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Risk Management

Locking in a Profit Without Day TradingDay trading can be a quick way to capture intraday profits. However, not all accounts are suitable for day trading or can afford the pattern day trader requirements. If a trader has already completed three day trades in the past five trading days, it leaves them with two options when they have a profit on a newly opened position. 1. Either close the position, take the profit, and trigger a pattern day trade label or 2. Hold the position until the next day and hope the profit is still there. There is a third option that locks in a profit while still avoiding a day trade. This is done by legging into a debit spread. Legging into a Debit Spread A vertical debit spread is created when an investor buys-to-open (BTO) one option and sells-to-open (STO) another option further OTM. Both legs are opened on the same underlying equity and use the same expiration. However, both legs do not need to be opened at the same time. An investor can instead buy-to-open (BTO) the long leg first and then setup a sell-to-open (STO) order for another option further OTM. The STO order should be placed for a credit greater than or equal to the debit paid for the BTO leg. This is called legging into a debit spread. Example: BTO September 200 put for $10.00 of debit. Instead of placing a closing order for the 200 put, place an order to STO September 195 put for $10.00 of credit. When the STO order fills, this will create a September debit spread with a net debit of $0.00. (BTO for $10.00 debit - STO for $10.00 credit = $0.00 net debit) The risk on the trade is $0.00. The maximum risk, or potential loss, from a vertical debit spread is the net debit (cost basis) of the spread (BTO leg debit minus the STO leg credit). The potential profit is $5.00. The maximum profit that can be earned from a vertical debit spread is equal to the width of the spread minus the cost of opening the spread. No further action should be taken on this spread until the next trading day. Even placing a closing order the same day opens up the risk of being filled and tagged with two day trades. The next market day, a closing order should be placed to STC the entire spread for a credit. This order can be placed in premarket or at market open. Regardless of when the order is placed, it should be worked until the position is closed. When locking in a zero cost basis, the current value of the spread is the profit. Example: Holding a legged into debit spread with $0.00 cost basis. STC the spread for 3.40 of credit. The spread was BTO for $0.00 and STC for $3.40 resulting in a $3.40 profit. The total profit on the position is $3.40 per share, or $340 per contract. Locking in Profits This strategy can also be used to lock in profits of a position that was initially intended to be held overnight. An investor BTO a TSLA call based on an upcoming earnings play. TSLA moves 50 points going into market close and the current position has $25 of profit per share. Instead of using a day trade to close the position, STO an adjacent strike to create a debit spread to lock in a profit. Then BTO a new TSLA call to realign the account for the same earnings play. Example: 7/21 13:15 PM ET TSLA trading at 1560. BTO Aug 1560 Call for $150 per share. 14:30 PM ET TSLA is now trading at 1610. The Aug 1560 Call is now worth $175, equaling $25 of profit per share. STO Aug 1570 Call for $170 per share. This creates a debit spread with a $20 net credit . BTO for a debit of $150, STO for a credit of $170 = $20 net credit . This is now a debit spread with a credit as the cost basis. Depending on your trading platform, this may be shown as a negative cost basis. This is because it is a credit on a debit spread. Max risk = $20 profit, no risk on the trade. Locking in a credit is a guaranteed profit on the trade. Max profit = $30: $20 of credit + $10 of spread width. BTO the Aug 1605 call for $157 per share. This allows the account to still be setup for an earnings play. Net risk of the two positions is $157 debit - $20 credit = $137 of risk per share. Next Market Day: 7/22 9:30 AM ET TSLA gaps open to 1679 due to earnings. STC the Aug 1560/1570 debit spread for a credit of 6.70. Total profit on the spread is the $20 net credit + 6.70 of credit to close = $26.70 of profit per share or $2,670 of profit per contract. STC the Aug 1605 call for $195 credit. BTO for $157, STC for $195 = $38 profit per share or $3,800 profit per contract. Total profit is $64.70 on a net risk of $137 = 47.2% return and no day trades used. Credit on a Debit Spread In the above example, the stock moved enough for the STO leg to have a higher value than that of the debit paid on the BTO leg. This legging in allowed for a credit cost basis when normally a debit cost basis would be held if both legs had been opened at the same time. When the credit received on the STO leg is higher than the debit paid on the BTO leg, this creates a credit on the spread. This does not make it a credit spread. It is still a correctly constructed debit spread because the STO leg is further OTM than the BTO leg, but instead of holding a debit and risk on the trade, the position now has a credit, no risk on the trade, and a guaranteed profit If a debit spread with a credit is held until expiration and expires out of the money, the “loss” on the spread is actually a profit equal to the credit held. When a strike is OTM at expiration, it no longer has any value to it. It has lost all time value and because it is OTM, it contains no intrinsic (ITM) value. Example: The BTO leg for $150 is STC for $0.00 = $150 loss. The STO leg for $170 is BTC for $0.00 = $170 profit. $170 profit - $150 loss = $20 profit per share or $2,000 per contract. If both legs of the debit spread are in the money at expiration, the profit on the spread is equal to the credit held plus the spread width. When a strike is ITM at expiration, it only contains intrinsic (ITM) value. It has lost all time value. Example: AMZN settles at expiration at 1580. The 1560 call is 20 points ITM. The 1570 call is 10 points ITM. The BTO leg for $150 is STC for $20 = $130 loss. The STO leg for $170 is BTC for $10 = $160 profit. $160 profit - $130 loss = $30 profit per share or $3,000 per contract. It is not recommended to hold ITM spreads on American style options until expiration due to risk of assignment/exercise. American vs European Style Options Most stocks and ETF’s are American style options. This means that if the buyer of an option chooses to exercise or assign their rights they may do so at any time prior to expiration. Indexes such as SPX, NDX, and RUT are European style options. This means that any exercise or assignment may only occur at expiration. Trading spreads on European style options, can alleviate the concern of early exercise/assignment. If both legs are ITM, they can only be exercised or assigned at expiration. For American style options, the closer to expiration and the further ITM the STO leg is, the more likely it is to be exercised/assigned. This is why building time into the position is beneficial by using an expiration at least 2-3 weeks out. Additional Information This strategy works best on long options, BTO a call or BTO a put. It is not recommended to be used to lock in a profit on an existing debit or credit spread. While you can use this strategy to leg into a credit spread, debit spreads tend to be more efficient as credit spreads rely on rapid time value decay so generally require sooner expirations. The legging in strategy works with any spread width. However, the larger the spread width the further the underlying will have to move for the STO leg to be at the same value or higher than the cost basis of the BTO leg. When legging into wide spreads if you can lock in a cost basis less than the current spread value you still have profit potential. Legging into a debit spread is an efficient way to avoid day trading but still guarantee yourself a position that can be closed the next market day for a profit. As long as the debit spread is not at expiration or extremely far out of the money, the spread should have value to it. A zero cost basis debit spread can be closed for a profit equal to the current value of the spread. While locking in a credit on a debit spread results in a guaranteed profit equal to the credit on the spread plus the current value of the spread.
SP:SPXEducation
by NewCycleTrading
4
Risk Management: How to Enter and set SL and TP for an Impulse Risk Management: How to Enter and set SL and TP for an impulse move in the market ? Hello everyone: Here is an educational video on how to enter and set SL and potential TP for an impulse move in the market. I will go over the different entries you can enter to capture the move, and I will also go over Risk Management at the end since it works interrelated with your entries. 3 type of entries to capture an impulse move (not all of them will happen, but sometimes 1, all, or none) Reversal: Top/bottom of the continuation structure, candlestick/reversal structure on lower time frame (High Risk, High Reward) Breakout: Price break out of the continuation structure (Low Risk, Low Reward) Correction after breakout: Enter in lower time frame (30Min/15Min) continuation correction (Medium Risk, Medium Reward) Risk Management is important to your entries. -Your #1 thing is to not lose money. It's not about gaining so much $/% in a month, but learn to control your trades and risk to be successful in the long run. -15-20 trades per month -Minimum 3:1 RR on every trade -Risk 1-2% account per trade -Understand that, this is my risk management, and how I would approach the market. You would adapt to your own style of trading, and you will then continue to work on this part of the management. Thank you
BITSTAMP:XRPUSDEducation
by jojofang0901
15
Here are a few tips every one should knowHere's a couple of tips from me that might help in your trading. Those are just my opinions and all are belong to me. Practice think practice think review old ones repeat repeat repeat. It takes a whole lot of thinking and a whole lot of practicing to be good. Give your brain practice all the time like a muscle, and just repeat over and over. Look at examples, past trades, re-read what to do and what not to, re-read all your rules over and over, not until you know them, until forever or they'll just fade away. The more you hammer it in the better you get. Be logical DO NOT FOMO AND INSIST (or enjoy lose lose lose and then miss the final move that is a winner). Mistakes are really expensive. Best to miss out and not force and go look at something else, possibly analyse that one you missed and understand why you missed it, and how to fix, maybe by simplifying the way you detect those. Spend a whole lot of time analysing markets... Try really hard to really think every trade through... do not waste time on "meh" setups. Missing out is not that big of a deal imagine you get 10 of those a month, that's 120/year, now imagine you miss out 2/month you still get to 96/year and you had more time to spend on the 96. And you can still learn something from what you missed out on. Better than losing sanity from looking at charts hunting for setups all the time (and ending up forcing trades and bleeding capital). Price action is not physics. A "weak uptrend" is really what they call a long bull market that ran over countless bears that are all underwater in much pain, and often it ends up with bears giving up and a massive green candle up. And same, a "strong uptrend" is what they call price action with no bears. They did not vanish into another dimension, they just are not present in the market right now. But they are around. Which means they could be just around the corner and all jump in at the same time and reverse the price. In general I think the best is to not go against a "weak" trend ever. What is weak and what is strong enough? That's for you to find out. If you want to go against a pullback it is generally better to enter on vertical price action. People when they see violent price action get scared and remove their orders. The opposite is the right thing to do. Slow price => remove order. Violent price => GOOD, bring it on. Of course you will get run over from time to time. This is your job as a speculator. Speaking of weak trends, do not just use a price stop, but also a time stop: Price just goes nowhere for a long while => Get out. There is no reason for risk ever to be over 2% , and those are reserved for top stuff. Usually around half a percent is good especially when starting, then it can be scaled as the acc grows and even increased progressively to 1% to get a decent sized account. If you really are very certain of your strategy and want to go fast and cannot contain yourself then it is perfectly fine ok I understand you can risk more than a small 2% that barely will make you any money who wants to be spending hundreds of hours to make $50 :) Go for it. Make sure you can not lose more than all of your money, such as with using options or stocks that can only go to zero. At that point the strategy does not even matter. Also make sure you use alot of money, that you spent years to save up. And then keep taking trades until you lose everything. You really have to make sure it is very painful and you go into despair and lose all hope. Trust me when I say with 99% certainty you will really learn your lesson and won't require to learn it again. You will then not ever want to "go quick" again. 99% efficiency guarenteed. You won't have these stupid urges to risk big. If your spouse leaves you it is even better. Leaves a scar that won't heal as a permanent reminder. And consider yourself lucky that you only lost everything.
Education
by MrRenev
1
LONG & SHORT POSITION TOOL📚An In-Depth Look at Using This ToolThis illustration explains the functionality of TradingView's Long/Short Position Tool and is intended to help new people looking for more information on this tool in a "novice friendly" format. TradingView’s position tool will aid you in pre-planning and pre-evaluating trades and as such should be an essential part of every trader's toolkit . Note: At its simplest, the position tool can quickly show you the R:R (Risk-To-Reward) of a single trade. By doing a little extra work, you’ll be able to then use this tool to properly plan for the risk of all trades you are taking compared to your total account size. Hit that 👍 button to show support for the content! Help the community grow by giving us a follow 🐣 ----- Important terms: Tick = A tick is a measure of the minimum upward or downward movement in price. Trade outcome statistics = Used to track the outcome of a trade. Example: “Current XYZ position closed +5.25% gain 10840 account balance after trade impact” P&L = A representation of current Profit & Loss. Be careful where you position the tool, as the P&L is calculated based on the position of the tool. Here are two uses for the Position Tool: 1. Only R:R = To quickly find only the R:R of a trade. This method does not bother changing account balance and such is only acceptable if you are tracking your current account balance and doing risk calculations off-platform in something such as a google spreadsheet. 2. Risk+R:R = To ensure your current trade idea meets both your R:R and max risk tolerance (risk amount; in our case, 1%). This is achieved by changing the “Account Size” option every time you are building a new position. This is the advised method to use, since like your trade journal, it’ll help keep you accurate and accountable. ----- We will now explain the options contained within the tool’s input on-chart menu: Account size = The current available balance within your account, the keyword here is available. If you are using the "Risk" option explained below then this needs to be updated upon starting to create a new trade setup. Risk = Your max tolerable risk amount (either in absolute numbers or as a % of your account size). The default option is "absolute numbers," this uses the base currency of the on chart asset (If you were on ETHBTC, then the base currency would be BTC; for SPX500USD it is USD since this asset is displayed in its USD value). As you know, we suggest you stick to %. Entry Price = The price you will be entering the position at. PROFIT LEVEL: Ticks = The tick difference from the entry price to the profit target. Price = The take profit price. STOP LEVEL: Ticks = The tick difference from the entry price to the stop loss. Price = The stop losses price. ----- We will now explain all metrics being displayed on the tool while it is plotted on the chart: Top info panel: 1. The difference in base currency (USD) from the entry price to the take profit price. 2. The difference in percentage change from the entry price to the take profit price. 3. The difference in ticks from the entry price to the take profit price. 4. The hypothetical account balance after the take profit target is achieved. Middle info panel: 1. Simulated P&L from the entry price to where the current live price is. (Displayed in the base currency of the on chart asset, USD in this example) 2. The quantity of the asset that should be purchased at the entry price. This is calculated as follows: Qty = Risk / (Entry Price – Stop Price) 3. The risk to reward ratio, this is how much you could gain compared to how much you could lose. The calculation is as follows: Risk/Reward Ratio = ((Take profit price - Entry price) / (Entry price - Stop loss price)) Bottom info panel: 1. The base currency (USD) difference from the entry price to the stop-loss price. 2. The difference in percentage change from the entry to the stop-loss price. 3. The difference in ticks from the entry price to the stop-loss price. 4. The hypothetical account balance after the stop-loss is hit. ----- Lastly, we will explain how Position Size and Account Balance are being calculated by TradingView: Long Position Variant Position Size: Qty = RiskSize / (EntryPrice - StopPrice) Account Balance when a position is closed after reaching the Take Profit level: Amount = AccountSize + (ProfitLevel – EntryPrice) * Qty Account Balance when position is closed after reaching the Stop Loss level: Amount = AccountSize – (EntryPrice – StopLevel) * Qty Short Position Variant Position Size: Qty = RiskSize / (StopPrice - EntryPrice) Account Balance when a position is closed after reaching the Take Profit level: Amount = AccountSize + (EntryPrice - ProfitLevel) * Qty Account Balance when a position is closed after reaching the Stop Loss level: Amount = AccountSize – (StopLevel – EntryPrice) * Qty AccountSize: Initial account size specified in the settings RiskSize: If the "Risk" option is set to "absolute numbers" = Risk If the "Risk" option is set to "percentage of account size" = Risk / 100 * AccountSize ----- Reference: www.tradingview.com If we made any mistakes please let us know in the comments. There was a lot of formatting we needed to do to best display all of this information for you guys! Enjoy. :)
BITSTAMP:BTCUSDEducation
by AlphaBotSystem
40
The Stigma of Options Pattern Day TradingIs there a pattern to your trades? Anyone trading options knows how little effort it takes to build up a healthy volume of transactions. But you should be aware of one rule that could inhibit your ability to trade options too often in a margin account. In the past, day trading represented the wild west of the market. It was possible for day traders to move in and out of positions within the trading day and end up with no open positions. Margin is calculated as of the ending positions in the trading day; this meant it was possible to trade on large volume with little or no cash at risk, meaning no margin requirements. It also meant huge risks for brokers. Trading on extreme leverage is attractive, but it is not the only motive for day trading. Many traders believe that the risk of price gaps between today’s close and tomorrow’s open are simply too great; day trading enables traders to close out positions during the trading day, avoiding this risk altogether. Even so, if you want to day trade, you could fall into the definition of a “pattern day trader.” Entry and exit decisions are based on momentum, chart patterns, and other technical strategies. Whichever strategy employed, the theme to day trading is that positions are opened and closed before the trading day’s end. This problem, at times representing unacceptable risks to brokers as well as to traders, is what led to the enactment of new rules concerning so-called pattern day traders. By definition, a day trade is when you buy-to-open and sell-to-close or sell-to-open and buy-to-close the same option within the same market day. A pattern day trader is when this action is repeated four or more times within five consecutive trading days using a margin account. If you fall into this definition, you must maintain at least $25,000 in equity balances (cash and securities) in your margin account. This balance has to be on hand before you can continue any day trading. You can also be labeled a pattern day trader by your broker if your broker believes there is a strong likelihood that you will day trade. One exception: If your day trading is lower than 6% of the total number of trades you make in the five-day period, then you are not considered a pattern day trader. So, high-volume traders can escape the rule under this provision. Once you have been labeled a pattern day trader, you will need to maintain at least a $25,000 equity value in the account . If your account falls below $25,000, it will be frozen from day trading until the account is restored to the minimum equity requirement of $25,000. Example of day trading: 8/18 10:10 AM BTO AUG-21 TSLA 1900 Call 8/18 10:50 AM STC AUG-21 TSLA 1900 Call This is a day trade. The position was opened and closed in the same trading day. Example of not day trading: 8/17 3:50 PM BTO AUG-21 TSLA 1900 Call 8/18 10:50 AM STC AUG-21 TSLA 1900 Call This is not a day trade. The position was opened and closed on two different trading days. Example of Pattern Day Trading: 8/13 Opened and closed an AMZN Put 8/13 Opened and closed a GOOG Call 8/17 Opened and closed a BKNG put 8/18 Opened and closed a TSLA call This is pattern day trading. There have been four day trades in a five trading day period. Trading days do not include weekends for stock/index/ETF options. If instead of taking the TSLA call on 8/18, the position was day traded on 8/21, this would not have been classified as pattern day trading. This is because the fourth day trade, TSLA, would have been over five business days away from the first day trade on 8/13. See below: 8/13 Opened and closed an AMZN Put 8/13 Opened and closed a GOOG Call 8/17 Opened and closed a BKNG put 8/21 Opened and closed a TSLA call This is not pattern day trading. Assuming no day trades were placed prior to 8/13. The pattern day trading requirements is one of those unexpected surprises many traders discover in their margin accounts. The rules are easily understood in hindsight, but unfortunately, they are likely to come to your attention only after you fall into the zone in which they kick in and apply to you. Individual brokers may have more strict rules regarding pattern day trading. For example, one broker may view the opening and closing of a vertical debit spread as one day trade, while another broker may view the same action as two day trades, since a spread has two different options. It is always important to contact your broker to understand how their day trading rules apply to you and your account. They will also have a record of your current day trades. If it is posted on your platform, make sure you know how to locate the day trade count if you intend to avoid being labeled a pattern day trader and are looking to stay at three day trades or lower in a five trading day period.
SP:SPXEducation
by NewCycleTrading
3
How to identify valid, high probability price action structuresHello everyone: In this educational video, I will go over how to identify valid, high probability price action structures/patterns in any market. I will go through price action structures/patterns from a multi-time frame analysis point of view, and how using a top down approach will help you to understand how to capitalize on higher time frame price action structures and its impulsive moves. Understand that, within a higher time frame bullish impulsive move, there will be many lower time frame corrections and impulses to bring up the overall price. That is how the market moves, just in different time frames. So the more structures and patterns we identify within the higher time frame price action and structures, the higher probability the entry setup would be. The key from this lesson is to understand that structures and patterns can and will appear everywhere in the market, in any time frames. However, not all of them will play out the way they should. So how to “filter” out lower probabilities structures to enter, and how to identify higher probabilities structures for entry. Thank you Feel free to ask me questions and comments.
BITSTAMP:ETHUSDEducation
by jojofang0901
30
Your guide to success [Beginners start here]*************************** Getting started as a Padawan *************************** Learn about investing When you start you should be interested. There are many ways to learn about investing: Books/videos/the internet/Losing money trading for the first time. My first trades (both speculative and not) were Forex, but I really got started "full time" (still had a job at first but spent a good 12 hours a day in this) in Q4 2017 with the crypto bubble. I looked at charts by myself, I also watched hundreds of hours of videos on crypto, technical analysis, price action, markets, I read articles on the internet, I looked at alot of tradingview ideas (where I started to notice herd patterns just like in real life). Being able to filter out the garbage is on you, and you have to check by yourself every thing you learn. If you can't bother reading or hearing about monetary policies, the economy, charts, risk to reward, probabilities, now is a good time to quit. Pick markets you like more The "retail" markets are usually: Indices, stocks (especially us), forex, crypto, hard commodities. It's ok to go back and forth, and even when you pick say 1 or 2 main markets to look at, you can still take a peak from time to time at other ones, but careful, you only have 1 brain, and you might just end up losing money. My own experience: Forex (usd, eur, gbp, jpy, mxn, sek, aud, cad, nzd, chf), Commodities (Gold, Oil, NatGas, Copper). I sometimes look at other markets there might be something interesting and I might get something out: Bitcoin, Ethereum, Silver, Grains. I am a consistent loser in stocks and indices yikes. Not like slightly below breakeven. No, like 100% losing rate. Hey I got the holy grail. I dislike USDJPY, I love EURJPY, not sure about some trashpairs such as EURNZD. I like all USD pairs except USDJPY. In the crosses I like AUDCAD EURSEK GBPAUD GBPCAD GBPJPY EURJPY. Some interest in USDCNH sometimes. I look at USDZAR and USDTRY but never touch them. With time you get your favorites, your best and worse performers. Learn about that market specifics You may be shocked but different markets work differently. First of all different hours (fx = 24 hours a day 5 days a week, oil is open 23 hours a day, most cme agri have 2 trading sessions with 3 per-market, stocks trade 8 hours a day with a pre and post market, crypto is 247...). And then unlike what some people that have never made money say, sorry but they just behave differently. When you learn to trade penny stocks you can't be an all around jack of all trades that will be able to trade dirt in Kyrgyzstan. As I said I like (certain) forex pairs & commodities, and do best with those, one reason is because they trend on the timeframes I'm best at and prefer. FX trends for days, Stocks trend for months, and so on. The patterns are different, the trends are different, the valuation is different etc. Bitcoin had 3 bull markets, and they all lasted 1-2 years, going straight up, why would anyway look at a 4 hour chart? There is only 1 way to trade Bitcoin in those situation and this is buy and hold. You might have wanted to buy pullbacks and hold for each wave within the bull market in 2017, but that's still several months of holding. First 2 corrections were ok, maybe some multi day or week buy/sell there, the current one is absolutely disgusting except from a straight down in 2018 and straight up in 2019. Pick a timeframe I swear every one wants to either be: - A (lazy) passive investor that will get rich doing nothing, because people told them this is what works and always will (cough cough) - A (gambler) day trader that will get rich quick making 2% every day (hahaha), because this is how brokers make the most money the fastest 90/90/90 => 90% of traders lose 90% of their money in 90 days. This might be a little exagerated but that's the idea. Brokers know they'll all be gone in a few months so they push to day trade so these losses are as much as possible made via commission, rather than a few big bagholding losers that evaporate into the market in a few weeks. And as I said, different markets really work on different timeframes. FX (& Gold & Oil & so on) I think the best timeframes are H1 H4 D1, Bitcoin that would be the daily and weekly (during trends), stocks weekly and monthly I suppose (and daily during crashes). Keep in mind the lower the timeframe, the bigger the spread. If you want to day trade FX well I hope you enjoy having your reward to risk divided by 2. Other than the Dow Jones and Dax indices (and cryptos especially as MM on Bitmex) everything is really expensive to speculate on on very low timeframes. An exception: Ending markets. Gold in July 2020 when it went parabolic, Oil when it went negative, that sort of things. But why would you want to close a mighty winner at 5 pm and go watch tv when you should be staying in as long as the price is skyrocketing? A few more hours = a few more R. *************************** Getting ready to make money *************************** Have fun spending hours on statistics (backtesting) You heard people tell you what works and what does not. The stuff I hear... It's up to you to check if that 🎪 oversold RSI strategy works, and by looking at charts and taking notes, you will find out that it overwhelmingly does not. Forget about your dreams of building the perfect mecanical holy grail. You need to know what you are interested in at first (reversals, pullbacks, powerful breaks, buying highs & lows in sideways choppy markets and losing money...) and then look at that, have to start somewhere. If you try looking at everything then see you in the mental ward in 2 months. Just find what works, what does not. At least you should have a vague idea of where to enter, odds, etc. You can't just jump in blindly in anything because CNBC, because "cheap" and then as soon as it goes against you go "wow I have no idea what to expect and what to do" 😆. So typical. Pick a charting provider Most frustrate me to no end. I hate them with a passion. Is it that hard to let me freely scale and move my chart around? Really? You can put all those idiotic indicators to make sure day traders are as active as possible and lose as much as possible, but you cannot give us a simple measuring tool? Wow, just wow. TradingView is really good. I don't see what people could want more. Unless they miss a market idk the Kyrgyzstan stock market maybe, then I would say they have everything on the charting side. Use good news services Don't be a Scrooge McDuck and dish out that $24,000 for a yearly bloomberg terminal sub. Did you know they have 325,000 subscribers worldwide? We're obviously all poor and need to use what little money we have for essentials & risk capital. Under $2.5 million of risk capital I would not even consider it. You might think "oh no, I want to isolate from the news because hype because I want to not be emotional" or whatever. Now first of all you're crazy if you do because the hype & emotions are the best part and you are missing out on all the fun. And as we have seen I myself have a watchlist of 25 fx pairs (10 currencies), 4 commodities, plus a dozen or more other tickers I may be interested in. You want to only trade the price action, ok. You're actually going to carefully check 30 charts every single day? Wow. And not forget to check several dozen stocks indices etc from other markets regularly and be ready for a big move? Well congratulations rain man. The media & investor hype tells you what is interesting to watch. And I'm sure it helps your opinion and subconscious mind. In July the dollar crashed as it should, and accelerated in the second part of the month and then I kept looking for shorts and guess what I kept winning and had a monster month. Gold & silver went up back then but I was too busy, and I did join gold in August when it was past ath and there was some hype and the laggards were starting to buy. Deposit with a regulated decent broker that suits you You're all ready. Time to deposit on a good broker and promise yourself this time you won't blow your account. This time it'll work out. *************************** What you'll be doing for the rest of your life *************************** Look for ideas, "inspiration" That's when you look at charts and remember or tag or set an alert on the ones that seem interesting to you. And that's when the news in general can come in handy. "K what is undervalued" "K what is exploding up I want to join - er I mean fight the trend and get decimated". Price action or no price action, there is more to this business than just drawing lines on a chart and placing an order based on price action. Much more. Decide on what you want to see Say you have an interest in Oil, Gold, and the USDollar. It is required you see something to take action. A strong break followed by a small pullback? A double top accompanied by mainstreet euphoria, signaling a top? You are a sniper and you do not just rush to a rooftop and shoot at random passerbys hoping to get your target. This is what the USA did in the Obama era in Yemen with drones. You are not the USA. Have a plan before setting an order You shall NOT jump into something without a plan first, you are not Bud Spencer that punches first asks questions later. This is an order. The number of times I heard people go "Ok so I bought x. Price is going down. What should I do I have no idea? Please fast!". I heard, not from personal experience but from others, that even "pros" with at least months in a company, have been spotted asking those questions. You know who you are. Please don't do this. Hahaha I nearly cry when I think of this, is this a casino "Oh well I just went all in let's see what happens yolo". Trail your stop, at least bare min You're at 99% of your target, you're actually going to risk everything for that last little percent? Even if you don't care about missing out on additional gains, I do not get it. Why? At least move your stop 1/3 towards target when the price goes past 2/3. Myself I prefer to have something more evolved, where based on experience and backtested data I know approximately how much it should retrace and how much is 1- too much loss of my gains I am not willing to give away, 2- high probability or sideways or reversal. Log your last operation (in excel) Note everything you buy & sell in excel (or you can use something else I don't care I am a libertarian do what you want, except jump in with no plan, I am a german dictator for this, you are not allowed to do this). This will be very useful. Going to share my own "method", I now have an excel with 3 tabs (alot more with all kinds of stuff in, but let's focus on the 3). 1 Tabs is for "Trends" and I have 8 columns: Date, Ticker, Thing, useless, useless, R, Result (Win Lose Breakeven), Comment. So actually it is 6 not 8. I used to have over a dozen tabs but I gave up, they're not that useful and they're a pain to maintain. In "Thing" I write the "strategy" I used, for the tab "trends" I got 4 choices: Pullback, Pump (actually it's pullback in a pump), FOMO, Downtrend/UptrendFeeling (when I just go in without a clean rule because I want to). Pullback and Pump are the main ones. So ye, pretty simple. And the specific relevant details I want to note, I note them in Comment. Such as "got stopped at the top and then missed 25R" 😃. Well in that case it might cause some depression so I'm not sure this is the best idea, but you do not want that happening consistently. Important: Log the ones you did not take because you were a terrified little coward, and ended up going like a rocket in your direction. Thank me later. Analyse your past trades You'd better spend time looking at your past trades. I like to screenshot mine, I got a 25 GB HDD allocated to that. I already used up 10 GB but I also have some backtesting ones. Check your average R, winrate, look at comments (maybe put the most important ones in red). You can also on top of this use a broker service some provide analysis data, and also MOAR you can use tradingview where you posted ideas (public or pvt) and see what your thoughts were, and more. If you took some screenshots with your thoughts at the time, go look at this and wonder what was in your mind to take such a stupid trade amirite? Do stats on your operations & backtest to confirm 1 step further: After checking your history, and getting an idea of what you were great at and sucked up. There are 2 reasons you might be good or bad at something: You actually being good or bad at it, and secondly luck. You want to go backtest dozens of cases to check "ok is this typically good or bad", "wow this pattern sure appears often in this situation". And then go even further, as we like to say in France "above it is the sun", you are such a natural born speculator that you take all of your worse trades, and go "ok then, I will do the exact opposite". Revenge trading and fomoing has done so much for me. It made me immensly more profitable (because of so much more opportuinites). I could not believe my eyes at how often I won and how much R I got through revenge trading and fomoing... I did it intelligently thought, not a recommendation to go double down on a lousy trade and risk 10% at once. By revenge trading I hear "taking the opposite side with reasonable size after getting stopped twice". "While cursing". Combat your addiction to stats Ye at that point you'll always need validation from the charts & the stats. Feel down? Go make yourself feel good with some stats. Feel good? Go get a high by looking at some good stats. Worried a trade might not work out? Go spend a few hours on stats to reassure yourself. It can get pretty bad. It can take over. You sometimes might run home in a hurry to get your chart fix. At your job or someone house you will break at the urge and just jump on your phone "just to check that pattern a little bit". Oh wow I just realized I'm not even really joking. Well at least it is a useful addiction, and you do need to have the most information as possible. But know that you cannot know everything, and if you get paralysis from not being 100% sure then... I guess you are a coward and better quit :D Mental health is important, as well as being a winner and wanting to do MOAR WHATEVER IT TAKES TO WIN. This ain't a wagecucking 9 to 5 sit on your *** job. It is one of the most competitive activities in the world and you have to WANT to be the best, to be the best. You don't even care about the money, you just want to crush the competition and you are unhealthy-ly obssessed with it. But just as with lifting, sports at pro level, esports (lol), you do not want to suffer overtraining, burnout (lol what is burnout? Sounds like a loser word), or emm going completely bananas (too late for me :/). With speculative investing, every day is chart day. And news day. And monetary day. And economic lesson day. And... How about rest days? Yes it is important to know when to rest. Know when you'll get plenty of refreshing rest? WHEN YOU DIE. Oh well this paragraph did not turn out how I intended it to. Improve your strats rr or build a new one even In my opinion the easiest best way to improve performance is to improve the risk to reward. Prices bounce on levels a certain % of the time. You cannot change that. You cannot make the trend go further more often. But you can learn what the best areas are, allowing you to slightly improve your stop and enormously your payout. Imagine you have a 0.25% SL, 1% tgt, and you notice the price always goes a little against you and not a single winner gets very close to your stop. You enter slightly later and have a slightly tighter stop, without being over greedy. SL is now 0.20%. You went from a RR of 4 to 5 with the same WR, this is huge! say with your wr you had an average payout per trade of 1.5 (winners*wr - losers*lr), now it is increased to 2.5! you are 2/3 more profitable. It is not that hard and you increase your profit by so much. Do not be worried to give up a bit of winrate if it tremendously will increase your payout. *************************** Emm bonus or something *************************** Constantly accumulate knowledge Every single day. In permanence. The more you know the better you'll be. Not to mistake with being drowned in information. Heard of MOBAS? Over 100 playable character with several different abilities. You cannot know them all at first, but the big nerds that play 10 hours a day end up knowing not only all the abilities, but they also know what all abilities do under other abilities, their effects, the time they take, their mana cost, how the abilities work with different items & builds (these games have magic and physical damage which are different for example, as well as true damage, also magic and armor pen), the interaction with other champions and abilities. It quickly gets overwhelming, there is a huge amount of info, and that's just for 1 video game. If you know LOL you'll have to learn DOTA from scratch, it will go faster that if you were a complete noob, alot of things are similar, but you will have to relearn everything. NOW IMAGINE THE MARKETS THAT ARE SEVERAL ORDERS OF MAGNITUDE MORE COMPLEX WITH MILLIONS OF PARTICIPANTS AND THE WHOLE WORLD INVOLVED MONETARY POLICIES GEOPOLITICS VARIOUS OPINIONS AND AGENDAS AND THE DOZENS OF MARKETS THE THOUSANDS OF STOCKS AND BONDS ALL HAVE SPECIAL INTERACTIONS AND INFLUENCE EACH OTHER AND IF YOU WANT TO HAVE DECENT OPPORTUNITIES YOU NEED A WATCHLIST OF MAYBE AT LEAST 10 GAMES (TICKERS) HAHAHAHAHAHAHAHAHAHA 💥. You don't have to be smart to do well they say, oh yes of course, memorising and understanding the thousands of patterns, the billions of interactions, the billions of trillions of variables, and DYNAMIC probabilities in a highly complex highly abstract activity with non stop conflicting info, dogmas every one believe in that go against the truth, disinformation, competing with the best in the world, does not require any intelligence at all, sure, makes a lot of sense. Intelligence is far from being sufficient, yes this is very true. It does not mean it is not sufficient lol imagine not being able to tell the difference between necessary and sufficient conditions and trying to give advice to people we found out why these guys sell hopium courses to new traders 🤣 Work on psychological failures Anger is a sign of weakness. Regret is a sign of weakness. Fear is a sign of weakness. And the weak shall fear the strong. Obstacles are designed to make you stronger, only the weak avoid them. And the gods have no obstacles. Jesse Livermore said: "If you cannot sleep because of your stock market position (you are weak), then you have gone too far. Reduce your positions to the sleeping level." Man is oftentimes weak-minded enough to be caught in the snare of greed and heneyed words. Listen to Gandhi, best warrior in India (am I allowed to say this was his caste or is it unwoke? xd), he won a war without fighting. Don't get greedy & keep a rational mind as opposed to trading throught feeling because someone said "the price will collapse" and it scared you. Giving up is not a sign of weakness but a sign of strength. To know that you can't win a particular battle is wisdom. => Very important. Are you a genius like Napoleon that retreated from Russia, or an idiot politician that thinks he knows warfare like Hitler that insisted and led to millions of dead and lost WW2? Do not short Tesla you cannot win (well actually now shorts got wiped out maybe it is possible but I'd wait for a downtrend). Cut your losses what is the point of holding bags? Swag? Don't try to defeat the market and don't get married to any commodity or idea. Fail, lose money, and quit Hey this can happen too. How many is it? 90%? Day traders are overrepresented here. According to fxcm data traders that had a reward equal or greater than 1 times their risk were making money at 53% (over 1 year in 2014-2015), versus traders with a RR under 1 (but why? xd) of which only 17% were profitable. The people that made most money were those the less leverages, while big size "get rich quick" clowns got absolutely wiped out. They do not show data for day traders versus long term ones, they're a broker they make money off commissions so they won't show this UNLESS it shows day traders making more, so you just know they're the ones getting decimated the most and the longer term ones are the ones cleaning house. It is a certainty. I've looked at plenty other data and you had such numbers, with over 1 year 83% people losing money, 88% over 2 years, 94% over 5 years, and so on (it tops logarithmically of course). People smart enough to trade with high (but not greedy huge) reward to risk, and on higher timeframes, are the ones doing best. So it's not all that bad, if you put in the hours and have a working brain (intelligence is important I said but you don't need to be an absolute genius to just be in the green). It's clearly possible. Making money does not mean making millions! It does not even mean outperforming the SnP. It does not even mean outperforming inflation. Few people outperform the SnP. Alot manage to make some money but not enough for it to be a viable business. But even if people end up quitting they did not waste their time, they learned a valuable lesson: Do not try to stand up to MrRenev. Nah I'm just messing around. Even if one does not outperform the SnP, he can use what he learned to: - Continue trading short term for diversification & to reduce portfolio volatility - Not miss out on generational moves (USO, Oil contango, Gold, Bitcoin...) - Use knowledge to manage risk or whatever - Use a fraction of their net worth to speculate with large size (but not casino large) to have more volatility and more returns - And plenty more... consolation prizes
Education
by MrRenev
88
SuperTrail Indicator Video / Trailing Stop LossWas just playing around with the replay function in Trading View and thought I'd share this to show how the SuperTrail indicator worked on a couple of different stocks. The SuperTrail is basically a modified SuperTrend but instead uses a percentage to allow you to manually set the trail level for individual stocks. Some need a wider trail, some a smaller one. You might set a trail based on the last months range, or the last 3 months. Totally up to you and the stock itself. The idea is to find what I call the natural range of a stock based on its past behaviour and hope that the stock maintains this range into the future. You can of course simply adjust it from time to time as the stock and the market goes through different behaviours (eg bull or bear), reacting to good or bad company news etc. I use the percentage value that I come up with to set as my stop loss / trailing stop with my broker. This way if the stock drops below the trail value (which automatically moves up as the stock price moves up, but never down if the stock goes down), the stock will automatically sell and I will hopefully bank any profits. Works best of course with trending stocks. You could use the buy signal to go long and the sell signal to short. Main thing for me is I don't have to sit and watch the market and worry how my shares are going. If one is starting to go the wrong way, I automatically get out. Completely up to you how you use it. It is a very simple system :) If you want to see more examples, just have a look at my profile, and if you would like access to the script, just message me and I'll send you the details.
NASDAQ:TSCOEducation
by zAngus
3
What is a Trading Plan? and what to include in there? Hello everyone: Here I make a video on my take on what a trading plan is, and how it will help you to become a better, consistent trader over time. I will include the general topic on what is in my current trading plan, and what works for me to include in them. The general topics I have in my trading plan: Personal Goals, Mindset, Changes Trading Checklist Trading Quotes to reflect on Trading Past experiences, mistakes, and lessons Trade Enter Criteria: Go-To-Setups Trade Management As always, feel free to ask me questions and comments. Thank you
BITSTAMP:BTCUSDEducation
by jojofang0901
33
Which method is the most profitable?Same strategy. 4 options on how to manage trades. Can use anything from a really tight stop and win very often but small to a very wide one and rarely win but win big. Which method really makes the most money? Let's look at the numbers after 100 trades: Strat 1 with a ridiculous winrate and profit factor => 1 RR 95 Wins 5 Losses => Get 90R out! Strat 2 with very high winrate and profit factor => 2 RR 80 Wins 20 Losses => 160 - 20 = 140! Strat 3 with a 50/50 winrate and high PF & RR => 4 RR 50 Wins 50 Losses => 200 - 50 = 150R! I think you see where this is going... Strat 4 with a rather low 1/3 winrate and high PF & very high RR => 8 RR 33 Wins 67 Losses => 264 - 67 = 197R / 200R! If you picked the one with the highest risk-to-reward as the most profitable congratulations, you fell for the bait :D Tihi Strat 5 with a very low winrate no one wants and ordinary PF => 16 RR 16 Wins 84 Losses => 256 - 84 = 172R The best strategy is the one that makes the most profit over the years, with the least risk. Another factor is how long it takes. Every market has its specificities. In the world of forex which is my specialty the realistic risk to rewards we get are in the 3 to 7 area. Less than 3 is not that great, and above 7 does not happen without big pullbacks (that take time). A reward to risk of above 10 is really not realistic. With crypto and stocks maybe, but with Forex no. With FX the time scale I prefer and think is best is 2 days to 2 weeks. The best moves with least noise happen on this one. Crypto and stocks holding times are also much longer (you could get 20 to 50R or even more with BTC in 2016-2017 but it's a holding period not of a couple of days no it's a couple of months instead). Commodities (Oil Gold Metals Grains) are close to FX I think. Of course as with everything else the best risk-to-reward and TF is the one you do best with. Typical FX strong moves: What day traders and signal providers do: And that's a really wide stop... Can you imagine? It's so stupid to day trade for so many reasons xd Horrible trends with big pullbacks, missing out on big wins, noise all the time, wasting one's time, gambling what will happen during a few hours, awful risk to rewards no matter what, a small spread decimates them. Lmao. Bitcoin. You won't get much out of Bitcoin swingtrading (and day trading is a joke) And then stocks And then Warren Buffet If you bought Ko with 10% of your money and risked 3.3% You can still trade with 96.7% (can use leverage to pretend it is 100%), and in 10 years you get a profit of 115% + dividends. Pretty nice! I don't think trading stocks for a few days or weeks makes sense with all the gaps there are, even if you participate in pre and post markets it still gaps alot between them. Once a decade stocks go absolutely vertical George Soros said it's not about how often you win, it's about how much you make when you win. Strat 1 "always win I am a legend" (I doubt anyone wins that often with a RR of 1) => 90R Strat 4 (PF of 4) => 200R (about twice as much) And if you risk 1% each time? Strat 1 = 144.7% profit Strat 4 = 546% profit xd Not twice as much. Lots as much! GG Compare strat 2 & 4 Strat 2 80% WR & RR 2 After 100 trades we make 140 R Strat 3 50% WR & RR 4 After 100 trades we make 150 R / 7% more 1% risk => Strat 2 = 299% profit (twice as much as 1 btw) Strat 3 = 330% profit / 10% more One more reason higher RR is better. This does not mean one should be obssessed with it and then get stopped all the time and blow up. It's just that first start with whatever strategy and it's ok to have a RR of 1.5 to 2 maybe, and then when improving it over time the most important goal is to try and increase the payout. Increasing the winrate is harder and pays less. If possible ok but not the main focus. Nothing increases profit more than improving the RR. And keep in mind while trailing a stop you are doing the same as if you closed your trade and are opening a new one (so if the stop is very wide it is like having a poor risk to reward on a new trade).
Education
by MrRenev
3
Trade Planning - How to Trade PlanThis video explains how to effectively trade plan to limit your risk and to maximize your gains. When it comes to Risk Management and Trade Planning, it's important to maintain a clear mind about the possibility of the asset your assessing going in either bullish or bearish direction. Furthermore, this video explains some ideas on how and where to place stop losses based upon entry confirmations and provides insights about position managing your trades as they develop into a winner. I hope you find this video informative and hope you use this video to your best advantage with your day-to-day trading activities. Thanks for watching. Always remember to trade safe - trade well. Regards, Michael Harding RISK DISCLAIMER Information and opinions contained with this video are for educational purposes only and do not constitute trading recommendations. Trading Forex on margin carries a high level of risk and may not be suitable for all investors.
FX:XAUUSDEducation
by Michael_Harding
Gold - Trade setups to avoidWe have been posting potential bullish trading signals on Gold and the ways in which to enter this trending market of late, as the probability for these has been very high. Now, the market doesn't trend in a straight line, so when we saw the price in Gold make its way to the $1900.00 level we looked to see if we could get any confirmation selling signals for a potential profit taking opportunity. Its easy for anyone to show profitable trades but we believe that showing examples of why you wouldn't take a trade or what to look for to avoid a potential losing trade is just as important. As you can see from the 15 Minute chart, price started to form a bearish selling 3 drive pattern at the highs just above the 1900 level. When we saw the 3rd and final drive high reject a little lower this sparked our interest. With any price pattern we look to trade we don't want to enter right at the 3rd drive because we have no proof that price will stop there and do what you want it to do. Instead we drew a lower trend line in the hope that price could continue lower and break this to the downside. Until this happens, we are sitting on the fence and staying away. What happened in the end was that the momentum in Gold was still very strong and price actually used the higher 3 drive trend line to retest this on the topside to propel price higher. No break of the lower trend line, no trade. Sometimes its better to walk away and live to trade another day then to let ego get the better of you.
OANDA:XAUUSDEducation
by DavidVillagra
How & Why I do backtesting in trading Hello everyone: Here to do a quick educational video on how I do backtesting in trading. I will utilize tradingview’s replay function and go over briefly on how I use it. I will also explain the benefits of doing backtesting. How it will strengthen a trader’s mindset and analysis. Key Concept on Backtesting: -Doesn't matter what trading strategies/setup/style you use, you need to backtest it so it becomes second nature to you when you are doing your analysis on the market. Simply watching your mentor’s screenshot and videos are not gonna be enough. Get hands on, do your analysis on past prices and see if they play out. How many times win and lose over the same setup on the same pair? -When you see how your strategies played out in the past, the easier it will be for you to identify them. Looking for a setup should be a simple task once you are familiar with your strategies. It should not take hours to do so. -Your mind is “programmed” now into finding your strategies on the current market condition, regardless the other “noise." Once you train your mind to understand your strategies will work, then you will simply filter out random things you hear and see. They won't bother you anymore. -The more you see your strategies play out, the more confidence you become in your trading analysis. Trading is a mind game. Master your mind, master the game. Understand that your trading success depends on you and you only. When you are confident in your trading plan and strategies, you simply will accelerate in your trading journey. Feel free to comment and ask questions, Thank you.
OANDA:XAGUSDEducation
by jojofang0901
2
FINDING THE BEST ROI BETWEEN SIMILAR ASSETS 📚 With Alpha's PoP💬Introduction : Today we are comparing the Dow Jones, NASDAQ, and the S&P by their annual performance to show how our open source indicator "Alpha Performance of Period" (PoP) can be used and why the results are useful. We will also look at other markets later in the writeup to see how they compare and to get a sense of which markets provide the best risk-to-reward and ROI. The idea here is to compare highly correlated markets over time to see which of these markets preforms the best overall represented by a period chosen by the user. This will help tell us which of these indexes is the best/worst to trade/invest with on average. For this article we will assume "best" equates to "best for long positions", but the indicator could be used for other purposes such as best shorting opportunities (largest drawdown amounts). Comparing these indexes shows that the NASDAQ has historically outperformed, while the DOW underperformed, and the S&P has been somewhere in the middle since the tech bubble on a year-over-year basis. You can also see this on the chart as represented by the indicator's metrics contained within its label, but we will summarize it below: NOTE: The figures below are rounded up to the nearest .01%, see charts for exact %'s. Equity Indices Total Annual performance results: (main chart) (Jan. 2000 - present) SPX = +111.79% NDX = +156.10% DJI = +117.65% Now let's look at the quarterly and monthly performance: Equity Indices Total Quarterly performance results: (Jan. 2000 - present) SPX = +104.57% NDX = +160.75% DJI = +111.65% Equity Indices Total Monthly performance results: (Jan. 2000 - present) SPX = +91.22% NDX = +125.274% DJI = +101.68% Equities Summary: While the NASDAQ has had periods of underperformance (for example the dot com bubble burst), on each of the charts you can see that not only has the NASDAQ outperformed (and the Dow underperformed) over time, the NASDAQ has also generally outperformed during each different period measurement. We won't do the math for each period here as that's the main purpose of this indicator, but you can apply the indicator on your own chart and take a look at it yourself. The main takeaways for us are this: 1. You are better off trading and/or holding the NASDAQ when compared to the 3 main indexes. 2. You are better off trading the S&P than the DJI. 3. The performance of the NASDAQ during COVID isn't an anomaly, and it doesn't necessarily indicate a tech bubble, outperformance in a specific period and overtime is the norm with this index. Now that you see how this works on the indexes, let's showcase how it can work for other markets. ----- RARE EARTH METALS~ Rare Earth Metals Total Annual performance results: (Jan. 2000 - present) GOLD = 193.87% SILVER = 186.72% PALLADIUM = 361.27% Rare Earth Metals Total Quarterly performance results: (Jan. 2000 - present) GOLD = 201.80% SILVER = 197.60% PALLADIUM = 304.04% Rare Earth Metals Total Monthly performance results: (Jan. 2000 - present) GOLD = 206.59% SILVER = 209.60% PALLADIUM = 283.25% Rare Earth Metals Summary: As you can see, despite the general public's love of Gold, Palladium vastly outperforms it. Meanwhile, we can confirm Silver underperforms. Many people wouldn't suspect Palladium was superior, but we now know from the resulting data (Hooray!). ----- FOREX~ Main Forex USD pairs Total Annual performance results: (Jan. 2000 - present) EURUSD = 19.48% GBPUSD = -9.03% AUDUSD = 23.90% Main Forex USD pairs Total Quarterly performance results: (Jan. 2000 - present) EURUSD = 20.75% GBPUSD = -16.53% AUDUSD = 20.98% Main Forex USD pairs Total Monthly performance results: (Jan. 2000 - present) EURUSD = 19.57% GBPUSD = -16.70% AUDUSD = 21.93% Forex Summary: As you can see against a USD base-pair, GBP is the worst performing from the 2000's by all periods. One might assume the more popular EUR pair preformed better than for example AUD, but the reality is AUD takes the cake and preformed better than both EUR and USD by each period over time. ----- CRYPTOCURRENCY~ Main Crypto USD(T) pairs Total Annual performance results: (Jan. 2017 - present) BLX = 1351.18% ETHUSDT = 8967.62% LTCUSD = 5012.80% Main Crypto USD(T) pairs Total Quarterly performance results: (Jan. 2017 - present) BLX = 504.60% ETHUSDT = 1124.81% LTCUSD = 824.44% Main Crypto USD(T) pairs Total Monthly performance results: (Jan. 2017 - present) BLX = 357.63% ETHUSDT = 739.39% LTCUSD = 530.67% Crypto Summary: Crypto has the largest period losses, but it also has the largest period gains (by far). Of all the crypto pairs, ETH offers the best ROI. Interestingly, ETH offers the best ROI of all markets mentioned in this article as well (although it also has the biggest losses and highest risk associated with its uptrends). Some might find it odd that Litecoin outperforms Bitcoin (although like with ETH, the drawdown is notably more intense). ----- Conclusion: Use "Alpha Performance of Period" (PoP) to compare markets for what is best suited to your portfolio depending on your individual risk appetite. It is meant to be used on highly correlated markets, but as you can see you can also compare different sets of markets together to get a sense of which offers the best risk-to-reward, ROI, etc. This tool thus has many uses related to figuring out which markets you want to trade based on historical data and offers a simple way to quickly compare past performance. Hope you guys enjoy it! :D Resources: apple.news Hit that 👍 button to show support for the content! Help the community grow by giving us a follow 🐣
TVC:SPXEducation
by AlphaBotSystem
15
RISK TO REWARD 📚 An Educational Write-up on How to Find ThisIntroduction: This illustration explains the minimum Risk-To-Reward ratio needed based on your average win-rate while using a fixed % risk amount. "Risk-To-Reward ratio": The ratio of what you stand to lose compared to win. "Fixed % Risk": A static % amount of your total account balance at risk per trade. "Fixed Dollar Risk": A static $ amount at risk per trade. Regardless of account size fluctuations. "Win-rate": The % out of all trades that are winners. Steps: 1. Before being able to determine what Risk-To-Reward is acceptable to use, you will need to create a baseline measurement of your strategy's performance. 2. To create this baseline, you will need to backtest your strategy and obtain its current average win-rate. 3. This can be done using your pre-determined entry logic with a fixed stop-loss/take-profit offset amount. (Adjusting your entry logic prior to finishing a round of backtesting may produce skewed results. Do not "cherry-pick" trades as that will lead to false results.) 4. Based on the resulting average win-rate you can then find the minimum Risk-To-Reward ratio you should be using. 5. Backtest again using the more optimal Risk-To-Reward ratio and repeat this step until the most optimal backtest results are obtained. Here is the formula for determining your Average win-rate after you have tallied the wins/losses of your backtest: #W = Number of winning trades #L = Number of losing trades (#W / (#W + #L)) * 100 = your average win rate % ----- Introduction to Fixed Dollar Risk: We have found it common for people to use the logic of fixed dollar risk amounts when calculating win-rates needed to break even, but then to use a fixed % risk in practice. This simple-to-make mistake can lead to account erosion over time due to the way compounding works. The fixed dollar approach uses relatively simple math for breaking even as shown below. Example: 3 losing trades followed by 1 winning trade using 1:3 risk-to-reward achieves breakeven (ignoring trading fees and slippage) This risk-to-reward ratio itself implies the win-rate needed (lose $100 three times, win $300 once, you break even). The fixed dollar amount risk doesn't deal with compounding. As such, its logic cannot be used for fixed %. ----- Using Fixed Percentage Risk: Fixed % uses a more complicated and less apparent method for calculating how to break even. As shown in our illustration, if you take three losses in a row you won’t break even after your next win. Fixed % is always dealing with the same % of your current balance. So as your balance decreases, the total dollar amount risked is less, and the total dollar amount gained with each win is reduced. Thus, strings of losses require additional wins compared to the fixed dollar approach. The fixed % method ensures against account erosion by showing the minimum win-rate needed to use each risk-to-reward ratio. MATH NOTE: We used a simplified method for finding the minimum win-rate to make this useful and generally applicable. Our method is based on a given risk-to-reward ratio and assumes the max number of losses in a row to produce a minimum win-rate, it does not factor in all different possible loss strings and their probability. ----- WHY USE FIXED % !?: The question one will have at this point is, "Why to use fixed % if it is so F'ing complicated!?" The answer to that is simple. Despite being more complicated, fixed % is actually objectively better by almost every other measure. With fixed % you generally perform better than fixed dollar during strings of losses and wins. As with fixed %, you lose less as you go down (because you only ever lose 1% of your balance), and you gain more as you go up (because of your winnings compounding). Not only that, but you also perform better even when losses and wins are more scattered, as you can see on the chart below. ----- Conclusion: Fixed % is more complicated than fixed dollar... to say the least. However , it is none-the-less superior in most instances. Use the logic above while using fixed % risk, since if you use fixed dollar logic but use fixed % in practice you will underperform your theoretical results. If there are any major flaws in our logic/approach please let us know in the comments as of course, we are looking to provide as accurate instructional writeups as possible!
BITSTAMP:BTCUSDEducation
by AlphaBotSystem
65
Options: Four Ways To Exploit Price ChangesMany traders start out with a sensible plan, only to abandon it because of the way the markets move. This abandonment of a smart plan may lead to potentially large net losses. In entering a trade, it is sensible to set two goals: the point where profits will be taken, and the bail-out point where losses will be cut. If you buy-to-open a long option, you should know going in that 75% of options held until expiration will expire worthless, so setting goals to sell and close make sense. These goals include getting out of the position before expiration, whether at a profit or a loss. For example, you buy-to-open a long option for 4.00 per share ($400) and set the following two goals: Sell when net value grows to 6.00 or above, representing a 50% profit; or sell when the value falls to 3.00 or below, a 25% loss. You know going in that time decay works against you, so you face the strong possibility of incurring losses. This means you have to select long options with some additional goals: 1. Buy calls or sell puts after the downside swing. This means you enter the long position on sessions when the price drops so it is at or near support. Stocks tend to follow the broader market, so when an otherwise well-managed quality stock falls several points, you know it is part of the index drop and not a problem for the company alone. This may be the best time to buy a call or sell a put for a fast swing trade turnaround. 2. Buy puts or sell calls after the upside swing. This suggestion does not contradict the one before. It is the opposite. Prices may rise just as irrationally as they fall. So when the index values jump sharply, stocks tend to go along for the ride; but you may see a retreat in the following two or three sessions. When overall market prices rise quickly, buy puts on the upside swing, anticipating a drop back to “normal” levels of trading. This is smart timing to open covered calls or long puts. When you sell calls at the top, it also reduces risk if you own shares so that those option short positions are covered. 3. Be aware of earnings dates. When earnings surprises occur, stock prices often overreact, only to return to “normal” trading within a few sessions. This presents an opportunity for swing trading with options. At such times, avoid short positions because you do not know which direction the surprise will take prices. A low-cost long straddle or spread could make the most sense when timed just before earnings announcements. 4. Know your stock beforehand. Every stock exhibits particular trading tendencies and rhythms. Some tend to over-react to broader markets while others hardly react at all. This tendency, is a valuable technical factor in identifying how stock prices react to market movement.
SP:SPXEducation
by NewCycleTrading