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Buy Fear, Not Euphoria: The Trader's EdgeWhen you look back at the greatest trading opportunities in history, they all seem to share a common element: fear. Yet, when you're in the moment, it feels almost impossible to pull the trigger. Why? Because fear paralyzes, while euphoria seduces. If you want to truly evolve as a trader, you need to master this fundamental shift: buy fear, not euphoria. Let's break it down together. ________________________________________ What Fear and Euphoria Really Mean in Markets In simple terms, fear shows up when prices are falling sharply, when bad news dominates the headlines, and when people around you are saying "it's all over." Euphoria, on the other hand, is everywhere when prices are skyrocketing, when everyone on social media is celebrating, and when it feels like "this can only go higher." In those moments: • Fear tells you to run away. • Euphoria tells you to throw caution to the wind. Both emotions are signals. But they are inverted signals. When fear is extreme, value appears. When euphoria is extreme, danger hides. ________________________________________ Why Buying Fear Works Markets are pricing machines. They constantly adjust prices based on emotions, news, and expectations. When fear hits, selling pressure often goes beyond what is rational. People dump assets for emotional reasons, not fundamental ones. Here’s why buying fear works: • Overreaction: Bad news usually causes exaggerated moves. • Liquidity Vacuums: Everyone sells, no one buys, creating sharp discounts. • Reversion to Mean: Extreme moves tend to revert once emotions stabilize. Buying into fear is not about being reckless. It’s about recognizing that the best deals are available when others are too scared to see them. ________________________________________ Why Chasing Euphoria Fails At the peak of euphoria, risks are often invisible to the crowd. Valuations are stretched. Expectations are unrealistic. Everyone "knows" it's going higher — which ironically means there's no one left to buy. Chasing euphoria often leads to: • Buying high, selling low. • Getting trapped at tops. • Emotional regret and revenge trading. You’re not just buying an asset — you're buying into a mass illusion. ________________________________________ How to Train Yourself to Buy Fear It's not enough to "know" this. In the heat of the moment, you will still feel the fear. Here's how you build the right habit: 1. Pre-plan your entries: Before panic strikes, have a plan. Know where you want to buy. 2. Focus on strong assets: Not everything that falls is worth buying. Choose assets with strong fundamentals or clear technical setups. 3. Scale in: Don’t try to catch the bottom perfectly. Build positions gradually as fear peaks. 4. Use alerts, not emotions: Set price alerts. When they trigger, act mechanically. 5. Remember past patterns: Study previous fear-driven crashes. See how they recovered over time. Trading is a game of memory. The more you internalize past patterns, the easier it is to act when everyone else panics. ________________________________________ A Recent Example: April 2025 Tariff Panic Very recently, at the start of April, Trump’s new tariff announcements sent shockwaves through the market. Panic took over. Headlines screamed. Social media was flooded with fear. But if you looked beyond the noise, charts like SP500 and US30 told a different story: the drops took price right into strong support zones. At the time, I even posted this : support zones were being tested under emotional pressure. If you had price alerts set and reacted mechanically, not emotionally , you could have bought into that fear — and potentially benefited from the rebound that followed just days later. This is the essence of buying fear. ________________________________________ Final Thoughts In trading, you are paid for doing the hard things. Buying when it feels terrible. Selling when it feels amazing. Remember: Fear offers you discounts. Euphoria offers you traps. The next time the market feels like it's crashing, ask yourself: • Is this fear real, or exaggerated? • Is this an opportunity hiding under an emotional fog? If you can answer that with clarity, you're already ahead of 90% of traders. Stay rational. Stay prepared. And above all: buy fear, not euphoria. Disclosure: I am part of Trade Nation's Influencer program and receive a monthly fee for using their TradingView charts in my analyses and educational articles.
TRADENATION:US500Education
by Mihai_Iacob
HOW-TO use the Rainbow Indicator? (full guide)Below is a complete instruction on how to use the Rainbow Indicator along with examples. This indicator is an important facet of my decision-making system because it allows me to answer two important questions: - At what price should I make a trade with the selected shares? - In what volume? Part 1: Darts Set My concept of investing in stocks is buying great companies during a sell-off . Of course, this idea is not unique. One way or another, this was said by the luminaries of value investing – Benjamin Graham and Warren Buffett. However, the implementation of this concept may vary depending on the preferences of each investor.To find great companies, I use the Fundamental strength indicator , and to plan opening and closing positions I use the Rainbow indicator. To begin your acquaintance with the Rainbow Indicator, ⁣ I would like to invite you to take part in a mental experiment. Imagine two small rooms for a game of darts. Each room has a different target hanging in it. It can be anywhere: center, left, right, bottom, or top. Target #1 from the first room looks like a small red circle. Target #2 from the second room looks like a larger red circle. You get a reward for hitting the target, calculated according to the following principle: the smaller the target in relation to the wall surface, the greater the reward you get. You have 100 darts in your hand, that is 100 attempts to hit the target. For each attempt, you pay $10. So to play this unusual game of darts, you take with you $1,000. Now, the most important condition is that you play in absolute darkness . So you don't know exactly what part of the wall the target is hanging in, so all your years of darts practice don't matter here. The question is: Which room will you choose? This is where you begin to think. Since your skills and experience are almost completely untapped in this game, all of your attempts to hit a target will be random. This is a useful observation because it allows you to apply the theory of probability. The password is Jacob Bernoulli. This is the mathematician who derived the formula by which you can calculate the probability of a successful outcome for a limited number of attempts. In our case, a successful outcome is a dart hitting the target as many times as necessary in order to, at least, not lose anything. In the case of Target #1, it is one hit or more. In the case of Target 2, it is 10 hits or more. The probability of hitting Target #1 is 1/100 or 1% (since the target area occupies 1% of the wall area). The probability of hitting Target #2 is 10/100 or 10% (since the target area occupies 10% of the wall area). The number of attempts is equal to the number of darts - 100. Now we have all the data to calculate. So, Bernoulli's formula : According to this formula: - The probability of one or more hits on Target #1 is 63% (out of 100%). - The probability of ten or more hits on Target #2 is 55% (out of 100%). You may say, "I think we should go to the first room". However, take your time with this conclusion because it is interesting to calculate the probability of not hitting the target even once, i.e., losing $1,000. We calculate using the same formula: - The probability of not hitting Target #1 is 37% (out of 100%). - The probability of not hitting Target #2 is 0.0027% (out of 100%). If we calculate the ratio of the probability of a successful outcome to the probability of losing the whole amount, we get: - For the first room = 1.7 - For the second room = 20370 You know, I like the second room better. This mental experiment reflects my approach to investing in stocks. The first room is an example of a strategy where you try to find the perfect entry point - to buy at a price below which the stock will not fall. The second room reflects an approach where you're not chasing a specific price level, but thinking in price ranges. In both cases, you'll have plenty of attempts, but in the first room, the risk of losing everything is much greater than in the second room. Now let me show you my target, ⁣ which is a visual interpretation of the Rainbow Indicator. It also hangs on the wall, in absolute darkness, and only becomes visible after I have used all the darts. Before the game starts, I announce the color where I want to go. The probability of hitting decreases from blue to green, and then to orange and red. That is, the smaller the color area, the less likely it is to successfully hit the selected color. However, the size of the reward also increases according to the same principle - the smaller the area of ​​color, the greater the reward. Throwing a dart is an attempt to close a position with a profit. Hitting the selected color is a position closed with a profit. Missing the selected color means the position is closed at a loss. Now imagine that in the absolutely dark room where I am, I have a flashlight. Thanks to it, I have the opportunity to see in which part of the wall the target is located. This gives me a significant advantage because now I throw darts not blindly, but with a precise understanding of where I am aiming. Light shining on the wall increases the probability of a successful outcome, which can also be estimated using the Bernoulli formula. Let's say I have 100 darts in my hands, that is, one hundred attempts to hit the chosen target. The probability of a dart hitting a red target (without the help of a flashlight) is 10%, and with the help of a flashlight, for example, 15%. That is, my ability to throw darts improves the probability of hitting the target by 5%. For hitting the red target, I get $100, and for each throw I pay $10. In this case, the probability of hitting the red target ten or more times is 94.49% (out of 100%) versus 55% (out of 100%) without a flashlight. In other words, under these game conditions and the assumptions made, if I try all 100 darts, the probability of recouping all my expenses will be 94.49% if I aim only at the red target. In my decision-making system, such a "flashlight" is the Fundamental strength indicator, dynamics of cash flows, the P/E ratio and the absence of critical news. And the darts set (target and darts) is a metaphor for the Rainbow Indicator. However, please note that all probabilities of positive outcomes are assumptions and are provided only for the purpose of example and understanding of the approach I have chosen. Stocks of public companies are not a guaranteed income instrument, nor are any indicators associated with them. Part 2: Margin of safety The idea to create the Rainbow Indicator came to me thanks to the concept of "margin of safety" coined by the father of value investing, Benjamin Graham. According to his idea, it is reasonable to buy shares of a company only when the price offered by the market is lower than the "intrinsic value" calculated based on financial statements. The value of this difference is the "margin of safety". At the same time, the indicator does not copy Graham's idea but develops it relying on my own methodology. So, according to Graham, the "margin of safety" is a good discount to the intrinsic value of the company. That is, if a company's stock is trading at prices that are well below the company's intrinsic value (on a per-share basis), it's a good opportunity to consider buying it. In this case, you will have a certain margin of safety in case the company is in financial distress and its stock price goes down. Accordingly, the greater the discount, the better. When it comes to the intrinsic value of a company, there are many approaches to determining it - from calculating the Price-to-book value financial ratio to the discounted cash flow method. As for my approach, I don’t try to find the coveted intrinsic value/cost, but I try to understand how fundamentally strong the company in front of me is, and how many years it will take to pay off my investment in it. To decide to buy shares, I use the following sequence of actions: - Determining fundamental strength of a company and analysis of cash flows using the Fundamental Strength Indicator. - Analysis of the recoupment period of investments using P/E ratio . - Analysis of critical news . - Analysis of the current price using Rainbow Indicator. To decide to sell shares, I use: - Analysis of the current price using Rainbow Indicator. - Or The Rule of Replacement of Stocks in a Portfolio . - Or Force majeure Position Closing Rule . Thus, the Rainbow indicator is always used in tandem with other indicators and analysis methods when buying stocks. However, in the case of selling previously purchased shares, I can only use the Rainbow indicator or one of the rules that I will discuss below. Next, we will consider the methodology for calculating the Rainbow Indicator. Indicator calculation methodology The Rainbow indicator starts with a simple moving average of one year (this is the thick red line in the center). Hereinafter, a year will mean the last 252 trading days. Applying a moving average of this length - is a good way to smooth out sharp price fluctuations which can happen during a year as much as possible, keeping the trend direction as much as possible. Thus, the moving average becomes for me the center of fluctuations of the imaginary pendulum of the market price. Then the deviations are calculated from the center of fluctuations. To achieve this, a certain number of earnings per share is subtracted from and added to the moving average. This is the diluted EPS of the last year. Deviations with a "-" sign from the Lower Rainbow of four colors: - The Blue Spectrum of the Lower Rainbow begins with a deflection of -4 EPS and ends with a deflection of -8 EPS. - The Green Spectrum of the Lower Rainbow begins with a deflection of -8 EPS and ends with a deflection of -16 EPS. - The Orange Spectrum of the Lower Rainbow begins with a deflection of -16 EPS and ends with a deflection of -32 EPS. - The Red Spectrum of the Lower Rainbow begins with a deflection of -32 EPS and goes to infinity. The Lower Rainbow is used to determine the price ranges that can be considered for buying stocks. It is in the spectra of the Lower Rainbow that the very "margin of safety" according to my methodology is located. The Lower Rainbow has the boundaries between the spectra as a solid line . And only the Red Spectrum of the Lower Rainbow has only one boundary. Deviations with a "+" sign from the Upper Rainbow of four similar colors: - The Red Spectrum of the Upper Rainbow begins with a deflection of 0 EPS and ends with a deflection of +4 EPS. - The Orange Spectrum of the Upper Rainbow begins with a deflection of +4 EPS and ends with a deflection of +8 EPS. - The Green Spectrum top rainbow begins with a deflection of +8 EPS and ends with a deflection of +16 EPS. - The Blue Spectrum of the Upper Rainbow begins with a deflection of +16 EPS and goes to infinity. The Upper Rainbow is used to determine the price ranges that can be considered for selling stocks already purchased. The top rainbow has boundaries between the spectra in the form of crosses . And only the Blue Spectrum of the Upper Rainbow has only one boundary. The presence of the Empty Area (the size of 4 EPS) above the Lower Rainbow creates some asymmetry between the two rainbows - the Lower Rainbow looks wider than the Upper Rainbow. This asymmetry is deliberate because the market tends to fall much faster and deeper than it grows . Therefore, a wider Lower Rainbow is conducive to buying stocks at a good discount during a period of massive "sell-offs". The situation when the Lower Rainbow is below the center of fluctuations (the thick red line) and the Upper Rainbow is above the center of fluctuations is called an Obverse . It is only possible to buy a stock in an Obverse situation. The situation when the Lower Rainbow is above the center of fluctuations and the Upper Rainbow is below the center of fluctuations is called Reverse . In this situation, the stock cannot be considered for purchase , according to my approach. Selling a previously purchased stock is possible in both situations: Reverse and Obverse. After loading the indicator, you can see a hint next to the closing price - Reverse or Obverse now. Because the size of the deviation from the center of fluctuation depends on the size of the diluted EPS, several important conclusions can be made: - The increase in the width of both rainbows in the Obverse situation tells me about the growth of profits in the companies. - The decrease in the width of both rainbows in the Obverse situation tells me about a decrease in profits in the companies. - The increase in the width of both rainbows in the Reverse situation tells me about the growth of losses in the companies. - The decrease in the width of both rainbows in the Reverse situation tells me about the decrease in losses in the companies. - The higher the company's level of profit, the larger my "margin of safety" should be. This will provide the necessary margin of safety in the event of a transition to a cycle of declining financial results. The corresponding width of the Lower Rainbow will just create this "reserve". - The growth in profit in the company (after buying its shares) will allow me to stay in the position longer due to the expansion of the Upper Rainbow. - A decrease in profit in the company (after buying its shares) will allow me to close the position faster due to the narrowing of the Upper Rainbow. So the Rainbow indicator shows me a price range that can be considered for purchase if all the necessary conditions are met. By being in this price range, my investment will have a certain margin of safety or "margin of safety." It will also tell me when to exit a stock position based on the company's earnings analysis. Part 3: Crazy Mr. Market The Fundamental strength of a company influences the long-term price performance of its shares. This is a thesis that I believe in and use in my work. A company that does not live in debt and quickly converts its goods or services into money will be appreciated by the market. This all sounds good, you say, but what should an investor do who needs to decide here and now? Moreover, one has to act in conditions of constant changes in market sentiment. Current talk about the company's excellent prospects can be replaced by a pessimistic view of it literally the next day. Therefore, the stock price chart of any companies, regardless of its fundamental strength, can resemble the chaotic drawings of preschool children. Working with such uncertainty required me to develop my own attitude towards it. Benjamin Graham's idea of market madness was of invaluable help to me in this. Imagine that the market is your business partner, "Mr. Market". Every day, he comes to your office to check in and offer you a deal with shares of your mutual companies. Sometimes he wants to buy your share, sometimes he intends to sell his. And each time he offers a price at random, relying only on his intuition. When he is in a panic and afraid of everything, he wants to get rid of his shares. When he feels euphoria and blind faith in the future, he wants to buy your share. This is how crazy your partner is. Why is he acting like this? According to Graham, this is how all investors behave who do not understand the real value/cost of what they own. They jump from side to side and do it with the regularity of a "maniac" every day. The smart investor's job is to understand the fundamental value of your business and just wait for the next visit from crazy Mr. Market. If he panics and offers to buy his stocks at a surprisingly low price, take them and wish him luck. If he begs you to sell him stocks and quotes an unusually high price, sell them and wish him luck. The Rainbow indicator is used to evaluate these two poles. Now let's look at the conditions of opening and closing a position according to the indicator. So, the Lower Rainbow has four differently colored spectra: blue, green, orange, and red. Each one highlights the desired range of prices acceptable for buying in an Obverse situation. The Blue Spectrum is upper regarding the Green Spectrum, and the Green Spectrum is lower regarding the Blue Spectrum, etc. - If the current price is in the Blue Spectrum of the Lower Rainbow, that is a reason to consider that company for buying the first portion (*) of the stock. - If the current price has fallen below (into the Green Spectrum of the Lower Rainbow), that is a reason to consider this company to buy a second portion of the stock. - If the current price has fallen below (into the Orange Spectrum of the Lower Rainbow), it is a reason to consider this company to buy a third portion of the stock. - If the current price has fallen below (into the Red Spectrum of the Lower Rainbow), that is a reason to consider that company to buy a fourth portion of the stock. (*) The logic of the Rainbow Indicator implies that no more than 4 portions of one company's stock can be purchased. One portion refers to the number of shares you can consider buying at the current price (depending on your account size and personal diversification ratio - see information below). The Upper Rainbow also has four differently colored spectra: blue, green, orange, and red. Each of them highlights the appropriate range of prices acceptable for closing an open position. - If the current price is in the Red Spectrum of the Upper Rainbow, I close one portion of an open position bought in the Red Spectrum of the Lower Rainbow. - If the current price is in the Orange Spectrum of the Upper Rainbow, I close one portion of an open position bought in the Orange Spectrum of the Lower Rainbow. - If the current price is in the Green Spectrum of the Upper Rainbow, I close one portion of an open position bought in the Green Spectrum of the Lower Rainbow. - If the current price is in the Blue Spectrum of the Upper Rainbow, I close one portion of an open position bought in the Blue Spectrum of the Lower Rainbow. This position-closing logic applies to both the Obverse and Reverse situations. In both cases, the position is closed in portions in four steps. However, there are 3 exceptions to this rule when it is possible to close an entire position in whole rather than in parts: 1. If there is a Reverse situation and the current price is above the thick red line. 2.if I decide to invest in another company and I do not have enough free finances to purchase the required number of shares (Portfolio Replacement Rule). 3. If I learn of events that pose a real threat to the continued existence of the companies (for example, filing for bankruptcy), I can close the position earlier, without waiting for the price to fall into the corresponding Upper Rainbow spectrum (Force majeure Position Closing Rule). So, the basic scenario of opening and closing a position assumes the gradual purchase of shares in 4 stages and their gradual sale in 4 stages. However, there is a situation where one of the stages is skipped in the case of buying shares and in the case of selling them. For example, because the Fundamental Strength Indicator and the P/E ratio became acceptable for me only at a certain stage (spectrum) or the moment was missed for a transaction due to technical reasons. In such cases, I buy or sell more than one portion of a stock in the spectrum I am in. The number of additional portions will depend on the number of missed spectra. For example, if I have no position in the stock of the company in question, all conditions for buying the stock have been met, and the current price is in the Orange Spectrum of the Lower Rainbow, I can buy three portions of the stock at once (for the Blue, Green, and Orange Spectrum). I will sell these three portions in the corresponding Upper Rainbow spectra (orange, green, and blue). However, if, for some reason, the Orange Spectrum of the Upper Rainbow was missed, and the current price is in the Green Spectrum - I will sell two portions of the three (in the Green Spectrum). I will sell the last, third portion only when the price reaches the Blue Spectrum of the Upper Rainbow. The table also contains additional information in the form of the current value of the company's market capitalization and P/E ratio. This allows me to use these two indicators within one indicator. Returning to the madness of the market, I would like to mention that this is a reality that cannot be fought, but can be used to achieve results. To get a sense of this, I will give an example of one of the stereotypes of an investor who uses fundamental analysis in his work.His thinking might be: If I valued a company on its financial performance and bought it, then I should stay in the position long enough to justify my expenses of analysis. In this way, the investor deliberately deprives himself of flexibility in decision-making. He will be completely at a loss if the financial performance starts to deteriorate rapidly and the stock price starts to decline rapidly. It is surprising that the same condition will occur in the case of a rapid upward price movement. The investor will torment himself with the question "what to do?" because I just bought stocks of this company, expecting to hold them for the long term. It is at moments like these that I'm aware of the value of the Rainbow Indicator. If it is not a force majeure or a Reverse situation, I just wait until the price reaches the Upper Rainbow. Thus, I can close the position in a year, in a month or in a few weeks. I don't have a goal to hold an open position for a long time, but I do have a goal to constantly adhere to the chosen investment strategy. Part 4: Diversification Ratio If the price is in the Lower Rainbow range and all other criteria are met, it is a good time to ask yourself, "How many shares to buy?" To answer this question, I need to understand how many companies I plan to invest in. Here I adhere to the principle of diversification - that is, distributing investments between the shares of several companies. What is this for? To reduce the impact of any company on the portfolio as a whole. Remember the old saying: don't put all your eggs in one basket. Like baskets, stocks can fall and companies can file for bankruptcy and leave the exchange. In this regard, diversification is a way to avoid losing capital due to investing in only one company. How do I determine the minimum number of companies for a portfolio? This amount depends on my attitude towards the capital that I will use to invest in stocks. If I accept the risk of losing 100% of my capital, then I can only invest in one company. It can be said that in this case there is no diversification. If I accept the risk of losing 50% of my capital, then I should invest in at least two companies, and so on. I just divide 100% by the percentage of capital that I can safely lose. The resulting number, rounded to the nearest whole number, is the minimum number of companies for my portfolio. As for the maximum value, it is also easy to determine. To achieve this, you need to multiply the minimum number of companies by four (this is how many spectra the Lower or Upper Rainbow of the indicator contains). How many companies I end up with in my portfolio will depend on from this set of factors. However, this amount will always fluctuate between the minimum and maximum, calculated according to the principle described above. I call the maximum possible number of companies in a portfolio the diversification coefficient. It is this coefficient that is involved in calculating the number of shares needed to be purchased in a particular spectrum of the Lower Rainbow. How does this work? Let's go to the indicator settings and fill in the necessary fields for the calculation. + Cash in - Cash out +/- Closed Profit/Loss + Dividends - Fees - Taxes +Cash in - the number of finances deposited into my account -Cash out - the number of finances withdrawn from my account +/-Closed Profit/Loss - profit or loss on closed positions +Dividends - dividends received on the account -Fees - broker and exchange commission -Taxes - taxes debited from the account Diversification coefficient The diversification coefficient determines how diversified I want my portfolio to be. For example, a diversification coefficient of 20 means that I plan to buy 20 share portions of different companies, but no more than 4 portions per company (based on the number of Lower Rainbow spectra). The cost of purchased shares of this company (fees excluded) Here, I specify the amount of already purchased shares of the company in question in the currency of my portfolio. For example, if at this point, I have purchased 1000 shares at $300 per share, and my portfolio is expressed in $, I enter - $300,000. The cost of all purchased shares in the portfolio (fees excluded) Here, I enter the amount of all purchased shares for all companies in the currency of my portfolio (without commissions spent on the purchase). This is necessary to determine the amount of available funds available to purchase shares. After entering all the necessary data, I move on to the checkbox, by checking which I confirm that the company in question has successfully passed all preliminary stages of analysis (Fundamental strength indicator, P/E ratio, critical news). Without the check, the calculation is not performed. This is done intentionally because the use of the Rainbow Indicator for the purpose of purchasing shares is possible only after passing all the preliminary stages. Next, I click "Ok" and get the calculation in the form of a table on the left. Market Capitalization The value of a company's market capitalization, expressed in the currency of its stock price. Price / EPS Diluted Current value of the P/E ratio. Free cash in portfolio This is the amount of free cash available to purchase stocks. Please note that the price of the stock and the funds in your portfolio must be denominated in the same currency. On TradingView, you can choose which currency to display the stock price in. Cash amount for one portion The amount of cash needed to buy one portion of a stock. This depends on the diversification ratio entered. If you divide this value + Cash in - Cash out +/- Closed Profit/Loss + Dividends - Fees - Taxes by the diversification coefficient, you get Cash amount for one portion . Potential portions amount Number of portions, available for purchase at the current price. It can be a fractional number. Cash amount to buy The amount of cash needed to buy portions available for purchase at the current price. Shares amount to buy Number of shares in portions available for purchase at the current price. Thus, the diversification ratio is a significant parameter of my stocks' investment strategy. It shows both the limit on the number of companies and the limit on the number of portions for the portfolio. It also participates in calculating the number of finances and shares to purchase at the current price level. Changing the diversification coefficient is possible already during the process of investing in stocks. If my capital ( + Cash in - Cash out +/- Closed Profit/Loss + Dividends - Fees - Taxes ) has changed significantly (by more than Cash amount for one portion ), I always ask myself the same question: "What risk (as a percentage of capital) is acceptable for me now?" If the answer involves a change in the minimum number of companies in the portfolio, then the diversification ratio will also be recalculated. Therefore, the number of finances needed to purchase one portion will also change. We can say that the diversification ratio controls the distribution of finances among my investments. Part 5: Prioritization and Exceptions to the Rainbow Indicator Rules When analyzing a company and its stock price using the Fundamental Strength Indicator and the Rainbow Indicator, a situation may arise where all the conditions for buying are met in two or more companies. At the same time, ⁣ Free cash in the portfolio does not allow me to purchase the required number of portions from different companies. In that case, I need to decide which companies I will give priority to. To decide, I follow the following rules: 1. Priority is given to companies from the top-tier sector group (how these groups are defined is explained in this article ). That is, the first group prevails over the second, and the second over the third. These companies must also meet the purchase criteria described in Part 2. 2. If after applying the first rule, two or more companies have received priority, I look at the value of the Fundamental Strength Indicator. Priority is given to companies that have a fundamental strength of 8 points or higher. They must also be within two points of the leader in terms of fundamental strength. For example, if a leader has a fundamental strength of 12 points, then the range under consideration will be from 12 to 10 points. 3. If, after applying the second rule, two or more companies received priority, I look at which spectrum of the Lower Rainbow the current price of these companies is in. If a company's stock price is on the lower end of the spectrum, I give it priority. 4. If, after applying the third rule, two or more companies have received priority, I look at the P/E ratio. The Company with the lower P/E ratio gets priority. After applying these four rules, I get the company with the highest priority. This is the company that wins the fight for my investment. To figure out the next priority to buy, I repeat this process over and over again to use up all the money I have allocated for investing in stocks. The second part of the guide mentioned two rules that I use when deciding whether to close positions: - The Rule for replacing shares in a portfolio. - Force majeure position closure Rule. They take priority over the Rainbow Indicator. This means that the position may be closed even if the Rainbow indicator does not signal this. Let's consider each rule separately. Portfolio stock replacement Rule Since company stocks are not an asset with a guaranteed return, I can get into a situation where the position is open for a long time without an acceptable financial result. That is, the price of the company's shares is not growing, and the Rainbow indicator does not signal the need to sell shares. In this case, I can replace the problematic companies with a new one. The criteria for a problem company are: - 3 months have passed since the position was opened. - Fundamental strength below 5 points. - The width of both rainbows decreased during the period of holding the position. To identify a new company that will take the place of the problematic one, I use the prioritization principle from this section. At the same time, I always consider this possibility as an option. The thing is that frequently replacing stocks in my portfolio is not a priority for me and is seen as a negative action. A new company would have to have really outstanding parameters for me to take advantage of this option. Force majeure position closure Rule If my portfolio contains stocks of a company that has critical news, then I can close the position without using the Rainbow Indicator. How to determine whether this news is critical or not is described in this article . Part 6: Examples of using the indicator Let’s consider the situation with NVIDIA Corporation stock (ticker - NVDA). September 02, 2022: Fundamental Strength Indicator - 11.46 (fundamentally strong company). P/E - 39.58 (acceptable to me). Current price - $136.47 (is in the Orange Spectrum of the Lower Rainbow). Situation - Obverse. There is no critical news for the company. The basic conditions for buying this company's stock are met. The Rainbow Indicator settings are filled out as follows: The table to the left of the Rainbow Indicator shows how many shares are possible to buy in the Orange Spectrum of Lower Rainbow at the current price = 10 shares. This corresponds to 2.73 portions. To give you an example, I buy 10 shares of NVDA at $136.47 per share. October 14, 2022: NVDA's stock price has moved into the Red Spectrum of the Lower Rainbow. The Fundamental Strength Indicator is 10.81 (fundamentally strong company). P/E is 35.80 (an acceptable level for me). Current price - $112.27 (is in the Red Spectrum of the Lower Rainbow). Situation - Obverse. There is no critical news for the company. The basic conditions for buying this company's stock are still met. The Rainbow Indicator settings are populated as follows: The table to the left of the Rainbow Indicator shows how many shares are possible to buy in the Lower Rainbow Red Spectrum at the current price (5 shares). This corresponds to 1.12 portions. To give you an example, I buy 5 shares of NVDA at $112.27 per share. A total of 3.85 portions were purchased, which is the maximum possible number of portions at the current price level. The remainder in the form of 0.15 portions can be purchased only at a price level below $75 per share. January 23, 2023: The price of NVDA stock passes through the Red Spectrum of the Upper Rainbow and stops in the Orange Spectrum. As an example, I sell 5 shares bought in the Red Spectrum of the Lower Rainbow, for example at $180 per share (+60%). And also a third of the shares bought in the Orange Spectrum, 3 shares out of 10, for example at $190 a share (+39%). That leaves me with 7 shares. January 27, 2023: NVDA's stock price has continued to rise and has moved into the Green Spectrum of the Upper Rainbow. This is a reason to close some of the remaining 7 shares. I divide the 7 shares by 2 and round up to a whole number - that's 4 shares. For my example, I sell 4 shares at $199 a share (+46%). Now I am left with 3 shares of stock. February 02, 2023: The price of NVDA stock moves into the Blue Spectrum of the Upper Rainbow, and I close the remaining 3 shares, for example, at $216 per share (+58%). The entire position in NVDA stock is closed. As you can see, the Fundamental Strength Indicator and the P/E ratio were not used in the process of closing the position. Decisions were made only based on the Rainbow Indicator. As another example, let's look at the situation with the shares of Papa Johns International, Inc. (ticker PZZA). November 01, 2017: Fundamental Strength Indicator - 13.22 points (fundamentally strong company). P/E - 21.64 (acceptable to me). Current price - $62.26 (is in the Blue Spectrum of the Lower Rainbow). Situation - Obverse. There is no critical news for the company. The basic conditions for buying shares of this company are met. The settings of the Rainbow Indicator are filled as follows: The table to the left of the Rainbow Indicator shows how many shares are possible to buy in the Lower Rainbow Blue Spectrum at the current price - 8 shares. This corresponds to 1 portion. To give you an example, I buy 8 shares of PZZA at a price of $62.26. August 8, 2018: PZZA's share price has moved into the Green Spectrum of the Lower Rainbow. The Fundamental Strength Indicator is a 9.83 (fundamentally strong company). P/E is 16.07 (an acceptable level for me). Current price - $38.94 (is in the Green Spectrum of the Lower Rainbow). Situation - Obverse. There is no critical news for the company. The basic conditions for buying shares of this company are still met. The Rainbow Indicator settings are populated as follows: The table to the left of the Rainbow Indicator shows how many shares are possible to buy in the Lower Rainbow Green Spectrum at the current price - 12 shares. This corresponds to 0.93 portions. To give you an example, I buy 12 shares of PZZA at a price of $38.94. A total of 1.93 portions were purchased. October 31, 2018: PZZA's stock price moves into the Upper Rainbow Red Spectrum and is $54.54 per share. Since I did not have any portions purchased in the Lower Rainbow Red Spectrum, there is no closing part of the position. February 01, 2019: After a significant decline, PZZA's stock price moves into the Orange Spectrum of the Lower Rainbow at $38.51 per share. However, I am not taking any action because the company's Fundamental Strength on this day is 5.02 (a fundamentally mediocre company). March 27, 2019: PZZA's stock price passes the green and Blue Spectrum of the Upper Rainbow. This allowed to close the previously purchased 12 shares, for example, at $50 a share (+28%) and 8 shares at $50.38 a share (-19%). Closing the entire position at once was facilitated by a significant narrowing in both rainbows. As we now know, this indicates a decline in earnings at the company. In conclusion of this instruction, I would like to remind you once again that any investment is associated with risk. Therefore, make sure that you understand all the nuances of the indicators before using them. Mandatory requirements for using the indicator: - Works only on a daily timeframe. - The indicator is only applicable to shares of public companies. - Quarterly income statements for the last year are required. - An acceptable for your P/E ratio is required to consider the company's stock for purchase. - The Rainbow Indicator only applies in tandem with the Fundamental Strength Indicator. To consider a company's stock for purchase, you need confirmation that the company is fundamentally strong. What is the value of the Rainbow Indicator? - Clearly demonstrates a company's profit and loss dynamics. - Shows the price ranges that can be used to open and close a position. - Considers the principle of gradual increase and decrease in a position. - Allows calculating the number of shares to be purchased. - Shows the current value of the P/E ratio. - Shows the current capitalization of the company. Risk disclaimer When working with the Rainbow Indicator, keep in mind that the release of the Income statement (from which diluted EPS is derived) occurs some time after the end of the fiscal quarter. This means that the new relevant data for the calculation will only appear after the publication of the new statement. In this regard, there may be a significant change in the Rainbow Indicator after the publication of the new statement. The magnitude of this change will depend on both the content of the new statement and the number of days between the end of the financial quarter and the publication date of the statement. Before the publication date of the new statement, the latest actual data will be used for the calculations. Also, once again, please note that the Rainbow Indicator can only be used in tandem with the Fundamental Strength Indicator and the P/E ratio. Without these additional filters, the Rainbow Indicator loses its intended meaning. The Rainbow Indicator allows you to determine the price ranges for opening and closing a position gradually, based on available data and the methodology I created. You can also use it to calculate the number of shares you can consider buying, considering the position you already have. However, this Indicator and/or its description and examples cannot be used as the sole reason for buying or selling stocks or for any other action or inaction related to stocks.
NASDAQ:NVDAEducation
by Be_Capy
5 tips for building a professional trading mindsetHey traders Building a professional trading mindset is crucial for success in the forex market. Here are five tips to help develop and maintain a professional approach: 1 . Develop Discipline and Patience: Stick to a Trading Plan: Develop a detailed trading plan that outlines your strategies, risk management rules, and goals. Adhere to this plan consistently to avoid impulsive decisions. Be Patient: Understand that success in trading doesn't happen overnight. Be patient and wait for the right trading opportunities that align with your plan. 2 . Embrace Continuous Learning: Stay Informed: Keep up-to-date with market news, economic indicators, and geopolitical events that can impact the forex market. Learn from Mistakes: Analyse your trades, both successful and unsuccessful, to identify what worked and what didn’t. Use this knowledge to improve your strategies. 3 .Manage Emotions: Stay Calm Under Pressure: Trading can be stressful, especially during volatile market conditions. Practice techniques to manage stress and maintain a clear, focused mind. Avoid Overtrading: Don’t let emotions drive you to overtrade. Stick to your trading plan and avoid chasing losses or getting overly greedy after wins. 4 . Implement Strong Risk Management: Use Stop-Loss Orders: Protect your capital by setting stop-loss orders to limit potential losses on each trade. Diversify Trades: Avoid putting all your capital into a single trade. Diversify your trades to spread risk across different currency pairs or financial instruments. 5 . Set Realistic Goals and Expectations: Define Clear Objectives: Set specific, measurable, achievable, relevant, and time-bound (SMART) goals for your trading activities. Understand the Learning Curve: Recognise that becoming a successful trader takes time and effort. Set realistic expectations regarding your progress and returns. By incorporating these tips into your trading routine, you can build a professional mindset that enhances your decision-making, improves your performance, and increases your chances of long-term success in forex trading.
Education
by Costy13
6
🧠 The Mind Of A Smart TraderTrading psychology is influenced by emotions like greed and fear, which can drive irrational behavior in markets. Greed causes excessive risk-taking and speculation, while fear causes traders to exit positions prematurely or avoid risk. Regret can also cause traders to violate discipline and make trades at peak prices, leading to losses. These emotions can be particularly prominent in bull or bear markets and can have a significant impact on market outcomes. Trading psychology is a crucial factor in determining success in trading securities. It includes aspects of an individual's character and behavior that affect their trading decisions. Discipline and risk-taking are critical components of trading psychology, as is the impact of emotions like fear, greed, hope, and regret. It can be as important as knowledge, experience, and skill in determining trading success. 🧠10 Trading mindset tips: 🔹 Stay informed: Stay updated with the latest market news, trends, and developments, as well as your preferred assets. 🔹 Create a trading plan: This should include a clear set of rules for entry, exit, and risk management. Stick to your plan. 🔹 Manage your emotions: Avoid making impulsive decisions, especially during volatile market conditions. Keep a clear head and stick to your plan. 🔹 Continuously educate yourself: Enhance your knowledge and skills by reading books, attending seminars, and practicing with demo accounts. 🔹 Diversify your portfolio: Spread your risk across different assets and markets to reduce your exposure to any one particular market. 🔹 Stay disciplined: Follow your plan and stick to your rules, even if your emotions are telling you otherwise. 🔹 Set realistic expectations: Be mindful of your limitations and don’t overreach. Accept small losses and focus on long-term success. 🔹 Stay focused: Avoid distractions and keep your mind on your trading activities. 🔹 Keep a trading journal: Record your trades, track your progress, and reflect on what you could have done differently. 🔹 Take breaks: Avoid overtrading, which can lead to burnout. Take time to recharge and come back fresh. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
8
The Hidden Key --> Multi-Timeframe Analysis 🪀I begin by explaining the Video Idea--> Using Multi-Timeframe analysis to put together a trade idea. MTF analysis is absolutely crucial for running a profitable trading business... It's something that takes some experience but once you understand the way in which all timeframes move together it's like an Aha moment. We look at 3 timeframes.. the 1Hr, 4hr and the Daily timeframes. We observe an example from just a few days ago that outlines how it was very possible to catch a 20 pips after the Monday(3/25/24) daily candle closed bullish.. Give and rocket and leave a comment for similar content in the future!
Education
by ShrewdCatfx
2
What is the best XAUUSD trading strategy?When it comes to trading XAUUSD (Gold/US Dollar), there’s no one-size-fits-all strategy. The “best” approach is highly individual, depending on your trading style, risk tolerance, and personal preferences. In this article, we will explore four popular trading strategies for XAUUSD: Trend Trading Breakout and Retest Trading Swing Trading Scalp Day Trading We will consider strategy pros and cons, trader personality factors, highest potential yield, stop losses and other lifestyle factors. 📈 Trend Trading The concept of this strategy involves identifying and following the prevailing trend in the XAUUSD market. Traders buy when the trend is upward (bullish) and sell or short-sell during a downward (bearish) trend. The main focus is to capture gains through large movements rather than small fluctuations. Trend Trading uses technical indicators like moving averages, trendlines, or MACD to identify trends and enter trades. Pros: Following the dominant trend in XAUUSD can lead to significant profits, especially in strong, sustained market movements. It’s relatively easier to identify and follow trends, making it suitable for both beginners and experienced traders. By trading with the trend, traders potentially reduce their risk exposure. Cons: Trend traders might enter a trade after a trend has been established, potentially missing early profits. Misidentifying a trend can lead to losses, especially in volatile markets. This strategy requires patience, as holding positions for longer periods can lead to substantial drawdowns during retracements. Suited personality: Ideal for patient individuals who are comfortable with holding XAUUSD positions for longer durations. 📈 Breakout and Retest Trading For breakout and retesting, traders look for moments when XAUUSD price breaks out of its typical trading range or surpasses a significant resistance or support level. This strategy capitalizes on the momentum that follows a breakout. A retest phase, where the price returns to the breakout point, often serves as the entry point. Breakout and retest trading use chart patterns and volume indicators to identify potential breakouts and confirm their strength. Pros: Traders can capitalize on new trends early, potentially increasing profits. This strategy provides clear signals for entry (breakout) and exit (retest failure). It works well in various market conditions, especially during high volatility periods. Cons: Traders may encounter false signals, leading to premature entries and losses. This strategy demands rapid responses to market changes, which can be stressful. Setting stop-losses can be challenging, particularly in volatile markets. Suited personality: Breakout and retest trading is best for decisive traders who can act quickly and are comfortable with a higher level of risk and uncertainty with Gold. 📈 Swing Trading Swing traders hold positions in the XAUUSD market for several days or weeks to capture gains from short- to medium-term price movements or “swings.” This approach balances between the longer-term view of trend trading and the short-term nature of day trading. Swing trading uses a combination of technical analysis and a basic understanding of market fundamentals to identify potential swing opportunities. Pros: Requires less screen time than day trading, allowing for a more balanced lifestyle. Swing traders take advantage of market “swings” or short-term trends, often leading to substantial gains. Allows for diversification of trades over different time frames and assets. Cons: Positions might have to be held through periods of adverse market movements. This strategy needs a good understanding of market fundamentals and technical analysis. Holding positions overnight can expose traders to unexpected market events. Suited personality: Ideal for gold traders who have the patience to wait for the right opportunity, and are comfortable with holding positions for several days. 📈 Scalp Trading Scalping involves making numerous, rapid trades on small price changes in the XAUUSD market, accumulating profit from these minor fluctuations. Scalp trades are held for a very short duration, often just minutes, and require quick decision-making and execution. This strategy has a strong focus on liquidity, volatility, and using smaller time-frames like one-minute to fifteen-minute charts for precise entry and exit points. Pros: Scalpers can make numerous trades in a day, accumulating profits from small price movements. Short holding periods reduce exposure to large market movements. Offers an engaging and dynamic trading experience Cons: Requires constant market monitoring and quick decision-making throughout your trading period, however your trading period could be as little as 1 hour a day. Risk to reward per trade are typically smaller as many scalping strategies aim for a 1:1 to 1:3 risk to reward Suited personality: Scalping is best suited for people who can make quick, decisive moves. It’s most suitable for personalities who like to do highly focused work in small burst time periods and for traders who don’t want to hold positions overnight. Which XAUUSD Strategy Gives The Highest Yield? Determining which XAUUSD trading strategy can provide the highest yield and profits is a complex question and highly dependent on market conditions, the trader’s skill level, risk management, and the ability to consistently execute the strategy. However, we can explore theoretical scenarios for each trading style using a $10,000 trading account over a 6-month period, with each trade risking 1% from a stop loss. We will also consider the compounding effects of growing a trading account and trading Gold exclusively. 📈 Trend Trading Yield Potential: Moderate to High Trend trading can yield substantial returns over time, especially in strong, consistent market trends. Scenario Example: Assuming a conservative estimate of 3% profit per successful trade. With 10 good trend-following trades over 6 months and compounding gains, the overall profit could be substantial. However, the growth rate would be slower compared to scalp trading due to fewer trades and a longer holding period. 📈 Breakout and Retest Trading Yield Potential: Moderate This strategy can be profitable in volatile markets, but it may offer lower compounding effects due to fewer trades compared to scalping. Scenario Example: Assuming an average profit of 2% per successful trade and around 15 trades over 6 months. The compounding effect would be present but less dramatic than scalping due to fewer trades and potentially more varied outcomes. 📈 Swing Trading Yield Potential: Moderate Swing trading can offer good returns, especially if large swings are captured, but the compounding effect is less pronounced due to the longer duration of trades. Scenario Example: With an average of 4% gain per successful trade and about 8 trades over 6 months. The compounding effect would contribute to growth, but the overall yield would be less compared to scalp trading due to the lower number of trades and slower turnover of capital. 📈 Scalp Trading Yield Potential: Very High Scalping, with its high frequency and quick profit opportunities, offers the highest yield potential, especially when compounded. Scenario Example: Assume an average gain of 1.5% per trade, with 2 trades each day. Trading 20 days a month, this results in 40 trades per month. With compounding, each win adds more to the account balance, which then increases the amount risked (and potentially gained) in each subsequent trade. Over 6 months, this compounding effect, coupled with a consistent win rate, could significantly amplify the initial $10,000 investment, potentially doubling it or more, depending on the exact win rate and consistency of the trader. Considering all of the above strategies, scalp trading shows the highest potential for compounded yield due to its high frequency, larger per-trade gains and ongoing compounding effects. It also requires a high level of skill and consistency. Each XAUUSD trading style has its own risk-reward balance and compounding potential, and the choice should align with the trader’s capabilities, risk tolerance, and trading goals. Stop Loss Considerations for XAUUSD Trading Strategies These trading styles each have its unique characteristics that can influence the likelihood of hitting a stop loss. When a stop loss is hit, your current position is closed instantly, ending the trade, resulting a loss. Understanding these following factors is crucial for effective risk management and XAUUSD strategy selection. 📈 Trend Trading Delayed Entry Trend traders often enter a trade after a trend is established, which can increase the risk of a reversal hitting the stop loss. Length of Trends If a trend unexpectedly shortens or reverses, stop losses may be hit more frequently, especially in highly volatile markets. Drawdowns During Retracements Trends often have retracements. If the XAUUSD retracement is deeper than expected, it might hit the stop loss before resuming the trend. 📈 Breakout and Retest Trading False Breakouts A common risk in breakout trading is the occurrence of false breakouts, where the price breaks a key level but then quickly reverses, often hitting the stop loss. Volatility Spikes Around breakout points, volatility can spike, which can cause prices to fluctuate rapidly and hit stop losses unexpectedly. Re-test Failure If the price fails to re-test successfully and instead reverses quickly, it can lead to hitting the stop loss. 📈 Swing Trading Overnight and Weekend Risk XAUUSD swing trades are often held for several days, exposing them to overnight and weekend risks where gaps can occur, potentially hitting stop losses. Market News and Events Swing traders might be more exposed to the impact of scheduled economic events or unexpected news, which can cause sudden market moves. Changing Market Sentiment As swing trading involves a longer time frame, a shift in market sentiment or trend can lead to stop losses being hit before the anticipated move materializes. 📈 Scalp Trading Rapid Price Fluctuations Given the short time frame of XAUUSD scalp trades, rapid and unexpected price movements can easily hit tight stop losses. Spread and Slippage In scalp trading, the cost of the spread and potential slippage can be significant relative to the trade size, increasing the likelihood of hitting the stop loss. It’s important to trade with a broker with low spreads Market Noise Scalp trading is often affected by market noise (random price fluctuations), which can trigger stop losses more frequently compared to other styles. Each trading style has its specific factors that can lead to the triggering of stop losses. Understanding these can help in refining stop loss placement, strategy selection, and overall risk management. Best XAUUSD Strategies Based On The Trader So we’ve finally made it to our key breakdowns and suggestions based on trader preferences. Based on the various aspects of XAUUSD trading strategies we’ve explored above, here are some suggestions tailored to different types of traders and objectives. 👤 What is the best XAUUSD trading strategy for beginners? Trend trading is generally the most suitable for beginners. This style’s relative simplicity in identifying trends and its emphasis on patience and discipline provide a solid foundation for new traders. It allows beginners to understand market dynamics without the pressure of making rapid decisions. This is not to say that beginner traders can’t start their trading journey with other strategies. 👤 What is the best XAUUSD trading strategy for advanced traders? Scalp Trading is the most suited gold trading style for advanced traders. It requires quick decision-making, an in-depth understanding of market movements, and the ability to handle high-stress situations effectively. Advanced traders are typically better equipped to handle the fast movements of scalp trading, including the rigorous discipline and risk management it entails. Scalp trading XAUUSD often becomes the natural progression of a gold trader. 👤 What is the best XAUUSD trading strategy for the highest potential yield? When executed effectively, scalp trading offers the highest potential yield. It capitalizes on small, frequent price movements, allowing skilled traders to accumulate gains rapidly. However, it’s important to note that this high potential yield comes with increased risk and requires a significant amount of skill, experience, and psychological fortitude. 👤 What is the best XAUUSD trading strategy for people who want structure in their day? Scalp trading can provide a structured trading day due to its high-frequency nature. It requires a trader to be active and focused during specific market hours. If you prefer a structured environment, and want to “work” only during certain hours and in short bursts, scalp trading offers this consistency. This can also provide freedom off the charts outside of your main scalping hours. 👤 Best XAUUSD trading strategy for people who want freedom away from screens? For individuals seeking more freedom and less time glued to the screen, swing trading is suitable. It doesn’t require constant market monitoring and allows for trades to be held over several days or weeks. This approach provides more flexibility and free time, fitting well for those who value a less intense trading lifestyle. The downside is that there are far less trades meaning you could experience weeks or months with no profits, and also illiquid access to any profits made. Scalping is a second alternative for freedom away from screens, especially for scalpers who aim to make 1 to 2 trades a day over a short time period then spend the rest of their day doing non-trading related activities. 📈 Best Overall XAUUSD Trading Strategy Scalp trading stands out to us as the best XAUUSD trading strategy for these reasons: Highest potential yield based on compounding gains Ideal for both advanced traders and beginners (who are committed to learning) Ideal for structure of your day and trading during specific hours Ideal for traders seeking freedom outside of their screens by not holding on to open positions while they are away from their screens Ideal for full-time job salary replacement in terms of liquid access to profits due to more frequent trades (Of course, this is performance dependent!) For traders who have the necessary skills, discipline, and experience, scalp trading can be extremely rewarding and profitable. It offers a dynamic trading environment and the potential for high returns. If you’re looking to scalp gold, it’s crucial that we emphasize that it requires a high level of education and mentorship before you commence scalping. Beginners are advised to start with the right foundations which we can teach you and provide a solid and stable learning curve to your scalping journey.
OEducation
by opes_trading_group
BOOM AND BUST CYCLE IN TRADINGThe "boom and bust" cycle in trading is a period in a trader's journey when significant gains are followed by periods of significant losses, which can lead to financial consequences and emotional burnout for traders. Breaking out of this cycle is not easy but very important for long-term trading success. When a trader doesn't know what he or she is doing, but is trying to break out of this cycle, the right direction is needed to find a way out of this difficult trading journey. Here are some tips that will help you stabilize your trading when you are not earning yet but also not losing all the capital as it was before. 1. Develop a solid trading plan. This sounds like a cliché. But if you don't have a trading plan you shouldn't be trading real money. Make a trading plan. A solid trading plan should describe your trading strategy. With a clear trading plan, you will be better able to anticipate market movements, avoid impulsive decisions, and stay focused on your goals. Start your trading day with a trading plan and end it with a trading plan. 2. Everyone talks about risk. The first job of a trader is to protect capital. You learn to defend first and only then attack. Apply strict risk management rules to protect your capital from day one. Because if you don't follow risk management it will become a habit that is hard to get rid of. What to consider about risks? This includes always setting stop loss orders, using the right position size to limit risk. Not trading everything. Less is more can never be applied to trading. 3. Sticking trading strategy. Consistency is the key to getting out of the boom and bust cycle. Stick to your proven trading strategy even in difficult market conditions or during losing streaks. Abandoning a strategy due to impatience or frustration can lead to inconsistency and poor performance. When you don't follow a trading strategy you don't give it a chance to show results. Deviation from a trading strategy kills any strategy. Stick to your trading strategy, give it a chance. 4. Discipline in trading. Discipline is the key to avoiding impulsive decisions. Avoid the temptation to recover losses or over-trade. If you are constantly losing money, just look at your trades for the past week. You will say to yourself, "if I had stopped trading, I wouldn't have lost so much". Why? Because the next day or week market always presents A+ setups that would have easily covered past losing trades. So, stick to your trading plan, manage your emotions and focus on making trades according to your strategy. 5 .Everyone says manage your emotions. Practice emotional discipline and keep your mind clear while trading. But how to do that? Emotions such as greed and fear can have serious consequences on trading results. One of the surest methods of dealing with emotions in trading is backtesting your strategy. You are afraid because you don’t know what to expect from the strategy. If you know all the numbers, for example which days are unprofitable, which session is more suitable for you, etc. then you won't panic and be afraid. You know what to expect. And all these techniques, like meditation, mindfulness or other methods of dealing with stress, will not help you in the beginning. After losing your capital, will you really sit and meditate? These methods work later when you have achieved stability. 6. Last but not least: journaling. Markets are constantly evolving, and pro traders adapt their strategies to changing conditions. How do you know the markets are changing? Or how do you know if you are trading better than last month? How do you identify the trading mistakes that are dragging you down? By logging what you trade, you have to regularly analyze your trading results and be prepared to try new ideas or adjust existing strategies to improve your consistency. Collect the data. If you can't measure it, you won't be able to improve it. Conclusion Avoiding the boom and bust cycle in trading requires a lot of work. You will need discipline, the right approach and 100% focus. Success in trading is not your golden goose strategy or some kind of secret money management. It is a combination of several things that bring success. Constant work on yourself, patience and consistency are your allies in overcoming the boom and bust cycle.
Education
by DeGRAM
5
The Trader's Toolkit: Building a Dynamic Trading JournalJoin us in this comprehensive tutorial as we walk through the essential process of building a personalized trading journal. Whether you're new to trading or aiming to elevate your strategies, this educational video empowers you with the knowledge of why building a trading journal is a critical step in your trading journey. Learn with us, and discover why a trading journal is a crucial addition to your trading toolkit.
NEducation
by LeafAlgo
2
The Squid Game Shows Why Most People Fail to Profit from Trading"Squid Game, the sensational Netflix series that has taken the world by storm, offers a gripping mirror to human psychology, reflecting the intricate dance of emotions and decisions that we often encounter in the world of finance. Just as unsuspecting individuals are lured into the deadly games by the enigmatic subway stranger, many novice investors are drawn into the stock market by tales of friends striking it rich, often diving in headfirst without a hint of the rules of the game. It's a rollercoaster ride from beginner's luck to the perilous cliffs of attribution bias. Beginner's luck, that elusive phenomenon where newcomers seem to outshine the experts, can be an enticing trap. It leads to overconfidence, a misplaced faith in gut feelings, and an overzealous desire to trade that often ends up costing a small fortune in fees. These overconfident traders become engrossed in their own world, neglecting the wisdom of statistics and putting all their eggs in a single, precarious basket. Attribution bias, another insidious cognitive bias, rears its head as traders concoct explanations for their successes and failures. Profit? They're geniuses with uncanny foresight. Loss? Blame it on market conditions or mere bad luck. The mind constantly seeks excuses for every twist and turn. Even great minds like Isaac Newton, who could unravel the mysteries of the cosmos, fell victim to the madness of financial markets, a glaring example of attribution bias in action. In Squid Game, the players, after witnessing horrifying tragedies during 'Red Light Green Light,' are given a choice to continue playing or not. Overconfidence and attribution bias grip the survivors as they believe they are destined for victory, much like many traders who cling to the belief that improbable outcomes are within their grasp. Mob psychology and the bandwagon effect rear their heads in the story, too. The players form alliances and teams based on earlier factions, mirroring the tendencies of investors to follow the crowd rather than adhere to their own strategies and analyses. Panic buying, selling frenzies, and susceptibility to pump-and-dump schemes ensue. In the financial world, these psychological phenomena can lead us astray, costing us dearly. But unlike the brutal Squid Game, financial markets aren't a zero-sum game. With a solid understanding of market characteristics, rules, and diligent research, you can gain a statistical edge. As a trader, I'd argue that technical knowledge accounts for less than 5% of the equation; it's all about mastering your cognitive biases and maintaining emotional control. So, just as the surviving players in Squid Game strive to outlast their competition, investors and traders should strive to outsmart their own psychological pitfalls. In the end, success in the market isn't about luck but about mastering the intricacies of the human mind in a complex financial world. If you found this insightful, don't forget to like and follow for more quality content! Feel free to share your thoughts and questions below—let's navigate this financial journey together!" This chart is inspired by @Michael_Wang_Official
BEducation
by CRYPTOMOJO_TA
3
Understanding US Economic newsUS Economic Indicators: We know about trends and trend changes, but why a trend changes? The tops and bottoms of the market are determined by the fundamentals, like news releases, while the technicals show us how we get between those two points. So a news release can be the cause or trigger of a trend change. So it is to our advantage to at least be aware of upcoming news releases. Here are some releases to watch for: Non-Farm Payrolls Non-Farm Payrolls have proven itself to be one of the most significant fundamental indicators in recent U.S. history. As a report of the number of new jobs created outside the farming industry each month, a positive or negative NFP can get traders to act very hastily. A better than expected figure is very bullish for the dollar, whereas a more sluggish number usually results in the dollar being sold off. There is another component of unemployment released on the same day: The Unemployment Rate. Unemployment measures the amount of people that are out of a job, but are actively seeking one. If this number is smaller, then it means that the people that are seeking jobs are finding them, possibly meaning that businesses are well off and that the economy is expanding. The NFP is a number, usually between 5-6 figures, whereas the Unemployment rate is a percentage. A higher NFP number and lower unemployment number are generally bullish for the dollar and vice versa. It is difficult to trade the NFP and Unemployment Rate only because many times traders will not pay attention to what seems to be the most significant components, but will instead focus in on what reinforces their bias. Also, the release causes a significant amount of volatility in the markets. FOMC Rate Decision Interest Rate decisions for the Fed Funds Rate are very important when trading the U.S. Dollar. When the Fed raises interest rates, the yield offered by dollar denominated assets are higher, which generally attracts more traders and investors. If interest rates are lowered, that means that the yield offered by dollar denominated assets is less, which will give investors less of an incentive to invest in dollars. When the decision is made about the rate it is always accompanied by a statement where the Fed gives a brief summary of what they think of the economy as a whole. When reading the statement it is important to check the exact language. Many times by the time that the decision is published, it is usually factored into the market. This means that only slight fluctuations are seen if the decision is as expected. The statement on the other hand is analyzed word for word for any signs of what the Fed may do at the next meeting. Remember the actual interest rate movement tends to be less important than the expectations for future interest rate moves. Retail Sales The Retail Sales figure is an important number in a series of key economic data that comes out during the month. Because it measures how much businesses are selling and consumers are purchasing, a strong retail sales figure could signal dollar bullishness because it means strength in the US economy, whereas a less-than-expected number could lead to dollar bearishness. Again, the logic behind this is that if consumers are spending more, and businesses are making more money, then the economy is picking up pace, and to keep inflation from creeping in during this time period, the Fed may have to raise rates, all of which would be positive for the US dollar. Traders tend to use the Retail Sales figure more as a leading indicator for other releases such as Consumer Confidence and CPI, and thereby don’t usually “jump the gun,” unless the numbers are terribly out of proportion. Foreign Purchases of US Treasuries (TIC Data) The Treasury International Capital flow (TIC) reports on net foreign securities purchases measures the amount of US treasuries and dollar denominated assets that foreigners are holding. A key feature of the TIC data is its measurement of the types of investors the dollar has; governments and private investors. Usually, a strong government holding of dollar denominated assets signals growing dollar optimism as it shows that governments are confident in the stability of the U.S. dollar. Looking at the different central banks, most important seems to be the purchases of Asian central banks such as that of Japan and China. Waning demand by these two giant US Treasury holders could be bearish for the US dollar. As for absolute amount of foreign purchases, the market generally likes to see purchases be much stronger than the funding needs of that same month’s trade deficit. If it is not, it signals that there is not enough dollars coming in to match dollar going out of the country. As a side note, purchases by Caribbean central banks are generally seen to be less consistent since most hedge funds are incorporated in the Caribbean. Hedge funds generally have a much shorter holding period than other investors. US Trade Balance The Trade Balance figure is a measure of net exports minus net imports and tends to be negative for the U.S. as it is primarily a “consuming” nation. However, a growing imbalance in the Trade Balance suggests much about the current account and whether or not if the U.S. is “overspending” on foreign goods and services. Traders will understand a decreasing Trade Balance number to implicate dollar bullishness, whereas a growing disparity between exports and imports will lead to dollar bearishness. Because the figure precedes the Current Account release, it pretty much helps project the direction of change in the Current Account and also begins to factor in those expectations. Current Account Balance The U.S. Current Account is a figure representing the total accrued deficit of the U.S per quarter against foreign nations. Traders will interpret a greater deficit as bad news for the U.S. and will consequently sell the dollar, whereas a shrinking deficit will spark dollar bullishness. Usually, the Current Account Deficit is expected to be funded by the net foreign securities, but when ends don’t meet in these data, the Current Account could signal a big dollar sell-off. Additionally, because the Current Account data comes out after the Trade Balance Numbers, a lot of its expectations begin to get priced into the market, so a surprise to either side of expectations could result in big market movements for the dollar. Consumer Price Index (CPI)/Producer Price Index (PPI) The Consumer Price Index is one of the leading economic gauges to measure the pace of inflation. Many investors and the Fed constantly monitor this figure to get an understanding about the future of interest rates. Interest rates are significant because not only do they have a direct impact on the amount of capital inflow into the country, but also say much about dollar-based carry trades. If the inflation number comes in higher than expected, traders will interpret that to mean that an interest rate hike is more likely in the near future and will thus buy dollars, whereas a figure that falls short of expectations may cause traders to wait on the sideline until the Fed actually makes a decision. Essentially, trading a negative change in CPI is much more difficult than trading a positive change due to the nature of different interpretations. A significant increase in the CPI will result in much dollar bullishness, but a decrease will not necessarily result in dollar bearishness. The CPI measures inflation at the retail level (consumers), while the PPI measures the inflation at the wholesale level (producers). Gross Domestic Product (GDP) The U.S. Gross Domestic Product is a gauge of the overall output (goods & services) of the U.S. economy. If the figure increases, the economy is improving, and often the dollar will strengthen. If the number falls short of expectations or meets the consensus, dollar bearishness may be triggered. This sort of reaction is again tied to interest rates, as traders expect an accelerating economy to be mired by inflation and consequently interest rates will go up. However, much like the CPI, a negative change in GDP is more difficult to trade; just because the pace of growth has slowed does not mean it has deteriorated. On the other hand, a better than expected number will usually result in the dollar rising as it implicates that a quickly expanding economy will sooner or later require higher interest rates to keep inflation in check. Overall though, the GDP has fallen in significance and its ability to move markets since most of the components of the report are known in advance Durable Goods The Durable Good figure measures the amount of capital spending the U.S. is doing, such as on equipment, transportation, etc., both on a business and personal level. Essentially, the more the U.S. spends the more the dollar stands to benefit; the opposite is also true. This is because increased spending could very well be a harbinger for inflation, and thus consequently, interest rate hikes. Traders will usually focus in on the durable goods figure, but not too deeply, as it usually precedes data regarding housing starts and the annualized GDP figure release. Therefore trading based on the Durable Goods number is only voluminous when stagnancy in other key economic releases has been confirmed by a market consensus.
Education
by Mihai_Iacob
21
🧠 THE CYCLE OF MARKET EMOTIONS📍 When starting a trading career, much emphasis is placed on trading strategies, technical analysis, and indicators, which is important. However, as traders gain experience, they may discover that analysis and strategy become more intuitive as they find their specialization in the market. On the contrary, trading psychology often demands significant effort from most traders. It is often overlooked that trading psychology is developed through practice. Some argue that simulated trading lacks realism and cannot adequately prepare traders for the emotional aspects of trading. However, this holds true only if traders have not yet learned to trust a tested strategy. The market emotions run the gamut from fear, despair, hope, anxiety, and even euphoria. It is so common to experience these emotions that you can actually expect them to occur in a predictable cycle. We call it the market of emotional cycle. 📌 Think of it this way: we all start out with optimism – optimism that we are going to make lots of money in the market. Over time we may have trades go in our favor and make lots of money. However, if we aren’t in tune with the normal price cycle of the market, we can ride our profits all the way back down, leading us to despair. The goal, of course, is to become a trader who learns to manage his emotions and make wise decisions. Instead of hope and fear and greed, become a process-oriented trader who can trust his judgment on the market. In the upcoming TV ideas, we will make a deep dive on each parts that effect the trader's psychology and why it does so. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
2
⚖️ How Much You Need To Recover LossesWhen an investment's value fluctuates, the amount of money required to bring it back to its initial value is equal to the amount of change, but with the opposite sign. When expressed as a percentage, the gain and loss percentages will be different. This is because the same dollar amount is being calculated as a percentage of two different initial amounts. 📌The formula is expressed as a change from the initial value to the final value. Percentage change = ( Final value − Initial value ) / Initial value ∗ 100 Examples: 🔹 With a loss of 10%, one needs a gain of about 11% to recover. (A market correction) 🔹 With a loss of 20%, one needs a gain of 25% to recover. (A bear market) 🔹 With a loss of 30%, one needs a gain of about 43% to recover. 🔹 With a loss of 40%, one needs a gain of about 67% to recover. 🔹 With a loss of 50%, one needs a gain of 100% to recover. (If you lose half your money you need to double what you have left to get back to even.) 🔹 With a loss of 100%, you are starting over from zero. And remember, anything multiplied by zero is still zero. As the plot graph showcased on the idea, after a percentage loss, the plot shows that you always need a larger percentage increase to come back to the same value To understand this, we can look at the following example: $1,000 = starting value $ 900 = $1,000 - (10% of $1,000), a drop of 10% $ 990 = $ 900 + (10% of $900), followed by a gain of 10% The ending value of $990 is less than the starting value of $1,000. 🧠 Psychological Aspect: Investors should be able to mentally admit that they have incurred a loss, which is expected in trading. The investor should give some time to heal the process and only keep a close watch on the market situation. Huge losses incurred might disrupt the decision-making skill and stop trading for a few days until the confidence is regained. There should be the right focus to approach the right opportunities, and there should not be any regrets of any loss during trading. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
1
Ninja Talks EP 26: Shocking Success Revelation of a Feline Earlier this morn, I was perched upright on my cozy outdoor chair in my garden enjoying a well earned Cuban. With the sun kissing my skin and the great release of energy I felt with every exhale of my cigar I was content, lost in thought, happy - still, but then to my surprise I was startled by a subtle movement off to my left on the bright green grass I cut days prior.  It was my Persian cat Leo, the feline was in hunt mode, completely oblivious to my onlooking observations, but it didn't matter he was zen.  Even though the sun was shining bright white there was a slight breeze that would brush the also bright white fur of Leo, rustle the trees and cascade noisy dried up leaves down the path - he was aware of it all, ears twitching and eyes wide, he missed nothing but, he was looking for a target and by golly he saw one down in the foot of a tree 6ft away from him. A Robin red breast collecting dried plant matter to blanket its young back at the nest. The Persian nustled down deep into the ground, making itself a flat fluffy invisible killing machine - as the Robin danced just outside of reach Leo didn't move, completely still, not even for an instant showing his intention. After a quick back and fourth of daring bravery on one hand and simple cunning on the other the Robin flew off, to which Leo - not at all dejected or defeated - reset, raising his body higher, leaving hunt mode and entering back into listening mode. This is an elite level trader personified. Silent. Ready. Prepared.  When the trade is close (just like the Robin), but it does not qualify totally and completely to your strategy, you do not pounce, you wait. Make sense? You stop. Reset. And start the hunt again. The hunt is what's enjoyable, not necessarily the prize. Think about that the next time you "see the Robin" in your own trading. Ninja out. Follow for more Ninja Talks.
AEducation
by NinjaTradingServices
Unraveling Efficient Market HypothesisMany believe that a well-defined, simple, and robust trading strategy can help a trader acquire gains that outperform the market or purchase undervalued stocks in hopes of outsized returns upon rebound, but is this the case? Students of the Efficient Market Hypothesis (EMH) would argue that fundamental and technical analysis are pointless approaches to the market that are merely a mirage of a self-fulfilling prophecy. EMH is a cornerstone of modern financial theory, which posits that markets are perfectly efficient and always reflect all available information. The influence of EMH is pervasive, guiding investment strategy and shaping financial regulation. There is growing skepticism among academics and traders about the accuracy and efficacy of EMH in modern markets. EMH is a dense topic, but we will do our best to dive into what EMH is, its strengths, and its limitations in modern times. Understanding EMH To understand what EMH is, we need to understand the forms of EMH, of which there are three levels of efficiency: weak, semi-strong, and strong. The weak form of EMH suggests that current prices reflect all past trading information, including past prices. Thus rendering fundamental analysis and technical analysis moot and impossible to beat the market. Semi-strong EMH argues that the current price accounts for all public data and does not include private data. Again, fundamental and technical analysis will not be fruitful in helping traders outpace market returns. The strong form of EMH posits that prices reflect all available information, including insider information. In Support Of and Against EMH Supporters of EMH argue that markets are efficient because of the excess number of rational investors, and the competition among them (bulls vs. bears) ensures that prices are always accurate. The more market participants there are, the more efficient a market becomes as it becomes increasingly competitive and more price information becomes available. The competitive nature and increased liquidity of the market shows that it is difficult, at best, to consistently outperform the markets. Opponents of EMH argue that human biases and irrational behavior can lead to market inefficiencies. Investors often make irrational decisions based on emotions and cognitive biases. This is tough to argue, given the countless articles and books on market psychology. Market anomalies, such as the value and momentum effects, also suggest that markets are not perfectly efficient. Historical market events, such as the 2008 financial crisis or other perceived “bubbles,” further question the assumptions of EMH. Practical Implications and Real-World Observations Despite EMH, some investors have consistently outperformed the market; famously among them is Warren Buffet. Some hedge funds have also been successful in beating market benchmarks. One could argue that though a market is efficient, there are individuals who are statistical anomalies that have outperformed the market under EMH theory. Market inefficiencies and opportunities exist in specific asset classes or regions, such as emerging markets or distressed debt-stricken economies, but an easily observable form of market inefficiency is arbitrage trading. Wherein traders buy and sell to exploit minute price discrepancies of assets between exchanges. Alternative Approaches It is hard to objectively believe that one can not formulate a system that helps a trader make returns that outpace the market. Fundamental analysis and technical analysis are two approaches to investing that challenge the assumptions of EMH. Fundamental analysis involves examining company-specific information and valuations to find undervalued stocks which is entirely conflicting with EMH theory. While technical analysis involves using price patterns and indicators for market timing in hopes of profits in your chosen trade direction. The Future of Market Efficiency The rise of technology, such as high-frequency trading, trading algorithms, and artificial intelligence, is changing the landscape of financial markets. Some argue that technology is making markets more efficient; others would suggest that it is introducing new sources of market inefficiencies. Will the definitive parameters of what EMH need to be adjusted as the markets evolve? Only time and people with significantly larger brains than I will tell. Conclusion EMH remains a principal concept in modern finance, but not without limitations and challenges. It is paramount for traders to understand what EMH is, even if they rely on different analysis theories to make their own trading decisions. Investors should adopt a flexible and adaptive approach to investing, recognizing that markets are not always perfectly efficient and that opportunities for outperformance exist. Ultimately, we believe the key to successful investing is a combination of sound strategy, disciplined execution, and a willingness to learn and adapt. If you like this post, don't forget to drop a boost and follow our page for more educational content!
DEducation
by LeafAlgo
3
📊 7 Steps To Plan Your TradingHere are 7 steps to consider before entering a trade. Pick one or multiple options for each step to incorporate into your plan. 🔷 Timeframe: This step involves determining the desired timeframe for the trade, which can vary from day trading on shorter timeframes (m15 to h1), swing trading on intermediate timeframes (h4 to d1), or position trading on longer timeframes (d1 to w1). Choosing the appropriate timeframe helps establish the trade duration and the level of monitoring required. 🔷 Risk Management: This step focuses on determining the level of risk to allocate to each trade. It is recommended to risk a certain percentage of capital per trade, typically ranging from 1% to 3%. This ensures that losses are limited and helps maintain consistent risk across trades. 🔷 Conditions: Identifying market conditions is crucial for trade planning. Traders need to assess whether the market is ranging (moving within a defined price range) or trending (showing a clear upward or downward direction). Understanding the prevailing market conditions helps in selecting appropriate trading strategies and indicators. 🔷 Markets: This step involves selecting the specific financial markets or instruments in which to trade. Traders can choose from a wide range of options, such as equities (stocks), options, bonds, futures or Crypto. The choice depends on individual preferences, market knowledge, and the availability of suitable trading opportunities. 🔷 Entries: Determining entry points is essential for initiating a trade. This step involves selecting entry strategies based on the identified market conditions. Common entry methods include taking advantage of pullbacks (temporary price retracements within a trend), breakouts (entering when price surpasses a key level), or trading news events that can cause significant price movements. 🔷 Stops: Placing stop-loss orders is crucial for managing risk and protecting capital. Traders need to determine stop levels that are strategically placed away from market structures, such as support and resistance levels. This helps minimize the chances of premature stop-outs due to normal market fluctuations while still ensuring that losses are controlled. 🔷 Targets: Setting profit targets is essential for determining when to exit a trade. Traders can choose between fixed targets, where a predetermined price level is identified to take profits, or trailing stops, where the stop-loss order is adjusted as the trade moves in the trader's favor. Both approaches aim to capture gains and lock in profits while allowing the trade to run if the market continues to move favorably. 👤 @QuantVue 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
1
The Art of PatienceAmong the dozens of qualities and attributes, experts say traders need, patience is one of the most important qualities a trader can possess. It is a virtue often overlooked in the fast-paced world of trading, where new traders are lured into the trap of the get-rich-quick ideology. The ability to wait for the right trades can be the difference between success and failure, but how can we grow our patience? In this article, we will dive into the art of patience. We will discuss why patience is important and methods to cultivate patience. Why Patience is Important in Trading In this day and age, patience is a difficult thing to master. As a society, we almost want things before we know we want them. That makes waiting for nearly anything a monumental burden for most. We are so impatient that we are willing to pay money to remove things that require patience. Ads on video or music streaming apps or expedited package delivery are great examples. However, this does not mean we cannot learn and become disciplined in the art of patience. Patience allows traders to take a long-term view of the market. That market can be a volatile and unpredictable environment, and the temptation to blindly leap into a trade can be immense if we cannot maintain discipline and patience. Emotional or impulsive trades often lead to losses. Patience allows traders to wait for ideal opportunities that are thoroughly analyzed, utilizing a robust yet simple trading system. If we as traders take the time to be patient and genuinely analyze potential opportunities we can often avoid trades that are likely to be unprofitable. How to Cultivate Patience Patience is not a natural trait for everyone, but it can be cultivated through practice. Here are some tips for building your patience: Set realistic goals: Patience really requires a long-term perspective. Traders should set realistic goals for their trading strategy and focus on achieving them over time, rather than trying to get rich quick. The old adage of “Rome wasn’t built in a day” couldn’t be more pertinent. Great things take time to develop, but they are often worthwhile. If you miss, you miss: Something that is difficult for any trader is missing an opportunity. Maybe you were pulled away or just generally distracted, and an opportunity passed by you. It is unwise to hop on the FOMO train in the hope that there is still room up or down for a trade to be profitable. It is far better to take a step back and analyze the market and find new entries or opportunities that can be verified by your system. Missed opportunities are also a great learning experience to build yourself up rather than tear yourself down. Avoid distractions: Ohhhh look a squirrel! Anyways, the markets can be overwhelming, and it can be easy to get distracted. Examples of distractions would include nonconsequential/irrelevant news, misleading social media posts or groups, and personal environmental factors. Avoid distractions and focus on your trading plan; your future self will be thankful. Practice mindfulness: Many mistakenly think mindfulness is to make your mind a blank canvas, devoid of thought, and disregarding everything external. Mindfulness is the practice of being present in the current moment, recognizing when your mind wanders, and letting it go as you bring your focus back. View your mind as a muscle that needs to be trained, not entirely dissimilar to an athlete training their body. Mindfulness can help you stay focused and avoid impulsive decisions as you bring yourself to the present moment. Conclusion The funny thing about patience is that it takes time to develop. Patience is a foundational pillar for a trader's market psychology, but it is one of the hardest to build up. It allows traders to wait for the right opportunities, avoid emotional decision-making, and take a long-term view of the markets. By cultivating patience and applying it to your trading strategy, you can increase your chances of success.
NEducation
by LeafAlgo
4
Overcoming Regret: How To Move Forward and SucceedRegret is a common emotion experienced by traders when they miss out on opportunities or a trade they took doesn't go the way they believed it would. It is a feeling of disappointment or dissatisfaction with a decision that has been made or not made. In trading, the fear of missing out (FOMO) can often lead to irrational decision-making, which leads to missed opportunities or poorly timed entries. Today we will explore the psychology of regret in trading and provide tips for dealing with missed opportunities. The psychology of regret: Regret is a complex emotion that can be triggered by many factors when trading. In trading, regret is frequently stirred up by missed opportunities. When an opportunity slips past a trader, they may experience disappointment, frustration, and anger. These emotions can lead to irrational decision-making, often resulting in further missed opportunities or poorly executed trades. One of the reasons why traders experience regret is due to the phenomenon of counterfactual thinking. Counterfactual thinking is the process of imagining alternative outcomes to past events. When traders miss out on an opportunity, they may engage in counterfactual thinking by imagining what could have been if they had made a different decision. This can lead to feelings of regret and disappointment. Another reason why traders experience regret is due to cognitive dissonance. Cognitive dissonance is the discomfort that arises when one feels a conflict between beliefs and actions. When traders miss out on an opportunity, they may experience cognitive dissonance because their faith in what they see in the market may conflict with their actions. How do we deal with missed opportunities? Dealing with missed opportunities is a principal aspect of trading psychology and maintaining a positive mindset. Your trading strategy and plan may have a strong foundation, but our own mind is often the biggest obstacle we face in trading. Here are some tips for dealing with missed opportunities. Accept that missed opportunities are a part of trading: Missed opportunities are a part of trading. No trader can catch every opportunity that arises in the market. Accepting this fact can help traders cope with the disappointment and frustration that can manifest when opportunities are missed. If we do not recognize this we may start to make brash decisions, which can lead to over-trading. Overtrading can lead to losses that may impact your trading mindset, more negatively than simply missing an opportunity. Learn from missed opportunities: Missed opportunities can be a valuable learning experience for traders. By analyzing the reasons why an opportunity was missed, traders can learn from their mistakes and improve their decision-making in the future. However, it is important to be careful with this, one or two missed opportunities do not mean you need to question your entire strategy. It is important to take a step back and objectively look at what happened and analyze if there were possible opportunities for improvement. Focus on the present moment: Focusing on the present moment can help traders avoid counterfactual thinking. Do not get sucked into making FOMO decisions and entering trades at poorly executed times. Instead of dwelling on missed opportunities, traders should focus on the current market conditions. As traders, we need to be forward-looking to explore new opportunities that can be confirmed by a robust yet simple trading system. Talk it out with other traders or a trading community: Talking to other traders or a trading community can help traders deal with missed opportunities and regret. Other traders can provide support, advice, and a fresh perspective on the given situation. You might be surprised to find out you are not alone in how you feel about missed opportunities. A trading community can also offer a sense of belonging and understanding, which can be helpful in managing other difficult emotions when trading. Conclusion Regret is a complex emotion that can be triggered by a variety of factors when trading, and if you have felt it, you are definitely not alone. Dealing with missed opportunities is a critical part of trading psychology as it happens to everyone at every skill level. By accepting that missed opportunities are a part of trading, learning from missed opportunities, focusing on the present moment, and talking to others, traders can cope with the disappointment and frustration that comes with missed opportunities and improve their decision-making in the future.
NEducation
by LeafAlgo
3
⚙️Creating a Trading Plan⚙️📍Creating a trading plan and trading journal are two important steps in developing a successful trading strategy. Backtesting is also a crucial component of any trading plan. Here are the steps you can follow to create a trading plan, trading journal, and backtest your strategy. 🔷Define Your Goals and Risk Tolerance The first step in creating a trading plan is to define your trading goals. You should have a clear idea of what you want to achieve with your trading, such as making a certain amount of profit per month or year, and how much you are willing to risk on each trade. Your risk tolerance will also play a role in determining your trading strategy. 🔷Choose Your Trading Methodology The next step is to choose your trading methodology. There are many different trading strategies, such as trend following, momentum trading, and mean reversion. You should choose a strategy that fits with your goals, risk tolerance, and trading style. 🔷Define Your Trading Rules Once you have chosen your trading methodology, you need to define your trading rules. Your trading rules should cover when to enter a trade, when to exit a trade, and how much to risk on each trade. Your rules should be clear, objective, and based on your trading methodology. 🔷Create a Trading Journal A trading journal is a record of all your trades. It is important to keep a trading journal so you can analyze your trading performance over time. Your trading journal should include the date and time of each trade, the entry and exit price, the size of the position, and the reason for entering the trade. You can use a spreadsheet or a specialized trading journal software to keep track of your trades. 🔷Backtest Your Strategy Backtesting is the process of testing your trading strategy on historical data to see how it would have performed in the past. You can use specialized backtesting software or create your own backtesting tool using spreadsheet software. Backtesting allows you to refine your trading strategy and identify its strengths and weaknesses. 🔷Analyze Your Trading Journal After you have started trading, you should analyze your trading journal regularly. Look for patterns in your trading performance and identify areas for improvement. You should also review your trading plan and adjust it as necessary. 📍Key Takeaways: 🔸 Defining your trading goals and risk tolerance is important before creating a trading plan. 🔸 Choose a trading methodology that fits your goals, risk tolerance, and trading style. 🔸 Define clear, objective trading rules based on your trading methodology. 🔸 Keep a trading journal to record all your trades. 🔸 Backtest your trading strategy to refine it and identify its strengths and weaknesses. 🔸 Analyze your trading journal regularly to identify areas for improvement and adjust your trading plan as necessary. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
4
How you can make 6 figures a month using prop fundsFirstly you need to be able to acquire one account such as a 100k account. Assuming your target is $110000 you start by risking $500 a trade until you reach $3000. if you take losses you continue risking the same until you're back at the starting point. once you reach $3000 of profit you now up your risk to $1000 until you get to $6000 and then $2000. This should easily allow you to pass phase 1 of the challenge, you then repeat the same for phase 2. Once you receive your first funded account, you are now going to purchase another challenge and copy trade your funded account (master acc) onto the challenge. Repeating the above and considering you have a strategy with a good win rate, you are now able to make money while passing the challenges without having to trade 2 accounts manually. You continue this process and max your funding with one prop fund, and then move on to a second and so on until you have 7 figures in funding under your belt. The key is to remain focused and have your psychology and mindset on point. making a mistake on your master account is going to reflect on all accounts. The same goes with profits however. If you have 1 mill in funding and make 1% in a week on one of your 100k accounts, then the other 9 will also make 1% bringing you to a total of 10% ($100000) in one week. My favourite prop fund atm is properfunded.com
Education
by opes_trading_group
3
⌛ It's Just A Matter Of Time📍Journey Of a Successful Trader No one started as a good trader. Every profitable trader was once a newbie. The journey of a successful trader is filled with challenges, hard work, and perseverance. It begins with a strong desire to learn and a commitment to become an expert in the markets they are trading. 📍The Right Path To Reach The Top 🔹Learn the basics of Trading 🔹Pick a Strategy that you fully understand 🔹Trading plan customized to your lifestyle 🔹Back Testing your strategy and plan 🔹Review your Trades, calculate your expectancy 🔹Demo Trading to build basic knowledge 🔹Live Trading, Manage your risk and emotions 🔹Professional Trader 📍Summary The first step in the journey is to acquire the necessary knowledge and skills. This includes learning about the financial markets, technical analysis, risk management, and trading psychology. Successful traders also develop a trading strategy that fits their personality and trading style. Once they have acquired the necessary knowledge and skills, successful traders spend countless hours studying the markets, analyzing charts, and monitoring news events that may impact their trades. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
4
♡4"indicators1. What are indicators? Indicators are statistical tools used by traders to analyze and interpret market data, with the goal of identifying trends, patterns, and potential opportunities for trading. These tools are based on mathematical calculations applied to various types of market data, such as price and volume, and can help traders make informed decisions based on historical trends and patterns. 2. Why use indicators? The use of indicators can provide traders with a wealth of information about the market, including the direction of the trend, the strength of the trend, and potential entry and exit points for trades. By using indicators, traders can make more informed decisions, based on objective data rather than emotions or guesses. ☆ Commonly used indicators: There are many types of indicators that traders use, including moving averages, relative strength index (RSI), stochastic oscillator, Bollinger Bands, and more. Moving averages are used to identify trends, while RSI and stochastic oscillator are used to measure the strength of a trend. Bollinger Bands are used to identify potential breakouts and to determine the volatility of the market. ☆ 3. Visual backtesting provided indicators. Visual backtesting refers to the process of testing a trading strategy using historical data. By using backtested indicators, traders can gain insight into how a particular strategy would have performed in the past, and can use this information to improve their current trading strategy. This process is particularly powerful when using provided indicators, as they are typically based on historical data and have been tested by experienced traders. ☆ Risk and psychological management: While indicators can provide traders with valuable insights into the market, it's important to remember that they are not foolproof. Traders should always practice proper risk management, such as setting stop-loss orders to limit potential losses. Additionally, it's important to manage psychological factors, such as greed and fear, which can often cloud judgment and lead to poor decision-making. ☆ Acknowledgemt Indicators are powerful tools used by traders to analyze and interpret market data, with the goal of making more informed decisions. By using visually backtested provided indicators and practicing proper risk and psychological management, traders can increase their chances of success in the market. 4. Moving Average (MA) influenced indicators. Commonly used indicators by traders to identify trends in the market are influenced with a MA calculation. By smoothing out the price action over a set period of time, MAs can help traders determine the direction of the trend, as well as potential entry and exit points. When combined with signals, plots, and alerts, MA influenced indicators can provide even more valuable information for traders. " # One of the benefits of MA influenced indicators is that they can help traders identify the beginning and end of trends. By plotting the MA on a chart and analyzing its slope and position relative to the price action, traders can determine whether the trend is bullish or bearish. Additionally, by using signals, plots, and alerts, traders can receive notifications when the MA crosses above or below the price, indicating potential changes in the trend. " RSI 4, on the other hand, is a momentum oscillator that measures the strength of a trend. By analyzing the magnitude of price movements, RSI can provide valuable information about the underlying strength of the market. When used in conjunction with MA influenced indicators, traders can gain a more complete picture of the market, including both the direction and strength of the trend. ☆ For example, when the MA is sloping upward and the price is above the MA, indicating a bullish trend, a cross above 91 on the RSI 4 may indicate an overbought market, and a potential opportunity to sell while conforming the crossbelow 91and commonly followed by a divergence. Conversely, when the MA is sloping downward and the price is below the MA, indicating a bearish trend, a cross below 9 on the RSI 4 may indicate an oversold market, and a potential opportunity to buy in conlfuences of the crossabove 9 and a divergence. ☆ In summary, MA influenced indicators, when used in conjunction with signals, plots, and alerts, can provide valuable information about the direction of the trend, as well as potential entry and exit points. When combined with momentum oscillators like RSI 4, traders can gain a more complete picture of the market, including both the direction and strength of the trend, and use this information to make more informed trading decisions. ● "Trading is a game of probabilities, where each trade is simply a bet on the likelihood of a particular outcome. While losing trades can be frustrating, they are an inevitable part of the game, and a necessary cost of doing business. In fact, losing trades can be just as valuable as winning trades, as they provide valuable feedback and can help traders refine their strategy, ultimately leading to greater success in the long run." ● J @ATU_TAD ♡4"indicators
OEducation
by ATU_TAD
The Process of Creating StrategyHello traders, In this post i am going to show that how we can create and develop the trading strategy that works. Now the first step we need to do is just search and find the any trading method that suitable for us for example that would be like elliott wave, ict concept, VSA, just using indicators and maybe you can also create your own method and backtest it. when you learned the method now its time to create your trading rules every strategy has own different rules like what is your risk to reward ratio? what is your trade management plan? either you manage your trade or just take the trade and come back after its hit TP or SL, how much is your daily limit means how much trades you will be taking in a day or in a week if you want to become a swing trader depends on you, what is your risk per trade? can you will be cutting the risk to half or just use fixed risk after lose trade? what is your daily limit of losing? can you hold trade overnight or over weekend? what is your trading timeframe? what is your trading sessions? etc... These all kind of rules you will be require to create for yourself they might be different rules depends on your strategy method now we learned the method and created the rule move forward to the next step is open the live demo trading account and trade with your strategy and apply the rules don't break the rules that you created trade at least 30 days and journal your data your taking trades after 30 days check the journal you will see your data for example in your rules you set 1/2 risk reward ratio so you need to have around 40% winning ratio check the journal check the results did you have a 40% winning ratio if the answer is yes then good to go i am sure that you know what to do next but if you failed and your winning ratio is below 40% now analyze your journal data the trades you taken you will see some of bad trades that you don't wanted to trade again just avoid those trades next time and try again the process for the next 30 days. repeat the process one day you will be profitable and consistent but if you not then try again again learn from your mistakes and don't do that mistakes again. When yo have been profitable this is the time you wanna enter in the market open the real live trading account and start trading with your strategy and follow the rules that you created for yourself run the process and always remember trading is not quick rish scheme you need to have a lot of patience, trading is a long run game like marathon race and its required patience. some of my advice is don't try to break the rules, don't depend on one trade, some times market will give you some results that you don't want from it but be patient and be consistent with your strategy with your rules, you will be facing drawdowns but that is the learning process you will learn a lot from the drawdown so with the time you will be better consistent and be profitable just don't leave the process too soon and believe in yourself and try again again and again, trading is a very beautiful and also the easiest thing to live life but firstly in the starting it required from us to pass the test. trading is a very easiest thing but also a very hardest thing. i hope you find this post useful, i wish you good luck and good trading. If you like the post, boost my work with like comments and share thanks!
Education
by TheLoserMan
1
🧊The Iceberg Illusion In TradingThe iceberg illusion in trading refers to the perception gap between what people think trading is and what it actually means. Many people see trading as a simple way to make quick profits and accumulate wealth, with the idea that all one has to do is buy low and sell high. However, the reality is far more complex. Under the surface of what appears to be a straightforward process lies a world of risk, stress, and uncertainty. Trading is not just about making money, it requires discipline, patience, and a deep understanding of the markets. Those who don't understand the true nature of trading may face financial loss, depression and failure, much like the hidden dangers beneath the surface of an iceberg. Success in trading often requires much more than just a basic understanding of market trends and patterns, and those who dive in without being fully prepared may face dire consequences. 🔷 Above the Iceberg Above the iceberg, people often see the glamorous and attractive side of trading, characterized by success, wealth, and financial independence. They imagine traders as confident and knowledgeable individuals, making smart decisions and reaping the rewards of their investments. The image of traders making large profits in a short amount of time is one that is often perpetuated by media and popular culture. People often see the stock market as a fast-paced, exciting place where opportunities for financial gain are abundant, and the idea of being able to control one's financial future through trading is alluring. This perception of trading often creates a rosy and idealized image of what it entails, leading many to believe that success in the markets is easy to achieve. 🔶 Bellow the Iceberg Below the iceberg, lies the reality of the challenges and difficulties that traders face on a daily basis. There are many hidden risks and uncertainties that are not immediately apparent to those who are new to the world of trading. Some of the things that people don't know that lie beneath the surface of the iceberg include: 🔸 Market volatility: The stock market is a highly volatile environment, and prices can fluctuate rapidly and unpredictably. This can make it difficult for traders to manage their positions and minimize their losses. 🔸 Emotional stress: Trading can be a highly emotional experience, and the pressure to make the right decisions can be immense. Many traders struggle with anxiety, fear, and depression, particularly when faced with losing trades. 🔸 Lack of understanding: The stock market is complex, and it can be difficult for traders to understand all of the factors that influence market trends and prices. This can lead to costly mistakes and an increased risk of financial loss. 🔸 Competition: The stock market is a highly competitive environment, and traders must be able to keep up with fast-moving markets and make quick decisions based on complex data and information. 🔸 Long-term success: Many traders are focused on short-term profits and may not consider the long-term impact of their trading decisions. Achieving lasting success in the markets requires a well-thought-out strategy and a strong understanding of the markets and the risks involved. 🔸 Timing: Successful trading often requires precise timing, as markets can change rapidly and prices can fluctuate. Traders must have a deep understanding of market trends and be able to make quick decisions to take advantage of opportunities. 🔸 Risk management: Trading involves risk, and traders must be able to manage their positions and minimize their losses. This requires a well-planned and executed risk management strategy, including setting stop-losses and taking profits at appropriate levels. 🔸 Knowledge and experience: Trading is not just about buying low and selling high. It requires a deep understanding of market trends, economics, and financial analysis, as well as years of experience to develop a successful trading strategy. 🔸 Discipline: Trading requires discipline and patience, as well as the ability to stick to a well-thought-out strategy. Many traders make impulsive decisions based on emotions or market rumors, which can lead to financial losses. Welcome to the hardest game in the world. 👤 @AlgoBuddy 📅 Daily Ideas about market update, psychology & indicators ❤️ If you appreciate our work, please like, comment and follow ❤️
Education
by QuantVue
11