how to use the position size tool in tradingviewi think i cracked it How to know how many micros to use on an instrument for example gold with a fixed dollar stop loss
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The Rookie Mistake of Timeframe Mismanagement: Avoid This!As a full time forex trader, I’ve seen my fair share of both triumphs and missteps. One of the most common pitfalls that can plague even the most seasoned investors is the rookie mistake of managing trades across different timeframes. It may seem innocuous at first, but failing to align your analysis can lead to confusion, frustration, and ultimately, poor trading decisions.
Understanding the Timeframe Disconnect
In the world of trading, charts come in all shapes and sizes. Whether you’re examining a daily chart to gauge the overall trend or an hourly chart to refine your entry and exit points, the timeframes you choose can significantly influence your trading strategy. The mistake often arises when traders analyze a longer timeframe, such as the daily chart, to identify a potential trade setup, only to switch to a shorter timeframe like the hourly chart to manage their positions. This inconsistency can lead to conflicting signals and erratic decision-making.
The Daily Chart: A Macro Perspective
The daily chart serves as a vital tool for understanding the broader market context. It reveals trends, support and resistance levels, and overall momentum. By focusing on the daily chart, you can identify high-probability setups and determine the prevailing sentiment. For example, if you notice a bullish trend on the daily chart, you might decide to enter a long position based on a breakout or a pullback.
The Hourly Chart: A Micro Perspective
On the other hand, the hourly chart provides a more granular view of price action. It helps traders refine their entry and exit points, offering insights into shorter-term fluctuations and volatility. While the hourly chart can help you capitalize on intraday movements, it can also introduce noise and lead to a focus on minor price changes that may not matter in the broader context.
The Mistake: Conflicting Signals
The rookie mistake occurs when traders attempt to manage their daily chart positions by referencing hourly charts without considering the potential for conflicting signals. For instance, imagine you spot a bullish setup on the daily chart, indicating a solid entry point. However, as you switch to the hourly chart, you notice some bearish price action—a couple of lower highs and lower lows—which may prompt you to second-guess your original thesis.
This disconnect can lead to unnecessary anxiety and erratic trading decisions. You might find yourself prematurely exiting a position or missing out on an opportunity because the hourly chart paints a picture that doesn’t align with your higher-timeframe analysis.
The Impact on Performance
In my early days as a trader, I fell victim to this very mistake. I would analyze a promising setup on the daily chart, only to find myself second-guessing my decision based on hourly price fluctuations. This led to whipsaw trades and emotional exits, ultimately impacting my profitability.
The emotional toll of constantly reacting to the noise of shorter timeframes can be detrimental. Instead of executing a well-thought-out plan, you may find yourself making impulsive decisions driven by fear or frustration.
Solutions: Aligning Timeframes
To avoid falling into the trap of conflicting signals, it’s essential to align your timeframes and establish a coherent trading strategy. Here are a few key strategies to consider:
Top-Down Analysis: Always start with a higher timeframe to set the context. Use the daily chart to determine the trend and potential trade setups, then drill down to the hourly chart for precise entry and exit points.
Avoid Overreacting to Noise: Understand that shorter timeframes can introduce volatility that may not reflect the overall trend. Stick to your original analysis unless there’s a compelling reason to change your viewpoint.
Set Clear Rules: Establish rules for managing trades based on the timeframe you used for your initial analysis. For example, if you entered a trade based on a daily chart setup, consider using the daily chart for exit signals as well.
Stay Disciplined: Remain patient and trust your analysis. If your daily chart setup is valid, give it time to unfold without being swayed by short-term fluctuations.
Conclusion
I’ve learned that managing trades across different timeframes requires discipline and a clear understanding of the market context. Avoiding the rookie mistake of conflicting signals can enhance your trading performance and help you navigate the complexities of the market with confidence.
By maintaining a consistent approach to your analysis and execution, you’ll be better positioned to capitalize on high-probability setups while minimizing the emotional turmoil that often accompanies reactive trading. Remember, the key to success lies in your ability to stay true to your trading plan, regardless of the noise surrounding you. Happy trading!
Misconceptions and Truths about Paper Trading
Hello, traders.
If you "Follow", you can always get new information quickly.
Please click "Boost".
Have a nice day today.
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TradingView also supports Paper Trading.
For more information, please click the link below. www.tradingview.com
More flexibility: change your Paper Trading account currency :
www.tradingview.com
Even more seamless order design — directly on chart :
www.tradingview.com
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Paper Trading is thought to support trading practice for beginners.
However, this is a wrong idea.
If you lack prior knowledge about trading or have no concept of trading strategy, you should not do paper trading.
The reason is that the psychological burden is different.
The success or failure of a trade is thought to be the result of trading strategy or response ability, but in reality, it can be said that it is determined by the battle with oneself and psychological state.
This means that psychological state has a significant impact on trading.
Therefore, paper trading should be considered as a transaction that is conducted to confirm one's trading strategy and response strategy after completing chart analysis.
If you have completed some verification of your trading strategy or response strategy, you should continue to conduct actual trading even if you suffer a loss.
The reason is that you should not forget that you can only gain know-how in trading through actual trading.
Therefore, paper trading should not be used to practice mid- to long-term trading, but should be used to verify trading strategies or response strategies for short-term trading or day trading.
In order to do so, you must close the transaction by selling or cutting your loss.
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For more information on trading orders in paper trading, please refer to the explanation through the link above.
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You can proceed with Paper Trading by clicking the Trading Panel at the bottom menu of the TradingView chart.
If you connect to a Paper Trading account, you can start with an initial fund of 100,000.
If the Buy/Sell button is not activated, activate the chart settings to activate the Buy/Sell button before proceeding with the trade.
Right-click on the space in the price candle area to activate the window, and then hover your mouse over the Trade section to check the trading order or trading settings (when you click the Trading menu in the Chart Settings window).
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In addition, TradingView is linked to a real exchange and supports real trading.
It supports various exchanges, so I recommend you to check if there is an exchange that you are trading on.
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Have a good time.
Thank you.
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US Interest Rates: Impact on Global Markets and StrategiesUS interest rates are a cornerstone of the global financial system, wielding significant influence over markets worldwide. Set by the Federal Reserve (Fed), these rates dictate the cost of borrowing, the return on savings, and overall liquidity in the economy. However, the impact of US interest rates goes far beyond American borders, affecting currency pairs, stock markets, and global investment strategies.
This article explores how changes in US interest rates shape global markets, including their effect on currencies like EUR/USD and USD/JPY, stock prices, and the strategies investors can adopt to navigate rate hikes and cuts.
The Role of US Interest Rates in Global Markets
US interest rates, specifically the federal funds rate, are a crucial tool for managing the US economy, but they also play a critical role in global financial stability. When the Federal Reserve adjusts interest rates, it signals shifts in economic conditions, such as inflation control or economic stimulation, to investors and central banks worldwide.
Effective federal funds rate - Bank of New York
The influence of US interest rates extends beyond domestic policy. A higher US interest rate often attracts global capital, strengthening the US dollar as investors seek better returns. This shift in investment flows impacts foreign currencies, stock markets, and global economic growth, making US monetary policy a key factor in global financial strategies.
For example, a rise in US interest rates can strengthen the dollar and increase borrowing costs for emerging markets holding dollar-denominated debt. On the other hand, lower US interest rates can boost global liquidity, prompting investment in riskier assets like foreign equities or bonds. As such, US interest rates serve as a global benchmark, shaping monetary policy decisions and influencing investment strategies worldwide.
Inflation and US Interest Rates
Inflation is a central consideration in the Fed’s interest rate decisions. When inflation rises, the Fed typically raises interest rates to cool the economy by making borrowing more expensive, which in turn curbs consumer spending and business investment. Conversely, when inflation is low or the economy is struggling, the Fed cuts interest rates to encourage borrowing, boost spending, and stimulate economic growth.
The US Dollar Currency Index (DXY) dropped during the coronavirus pandemic despite the Fed raising interest rates.
However, the relationship between inflation and interest rates is a balancing act. If rates are cut too much or inflation rises while rates remain low, purchasing power can be eroded, causing instability in financial markets. In the global context, rising inflation in the US can weaken the dollar, affecting currency pairs like EUR/USD and USD/JPY, while inflation-related volatility in commodities like oil and gold can ripple across global markets.
For global investors, tracking US inflation trends and the Fed’s response is crucial for understanding potential shifts in exchange rates and market stability.
Impact on Currency Pairs
US interest rates have a direct impact on the US dollar’s value relative to other major currencies. When the Fed raises interest rates, the US dollar usually strengthens because higher rates offer better returns on dollar-denominated investments. This increase in demand for the dollar causes currency pairs like EUR/USD, GBP/USD, and USD/JPY to move in favor of the dollar, making these currencies weaker relative to the USD.
On the flip side, when the Fed lowers interest rates, the dollar typically weakens as investors look for higher returns in other currencies. As a result, other currencies gain strength relative to the USD, leading to significant shifts in global currency markets.
Moreover, interest rate differentials—the gap between interest rates in different countries—create opportunities for strategies like the carry trade, where investors borrow in a currency with low interest rates (such as the Japanese yen) and invest in a currency offering higher yields (like the US dollar). These strategies add further volatility to currency markets, especially when central banks adjust their policies unexpectedly.
Impact on Global Stock Markets
US interest rates have a profound influence on global stock markets. When the Federal Reserve raises interest rates, yields on US Treasury bonds increase, making them more attractive to investors seeking safer returns. This can lead to a shift away from equities, especially in riskier markets like emerging economies, and into bonds, causing stock prices to fall.
US Government Bonds 5 Years
US Government Bonds 2 Years
United State Interest Rate
Higher interest rates can also hurt sectors that are sensitive to borrowing costs, such as technology and consumer discretionary, which rely heavily on debt to finance growth. In contrast, financial stocks, particularly banks, often benefit from rising interest rates as they can charge more for loans, improving their profitability.
Conversely, when the Fed cuts interest rates, borrowing costs decrease, which can lead to a rally in stock markets. Sectors like technology and consumer discretionary tend to perform well in a low-interest-rate environment, as companies find it cheaper to borrow and expand. At the same time, dividend-paying stocks and real estate investment trusts (REITs) become more attractive as investors seek better returns than those offered by bonds.
Possible Market Reactions to a Fed Rate Cut
A Federal Reserve rate cut can trigger several reactions across global markets:
--Stock Market Rally: Lower interest rates reduce the cost of borrowing for businesses, potentially boosting economic activity and stock prices. Sectors like technology and consumer discretionary often benefit, while investors may also flock to dividend-paying stocks due to their relatively higher yields.
--Weaker US Dollar: A rate cut usually weakens the dollar, as lower rates make the currency less attractive to investors. This depreciation can benefit exporters and companies with significant foreign revenues but can hurt importers.
--Increased Inflation Risk: While rate cuts stimulate growth, they can also fuel inflation if demand exceeds supply. Investors may turn to inflation-protected assets like commodities or inflation-linked bonds.
--Emerging Markets: Lower US interest rates reduce borrowing costs for emerging markets, encouraging investment in their higher-yielding assets. However, a weaker dollar can lead to currency appreciation in these markets, impacting their export competitiveness.
--Bond Market Dynamics: A Fed rate cut can lead to lower yields on short-term US government bonds, pushing investors to seek better returns in long-term bonds or riskier assets.
Strategies for Managing Interest Rate Volatility
In periods of fluctuating interest rates, investors must adjust their strategies to protect portfolios and capitalize on new opportunities.
During Interest Rate Hikes:
--Shift to Bonds and Fixed-Income Assets: As interest rates rise, bonds, particularly short-term ones, offer higher yields, making them an attractive addition to portfolios.
--Focus on Financial Stocks: Banks and financial institutions benefit from higher rates, as they can charge more for loans, increasing their profits.
--Reduce Exposure to High-Growth Stocks: High-growth sectors, like technology, are more sensitive to rising borrowing costs and may underperform during rate hikes.
During Interest Rate Cuts:
--Increase Equity Exposure: Rate cuts often lead to stock market rallies, particularly in growth-oriented sectors like technology. Increasing equity exposure during rate cuts can help capture gains.
--Look for Dividend-Paying Stocks: In a low-rate environment, dividend-paying stocks become more attractive as investors seek yield.
--Consider Real Estate Investments: Lower rates reduce borrowing costs, making real estate and REITs more appealing as an investment.
Managing Volatility in Your Portfolio
To navigate the volatility caused by interest rate changes, diversification is essential. A well-diversified portfolio, spanning stocks, bonds, commodities, and currencies, can help mitigate the impact of rate fluctuations on overall returns.
Currency hedging is another key tool for managing volatility. When US interest rates rise, the dollar strengthens, potentially eroding the value of foreign-denominated investments. Hedging strategies using currency futures or options can protect against adverse currency movements.
Lastly, a focus on defensive stocks—such as utilities and consumer staples—can provide stability in uncertain times. These companies tend to have stable earnings and are less affected by interest rate changes.
Conclusion
US interest rates wield significant influence over global markets, affecting everything from currency pairs to stock prices. Investors must stay informed about the Fed's actions and adapt their strategies to reflect the current interest rate environment. By incorporating risk management tools like diversification, currency hedging, and a focus on defensive stocks, investors can better protect their portfolios and capitalize on opportunities that arise from interest rate fluctuations.
Understanding the Renko Bricks (Educational Article)Today we are going to study a chart which is called a Renko chart. Renko chart is a chart which is typically used to study price movement. I use Renko chart many times to determine supports and resistnace. I find it easy and accurate way of determining supports and resistances. The word Renko is derived from Japanese word renga.
Renga means brick. As you can see in the chart below it shows a kind of Brick formation. The brick size is determined wither by the user and mostly it depends of typical average movement on the stock historically.
A new brick is formed once the price moves upwards on downwards in the same proportion or ratio of the typical brick. New brick is only added post the price moves in that particular proportion. A new brick might not be added in months if the price movement is not as per the ratio. At the same time a new brick might be added in a day or few bricks in a week is price moves accordingly.
We will try to understand this concept further by looking at the chart in the post. We have used the chart of Reliance industries to understand this concept and concept only. Please do not consider this buy or sell call for the stock. As you can see in the above chart I have used a combination of RSI, EMA (50 and 200 days) and Bollinger band strategy. RSI support for Reliance is at 35.89 with current RSI at 40.13. Bollinger band suggests that support might be round the corner for the stock. The peaks from previous tops are used to find out further supports and resistances. Mid Bollinger band level and Bollinger band top level coincide with other pervious tops making them tough resistance when the price moves upwards. Mother line EMA is a resistance now and Father line EMA support is far away. All these factors indicate the support zones for the stock to be around 2736, 2657, 2601 and 2561 in the near term. Resistance for Reliance seem to be at 2814, 2972, 3006, 3048 and 3202 levels. Let me give a disclaimer again. The above data is for analysis purpose and to understand Bollinger band, RSI, effect of EMA and Renko Bricks only. Please do not trade based on the information provided here as it is just for understanding Renko charts.
Disclaimer: There is a chance of biases including confirmation bias, information bias, halo effect and anchoring bias in this write-up. Investment in stocks, derivatives and mutual funds is subject to market risk please consult your investment advisor before taking financial decisions. The data, chart or any other information provided above is for the purpose of analysis and is purely educational in nature. They are not recommendations of any kind. We will not be responsible for Profit or loss due to descision taken based on this article. The names of the stocks or index levels mentioned if any in the article are for the purpose of education and analysis only. Purpose of this article is educational. Please do not consider this as a recommendation of any sorts.
Bullish rates reversal signals US dollar downside riskIf you want clues on directional risks for the US dollar, there are worse places to look than US 2-year Treasury note futures, shown in the left-hand pane of the chart. As one of the most liquid futures contracts globally, the price signals it provides can be very informative for broader markets, especially in the FX universe.
Having tumbled most of October, implying higher US yields given the inverse relationship between the two, the price action this week looks potentially important. We saw the price take out long-running uptrend support on Wednesday before staging a dramatic bullish reversal on Thursday despite another hot US inflation report.
The bounce off the 200-day moving average on the back of big volumes delivered not only a hammer candle but also took the price back above former uptrend support, delivering a bullish signal that suggests directional risks for yields may be skewing lower. You can see that in the right-hand pane with US 2-year bond yields hitting multi month highs on Thursday before reversing lower.
But it’s the correlation analysis beneath the chart that I want you to focus on, looking at the strength of the relationship US 2-year yields have had with a variety of FX pairs over the past fortnight.
USD/JPY has a score of 0.9 with USD/CNH not far behind at 0.89, signalling that where US 2-year yields have moved over the past two weeks, these pairs have almost always followed.
EUR/USD, GBP/USD and AUD/USD have experienced similarly strong relationships over the same period with scores ranging from -0.88 to -0.96, the only difference being where yields have moved, they’ve usually done the opposite.
The broader readthrough is that shorter-dated US yields have been driving US dollar direction recently, with rising rates fuelling dollar strength. But given the bullish signal from US 2-year Treasury note futures on Thursday, if we just saw the lows, it implies we may have seen the highs for US yields and the US dollar.
Good luck!
DS
The importance of the length of the linear regression channelYou can see here that a linear regression channel that starts as early as September 2022 explains why Micron shares are now rising.
Mastering Support and Resistance: An Essential Tools for SuccessSupport and resistance are cornerstone principles in trading, offering crucial insights into price dynamics and market behavior. These levels act as key indicators, signaling points where an asset's price is likely to either pause or reverse direction. Support refers to the price level where strong demand prevents further declines, while resistance marks the point where selling pressure halts a price rise. Understanding and effectively utilizing these concepts can make a significant difference in trading success.
In the realm of technical analysis, which focuses on using historical market data to predict future price movements, understanding support and resistance is essential. Traders rely on these levels to pinpoint optimal trade entry and exit points while also managing risk effectively. By recognizing where the market may reverse or maintain its trajectory, traders can craft more robust strategies.
Decoding Support and Resistance Levels
Support and resistance levels are vital price points on a chart that traders use to forecast future market behavior. Support represents a level where a downtrend is likely to pause, driven by a concentration of buying interest. In other words, it's the price point where demand is strong enough to stop further declines. For instance, if a stock repeatedly drops to $100 and then bounces back, $100 becomes a recognized support level.
On the flip side, resistance is the price level where an uptrend often halts due to a high volume of sellers. Unlike support, resistance is where selling pressure overpowers buying interest, preventing prices from climbing further. If a stock consistently hits $150 and then retreats, $150 serves as a resistance level.
Example Support and Resistance on Silver
These levels are significant because they represent psychological thresholds for market participants. When prices approach support, buyers may step in, seeing it as a good entry point. Conversely, when prices near resistance, sellers might take action, expecting the price to struggle moving higher. Understanding how these levels work helps traders refine their timing and make more informed decisions.
The Impact of Support and Resistance in Technical Analysis
Support and resistance are pivotal in technical analysis, guiding traders in interpreting market movements and predicting future price trends. These levels act as psychological barriers that help determine whether a price trend will persist or reverse.
For example, if a stock repeatedly approaches a resistance level but fails to break through, traders may interpret this as strong selling pressure and consider selling or shorting the asset. Conversely, if a price consistently rebounds off a support level, traders might see it as a buying opportunity.
Example Resistance and Support on Apple Stock
Visual tools like charts and diagrams are indispensable for identifying support and resistance levels. By drawing horizontal lines at points where the price has historically reversed, traders can easily spot critical levels and predict potential market movements. These visual aids enhance decision-making by providing a clear picture of where key price barriers lie.
The Crucial Role of Support and Resistance Levels in Trading Strategies
Support and resistance levels are the foundation of successful trading strategies, offering traders the tools to optimize entry and exit points, maximize profits, and manage risks effectively.
For example, when a price hovers near a support level, a trader might take a long position, anticipating a rise in value. Simultaneously, they could place a Stop Loss just below the support level to limit potential losses if the price unexpectedly drops. Similarly, resistance levels provide invaluable insights for deciding when to exit trades or set profit targets. If a price approaches resistance, it might be wise to close a position to secure gains or prepare for a possible reversal.
Understanding and identifying support and resistance levels also play a vital role in risk management. Setting Stop Loss orders near these levels helps traders protect their capital from significant losses if the market turns against them. This disciplined approach not only enhances profitability but also promotes long-term success in trading.
Different Forms of Support and Resistance
Support and resistance levels come in various forms, each providing unique perspectives on market behavior. The most common types include horizontal levels, trendlines, and moving averages.
--Horizontal Support and Resistance: These levels are drawn at points where the price has consistently reversed in the past, making them straightforward and widely recognized.
Horizontal Resistance on Tesla Stock
--Trendline Support and Resistance: Trendlines connect a series of higher lows in an uptrend or lower highs in a downtrend, acting as dynamic support and resistance. In an uptrend, the trendline can signal buying opportunities, while in a downtrend, it might serve as resistance.
Trendline Support on EUR/USD
--Moving Averages: Moving averages, such as the 50-day or 200-day average, often act as support or resistance. For instance, during an uptrend, a pullback to the 50-day moving average can indicate a buying opportunity.
Moving Averages Used as Support and Resistance on USD/CAD
How to Identify Key Support and Resistance Levels
To identify strong support and resistance levels, traders use several strategies:
--Spot Price Clusters: Look for areas where the price consistently reverses direction, signaling strong support or resistance zones.
--Use Technical Indicators: Tools like Fibonacci retracements help identify potential reversal levels during pullbacks by dividing a price move into key percentages (38.2%, 50%, and 61.8%).
Fibonacci Tool used as Support and Resistance areas on DXY
Common Pitfalls When Using Support and Resistance in Trading
While support and resistance are essential, there are common mistakes traders should avoid:
--Over-Reliance on Exact Numbers: Support and resistance are better viewed as zones rather than exact values. Prices may fluctuate slightly above or below these levels before reversing.
--Ignoring Confirmation Signals: Jumping into trades without confirmation can lead to losses. Always look for signs like candlestick patterns or increased volume to confirm that the level will hold.
--Chasing Breakouts Too Hastily: Not all breakouts result in sustained trends. Waiting for confirmation, such as increased volume, helps avoid being caught in a false breakout.
--Impatience: Many traders act prematurely at support or resistance levels. Patience is key—stick to your trading plan and wait for the right setup.
Advanced Strategies for Support and Resistance Trading
For more experienced traders, support and resistance levels can serve as the basis for advanced strategies:
--Breakouts: A breakout occurs when the price moves above resistance or below support, often signaling the start of a new trend. Confirming breakouts with increased volume helps reduce the risk of false signals.
Breakout Confirmation on BTC
--Fakeouts: Prices may temporarily breach support or resistance before reversing direction. Advanced traders capitalize on these by waiting for the price to return within the range and then taking positions in the opposite direction.
Fakeouts on BTC
--Reversals: Traders use reversal strategies when the price changes direction after hitting support or resistance, often signaling the start of a new trend.
Area $72000 resistance used as reversal on BTC
Conclusion
Mastering support and resistance levels is vital for any trader aiming for long-term success. These concepts are the backbone of technical analysis, guiding traders in making informed decisions about when to enter, exit, and manage risks. By understanding and identifying key support and resistance zones, traders can predict price movements, spot opportunities, and refine their strategies.
Incorporating technical analysis into your trading routine will boost your confidence in navigating the market. Whether you’re a beginner or a seasoned trader, honing your skills with support and resistance can lead to more disciplined and profitable trading.
Trading advice part 6: Special risks with crypto assetsSpecial risks, especially when dealing with crypto assets
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As the crypto market is comparatively “young” and only lightly regulated (compared to conventional markets), there are a number of potential risks to losing your own assets. In the following section, we highlight some of these risks and provide tips on how to avoid them.
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-- Risks with self-custody wallets --
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When using self-custody wallets, regardless of whether they are hot wallets (software) or cold wallets (usually hardware), the control over your assets lies with you and no one else. If fraudsters manage to convince you to disclose your private keys or the secret recovery phrase, they will subsequently have full access to your funds.
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A little metaphor for better understanding:
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The wallet can be imagined as a locked safe deposit box in a public place. The private key is the key to the locker. The secret recovery phrase is a construction manual for the key to the locker. If an attacker succeeds in obtaining the private key, they can directly unlock the locker and steal the contents. If the recovery phrase can be obtained, it can be used to create a copy of the key to the locker and open it within a very short time. In both cases, this is possible very quickly and without the locker owner being able to do anything about it.
Once an attacker has stolen crypto assets from your wallet, it is no longer possible for anyone to reverse the transaction in decentralized blockchains. Immutability, i.e. the inability to cancel or reverse transactions, is one of the most important features of blockchain technology.
So be aware that with control over your assets comes the added responsibility of protecting those assets. Below we outline some common tactics for detecting fraudulent intent or attacks. Being aware of these is already an essential preventative measure.
Caution
If you suspect that you have been defrauded, we recommend that you report this to your local law enforcement agency as a criminal offense.
Attention
If you suspect that you have been cheated, we recommend that you report this as a criminal offense to your local law enforcement agency.
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--> Phishing <--
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The attack variant of phishing is one of the most widespread and successful methods of gaining access to other people's assets. This is a method in which the attackers pretend to be someone else, usually famous people, or pretend to be from reputable, mostly well-known companies. The aim is to get people to disclose as much personal data as possible. The attackers “fish” (phishing) for information, so to speak.
To this end, fake emails are usually sent, fake websites are created or the attackers pretend to be someone else on social networks. The ultimate goal is often to obtain the secret recovery phrases, private keys or other specific personal information of potential victims and steal their assets or money.
Phishing scams are ubiquitous and not unique to crypto assets. However, attackers are very active in this area due to its unique characteristics. These attacks can target assets in self-custody wallets as well as assets on exchanges.
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--> Possible attack vectors for phishing <--
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-- Attack by means of spoofing: fakes of legitimate websites --
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Spoofing is when a malicious website is disguised as a well-known, trustworthy platform. Fake websites may look almost exactly like an official website, but on closer inspection, small differences can be detected. For example, attackers use a domain address that looks very similar to the real website. They may change one letter of the company name or use other domain extensions such as “.biz” or “.info”.
Fake websites are successful because many attackers buy advertising space in search engines. As a result, advertising links for the fake sites appear higher up in the search results, making people think it is a legitimate website. Therefore, avoid clicking on advertising links when searching for a website. Even if some ads lead to the correct websites, it is good security practice to only click on the search engine results themselves and not the advertising links, and also to check that the address begins with “https://” and that the URL is spelled correctly.
Note
The initial letters in web addresses “https” stand for “Hypertext Transfer Protocol Secure”. This protocol, the transfer protocol, is the language in which your web browser communicates with the server, so to speak. In contrast to “http”, this communication is encrypted with “https”. This prevents external parties from being able to read the content directly. But beware, the fact that an “https” connection is used is no guarantee that the website is secure.
Be very careful not only with search engines, but also with social media when it comes to advertising links. Fraudsters often set up accounts on popular social media platforms such as X/Twitter, Reddit, Facebook, TikTok, Telegram, Instagram, Discord and other social media platforms and wait for vulnerable users to exploit them.
The attackers often offer good advice or seem to actively want to help you to make you believe that they are reputable and that you can rely on them. Once they have gained your trust, they redirect you to a fake website where they ask for your personal details. They use official-sounding terms like “validate your wallet” or “verify your wallet” or “verify your info”.
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-- Attack using fake crypto tokens --
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Similar to fake versions of legitimate websites, fraudsters can also create and distribute fake versions of legitimate tokens, particularly in over-the-counter (OTC) trading. Fraudulent tokens look and behave like their legitimate counterparts, but have no value.
Counterfeit tokens can be recognized in particular by checking the underlying token contract address. This can be viewed on the major overview platforms such as xxxx or xxx.
Be wary of tokens with an unknown reputation, low holder numbers, low transfer numbers and missing code audits. Although none of these checks automatically rules out the legitimacy of a token, a token that does not meet all of these criteria should be treated with caution.
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-- Attack using fake wallets and apps --
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Both hot wallets and cold wallets can be counterfeited. When purchasing cold wallets (e.g. Ledger, Trezor, SecuX, D'Cent, Shift Crypto), make sure you buy from reputable platforms or from the manufacturer itself. Counterfeit or tampered products are increasingly coming into circulation, particularly on resale platforms or in marketplace trading.
Although Apple and Google control their app stores very well, counterfeit wallets and malicious apps can sometimes still get through. When attackers put fake versions in the official stores, they use screenshots and images of the real app as well as fake reviews to make their wallets look legitimate.
If you are technically savvy, you can use a checksum and look for the release hashes to verify that the download is signed. You can also enable auto-update in your phone's settings or desktop app to update your already legitimate installed apps.
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Note:
This is a small excerpt from learning content, so the list is incomplete at this point. There are a few more dangers & risks.
Greetings from Germany :)
CPI Report: How Can You Use It in Trading?CPI Report: How Can You Use It in Trading?
The Consumer Price Index (CPI) report is a vital economic indicator that measures inflation by tracking changes in the prices of goods and services. Understanding CPI data is crucial for traders as it influences interest rates, market trends, and investment strategies. This article delves into the intricacies of the CPI report, explaining its significance and how traders can utilise it in their trading decisions.
Understanding the CPI
Understanding the CPI is crucial for grasping inflation trends and their broader economic implications. The CPI measures the average price change over time, generally a year, quarter, or a month, for a basket of goods and services typically purchased by households.
In the US, the Bureau of Labor Statistics (BLS) collects price data on a wide range of items, including food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services. This data is then weighted based on consumer spending patterns to calculate the Consumer Price Index.
In the UK, the Office for National Statistics (ONS) publishes the CPI, similar to the US model, while the European Union releases both individual country CPIs and a harmonised index for the Eurozone. Australia's CPI is released by the Australian Bureau of Statistics (ABS).
There are two main types of CPI:
1. Headline CPI: This is the most comprehensive measure, including all items in the consumer basket. It captures overall inflation but can be volatile due to fluctuating food and energy prices.
2. Core CPI: This excludes food and energy prices, which are highly volatile. Core CPI provides a clearer view of underlying inflation trends, helping policymakers and traders focus on sustained price changes.
Headline CPI is considered the most important, closely followed by Core CPI. Traders focus on year-over-year (YoY) and month-over-month (MoM) rates, with the YoY headline and core rates receiving the most attention due to their longer-term view of inflation. The YoY rate compares the current CPI with the same month in the previous year, providing a long-term view of inflation trends. The MoM rate compares the current CPI with the previous month, offering a shorter-term perspective. Traders look to these rates to gauge how fast or slow inflation is growing.
CPI and Inflation Rate
CPI is a specific measure of the price level of a fixed basket of goods and services. It provides a snapshot of the cost of a fixed basket of goods and services at a given point in time and is expressed as an integer (e.g. May’s US CPI reads 314.07).
CPI = (Cost of Market Basket in Current Year/Cost of Market Basket in Base Year) x 100
Inflation Rate
The inflation rate is a percentage change that indicates how much the general price level is rising over time.
Inflation Rate = ((CPI in Current Year-CPI in Previous Year)/CPI in Previous Year)x100
In essence, the CPI provides the data needed to calculate the inflation rate, which in turn gives insight into the economic trend of rising prices.
CPI data is critical for policymakers, businesses, and traders. Policymakers use it to adjust economic policies and social security benefits. Businesses use CPI trends to set prices and wages. Understanding the CPI report helps traders gauge inflationary pressures, anticipate monetary policy actions, and adjust their trading strategies accordingly.
Schedule of Releases for the Consumer Price Index
The schedule of Consumer Price Index releases varies across major economies. Below is the CPI release time for the most notable economies:
- United States: Monthly, usually around the middle of the month, released by the Bureau of Labor Statistics (BLS).
- United Kingdom: Monthly, typically around the middle of the month, published by the Office for National Statistics (ONS).
- Eurozone: Monthly, with preliminary data at the end of the month and final data in the middle of the following month, released by Eurostat.
- Individual Eurozone Countries: Monthly, with slight variations; national statistics agencies release individual country data.
- Australia: Quarterly, released by the Australian Bureau of Statistics (ABS).
- Japan: Monthly, typically at the end of the month, published by the Statistics Bureau.
- Canada: Monthly, around the third week of the month, released by Statistics Canada.
CPI Meaning in Forex and Other Markets
Interpreting CPI data is essential for traders aiming to understand inflation trends and their potential market impacts. CPI data helps central banks, like the Federal Reserve in the US, the Bank of England, and the European Central Bank, monitor inflation and adjust monetary policy. Central banks often have a target inflation rate as a sign of a healthy economy. This target informs decisions on interest rates and other monetary policies. In a high CPI environment, where inflation is consistently above the target, central banks may raise interest rates to cool the economy. Conversely, in a low CPI environment, they may lower rates to stimulate spending and investment.
Short-term Implications
In the short term, traders compare actual CPI results with forecasts or consensus estimates, which are available through FXOpen's economic calendar or financial news sites like Bloomberg and CNBC. Whether CPI is higher or lower than the previous month tends to have less bearing for short-term traders.
A weaker-than-expected result, indicating lower inflation, typically weakens a currency and boosts stocks. This is because it suggests future monetary policy will be looser, either through lower interest rates or maintaining current low rates.
Conversely, a higher-than-expected result suggests rising inflation, likely leading to a stronger currency and weaker stock market due to anticipated tighter monetary policy.
If the CPI meets the forecast, the market reaction is usually weak as the data is priced in. However, the currency is expected to rise/fall before the release. For example, if the CPI is expected to be higher, this could strengthen the currency and weaken stocks ahead of the release.
Long-term Implications
Over the long term, the trend in CPI data is more critical. Policymakers typically look for sustained movements in the inflation rate before making significant monetary policy changes. For example, a higher-than-forecast CPI rate might strengthen a currency in the short term, but if it occurs within a longer-term trend of falling inflation, it may not lead to immediate interest rate hikes and the currency is likely to weaken over time, all else being equal.
Additional Considerations
Traders also consider the broader economic context, such as employment data and GDP growth, when interpreting CPI data. For instance, if the labour market is strong (low unemployment) and GDP growth is robust, then a high inflation reading may result in a significant strengthening of a currency since the economy appears to be overheating and may require higher interest rates.
However, as described, the market expectation is generally the most important when trading CPI news. If the market is already expecting a high inflation reading in this scenario, then a weaker-than-forecast CPI report may actually weaken a currency initially, even if inflation remains elevated overall.
Trading the CPI Report
Here are the main steps traders follow when trading CPI reports.
Preparing for the Report
Before the release of the CPI report, it’s crucial to gather insights and projections from analysts. Researching consensus ranges by searching terms like "US CPI May 2024 consensus ranges" can also help traders understand potential deviations from the expected figures, which is useful for understanding what constitutes an expectation vs a surprise.
It’s worth noting that, in periods of low inflation, CPI tends to be more stable and predictable. However, during high or volatile inflation, the market reaction can be more pronounced.
Traders can also monitor leading inflation indicators such as the Producer Price Index (PPI). This indicator reflects the inflationary pressures faced by producers, which can influence the CPI. While these should be used holistically rather than as definitive signals, they can provide valuable context for anticipating CPI movements.
Trading Before the Report
The CPI release is typically one of the most volatile events of the month for stocks and currencies, especially during periods of heightened inflation focus, as seen since 2021. Traders either position themselves based on their expectations or wait for the release to act.
Those taking positions before the release do so several hours before the release to catch the increased volatility, but they close their trades just before the data is out to avoid potential losses due to unexpected market reactions.
Post-Release
Following the release, there are usually two main outcomes: a trend triggered by a surprise or a reversal.
Surprise Outcome
A significant deviation from expectations (higher or lower) can lead to a repricing of assets, resulting in increased market volatility and a change in the price movement. In such scenarios, some traders wait for a pullback as traders take profits. These pullbacks can potentially provide good entry points as long as the underlying data is in line with the trend.
Stop loss placement in a pullback after CPI may be difficult, given there is unlikely to be a nearby swing point. A trader may, therefore, prefer for the high or low originating the pullback to be traded through to enter a position, allowing for a stop loss beyond the pullback’s high or low.
Reversal Outcome
In some cases, there may be a reversal after the initial market reaction. Algorithms might push prices in one direction initially based on the headline reading, only for the trend to reverse as traders examine the underlying details. This is more common with at-forecast headline CPI figures but can also occur with surprises.
Fading the initial strong push can be tricky and requires high conviction in the reversal. Some traders may prefer to wait for the price to close beyond the open of the CPI release candle, which can be a strong indicator that a reversal is truly underway.
GBP/USD Example
In the chart above, we see GBP/USD on April 10th, with US CPI data released at 12:30 pm GMT time. Traders were anticipating signs of falling inflation to bring forward rate cuts from the Federal Reserve. To observe price action for yourself, head over to FXOpen’s free TickTrader platform to access live charts.
Here are the actual vs expected figures:
- CPI YoY: 3.5% (expected 3.4%)
- CPI MoM: 0.4% (expected 0.3%)
- Core CPI YoY: 3.8% (expected 3.7%)
- Core CPI MoM: 0.4% (expected 0.3%)
Each metric exceeded forecasts. This delayed expected Fed rate cuts and strengthened the dollar. Consequently, GBP/USD dropped sharply after the release.
We observed a brief dead cat bounce before the bearish trend resumed for the rest of the day, reinforcing dollar strength for the rest of the week. Notably, this dead cat bounce/pullback presents an ideal entry point.
Waiting for the low to be traded through is a viable strategy; a trader can enter once the low is closed through, with a stop loss set above the pullback high. Presumably, price moving back above an area it previously found resistance in post-release and after a lower low would potentially invalidate the idea.
As seen in the chart above, the release severely damaged hopes of Fed rate cuts, with dollar bullishness persisting for the following days.
The Bottom Line
Understanding the CPI meaning in the stock market and other markets is essential for gauging market trends and economic policies. By analysing CPI data, traders can better navigate the underlying currents of the market and leverage inflation reports for trading. Open an FXOpen account to stay ahead of economic indicators and enhance your trading experience with expert insights and tools.
Frequently Asked Questions
What Does CPI Stand For?
CPI stands for Consumer Price Index. It is a key economic indicator that tracks changes in the prices of a basket of consumer goods and services purchased by households.
What Is the CPI Report?
The Consumer Price Index (CPI) report measures the average change in prices over time for a basket of goods and services. Compiled by national statistics agencies, it provides essential data on inflation, influencing economic policy and monetary policy decisions.
How Does CPI Affect Interest Rates?
CPI data influences central bank decisions on interest rates. Higher-than-expected inflation can lead to increased interest rates to cool the economy, while lower-than-expected inflation might prompt rate cuts to stimulate growth.
How Does CPI Affect Currencies?
CPI impacts currency values by influencing interest rate expectations. Higher CPI readings typically strengthen a currency due to anticipated rate hikes, while lower readings can weaken it as rate cuts become more likely. Traders can infer currency direction from CPI, meaning in forex trading, they might enter a position based on the results of the release.
How Does CPI Affect the Stock Market?
CPI affects the stock market by shaping investor expectations about future economic conditions and monetary policy. Higher inflation can lead to fears of tighter monetary policy, potentially decreasing stock prices, while lower inflation might boost stocks due to anticipated easier monetary policy.
When Does CPI Come Out?
The release schedule for CPI varies by country. For instance, in the US, it is typically released around the middle of each month. Generally speaking, CPI reports are released in the morning of the respective country.
How Often Does the CPI Come Out?
The frequency of CPI releases differs by region. In most major economies, including the US, UK, Eurozone, Japan, and Canada, CPI is released monthly. In Australia and New Zealand, it is published quarterly.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
How to Assess Market Sentiment EffectivelyAs a financial markets trader, understanding market sentiment is crucial. Here's how I guide my students to assess it effectively:
1️⃣ Embrace News Analysis: Staying abreast of economic events, geopolitical news, and central bank speeches provides insight into market sentiment shifts. You need to know what is driving the markets YOU trade. Technicals are a rear-view mirror.
2️⃣ Sentiment Indicators: I like to use sentiment indicators like the COT report, Fear & Greed Index, and VIX, which help gauge market mood, but my favorite way of checking out session sentiment at a glance is analyzing safe haven flows, equity positioning, antipodean and Chinese mood and the DXY (as long as it is correlated).
3️⃣ Social Media & Sentiment Analysis: Monitoring social media platforms and sentiment analysis tools allows me to tap into the retail trading community's collective sentiment.
4️⃣ Price Analysis: Analyzing price patterns, trading volatility, supply & demand and market breadth helps identify underlying sentiment behind price movements.
5️⃣ Commitment to Data-driven Decisions: I stress the importance of basing trading decisions on data rather than emotions. Objective analysis is key to avoiding impulsive moves. I let others play the guessing game, forecasting always with a 50/50 chance of being right... I follow and ride market movements.
6️⃣ Spotting Divergence: Identifying divergences between market sentiment and price trends can signal potential reversals or continuation patterns. Establish what a deviation from baseline sentiment looks like and then be on the lookout for those clues.
7️⃣ Context Matters: Assessing sentiment within the broader market context ensures well-rounded analysis. Sentiment alone may not dictate trends so I like to also gauge the strength and momentum of sentiment to see if the time horizon matches my trade idea's scope.
Understanding market sentiment arms us with a valuable edge in forex, indices and commodities trading. Simple as that.
How to Make Money in the Stock Market and Keep ItI have always said that making money in the stock market is easy. It is learning how not to lose money that is the hard part of trading. To that end, when you find yourself in the surprising and often disturbing position of having made a whole lot of profit, or more profit than you expected in a very short time, you may be feeling overwhelmed. This is when you need to remember some basics about the art of trading.
The primary factor in making money and keeping it depends upon your ability to stop trading to get your emotions under control again. Stop trading for at least a few days to a week. This sounds ludicrous, but my experience with teaching traders for more than 20 years is that those who follow this rule keep their big gains while those who do not, lose them back to the market and then some.
The reason behind this is emotion. You are in a state of emotional flux, not thinking logically. You are thinking, “I’m brilliant, I’m invincible, I am going to be rich!” Well, sure, but not at this moment. At this moment, you are overly exuberant, you are thinking you can do no wrong, so you are likely to miss the parts of your analysis that would keep you out of high-risk setups. So, take a few days to cool off. The Stock Market is not going anywhere. Great trades present themselves over and over again.
While you are recovering from the shock of a large gain, these steps can help bring you back down to Earth :
Review your notes from some of the courses you have taken. Reading back over rules and the reasons behind them for making sounding trading decisions helps a lot to keep you grounded.
Review your trading plan and your goals. If you don't have this written out somewhere, do it now. Most people refuse to write down their goals because of “fear of failure.” They are so afraid that they are not capable of reaching those goals that they do not try. Try to write down realistic goals, and adjust them as you see the need. We have a calculator that we provide to our students for help with this. Once you do the task of setting goals, you will find that they are achieved much of the time.
Consider if you need to increase your goals. Continually pushing yourself to reach higher and higher levels of efficiency and profit helps to both dispel the fear of failure and propel you forward with perhaps stricter rules to achieve those higher goals.
Trading is 50% skill which, in short, includes understanding your Trading Style and using proper Strategies for the current Market Condition.
The other 50% is controlling emotion, which includes setting goals, keeping calm and centered, using discipline in your trading rules, having the determination to keep working until you are successful, maintaining your personal parameters while expanding them, and using logic rather than emotion. These are the major components of making money and keeping it.
Using 15 minute and 5 Minute Time Frames To Scalp In this video we break down how you can use 15minute and 5 minute time frames to Scalp.
Your 15 min can be your short term gauge for trend and your 5 minute can be where you enter into the market.
Using basic candle sticks patterns I go through a couple different setups one can do on the scalping side of things
If you found this helpful: boost, like or comment
MB Trader
Happy Trading
EDUCATION: Utilizing Renko Charts for Top-Down Analysis In this tutorial, we will explore the art of conducting a top-down analysis using Renko charts, a technique that can significantly enhance your understanding of market structure. If you've ever felt overwhelmed by the myriad of information in traditional charts, Renko offers a refreshing perspective by focusing purely on price action, enabling you to dissect trends with ease.
We'll start at the higher timeframes, identifying the overarching trends that guide the market's behavior, and then work our way down to the lower timeframes to pinpoint precise entry and exit levels. By employing Renko, you'll learn to filter out the noise and hone in on key price movements, allowing you to visualize the market's rhythm.
This tutorial emphasizes the importance of understanding market structure and how Renko charts can reveal significant support and resistance levels, helping you make informed trading decisions. You'll discover how to read price action patterns, recognize potential reversal points, and apply these insights to develop a robust trading strategy.
By adopting a stoic mindset, you'll learn to remain disciplined and objective, empowering you to navigate the complexities of the market with confidence. Join us as we unravel the intricacies of Renko charts and elevate your trading skills to new heights through effective top-down analysis.
Reacting to Change Part 2: Evolution of TrendsAdapting to subtle changes within a trend is a key element of successful trading. It's not enough to recognise that a trend exists; to stay ahead, you need to understand how trends evolve.
From the initial surge to the steady grind, each phase of a trend carries its own characteristics—and knowing how to react to these transitions is what separates a prepared trader from one caught off guard.
The Anatomy of a Trend
In this section, we’ll explore the different types, phases, and characteristics of trends:
1. Initial Momentum Drive
The first leg of a new trend often follows a prolonged period of sideways consolidation, and this momentum-driven move is typically sparked by a fundamental catalyst. Characterised by a strong surge either higher or lower, this phase usually comes with significant volume and can even include price gaps. The energy in this phase is palpable; it's where the trend announces itself.
Apple (AAPL) Daily Candle Chart
Past performance is not a reliable indicator of future results
2. Standard Pullback, Trend, Pullback Trend
In the heart of a trend, the market often moves in a wave-like fashion: trend legs followed by pullbacks. These pullbacks are typically less volatile and weaker in momentum than the dominant trend legs, making them perfect opportunities for traders to enter in the direction of the trend. Whether you're looking at a bullish or bearish market, these pullback-and-trend cycles are the bread and butter of swing trading strategies.
Apple (AAPL) Daily Candle Chart
Past performance is not a reliable indicator of future results
3. Steady Slide Higher
A rarer but powerful trend type, the steady slide higher (or lower) features minimal pullbacks and a consistent, almost relentless direction. When a trend is in this phase, it signals sustained pressure from buyers or sellers, and it often grinds slowly but surely in one direction. This trend type is highly attractive to trend-followers, but it requires patience and conviction to hold through what may appear to be an over-stretched market.
Tesla (TSLA) Daily Candle Chart
Past performance is not a reliable indicator of future results
4. Exponential Blow-Off
This phase represents the trend on steroids. Expanding ranges, steepening price action, and rising volume all signal that the market has entered an aggressive, almost frantic, final phase. The exponential blow-off can be exhilarating to watch and trade but carries a warning: when this phase comes during an established trend, it's often a sign that the end is near. Traders should be cautious, as a reversal or prolonged consolidation may follow shortly after this euphoric push.
Tesla (TSLA) Daily Candle Chart
Past performance is not a reliable indicator of future results
Simple Tools to Identify Trend Phases
Reacting to these phases means recognising them as they unfold. Luckily, there are several simple tools traders can use to identify which part of the trend they're dealing with.
1. Trendline Fans
Trendlines are perhaps the cleanest and most effective tool for gauging trend strength with no lag. By mapping the swings with multiple trendlines, or trendline "fans," you can visually track momentum. A rising trendline fan—where each new trendline is steeper than the last—indicates increasing momentum, while a falling trendline fan suggests that momentum is starting to ebb. Trendline fans are particularly useful for identifying whether a trend is accelerating into an exponential blow-off phase or slowing down into a pullback phase.
2. Keltner Channels
Keltner Channels are another versatile tool for identifying different trend phases. These bands are plotted around a central moving average, with the distance between the bands determined by the volatility of the market. A price movement outside the Keltner Channels usually signals strong underlying momentum, often associated with the initial trend phase. A steady grind along the bands is characteristic of the "steady slide higher" trend type, while prolonged periods outside of the bands are usually indicative of the exponential blow-off phase. The midline of the Keltner Channels can also be used to gauge pullbacks and time entries during a trend.
3. Long-Term Moving Averages
Long-term moving averages like the 50-day and 200-day simple moving averages (SMA) are essential for gaining perspective on the overall health and strength of a trend. These moving averages act as a dynamic support or resistance level during trends, and their positioning relative to the price can offer clues about the trend's longevity.
4. Anchored Volume Weighted Average Price (VWAP)
The Anchored VWAP is a more sophisticated tool for assessing trend strength. VWAP represents the average price at which a market has traded, adjusted for volume, and anchoring the VWAP to the inception of a trend allows traders to see whether those who initiated the trend are still in control. If the price remains above the anchored VWAP in an uptrend, it suggests that buyers are still in control, whereas falling below could signal that sellers are beginning to take over.
Example: Brent Crude Daily Candle Chart
Let’s take a closer look at how these tools can be applied to understand an evolving trend in the oil market. Recently, oil experienced a strong rally, breaking through the first trendline and surpassing the 50-day moving average. While this initial momentum signals strength, the bigger picture still points to a bearish trend. We see that prices remain below the 200-day moving average, under a long-term descending trendline, and crucially, below the VWAP anchored to the April highs.
This combination of tools highlights the importance of maintaining a wider perspective. Even though there is short-term upward momentum, the prevailing longer-term trend suggests that sellers may still have the upper hand.
Past performance is not a reliable indicator of future results
Conclusion: Adapting to Trend Phases
Understanding and reacting to the different phases of a trend is crucial for any trader. From the initial surge of momentum to the steady grind or explosive blow-off, each phase requires a unique strategy and a deep understanding of market dynamics.
By using tools like trendline fans, Keltner Channels, moving averages, and Anchored VWAP, traders can stay on top of these phases and maximise their potential for success.
Stay flexible, stay alert, and always be prepared to evolve with the trend.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.67% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
3 Technical Analysis Tools to Identify Resistance Levels on GOLD
How to trade Gold when it is constantly setting new all-time highs?
When Gold is trading beyond historical levels, technical analysis can help you to identify the next potentially strong resistance levels.
In this article, I will teach you the only 3 technical analysis tools you need to find the next key resistances and predict future correctional movements on Gold chart.
Tool 1 - Trend Line
The first technical analysis tool that will help you to identify a potentially strong resistance is a trend line based on previous highs.
Simply analyze the previous historic highs and try to find a trend line that was respected by the market at least 3 times in the past.
It means that such a trend line should be based at least on 3 historic highs.
Look at that rising trend line on Gold on a daily time frame. It is based on 3 historic highs, and it can be a potentially strong resistance.
Tool 2 - Psychological Levels
The second technical analysis tool is psychological levels.
These levels are based on round, whole numbers.
In our example, the closest psychological level is 2500 level. This level is based on round numbers, it is a multiple of 500 and 100.
It can compose a potentially strong resistance cluster.
Tool 3 - Fibonacci Levels
The third technical analysis tool is Fibonacci extension and confluence.
In order to identify a potentially strong resistance with Fibonacci extension, you should identify at least 3 last bullish impulses/waves.
Above is the example of 3 significant impulse legs on Gold chart on a daily.
Draw Fibonacci Extension levels based on these 3 impulse legs.
Here are important Extension levels to consider:
-1.272
-1.414
- 1.618
Above, you can see how I draw Fibonacci Extension levels based on all the impulse legs that we identified.
Your task is to identify the point where the extension levels of 3 impulses match in one point. Such a point will be called confluence zone.
This confluence zone will be the next potentially strong resistance.
These 3 technical tools helped us to identify the resistances beyond all historical levels easily.
Remember that there is no 100% guarantee that all the resistances that we spotted will be respected by the market.
For that reason, you should strictly analyze a price action and a reaction of the price to these levels before you open a short trade.
Alternatively, remember that these resistances can be applied as the targets for long trades.
❤️Please, support my work with like, thank you!❤️
Contrarian Approach: Going Against the Grain for Long-Term GainsContrarian investing is a distinct and often rewarding approach to financial markets that revolves around going against prevailing market trends. The strategy is based on the belief that herd behavior among investors frequently leads to significant market mispricings. When most investors are buying, contrarians sell, and when others are selling, contrarians buy. By defying conventional wisdom, contrarian investors seek opportunities where others see risk or insignificance.
The fundamental principle of contrarian investing is simple: buy when others are fearful and sell when others are greedy. This strategy leverages the cyclical nature of markets and investor sentiment, which tends to swing between extremes. Contrarian investors actively look for undervalued assets that have been negatively impacted by market sentiment, betting on a correction that will realign the asset's price with its true value.
While this approach can yield significant benefits—such as acquiring assets at a lower price and achieving substantial returns when markets correct—it is not without its risks. Contrarian investors often face prolonged periods of market disagreement, during which their positions may lose value before the anticipated correction occurs. Additionally, distinguishing between true contrarian opportunities and value traps—assets that are cheap for valid reasons—requires skill and patience.
What Is Contrarian Investing?
At its core, contrarian investing involves making investment choices that go against the crowd. Rather than following popular trends or chasing the latest fads, contrarian investors look for opportunities where collective sentiment has led to market distortions. They thrive on the idea that the market often overreacts to news and events, creating ideal conditions to buy undervalued assets and sell those that have become overhyped.
Contrarian investors stand out due to their mindset, which includes:
1- Independence: The ability to think and act independently of market sentiment.
2- Patience: The discipline to wait for the market to correct and recognize mispricings.
3- Skepticism: A critical approach to popular views and current market trends.
This strategy contrasts with momentum investing, which focuses on assets with recent strong performance, and growth investing, which targets companies poised for future earnings. Contrarian investors focus on understanding market psychology and behavioral finance to spot opportunities others might miss.
Key Principles of Contrarian Investing
Several foundational principles guide contrarian investors in recognizing and leveraging market inefficiencies:
-Market Sentiment Analysis: Contrarian investors thrive on identifying periods of extreme market sentiment, whether it's excessive optimism or pessimism. They prepare to sell during moments of widespread market enthusiasm and buy during times of fear and uncertainty.
-Overbought and Oversold Conditions: Recognizing when an asset is overbought (trading above its intrinsic value) or oversold (trading below its true worth) is essential. Contrarians capitalize on these conditions, making strategic decisions based on market extremes.
-Value Investing Component: Contrarian investing is closely tied to value investing, as both involve seeking out undervalued assets with strong fundamentals. Contrarians conduct thorough research to find stocks that are temporarily out of favor but fundamentally sound.
-Patience and Long-Term Perspective: Success in contrarian investing requires a long-term outlook and the ability to withstand short-term losses while waiting for the market to realign with the asset’s true value.
Identifying Contrarian Opportunities
Identifying contrarian opportunities involves a combination of fundamental and technical analysis, along with a keen understanding of market anomalies.
-Fundamental Analysis: Contrarian investors dig deep into a company’s financial statements, management quality, and growth potential to determine whether an asset is undervalued. Metrics like price-to-earnings (P/E) and price-to-book (P/B) ratios are key indicators of undervaluation.
-Technical Analysis: While fundamentals highlight a company’s intrinsic value, technical indicators like moving averages and the Relative Strength Index (RSI) help pinpoint ideal entry and exit points for contrarian trades.
-Market Anomalies: Contrarians exploit anomalies such as market overreactions to news, seasonal trends, and behavioral biases like herd behavior, creating opportunities to buy low and sell high.
Risk Management for Contrarian Investors
Risk management is essential for contrarian investors, especially since their strategy often involves going against prevailing trends. Key risk management techniques include:
-Stop Loss Orders: Setting predetermined levels where a trade will automatically close helps cap potential losses and protect against market downturns.
-Position Sizing: Proper position sizing ensures that no single investment can significantly impact the portfolio, reducing the risk of overexposure.
-Diversification: Building a diversified portfolio of assets across different sectors and asset classes helps mitigate risk and balance returns.
Conclusion: The Power of the Contrarian Mindset
Contrarian investing is a unique approach to navigating financial markets, capitalizing on the emotional reactions and inefficiencies created by the crowd. By applying key principles such as market sentiment analysis, identifying overbought and oversold conditions, and maintaining a value-oriented perspective, contrarians uncover opportunities that others may overlook.
With discipline, patience, and careful risk management, contrarian investing offers the potential for substantial long-term gains. Embracing the contrarian mindset allows investors to navigate market noise, remain patient during market downturns, and act decisively when opportunities arise. In a world where following the crowd can lead to mediocrity, contrarians stand out by daring to go against the grain.
AlgoTrading Basics for Beginners and Advanced StrategiesHello,
1 Introduction
Algotrading or Algorithmic trading has brought about a revolution in the financial markets: automation of trades with the help of complex algorithms. These algorithms execute trades according to predefined rules and are quicker in capturing market opportunities compared to manual trading. HFT in gold HFT-based algotrading has also greatly skewed the transaction volumes in recent years, but even though these trades are very short-term, they can tell us something about longer-term trading strategies.
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2 What is Algorithmic Trading?
Algorithmic trading is a method of executing orders using automated, pre-designed trading instructions that account for variables such as trade timing, price, and volume. The platform has found application in the work of large financial institutions, hedge funds, and individual traders to facilitate the ease of trading strategy selection and optimization.
One might be, a set of rules that tells it to buy the gold if it falls below a certain level and sells as soon as the price of that gold hits a specified level. Traders can take advantage of small price movements without sitting in front of their screens all day.
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3 Why use Algorithmic Trading?
There are various reasons as to why one would engage in Algotrading:
Speed: It is obvious that technology is used to carry out trades and computers do this faster than people. This proves extremely useful in fast markets like gold trading where prices may change in milliseconds.
Emotionless Trading: An individual does not deviate from the proposal; emotional elements like fear and greed that affect traders do not affect its operation.
Backtesting: Trading systems risk analyses can be done using test histories which access the performance of trading systems on historical figures, thus preventing any risk when trading.
Precision and Consistency: Algorithms maintain accuracy levels in trade initiation with almost never deteriorating without human intervention as only information is required regarding trading and no emotions.
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4 Core Principles of Algorithmic Trading
Apart from trading in shares, forex or even taking a position in gold (XAUUSD) there are a few primary principles common to all algorithmic trading:
a Data Mining And Data Management
Technical Indicators – Besides backtesting and strategy optimization, algorithms employ very prominent technical indicators such as Moving Averages (MA), Relative Strength Index (RSI), Bollinger Bands, or other indicators associated with detecting trends or momentum.
Price Patterns – Other factors that might be of influence include pattern recognition algorithms which can be trained to identify specific shapes such as heads and shoulders, flags, or triangles, and thereby predicting price movements.
Volume Analysis – Volume analysis can be instrumental in price movement validation. Volumes increase during up-trend or down-trend and their analysis is essential when confirming trends or reversals.
b Machine Learning Models
Machine learning models aim to work in this way in modern algorithms with a view to predicting price changes in the near future. Algorithms that one develops or wires are fed with data sets and they learn patterns and devise methods of trading faster or more efficiently anyway as the case might be. There are other strategies like SVM, Random Forests, and Neural Networks that one can use to enhance predictive power.
c High-Frequency Trading
HFT involves placing numerous orders and getting them executed in split seconds and on some occasions microseconds. That is particularly attractive in cash markets like a gold market where there are narrow price bands in which one can place determinants and capitalize on the fluctuations.
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5 Advanced Techniques in Gold (XAUUSD) Algorithmic Trading
Trading gold presents unique challenges and opportunities in the algorithmic trading world. Here are some advanced techniques tailored to the XAUUSD market:
Reinforcement learning has emerged as a powerful technique in gold trading. RL works as the trading systems interact with the market and improvise over the strategy by solving the problem by trying it in the market. This is useful for gold trading, as RL strategies are adaptable to external shocks such as economic news or investor sentiment changes.
They include sentiment predictions around precious metals.
Gold as an asset class has a unique character because it is a ‘safe-hoard’ asset and hence its price is subject to global and domestic conditions, military conflicts and general investor feel. Sentiment algorithms incorporate news, social networks, and reports on economics and stock markets to identify the mood of the investor's community. If there is a piece of news pointing to some uncertain or negative times ahead, then the algorithm predominantly directed by the sentiment may initiate purchases of gold.
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6 The Future of Algorithmic Trading
Although this form of trading has not yet reached widespread use, the potential of quantum computing in investment strategies including gold markets is promising. Quantum calculations have been demonstrated to outperform classical computation in solving combinatorial optimization problems and processing big data. This can allow the development of new and better trading strategies and more effective utilization of unnecessary.
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7 Practical Use of the Traders on Platforms like TradingView
With the inception of platforms like TradingView, algorithmic traders have been aided with a design, a test, and an automated strategy submission in the most reliant fashion.
a Algorithmic Strategies Implemented Using Pine Script
On its part, TradingView accepts user-written trading algorithms. Pine Script programming language is based on TradingView. These traders favor strategies resting on either technical indicators, patterns, or custom conditions. For instance, one can formulate a strategy to place a gold (XAUUSD) order whenever the price rises above its 50-day moving average and a closing order whenever the price goes down.
b Strategic Testing
Strategies (algorithms) are tested using back-testing methods incorporated in the trading software, this process is known as back-testing. A feature of the TradingView platform is that a trader can run their algorithms on record and see how those algorithms would have played out on historical data. This is important for adjusting the entry and exit plus the risk control parameters and further the performance of a strategy.
c Community Insights
Another benefit of using the TradingView platform is the community of traders around it who can post their strategies, exchange ideas, and learn from each other. You will be able to learn how other traders have taken to algorithmic trading with gold and other assets and be able to develop better strategies.
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8 Tactics to Consider for New and Intermediate Trading Positions
The strategies provided for algorithmic trading may vary from simple to complex in levels. Below are some typical strategies that every trader should consider implementing in their trading practice:
a Trend Following
This is perhaps the most basic type of algorithmic trading. The idea is very simple; one buys those assets that are on the uptrend (bullish) and sells those that are on the downtrend (bearish). For example, in gold trades, a strategy for a trader may be quite simple: moving averages. For instance, an algorithm could be designed in such a way that it buys gold whenever the 20-day moving average of gold crosses the 50-day moving average upwards and sells when this situation is reversed.
b Arbitrage
Arbitrage strategies, as the very definition suggests, enable traders to exploit all such situations which emerge, due to the mispricing corrects routinely. In gold trading, for instance, this would refer to the action of selling short shares in an exchange retrieved in one exchange, where that price, would include a premium orchestrated by other markets.
c Mean Reversion
Mean reversion strategies originate from the classic concept that there is a high likelihood of prices returning to their average or mean. For instance, an algorithm buys an asset such as gold if its average is lower than the over its certain period moving average and sells whenever it is above that average.
d High-Frequency Trading (HFT)
HFT although it calls for many resources, there are traders who have this kind of approach to gold markets in that they seek to benefit from price changes within seconds or rather milliseconds HFT. This strategy also calls for other aspects such as having very good network connectivity to enable very fast execution of trades as well as high volume trades.
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9 Conclusion
Algorithmic trading opens a world of opportunities for all kinds of traders. It doesn't matter whether you're a beginner looking into simple tactics such as trend-following or a seasoned trader putting more sophisticated approaches to work with gold (XAUUSD), there has never been a time that the tools and methods are more readily available to you for successful algotrading. Traders can use existing platforms such as our TradingView to develop, back & optimize their strategies to keep up with today’s fast-moving financial markets.
The financial world is evolving and staying up to date with these new breakthroughs in technology, including machine learning, sentiment analysis, and quantum computing will help give the traders the edge. Algorithmic trading can become everyone’s thing if one is patient, disciplined, and keeps learning.
Regards,
Ely
What Is a Global Macro Strategy?What Is a Global Macro Strategy, and How Do Traders Use It in Trading?
A global macro strategy is a comprehensive investment and trading approach that includes analysis of economic, political, and global trends to make decisions. This article delves into the core components, analytical tools, and practical applications of global macro strategy, providing a detailed outline for understanding and implementing this sophisticated trading method.
Understanding Global Macro Strategy
Global macro strategy is an investment and trading approach that focuses on the analysis and interpretation of economic and political events on a global scale.
This strategy is typically employed by hedge funds and mutual funds, which take positions based on macroeconomic principles and geopolitical developments, including interest rates, currency movements, and political changes. However, many individual traders also opt for this approach, but it typically requires a deep understanding of the global economic system and the interrelated factors that drive markets.
The core idea behind global macro strategy is to leverage broad market trends and economic shifts rather than focusing on individual assets, companies or sectors. Funds taking this approach are considered highly opportunistic, quickly adapting to changing market conditions and capitalising on emerging trends.
Such an approach provides flexibility, allowing investors to take both long and short positions across various asset classes such as equities, bonds, currencies, and commodities. For instance, if a fund manager anticipates a recession in a particular country, they might short-sell that country's stock indices while taking long positions in more stable regions.
The Core Components of Global Macro Strategy
Global macro trading strategies typically revolve around analysing and making decisions based on specific aspects, typically macroeconomic indicators, political events, and global trends.
1. Economic Indicators
Economic indicators are critical to global macro strategy as they provide insights into the overall health and direction of economies. Key indicators include:
- Gross Domestic Product (GDP): GDP measures a country's economic output and growth. A rising GDP indicates economic expansion, which can positively affect equity markets, while a declining GDP may signal a recession, prompting defensive investment strategies.
- Inflation Rates: Inflation impacts purchasing power and interest rates. High inflation might lead to tighter monetary policy, positively affecting bond yields and domestic currency values. Conversely, low inflation could lead to more accommodative policies, boosting equities.
- Employment Figures: Employment rates indicate economic stability. High employment usually correlates with economic growth, while high unemployment can signal economic distress. Market participants analyse employment data to gauge future economic performance and central bank policies.
2. Political and Geopolitical Factors
Political stability and geopolitical events significantly influence global markets. Key factors include:
- Government Policies: Fiscal policies (taxation and government spending) and monetary policies (central bank actions) directly impact economic performance. For instance, expansionary policies can boost economic growth, while contractionary policies can slow it down.
- International Relations: Trade agreements, tariffs, and diplomatic relations between countries affect global trade and investment flows. For example, trade tensions between major economies can lead to market volatility and shifts in investment strategies.
- Geopolitical Events: Conflicts, elections, and regulatory changes can cause market uncertainty and volatility. Investors monitor these events to adjust their portfolios accordingly, often seeking so-called safe-haven assets during periods of instability.
3. Global Trends
Global macro strategists also pay close attention to broad, long-term trends that shape the global economy. Important trends include:
- Technological Advancements: Innovations in technology can drive economic growth and create new investment opportunities. For instance, the rise of digital currencies and advancements in artificial intelligence impact various sectors differently.
- Demographic Shifts: Changes in population dynamics, such as ageing populations or urbanisation, affect labour markets, consumption patterns, and economic growth. These shifts influence long-term investment strategies.
- Environmental Changes: Climate change and environmental policies are increasingly impacting global markets. Investments in renewable energy and sustainable practices are growing as governments and companies address environmental concerns.
How Global Macro Strategy Influences Trading Decisions
Using global macro strategies is all about making decisions based on the broad economic landscape. It requires analysing the interplay of macroeconomic factors and their effects across different asset classes. Here’s how it works:
Market Correlations and Interdependencies
Global macro strategists analyse how different markets are interlinked. For example, a rise in US interest rates might strengthen the US dollar, impacting emerging market currencies and commodities priced in dollars, such as gold and oil. A hike can also strengthen bond yields, which are inversely correlated to bond prices and often equities.
However, many factors may drive a particular asset’s price movements at any given time. The Canadian dollar is highly correlated to oil, while the price of oil itself can be correlated to expectations for global economic growth. Global macro investing and trading revolves around interpreting these various interdependencies with a structured approach.
Impact on Different Asset Classes
The impact of macro factors has a distinct effect across varying asset classes. Want to explore and trade the movements of assets within different classes via CFDs? Head over to FXOpen’s free TickTrader platform to get started with real-time charts and more than 1,200 trading tools.
Equities
Investors might use global macro analysis to identify countries or sectors poised for growth. For instance, if a country’s GDP is expected to rise, equities in that region may see upward momentum. Conversely, if geopolitical tensions are high, investors might reduce exposure to affected equities to avoid potential losses.
Bonds
Interest rate expectations are crucial for bond trading. When central banks signal rate hikes to combat inflation, bond prices typically fall due to higher yields. Investors can adjust their bond portfolios based on anticipated central bank actions.
Currencies
Currency markets are highly sensitive to macroeconomic data. For example, a stronger-than-expected US jobs report can boost the dollar as traders anticipate tighter monetary policy from the Federal Reserve. Conversely, political instability in a region can lead to currency depreciation, which also creates potential trading opportunities.
Commodities
Global macro trends such as economic growth or contraction directly impact commodity prices. For instance, increased industrial activity in China can drive demand for metals like copper. Conversely, an economic slowdown might reduce oil demand, lowering its prices. Investors may use these insights to decide on long and short commodity positions.
Discretionary vs Systematic Global Macro Strategies
Global macro strategies can be broadly categorised into discretionary and systematic approaches, each with distinct methodologies and characteristics.
Discretionary Global Macro Strategies
Discretionary strategies rely on the judgement and expertise of fund managers. These investors manually interpret macroeconomic data, geopolitical events, and market sentiment to make decisions.
They leverage their experience to form opinions on how these factors will impact various asset classes, often making adjustments based on their insights and intuition. This approach allows for flexibility and adaptability, as investors can respond to unexpected market changes and emerging trends. However, it also introduces a degree of subjectivity and potential for bias, as the investor’s perspective influences decisions.
Systematic Global Macro Strategies
Systematic strategies, on the other hand, use quantitative models and algorithms to drive investment decisions. These models analyse large sets of historical and real-time data to identify patterns and trends and are typically only used by professional investors and funds.
The approach is rule-based, minimising human intervention and emotional bias. Systematic strategies are typically more consistent and can handle vast amounts of data to generate trading signals. They excel in environments where market conditions follow historical patterns but may struggle during unprecedented events (like black swans) that the models haven’t been trained to handle.
Tools for Implementing a Global Macro Strategy
Implementing a global macro strategy involves a comprehensive set of tools and techniques that help investors make informed decisions based on macroeconomic and geopolitical factors.
Central Bank Reports and Speeches
Reading central bank monetary policy reports and speeches helps market participants understand future policy directions, particularly speeches by voting members of a monetary policy committee. For instance, the Federal Reserve’s statements can signal upcoming interest rate changes impacting currency and bond markets.
Economic Indicators
Analysing indicators like GDP growth, inflation rates, and employment figures provides insights into the country’s economic health and future trends. These indicators can help analyse the growth or decline of an economy and its related markets.
Global News
Staying updated with global economic and geopolitical news is crucial. Events like trade wars, elections, and natural disasters can significantly impact markets, and being informed allows market participants to anticipate and react to these changes before others catch on.
Long-Term Economic Trends
Understanding long-term emerging economic trends, such as demographic shifts or technological advancements, helps identify investment opportunities in markets and sectors poised for growth. Good examples include ageing populations, the shift towards renewable energy, and food/water insecurity.
Correlations and Interdependencies
It is vital to recognise the interdependencies between different markets and assets. For example, increasing oil prices might affect currency values in oil-exporting countries like Canada and Norway, offering opportunities in forex markets.
Equity/Fund Weighting
Investors can understand the weighting of companies in an index or fund to gauge its future performance. For instance, Microsoft, Apple, and Nvidia currently collectively account for around 20% of the S&P 500’s weighting. Therefore, even if an index’s smaller components are lagging behind, understanding the expected price movements of its biggest components can provide an idea of the broader index’s performance.
Alternative Data
Alternative data includes non-traditional data sources such as satellite imagery, web traffic, and social media activity. For instance, some hedge funds use satellite imagery to assess how busy a particular retailer is; if footfall is misaligned with the current bullishness surrounding the retailer, then the fund may take a short position in anticipation of lower revenues and generally worse earnings results. While most retail traders won’t have access to this kind of costly data, it’s always good to think outside the box in a global macro strategy.
Sentiment and Positioning Analysis
Sentiment analysis involves monitoring news, reports, and market sentiment indicators to gauge investor mood and potential market reactions, such as CNN’s Fear and Greed Index. Positioning analysis, on the other hand, looks at the positions reported by financial institutions, like Commitment of Traders (COT) reports, which break down the positions held by different types of traders in futures markets, and SEC Form 13F reports, which are a quarterly snapshot of holdings by institutional investors.
Expert Opinions and Reports
Considering expert opinions and in-depth research reports can provide additional perspectives and insights, helping to validate or challenge existing strategies and assumptions. Many banks offer their own individual analyses of macroeconomic conditions, usually under the Research or Insights section of their websites. Publishing platforms can also provide access to detailed analysis of macro conditions by professional traders.
The Bottom Line
Understanding and implementing a global macro strategy can be a valuable avenue for any type of trader looking to enhance their decision-making processes. Using these macroeconomic insights, it might become easier to navigate the complexities of global financial markets. To implement macro strategies and explore opportunities in forex, commodities, indices, and stocks CFDs, open an FXOpen account today and start your journey with a broker you can trust.
FAQs
What Is Macro Trading?
Macro trading involves making trading or investment decisions based on the analysis of macroeconomic trends and global events. Traders consider economic, geopolitical, and emerging factors to identify opportunities across various asset classes.
What Is a Macro Strategy?
A macro strategy focuses on broad economic and political factors to guide decisions. It may include analysing global economic indicators, central bank policies, and geopolitical events to analyse market movements and allocate assets accordingly.
What Is the Difference Between Micro and Macro Trading?
Micro trading focuses on the performance of individual companies or sectors, analysing specific financial statements and market positions. In contrast, macro trading looks at broader economic trends and geopolitical events that impact entire markets or economies, making decisions based on these larger-scale factors.
Who Are the Famous Global Macro Traders?
Famous global macro traders include George Soros, known for his bet against the British pound in 1992, and Ray Dalio, founder of Bridgewater Associates. Paul Tudor Jones and Louis Bacon are also notable for their successful application of macro trading strategies.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Strike a Perfect Balance Between Systematicness and AdaptabilitySuccessful, consistent trading in the long run demands a delicate balance between two key realms: systematicness and adaptability. You can neither be fully automated/robotic nor completely agile and without a plan. Radicalising either approach could lead to catastrophe.
Thus, we must blend these elements into a cohesive strategy.
The Notion of Systematicness
1) Risking 1% of the Total Capital per Trade
You must remain consistent regarding your risk exposure per transaction. Defining your risk appetite beforehand and strictly adhering to these principles is crucial. Being flexible with this factor increases the likelihood of becoming overconfident and over-risking at times.
2) Trading Only One or Two Financial Instruments
Every financial security has its own unique market dynamics. Sticking to one or two pairs allows for deeper understanding without overloading your watchlist with dozens of instruments. By taking a selective approach, you can develop a closer connection with those instruments and better understand their price behavior. In our practice, we focus on two pairs: EUR/GBP and USD/CHF.
3) Monitoring and Executing Trades Based on Two Timeframes
Timeframes are interconnected. A daily candle comprises six 4-hour candles, and each 4-hour candle includes four 1-hour candles, and so on. By focusing on just two or three timeframes—one for direction and another for entries and target settlements—you cultivate a more minimalistic approach and a deeper understanding of price behaviour.
4) Thoroughly Journaling Every Transaction
Journaling every trade, extracting key takeaways, and implementing optimisations is absolutely critical. A systematic approach to journaling helps improve your skills and understanding of the market over time.
5) Establishing Psychological Consistency Through a Set of Rules
Your mental state directly affects your trading performance. That’s why it's often said to avoid trading when emotional, tired, or mentally clouded. Establishing and adhering to a set of psychological norms is crucial to maintaining consistency and avoiding emotional trading decisions.
6) Controlling Leverage and Margin Use
Similar to risk management, using excessive leverage and high margin per trade can be detrimental. Define your leverage and margin criteria in advance and stick to them rigorously to avoid catastrophic losses.
The Realm of Adaptability
1) Entering Trades Based on Ongoing Development
If you adopt a fully static approach to trade execution, this rule falls under systematicness. However, if you prefer to read a chart like a book and make decisions based on price behavior, you're taking an adaptive approach. This means you trade what you see, not what you hope for. You must assess how price is developing and interpret its signals before taking action.
2) Conducting Early Closures Based on Market Build-Up
Optimism can sometimes cloud judgment when setting target settlements. However, it's essential to remain flexible and know when to exit if the original plan becomes invalid. Recognising when to abandon a trade is key to protecting profits.
3) Setting Realistic Target Zones Based on Price Development
Some traders aim for the same risk-reward ratio (e.g., 1:3) on every trade. However, it is often more effective to set realistic targets based on technical analysis, such as previous key levels or significant areas of interest. This flexibility allows for better alignment with current market conditions.
4) Placing Relatively Wide Stop-Loss Levels to Account for Potential Liquidity Grabs
While some traders use a static stop-loss value, others take a more flexible approach. By adjusting the stop-loss based on price development, you can avoid liquidity grabs and give the trade more breathing room.
5) Refraining from Entering Positions
When Indecisive Adaptability also applies to your psychological state. When you feel unsure or indecisive, it's often better to stay off the charts, allowing time for clarity and a fresh perspective before re-engaging with the market.
6) Making Optimisations Within the Trading Plan
Over Time Trading success requires continuous improvement and optimisation. There’s always room for refinement, and adapting your plan as you gain experience is essential for long-term growth.
Of course, every trader has his/her own approach within the market. In our case, we aim towards creating a feasible bridge between two universes - systematic and adaptive - and preserving consistent profitability in the long run.
How to REALLY Trade Divergences (One of My Favorite Entries)This tutorial might be short, but it is packed with potent information on how to REALLY trade divergences.
Divergences are one of the BEST ways to catch market reversals. However, from what I have seen, most people do not have a real process for determining when a divergence is actually confirmed/triggered, and then how to determine targets based on the divergence setup.
In other words, most people don't have a plan for trading divergence.
This video will give you a full plan (Setup/Trigger/Follow Through) for trading divergences.
I give full credit to Jake Bernstein, as this is a concept that I learned from him. He is one of the all time greats, and very worth your time to check out.
I hope you found this video insightful.
Have a great week.
How FOMO Can Kill a Trader’s Gains!FOMO, or the Fear of Missing Out, is a feeling many traders know well. It’s that worry that you’re missing a big opportunity while others are making money. While it’s natural to want to jump in, FOMO can lead to bad decisions that erase months of hard work (unfortunately, this is from a personal experience). In this article, we’ll explain why FOMO is dangerous, how it traps traders, and how you can avoid it.
The NASDAQ:NVDA Story: How FOMO Wiped Out 3 Months of Gains
Let’s say you’ve been trading carefully for three months, making steady progress. Then one day, you see headlines everywhere: “NVIDIA ( NASDAQ:NVDA ) stock is soaring!” Everyone’s talking about it on social media, and people are posting their big profits.
You start feeling anxious. You didn’t plan to trade NVDA, but the fear of missing out kicks in. You decide to buy the stock, even though it’s already at its highest point.
But soon after, the stock price drops, and you’re stuck with big losses. In just a few days, the gains you worked hard for over three months are gone—all because FOMO made you jump in without thinking.
What Causes FOMO?
Here are some common things that trigger FOMO in traders:
Social Media: Seeing others bragging about their gains makes you feel like you’re missing out.
Market Buzz: When everyone is talking about a stock, it feels like you have to act fast or you’ll lose your chance.
Seeing Others Profit: Watching friends or other traders make money makes you question your own strategy.
Overconfidence: After making a few good trades, you might start thinking you can time the market perfectly.
Fear of Falling Behind: You don’t want to be the only one not making money, so you make impulsive trades.
How Retail Traders Fall for FOMO
FOMO is especially tough on retail traders, who are often newer to the market. Here’s how it usually happens:
Following the Crowd: Instead of doing their own research, traders jump into stocks because everyone else is.
Impulse Decisions: They buy stocks based on emotion, not logic or analysis.
Chasing Losses: After losing money in a FOMO trade, they take even more risks to try and win it back.
This kind of behavior can lead to bigger and bigger losses, making it hard to recover.
Here are 5 tips that I hope can help you avoid FOMO in trading:
Have a Plan
Before you start trading, make a clear plan. Know when you’ll buy, when you’ll sell, and stick to it. This helps you avoid getting swept up in hype.
Limit Market Noise
Avoid spending too much time on social media or reading news that hypes up stock movements. It’s easy to get influenced, but remember, your strategy is more important than others’ excitement.
Set Realistic Goals
Whether trading short-term or long-term, focus on consistent, well-planned trades. For short-term traders, aim for steady, smaller gains rather than chasing quick profits. Stick to reliable setups that match your strategy.
Manage Your Emotions
Take a step back and think before making decisions. Don’t let fear or excitement control your trades. Stay calm and follow your plan.
Learn from Mistakes
Everyone makes mistakes in trading. What matters is learning from them. Instead of rushing into more trades to recover, reflect on what went wrong and how to avoid it next time.
Takeaway
FOMO can lead to bad decisions and wipe out months of progress. The fear of missing a big opportunity is strong, but chasing after hyped stocks can backfire. By staying disciplined, keeping your emotions in check, and following a solid trading plan, you can avoid the traps of FOMO and keep building your gains over time.
How To Have An Edge Over The Markets!Hello TradingView Family / Fellow Traders. This is Richard, also known as theSignalyst.
Today I want to share a basic trading plan that you can follow to quantify your trading edge.
📌Step 1:
First, start from the higher timeframes like Daily/Weekly to identify the current long-term trend. is it bullish, bearish or stuck inside a range?
If the price is sitting in the middle of nowhere, then it is a NO trade zone as price has 50% change to go either up or down. Thus no edge!
📚Wait for the price to approach the lower bound or upper bound. Then proceed to Step 2
📌Step 2:
No matter how strong a horizontal / non-horizontal support or resistance is, it can still be broken. Thus don't buy/sell blindly as price approaches a support/resistance.
Instead, zoom in to lower timeframes like H1 and M30 to look for setups.
🏹A basic approach would be to wait for a swing low to be broken downward around a resistance as a signal that the bears are taking over.
In parallel, wait for a swing high to be broken upward around a support for the bulls to take over.
This would be the confirmation to enter the trade.
⚙️Of course, your second edge would be through risk management by targeting at least double than your indented risk.
But that's a topic for another post 😉
Always follow your trading plan regarding entry, risk management, and trade management.
Hope you find the content of this post useful 🙏
All Strategies Are Good; If Managed Properly!
~Rich
