if the trade moves against you.
Example of Trading with Leverage
Suppose you have €100 in your trading account and your broker offers a leverage of 1:5. This means you can control a position worth €500 with your €100 investment. If the market moves in your favor, your profits will be calculated based on the €500 position, not just the €100 you originally invested. However, if the market moves against you, your losses will also be based on the larger amount.
What is Margin in Trading?
Margin is the amount of money you must set aside as collateral to open a leveraged trade. When you use leverage, the broker requires a deposit to cover potential losses—this is called margin. Margin essentially acts as a security deposit, ensuring that you can cover losses if the trade doesn’t go as planned.
Margin is usually expressed as a percentage of the total trade size. For example, if a broker requires a 5% margin to open a position, and you want to open a €1,000 trade, you would need to deposit €50 as margin.
How Does Margin Work?
Margin works together with leverage. The margin required depends on the leverage ratio offered by the broker. For instance, with a 1:10 leverage, you’d only need a 10% margin to open a position, while a 1:20 leverage would require a 5% margin.
If the market moves against your position significantly, your margin level can drop. If it falls too low, the broker may issue a **margin call**, requesting additional funds to maintain the trade. If you don’t add funds, the broker might close your position to prevent further losses, which could lead to a loss of the initial margin amount.
How Does Leveraged Trading Work?
Leveraged trading involves borrowing capital from the broker to increase the size of your trades. This allows you to open larger positions and potentially gain higher profits from favorable market movements.
Here’s a simplified process of how it works:
1. Deposit Margin: You set aside a portion of your own funds (margin) as a security deposit.
2. Leverage Ratio Applied: The broker provides you with additional capital based on the leverage ratio, increasing your trading power.
3. Open Larger Positions: You can now open larger trades than you could with just your capital.
4. Profit or Loss Magnified: Any profit or loss from the trade is amplified, as it’s based on the larger position rather than just your initial capital.
While leverage doesn’t change the direction of your trades, it affects how much you gain or lose on each trade. That’s why it’s essential to understand both the potential for profit amplification and the risk amplification that leverage brings.
The Benefits and Risks of Using Leverage
Benefits of Leverage
- Profit Amplification: With leverage, you can control larger trades, which means any favorable movement in the market can lead to greater profits.
- Capital Efficiency: Leverage allows you to gain exposure to the markets without needing to invest a large amount of your own money upfront.
- Flexibility in Trading: Leveraged trading gives traders more flexibility to diversify their positions and take advantage of multiple opportunities in the market.
Risks of Leverage
- Risk Amplification: Just as leverage can amplify profits, it also amplifies losses. If a trade moves against you, your losses can be substantial, even exceeding your initial investment.
- Margin Calls: If the market moves significantly against your leveraged position, you may face a margin call, requiring you to add more funds to your account to keep the position open.
- Rapid Account Depletion: High leverage means that small market moves can have a big impact on your account. Without careful management, you could deplete your account balance quickly.
Important Considerations for Leveraged Trading
1. Understand the Leverage Ratio: Different brokers offer various leverage ratios, such as 1:5, 1:10, or even 1:100. Choose a leverage ratio that aligns with your risk tolerance. Higher leverage ratios mean higher potential profits but also higher potential losses.
2. Know Your Margin Requirements: Always be aware of the margin requirements for your trades. Brokers may close your positions if your margin level drops too low, so it’s essential to monitor your margin balance regularly.
3. Risk Management is Key: Use risk management strategies like stop-loss orders to limit potential losses on each trade. Don’t risk more than a small percentage of your account balance on any single trade.
4. Avoid Overleveraging: One of the biggest mistakes new traders make is using too much leverage. Start with a lower leverage ratio until you’re more comfortable with the risks involved in leveraged trading.
5. Only Use Leverage if You Understand It: Leveraged trading is suitable primarily for experienced investors who understand the market and the risks involved. If you’re new to trading, practice with a demo account to learn how leverage works before applying it in a live account.
Final Considerations
Leverage and margin are powerful tools in trading that can amplify profits, but they come with considerable risk. Using leverage wisely and understanding margin requirements are essential to avoid unnecessary losses and protect your account. While the prospect of profit amplification is attractive, traders should always remember that leveraged trading is a double-edged sword—it can lead to significant gains, but it can also result in rapid account depletion if not managed carefully.
To summarize:
- Leverage allows you to control larger trades with a small investment, multiplying both potential profits and potential losses.
- Margin is the deposit required to open a leveraged trade and acts as a security against potential losses.
- Use leverage responsibly and only after understanding the risks involved.
Leverage can be a valuable tool in trading if used wisely, so make sure to educate yourself, practice with a demo account, and always approach leveraged trading with caution.
Comparing Full Time Trading and Full Time Job
Hey traders,
In this educational article, we will compare full-time trading and full-time job .
THE MONEY
And I guess, the essential thing to start with is the money aspect.
Full-time job guarantees you a stable month-to-month income with the pre-arranged bonuses.
In contrast, trading does not give any guarantees. You never know whether a current trading month will be profitable or not.
Of course, the average annual earnings of a full-time trader are substantially higher than of an employee. However, you should realize the fact that some trading periods will be negative, some will be around breakeven and only some will be highly profitable.
Sick-leave & Vacations
In addition to a stable salary, a full time job usually offers a paid sick-leave and vacation , while being a full-time trader, no one will compensate you your leaves making the position of an employee much more sustainable.
Office
Being an employee, you usually work in an office with the fixed working hours . Taking into consideration that people often spend a quite substantial time to get to work and then to get home, a full-time job typically consumes at least 10 hours, not leaving a free-time.
In contrast, full-time traders are very flexible with their schedule .
Even though they often stick to a fixed working plan, they spend around 3-4 hours a day on trading. All the rest is their free time, that they can spend on whatever they want.
Moreover, traders are not tied to their working place. They can work from everywhere, the only thing that they need is their computer and internet connection.
No Boss
Traders normally work alone. The main advantage of that is the absence of a subordination . You are your own boss and you follow your own rules.
However, such a high level of freedom breeds a high level of personal responsibility . We should admit the fact that not every person can organize himself.
In addition to that, working alone implies that you are not building social connections and you don't have colleagues.
Being an employee, you are the part of a hierarchy . You usually have some subordinates, but you have a supervisor as well.
You are constantly among people, you build relationships, and you are never alone.
There is a common bias among people, that full time trading beats full time job in all the aspects. In these article, I was trying to show you that it is not the fact.
Both have important advantages and disadvantages . It is very important for you to completely realize them before you decide whether you want to trade full time or have a full time job.
Understanding Forex CorrelationA Comprehensive Guide to Forex Pair Correlation Strategies
Forex correlation is a powerful tool that can help traders understand how currency pairs move in relation to each other. It’s an essential concept that, when used correctly, can improve risk management, enhance profits, and provide valuable insights into the behavior of different currency pairs.
The image you've provided breaks down key aspects of forex pair correlation, including positive correlation, negative correlation, and hedging strategies. In this article, we’ll dive deeper into what forex correlation is, how it works, and how you can use it to your advantage in your trading strategies.
What Is Forex Correlation?
Forex correlation refers to the relationship between the movements of two different currency pairs. When two currency pairs move in tandem or in opposite directions, they are said to be correlated. Correlation can be positive, where both pairs move in the same direction, or negative, where the pairs move in opposite directions.
Traders use correlation data to understand potential risks and opportunities. Understanding the relationships between currency pairs allows you to diversify your trades, hedge positions, or double down on strategies based on the expected movements of correlated pairs.
Types of Forex Correlations
1. Positive Correlation
When two currency pairs move in the same direction, they are said to have a positive correlation. For example, EUR/USD and GBP/USD often have a positive correlation because both pairs share the USD as the base currency, and they tend to respond similarly to events affecting the U.S. dollar.
Example of Positive Correlation: If EUR/USD is rising, GBP/USD is also likely to rise due to the influence of the U.S. dollar.
Strategy for Positive Correlation: Traders can use positive correlation to open the same-direction positions in both pairs to amplify gains. However, keep in mind that a highly correlated pair will also double your risk if the market moves against you.
2. Negative Correlation
When two currency pairs move in opposite directions, they are said to have a negative correlation. For instance, USD/JPY and EUR/USD often have a negative correlation. When the U.S. dollar strengthens against the Japanese yen (USD/JPY), it may weaken against the euro (EUR/USD).
Example of Negative Correlation: If EUR/USD is rising, USD/JPY may be falling due to changes in the strength of the U.S. dollar.
Strategy for Negative Correlation: Traders can open opposite-direction positions in negatively correlated pairs to offset potential losses. For example, if you are long on USD/JPY and the trade turns against you, holding a short position in EUR/USD can help balance the loss.
How to Calculate Correlation
Correlation is typically measured on a scale from -1 to +1:
+1 means that two currency pairs are perfectly positively correlated. This means they will move in exactly the same direction at all times.
-1 means that two currency pairs are perfectly negatively correlated. This means they will always move in opposite directions.
0 means no correlation exists, meaning the pairs move independently of each other.
Many trading platforms provide correlation matrices or tools to help you understand the correlation between different pairs. These can be updated in real time or calculated over different time frames (daily, weekly, or monthly).
Why Forex Correlation Matters for Traders
Understanding forex correlation is crucial for several reasons:
1. Risk Management
By using correlation strategies, you can manage your risk more effectively. For example, if you have two highly correlated positions, you're effectively doubling your exposure to the same market conditions, which can increase risk. On the other hand, trading negatively correlated pairs can help reduce exposure to one-sided market movements.
2. Diversification
Forex correlation helps you diversify your portfolio by balancing positively and negatively correlated pairs. Proper diversification ensures that you aren’t overly exposed to one currency or market, providing better protection against volatile market movements.
3. Hedging Opportunities
As shown in the image, hedging with correlations allows traders to use correlated pairs to balance risk and protect investments. If one pair moves against you, a correlated position in another pair can help minimize the loss. This is a strategy that advanced traders often use during periods of high market uncertainty.
Using Forex Correlation Strategies
1. Hedging with Correlations
A popular strategy involves using negatively correlated pairs to hedge positions. Let’s say you have a long position in EUR/USD. You might take a short position in USD/CHF to reduce exposure to potential USD weakness. If the U.S. dollar weakens, your EUR/USD trade may incur a loss, but the short USD/CHF position can offset that loss.
2. Trading Positively Correlated Pairs
When trading positively correlated pairs, you can open same-direction positions to amplify gains. For instance, if you anticipate the U.S. dollar weakening and are bullish on both the euro and the British pound, you might go long on EUR/USD and GBP/USD. In this case, your profits could multiply if both trades move in your favor. However, this strategy also increases risk since losses would be compounded if the U.S. dollar strengthens instead.
3. Avoiding Over-Exposure
While correlation strategies can help increase profits or hedge risks, they can also lead to overexposure if not carefully managed. For example, trading multiple highly correlated pairs (e.g., EUR/USD, GBP/USD, AUD/USD) simultaneously can result in taking on too much risk in a single direction, especially if the market turns against you.
To avoid overexposure:
Check correlation matrices regularly to understand current correlations.
Adjust trade sizes based on the degree of correlation between pairs.
Avoid trading multiple pairs that have a perfect or near-perfect correlation unless you are intentionally doubling down on a strategy.
When to Use Forex Correlation Strategies
During High Volatility: Correlation strategies are particularly useful when the market is volatile, and you want to either reduce your risk through hedging or amplify your profits by trading positively correlated pairs.
Economic News Events: Major news events often affect several currency pairs simultaneously. By understanding the correlations between pairs, you can plan for potential reactions and adjust your strategy accordingly.
Portfolio Balancing: Long-term traders can use forex correlations to balance their portfolios, ensuring they are not overly exposed to any single currency or market condition.
Conclusion
Forex correlation is an essential concept for traders seeking to manage risk, diversify portfolios, and maximize profits. By understanding how different currency pairs relate to each other, traders can build more robust strategies that leverage both positive and negative correlations.
Whether you're looking to hedge your positions, amplify your gains, or simply protect your investments, correlation strategies offer valuable tools for navigating the complex forex market. Be sure to incorporate correlation analysis into your overall trading plan to enhance your decision-making process and boost your chances of success in the forex market.
Happy trading!
5 Common Mistakes New Traders Must Avoid
Trading in the financial markets can be an exciting journey, but it's not without its challenges. Many new traders often make common mistakes that can lead to losses and frustration. Understanding these mistakes is essential for developing a successful trading strategy. In this idea, we will discuss the top five mistakes new traders make and provide practical tips on how to avoid them. By being aware of these pitfalls, you can improve your trading skills and work towards achieving your financial goals.
1. Lack of a Trading Plan
Mistake: Many new traders dive into trading without a well-defined plan. They often trade based on emotions, tips from friends, or market hype, which can lead to inconsistent results and unnecessary losses.
Solution: Develop a comprehensive trading plan that outlines your trading goals, risk tolerance, entry and exit strategies, and criteria for selecting trades. A good plan should also include guidelines for risk management, such as how much capital you are willing to risk on each trade. Stick to your plan, and avoid making impulsive decisions based on market fluctuations or emotions.
Key Elements of a Trading Plan:
-Objectives: Define what you aim to achieve (e.g., short-term gains, long-term investment).
-Risk Management: Determine how much you are willing to lose on a single trade and set stop-loss orders accordingly.
-Trading Strategies: Decide on the type of analysis you will use (technical, fundamental, or a combination).
2. Ignoring Risk Management
Mistake: New traders often underestimate the importance of risk management, leading to excessive losses. They may over-leverage their positions or fail to set stop-loss orders, which can result in significant financial damage.
Solution: Implement strict risk management rules. A common rule of thumb is to risk no more than 1-2% of your trading capital on a single trade. This approach allows you to withstand several losing trades without depleting your account. Use stop-loss orders to limit your losses and consider using trailing stops to protect profits as trades move in your favor.
Tips for Risk Management:
-Position Sizing: Calculate the appropriate size of your trades based on your risk tolerance.
-Stop-Loss Orders: Always set a stop-loss order to exit a trade if it moves against you.
-Diversification: Avoid putting all your capital into a single trade or asset.
3. Overtrading
Mistake: In an attempt to make quick profits, new traders often engage in overtrading. This can result from the desire to recover losses or the excitement of seeing trades executed, leading to poor decision-making and increased transaction costs.
Solution: Set specific criteria for entering and exiting trades, and resist the urge to trade more frequently than necessary. Focus on quality over quantity. It's better to wait for high-probability setups than to force trades that don’t meet your criteria.
Strategies to Avoid Overtrading:
- Limit Trading Frequency: Define a maximum number of trades per day or week.
- Review Trades: After each trading session, review your trades to assess whether they adhered to your trading plan.
- Take Breaks: If you find yourself feeling overwhelmed or impulsive, take a break from trading to reset your mindset.
4. Emotional Trading
Mistake: Emotional trading occurs when traders let their feelings dictate their decisions. Fear, greed, and frustration can lead to impulsive trades, often resulting in losses.
Solution: Practice emotional discipline. Recognize that emotions can cloud your judgment and lead to poor trading decisions. Use techniques such as journaling to reflect on your trading experiences and identify emotional triggers.
Techniques to Manage Emotions:
-Set Realistic Expectations: Understand that losses are a part of trading, and not every trade will be profitable.
-Develop a Routine: Establish a pre-trading routine to calm your mind and focus on your trading plan.
-Mindfulness Practices: Consider techniques such as meditation or deep-breathing exercises to manage stress and maintain focus.
5. Neglecting Market Research and Education
Mistake: New traders sometimes jump into trading without sufficient knowledge about the markets, trading strategies, or economic indicators. This lack of understanding can lead to poor decision-making.
Solution: Commit to continuous learning. Take advantage of the wealth of educational resources available online, such as webinars, articles, and trading courses. Stay updated with market news and analysis to understand the factors influencing price movements.
Steps for Education:
Read Books: Invest time in reading books on trading, market psychology, and investment strategies to deepen your understanding and broaden your knowledge base.
Practice with a Demo Account: Before trading with real money, use a demo account to practice your strategies in a risk-free environment.
Join Trading Communities: Engage with other traders on platforms like TradingView, where you can share insights and learn from each other.
Follow Experts: Subscribe to trading blogs, YouTube channels, or podcasts from experienced traders.
Trading is a journey that requires discipline, patience, and a commitment to continuous learning. By avoiding these common mistakes and implementing effective strategies, new traders can enhance their trading skills and improve their chances of success in the financial markets. Remember, every trader faces challenges, but those who learn from their experiences and adapt will ultimately thrive.
Bitcoin breaking 64k!!! Next 68???Hey guys!
Friday scenario didn't worked and we continue growing. Here are some thoughts about next movements.
Bullish: We're now moving in a raising channel and the MA have a bullish cross.
Bearish: The RSI is closing to the overbought point and there is the volume divergence.
Additional: We are between two important resistance and support levels.
So my thoughts here, that If buying momentum continues to fade, given the volume divergence and high RSI, a short-term pullback could occur, potentially taking Bitcoin towards the $62,000 support level. Should this support hold, it may provide a bounce opportunity for bulls to regain momentum.
On the other hand, if Bitcoin manages a successful break above the $64,000 resistance, it could pave the way for a move towards the higher resistance levels between $66,000 and $68,000, marking a continued bullish trend.
What u think?
NTRA: Entry, Volume, Target, StopEntry: above 132.01
Volume: above 1.34M
Target: 142.90 area (this is an area, no guarantees, you should be selling on the way up)
Stop: Depending on your risk tolerance; Based on an entry of 132.02, 126.58 gets you 2/1 Reward to Risk Ratio.
This LONG swing trade idea is not trade advice and is strictly based on my ideas and technical analysis. No due diligence or fundamental analysis was performed while evaluating this trade idea. Do not enter a trade based on my idea, do not follow anyone blindly, do your own analysis and due diligence. I am not a professional trader.
TRADE REVIEW ANALYSISIn this video, i share the thought process that led to an 80pip winning trade on GU after the previous analysis. i also shared what to look out for on GU for the coming sessions
Quarter Theory: Intraday Trading Mastery - Part 1 IntroGreetings Traders!
In today’s video, we’ll be introducing Quarter Theory Intraday Trading Mastery, a model grounded in the algorithmic nature of price delivery within the markets. We’ll explore candle anatomy and learn how to predict candle behavior on lower timeframes to capitalize on intraday trading opportunities. This model will also help us identify the optimal trading sessions and execute trades with high probability, all while effectively acting on market bias.
This video will focus primarily on the foundational content, with practical examples to follow in the next video. In the meantime, I encourage you to practice these concepts on your own to deepen your understanding.
This video is part of our ongoing High Probability Trading Zones playlist on YouTube. If you haven’t watched the previous videos in the series, I highly recommend checking them out. They provide crucial insights into identifying market bias, which Quarter Theory will help you act on effectively.
I’ll attach the links to those videos in the description below.
Premium Discount Price Delivery in Institutional Trading:
Mastering Institutional Order-Flow Price Delivery:
Quarter Theory Mastering Algorithmic Price Movements:
Mastering High Probability Trading Across All Assets:
Best Regards,
The_Architect
Hidden Costs of Trading You Must Know
In this educational article, we will discuss the hidden costs of trading.
1 - Brokers' Commissions
Trading commission is the brokers' fee for opening a trading position.
Usually, it is calculated based on the size of the trade.
Though most of the traders believe that trading commissions are too low to even count them, the fact is that trading on consistent basis and opening a couple of trading positions weekly, the composite value of commissions may cut a substantial part of our profits.
2 - Education
Of course, most of the trading basics can be found on the Internet absolutely for free.
However, the more experienced you become, the harder it is to find the materials . So you typically should pay for the advanced training.
Moreover, there is no guarantee that the course/coaching that you purchase will improve your trading, quite often traders go through multiple courses/coaching programs before they become consistently profitable.
3 - Spreads
Spread is the difference between the sellers' and buyers' prices.
That difference must be compensated by a trader if one wished to open a trading position.
In highly liquid markets, the spreads are usually low and most of the traders ignore them.
However, being similar to commissions, spreads may cut the substantial part of the overall profits.
4 - Time
When you begin your trading journey, it is not possible to predict how much it will take to become a consistently profitable trader.
Moreover, there is no guarantee that you will become one.
One fact is true, you should spend a couple of years before you find a way to trade profitably, and as we know, the time is money. More time you sacrifice on trading, less time you have on something else.
5 - Swaps
Swap is the fee you pay for transferring a position overnight .
Swap is based on a difference between the interests rates of the currencies that are in a pair that you trade.
Occasionally, swaps can even be positive, and you can earn on holding such positions.
However, most of the time the swaps are negative and the longer you hold your trades, the more costly your trading becomes.
The brokers' commissions, spreads and swaps compose a substantial cost of our trading positions. Adding into the equation the expensive learning materials and time spent on practicing, trading becomes a very expensive game to play.
However, knowing in advance these hidden costs, the one can better prepare himself for a trading journey.
Never Trade Without Stop Loss!
Hey traders,
Talking to many struggling traders from different parts of the world, I realized that the majority constantly makes the same mistake : they do not set a stop loss .
Asking for the reason why they do that, the common answer is that
these traders consider the manual position closing to be safer, implying that if the market goes in the opposite direction, they will be able to much better track the exact moment to cut loss.
In this article, we will discuss why it is crucially important to set a stop loss and why it is the number one element of your trading position.
What is Stop Loss?
Let's discuss what is a stop loss . By a stop loss , we mean a certain price level where we close our trading position in loss. In comparison to a manual closing, the stop loss (preferably) should be set at the exact moment when the order is executed.
On the chart above, I have an active selling position on Gold.
My entry level is 2372, my stop loss is 2381.
It means that if the price goes up and reaches 2381 level, the position will automatically close in a loss.
Why Do You Need a Stop Loss?
Stop loss allows us limiting the risks in case of unfavorable movements .
On the chart above, I have illustrated 2 similar negative scenarios : 1 with a stop loss being placed and one without on USDJPY.
In the example on the left, stop loss helped to prevent the excessive risk , cutting the loss at the beginning of a bearish wave.
With the manual closing, however, traders usually hold the negative positions much longer , praying for a reversal.
Holding a losing trade, emotions intervene. Greed and fear usually spoil the reasoning, causing irrational decisions .
Following such a strategy, the total loss of the second scenario is 6 times bigger than the total loss with a placed stop loss order.
Always Set Stop Loss!
Stop loss defines the point where you become wrong in your predictions. Planning your trade, you should know in advance such a point and cut your loss once it is reached.
Never trade without a stop loss.
How to Identify Candlestick Strength | Trading Basics
Hey traders,
In this educational article, we will discuss
Please, note that the concepts that will be covered in this article can be applied on any time frame, however, higher is the time frame, more trustworthy are the candles.
Also, remember, that each individual candle is assessed in relation to other candles on the chart.
There are three types of candles depending on its direction:
🟢 Bullish candle
Such a candle has a closing price higher than the opening price.
🔴 Bearish candle
Such a candle has a closing price lower than the opening price.
🟡 Neutral candle
Such a candle has equal or close to equal opening and closing price.
There are three categories of the strength of the candle.
Please, note, the measurement of the strength of the candle is applicable only to bullish/bearish candles.
Neutral candle has no strength by definition. It signifies the absolute equilibrium between buyers and sellers.
1️⃣ Strong candle
Strong bullish candle signifies strong buying volumes and dominance of buyers without sellers resistance.
Above, you can see the example of a strong bullish candle on NZDCHF on a 4H.
Strong bearish candle means significant selling volumes and high bearish pressure without buyers resistance.
On the chart above, you can see a song bearish candle on EURUSD.
Usually, a strong bullish/bearish candle has a relatively big body and tiny wicks.
2️⃣ Medium candle
Medium bullish candle signifies a dominance of buyers with a rising resistance of sellers.
You can see the sequence of medium bullish candles on EURJPY pair on a daily time frame.
Medium bearish candle means a prevailing strength of sellers with a growing pressure of bulls.
Above is the example of a sequence of medium bearish candles on AUDUSD pair.
Usually, a medium bullish/bearish candle has its range (based on a wick) 2 times bigger than the body of the candle.
3️⃣ Weak candle
Weak bullish candle signifies the exhaustion of buyers and a substantial resistance of sellers.
Weak bearish candle signifies the exhaustion of sellers and a considerable bullish pressure.
Usually, such a candle has a relatively small body and a big wick.
Above is the sequence of weak bullish and bearish candles on NZDCHF pair on an hourly time frame.
Knowing how to read the strength of the candlestick, one can quite accurately spot the initiate of new waves, market reversals and consolidations. Watch how the price acts, follow the candlesticks and try to spot the change of momentum by yourself.
Demo Account Will Not Make You a PRO TRADER
Hey traders,
In this article, we will discuss demo account trading .
We will discuss its importance for newbie traders and its flaws.
➕ Pros:
Demo account is the best tool to get familiar with the financial markets . It gives you instant access to hundreds of different financial instruments.
With a demo account, you can learn how the trading terminal works . You can execute the trading orders freely and get familiar with its types. You can get acquainted with leverage, spreads and volatility.
Trading on paper money, you do not incur any risks , while you can see the real impact of your actions on your account balance.
Demo account is the best instrument for developing and testing a trading strategy , not risking any penny.
The absence of risk makes demo trading absolutely stress-free.
➖ Cons:
The incurred losses have no real impact , not causing real emotions and pressure, which you always experience trading on a real account.
Your performance (positive or negative) does not influence your future decisions.
Real market conditions are tougher. Demo accounts execute the orders a bit differently than the real ones. That is clearly felt during the moments of high volatility, with the order slippage occurring less often and trade execution being longer.
Trading with paper money allows you to trade with the sums being unaffordable in a real life, misrepresenting your real potential gains and providing a false confidence in success.
Even though we spotted multiple negative elements of demo trading, I want you to realize that it still remains the essential part of your trading journey and one of the main training tools. You should spend as much time on demo trading as you need to build confidence in your actions, only then you can gradually switch to real account trading.
Profitable Triangle Trading Strategy Explained
Descending triangle formation is a classic reversal pattern . It signifies the weakness of buyers in a bullish trend and bearish accumulation .
In this article, I will teach you how to trade descending triangle pattern. I will explain how to identify the pattern properly and share my trading strategy.
⭐️ The pattern has a very peculiar price action structure :
1. Trading in a bullish trend, the price sets a higher high and retraces setting a higher low .
2. Then the market starts growing again but does not manage to set a new high, setting a lower high instead.
3. Then the price drops again perfectly respecting the level of the last higher low, setting an equal low .
4. After that, one more bullish movement and one more consequent lower high , bearish move, and equal low .
Based on the last three highs , a trend line can be drawn.
Based on the equal lows , a horizontal neckline is spotted.
❗What is peculiar about such price action is the fact that a set of lower highs signifies a weakening bullish momentum : fewer and fewer buyers are willing to buy from horizontal support based on equal lows.
🔔 Such price action is called a bearish accumulation .
Once the pattern is formed it is still not a trend reversal signal though. Remember that the price may set many lower highs and equal lows within the pattern.
The trigger that is applied to confirm a trend reversal is a bearish breakout of the neckline of the pattern.
📉Then a short position can be opened.
For conservative trading, a retest entry is suggested.
Safest stop is lying at least above the level of the last lower high.
However, in case the levels of the lower highs are almost equal it is highly recommendable to set a stop loss above them all.
🎯For targets look for the closest strong structure support.
Below, you can see the example of a descending triangle trade that I took on NZDCAD pair.
After I spotted the formation of the pattern, I was patiently waiting for a breakout of its neckline.
After a breakout, I set a sell limit order on a retest.
Stop loss above the last lower high.
TP - the closest key support.
90 pips of pure profit made.
Learn to identify and trade descending triangle. It is one of the most accurate price action patterns every trader should know.
How to Apply a Position Size Calculator in Forex Trading
In this educational article, I will teach you how to apply a position size calculator in Forex and calculate a lot size for your trades depending on a desired risk .
Why do you need a position size calculator?
Even though, most of the newbie traders trade with the fixed lot , the truth is that fixed lot trading is considered to be very risky .
Depending on the trading instrument, time frame and a desired stop loss, the risks from one trade to another are constantly floating .
With the constant fluctuations of losses per trade, it is very complicated to control your risks and drawdowns.
A lot size calculation , however, allows you to risk the desired percentage of your capital per trade , limiting the maximum you can potentially lose.
A lot size is calculated with a position size calculator .
How to Measure Lot Size for Trades?
Let's measure a lot size for the following trade on EURUSD.
Step 1:
Measure a pip value of your stop loss.
It is the distance from your entry level to your stop loss level.
In the example on the picture, the stop loss is 35 pips.
Step 2:
Open a position size calculator
Step 3:
Fill the form.
Inputs: Account currency, account balance, desired risk %, stop loss in pips, currency pair.
Let's say that we are trading with USD account.
Its balance is $10000.
The risk for this trade is 1%.
Step 4:
Calculate a lot size.
The system will calculate a lot size for your trade.
0.28 standard lot in our example.
Taking a trade on EURUSD with $10000 deposit and 35 pips stop loss , you will need 0.28 lot size to risk 1% of your trading account.
Learn to apply a position size calculator. That is the must-use tool for a proper risk management.
Learn How to Apply Top-Down Multiple Time Frame Analysis
In this article, we will discuss how to apply Multiple Time Frame Analysis in trading .
I will teach you how to apply different time frames and will share with you some useful tips and example of a real trade that I take with Top-Down Analysis strategy.
Firstly, let's briefly define the classification of time frames that we will discuss:
There are 3 main categories of time frames:
1️⃣ Higher time frames
2️⃣ Trading time frames
3️⃣ Lower time frames
Higher Time Frames Analysis
1️⃣ Higher time frames are used for identification of the market trend and global picture. Weekly and daily time frames belong to this category.
The analysis of these time frames is the most important .
On these time frames, we make predictions and forecast the future direction of the market with trend analysis and we identify the levels , the areas from where we will trade our predictions with structure analysis .
Above is the example of a daily time frame analysis on NZDCAD.
We see that the market is trading in a strong bullish trend.
I underlined important support and resistance levels.
The supports will provide the safest zones to buy the market from anticipating a bullish trend continuation.
Trading Time Frames
2️⃣ Trading time frames are the time frames where the positions are opened . The analysis of these time frames initiates only after the market reaches the underlined trading levels, the areas on higher time frames.
My trading time frames are 4h/1h. There I am looking for a confirmation of the strength of the structures that I spotted on higher time frames. There are multiple ways to confirm that. My confirmations are the reversal price action patterns.
Once the confirmation is spotted, the position is opened.
Analyzing the reaction of the price to Support 1 on 1H time frame on NZDCAD pair, I spotted a strong bullish confirmation - a triple bottom formation.
A long position is opened on a retest of a broken neckline.
Lower Time Frames
3️⃣ Lower time frames are 30/15 minutes charts. Even though these time frames are NOT applied for trading, occasionally they provide some extra clues . Also, these time frames can be applied by riskier traders for opening trading positions before the confirmation is spotted on trading time frames.
Before the price broke a neckline of a triple bottom formation on an hourly time frame on NZDCAD, it broke a resistance line of a symmetrical triangle formation on 15 minutes time frame. It was an earlier and riskier confirmation to buy.
Learn to apply these 3 categories of time frames in a combination. Start your analysis with the highest time frame and steadily go lower, identifying more and more clues.
You will be impressed how efficient that strategy is.
Red Trading DaysDoes this ring a bell?, You lose a trade and you feel the need to instantly reenter. You were absolutely sure that trade would win. So you reenter, this new trade loses as well, now you are furious you wait a bit and you reenter again with the same lot size and yet again you lose - this typically occurs because you are no longer trading based on logic but on pure vibes, pure emotion. You are 3 trades in the hole and your desire to be right is higher than ever. You’re almost seeing red itself as if you had a bloodlust towards the market. So you take a 4th trade but this is where the beginning of the end starts, you decide to go in with a bigger lot size. Once you get here, you’ve already lost the game because now you are no longer willing to listen to reason.
You definitely aren’t willing to stop and you won’t rest until you win a trade. And maybe you do win this trade but it wasn’t enough, you’re still just under break even and you need to make back your profit. So you take another trade with the same overleveraged lot size and that trade comes and loses as well, bummer. And now you are delusional thinking that the market must be against you, So by this point you pretty much give up, you yolo the account activating the margin call. Account has been blown.
Nobody likes red days, you know what I’m talking about - when almost no matter how hard you try you just can’t seem to win any trades. I promise you aren’t alone in both feeling that way and having red days to begin with. But I’ve found in my experience that learning to be okay with a losing day is one of the keys to trading from a place of peace. It is also instrumental in stopping you from both taking stupid trades and or revenge trading.
We’ve all been there, things going good - it seems like you’re finally getting it. Everyday you’re winning, Monday Profit. Tuesday Profit. Wednesday Profit. And then BAM. Thursday you start to lose your first trades. Calm down and relax, what you do next will dictate if you get to keep this account alive or not. I’ve seen it happen to other traders and it has happened to me as well. As soon as you lose a trade you instantly feel wrong and have an immediate desire to make your money back. But if you come to terms with the fact that it was never your money to begin with. You can have a shift in your perception which could help calm your nerves a bit. Many a trader has destroyed their entire account because of one silly losing trade.
So we already know that, feeling this way is normal and you are not alone. So why is it other traders can be successful and you can’t? Well the answer is you can but you must control yourself. Trading is more of a mental thing than anything else. For instance, drawdown. Drawdown is a mental thing. It is designed like that to freak you out but in actuality if you are right drawdown is just a part of the process, maintain control and follow your directive.
One thing that has greatly helped me better deal with red days is pass it off as a loan towards the market. I like to think as though the market needs to borrow my money, no biggie, sometimes people need to borrow money from you right? But good news, you get to apply interest when they are paying you back because all financial institutions do that, why shouldn’t you? When you are taking money back from the market that is the market paying interest to you. It sounds silly but that is what I do to cope with losing, something I have little to no control over. It stops me from taking stupid ill-advised trades and allows me to justify those “losses”.
It is all about the little things that allow you to better control yourself. It isn’t crazy if it works. What if I told you.
It is also very important to acknowledge the fact that you cannot win every single trade. By not actively trying to win every single trade what you are actually doing is taking pressure off of yourself because you are prepared for the worst.
I say this to say - I will likely be taking the rest of the day off from trading Either Gold or BTC as neither of them have any real opportunity to me currently. Peace out folks!
Understanding Technical Indicators - Avoid FaultsI received a question from a member today related to Divergence on RSI or Stochastics.
I've been lucky to actually sit down with the creator of Stochastics, George C. Lane, to discuss his indicator and how he used it to trade.
I've also been luck to be able to attend multiple industry conferences over the past 20+ years where I've been able to watch and listen to dozens of the best technicians and analysts explain their techniques.
Boy, those were the days - right?
This video is going to help you understand most technical indicators are designed based on a RANGE of bars (usually 14 or so). This means they are measuring price trend/direction/strength/other over the past 14 bars - not longer.
And because of that you need to understand any trend lasting more than 14+ bars could result in FAILURE of the technical indicator.
Watch this video. I hope it helps.
Get some.
The Wisdom of Pro Traders vs. Newbie Naivety
Hey traders,
In this article, we will discuss the perception of trading by individuals .
We will compare the vision of a professional trader and a beginner - trading vs gambling.
Most of the people perceive trading performance incorrectly. There is a common fallacy among them that win rate is the only true indicator of the efficiency of a trading strategy.
Moreover, newbies are searching for a strategy producing close to 100% accuracy.
Such a mindset determines their expectations.
Especially it feels, when I share a wrong forecast in my telegram channel.
It immediately triggers resentment and negative reactions.
Talking to these people personally and asking them about the reasons of their indignation, the common answer is: "If you are a pro, you can not be wrong".
The truth is that the reality is absolutely different. Opening any position or making a forecast, a pro trader always realizes that there is no guarantee that the market will act as predicted.
Pro trader admits that he deals with probabilities , and he is ready to take losses . He realizes that he may have negative trading days, even weeks and months, but at the end of the day his overall performance will be positive.
Remember, that your success in trading is determined by your expectations and perception. Admit the reality of trading, set correct goals, and you will take losses more easily.
I wish you luck and courage on a battlefield.
WHAT IS TRADING ACCOUNT DRAWDOWN | 3 Types Of Drawdown Explained
In my videos, I frequently use the term "trading account drawdown ".
Many of you asked me to explain the meaning of that term and share some examples.
What is Trading Account Drawdown?
The account drawdown is the highest observed loss from the highest
value of the deposit to the lowest value of the deposit at
a certain period of time.
Imagine you started to trade with 10,000$ account.
At the end of the year, your account size reached 15,000$ .
However, at some point through the year the deposit value dropped to 6,000$ . It was the absolute minimum for the one-year period.
At some point, your net loss was -4,000$ or 40% of your account balance.
The account drawdown is 40% .
❗️Knowing the account drawdown is very important for the risk assessment of the trading strategy. Usually, 50% and bigger drawdown signifies an extremely high risk.
3 Types of Drawdown
1. Current drawdown - a temporary drawdown associated
with the negative total value of opened trading position(s)
at present.
Once you start trading with 10,000$ deposit, you open several trading positions. Being opened, with the constant price movements, your potential gains fluctuates from positive to negative.
For example, with 3 active trades :
EURUSD ( -500$ at present);
GBPUSD ( +200$ at present);
GOLD ( -100$ at present)
Your current account drawdown is -400$ or 4% of your deposit.
2. Fixed drawdown - the negative value of the closed trading
position(s) at present for a certain period of time.
While some of your trades remain active, some are already closed .
Imagine the same deposit - 10,000$ .
On Monday you opened 6 trades,
2 still remain active ;
4 are already closed .
Your total loss from your closed trades is -500$. Your fixed Monday's drawdown is 5%.
3. Maximum Drawdown - the maximum observed loss from
the highest value of the deposit before a new maximum
is reached.
Starting to trade with 10,000$ you are already trading for 5 years .
Your account were growing rapidly and at some moment it reached 25,000$ . Then the recession started. You faced a dramatic loss of 12,500$ before you started to recover.
That was the maximum observed loss for the period.
Your maximum account drawdown was 50% .
❗️Different types of drawdown give a lot of insights about a trading strategy. Its proper assessment will help to spot a high risk strategy and to find a conservative one.
Constantly monitor your account drawdown and always check the numbers.
What is your highest account drawdown?
The ONLY Strategy You Need to Identify The Market Trend
In this article, we will discuss a proven price action based way to identify the market trend .
❗️And let me note, before we start, that no matter what strategy do you use in your trading, you should always know where the market is going and what is the current trend . Your judgement should be based on strict and objective rules that proved its accuracy.
There are a lot of ways to identify the market trend. One of the simplest and efficient ones is price action based method .
This method relies on impulse legs .
The market never goes just straight up or down, the price action always has a zigzag shape with a set of impulses and retracements.
The impulse leg is a strong directional movement , while the retracement is the correctional movement within the boundaries of the impulse.
UPTREND
📈The market is trading in a bullish trend if 3 conditions are met:
1️⃣the price forms an initial bullish impulse ,
2️⃣ retraces , setting a higher low ,
3️⃣then starts growing again and sets a new high with the second bullish impulse .
Once these 3 conditions are met, we consider the market to be bullish, and we expect a bullish continuation in such a manner.
Take a look at a price action on USDCAD. According to the trend-analysis rules, the pair is trading in a bullish trend.
DOWNTREND
📉The market is trading in a bearish trend if 3 following conditions are met:
1️⃣the price forms an initial bearish impulse ,
2️⃣ retraces , setting a lower high ,
3️⃣then drops lower and sets a new low with the second bearish impulse .
Once these 3 conditions are met, we consider the market to be bearish, and we expect a bearish trend continuation.
According to the rules, NZDUSD is trading in a bearish trend on the chart above.
CONSOLIDATION
➖The third state of the market is called consolidation . The market is trading in a consolidation if the conditions for bullish or bearish trend are not met . The price chaotically forms bullish and bearish impulses, usually trading within the range .
Above is the example of a sideways, consolidating market, where the price sets equal or almost equal highs and lows and conditions for bullish/bearish trend are not met.
Knowing the current trend, one always knows whether a current trading position is trend-following or counter trend, or it is a sideways consolidation trade.
Learn these simple rules and try to identify the market trend with them.
