Timely Opening Range Breakout Strategy (TORB)Today, I’ll tell you about an amazing research study back from 2019 by a team of Taiwanese researchers, “Assessing the Profitability of Timely Opening Range Breakout on Index Futures Markets.”
Takeaway: The study's results are compelling. Implementing the TORB strategy yielded over 8% annual returns across the tested markets. Remarkably, the TAIEX index showcased a staggering 20.28% annual return. These numbers underline the potential of TORB in maximizing trading gains.
█ What is Open Range Breakout?
Open Range Breakout (ORB) is one of the simplest and safest strategies day traders use in a relatively low-volatility market. Opening Range means exactly just that. You check an asset's highest and lowest price in a certain time frame (usually 15 to 60 minutes) from the market's opening time.
These levels become your resistance and support that guide your trading plan for that day. Say if your chosen stock price goes higher than the highest level after the opening range; it indicates a bullish run for the day. Conversely, it indicates a bearish run if the price loses support in a downward trend.
█ Timely Opening Range Breakout Strategy
ORB has a certain set of challenges, especially for volatile markets. The Timely Open Range Breakout (TORB) strategy has been proposed in response to these challenges.
TORB leverages high-frequency intraday data and aligns trading strategies with the active hours of the underlying stock markets.
By analyzing one-minute intraday data from 2003 to 2013 across various markets, including DJIA, S&P 500, NASDAQ, HSI, and TAIEX, the study by Yi-Cheng Tsai et al. demonstrates the effectiveness of this strategy.
The key lies in identifying the 'active hours' of the market, aligning with the opening range of the underlying index.
█ 1. PMMV and PMVR:
The research paper introduces two critical variables for the TORB strategy: Per-Minute Mean Volume (PMMV) and Per-Minute Variance of Return (PMVR). These metrics are essential in identifying the most active hours for futures market trading.
PMMV provides a snapshot of the market's activity level at each minute of the trading day. PMVR is crucial for understanding the volatility or the degree of fluctuation in the market at each minute.
PMMV (Per-Minute Mean Volume) is calculated by averaging the trading volume in a one-minute interval over a specified number of trading days.
The graph shows that the German 40 is most active during the London opening and 30 minutes into the New York opening.
PMVR (Per-Minute Variance of Return) measures the variance of the one-minute returns, calculated as the logarithmic difference between the closing prices of one-minute intervals.
Using PMVR, the German 40 is most active during the London opening session and approximately one hour into the New York session.
█ 2. TORB Trading Rules:
Basic ORB trading rules are applied here.
Buying pressure dominates if the price moves above the resistance level, suggesting potential upward price movement. Conversely, selling pressure prevails if the price falls below the support level, indicating a possible downward trend.
These rules are applied within the active trading hours, defined by the PMMV and PMVR metrics.
Buy Signal
Sell Signal
The strategy also defines three key time points: the beginning of the observed period, the end of the observed period (probe time), and the time of closing the position. The prices at these specific times determine the conditions for buying and selling.
█ 3. Data Sets:
The study utilized two main datasets for its experiments:
Intraday Data of Five Futures Markets: This dataset includes one-minute intraday data of the E-mini futures of the DJIA, S&P 500, NASDAQ 100, HSI (Hong Kong), and TAIEX (Taiwan). The period covered ranges from 2001/2003 to 2013, providing a comprehensive overview of these markets over a decade.
Transaction Data for TAIEX Index Futures: This dataset contains detailed transaction data for the TAIEX index futures, covering the period from 2006 to 2013. It analyzes the relationship between TORB signals and trader behavior in the Taiwanese market.
Interestingly, the research even considers the global financial crisis of 2007-2008, presenting test results for two sub-periods: before and after 2007. This approach ensures a thorough understanding of the strategy's performance across different market conditions.
█ Results and Analysis
1. TORB Profitability Test:
The TORB profitability test involved back-testing the strategy for the five futures markets.
DJIA, S&P, and NASDAQ results revealed that strategies with probe times in the early stages yielded significantly higher annual returns.
DJIA: The results showed that TORB transactions decreased as the probe time moved away from the beginning of active hours. This implies that the strategy was most effective when applied close to market opening times.
S&P and NASDAQ: Similar to the DJIA, these markets also showed that strategies with early-stage probe times earned higher annual returns.
Additionally, the TAIEX results demonstrated that TORB strategies earned significantly higher returns with probe times of less than 200 minutes.
2. Impressive Returns:
The study's results are compelling. Implementing the TORB strategy yielded over 8% annual returns across the tested markets. Remarkably, the TAIEX index showcased a staggering 20.28% annual return. These numbers underline the potential of TORB in maximizing trading gains.
It also found that the best probing times were shorter in the U.S. markets and longer in Asian markets.
The research demonstrated that TORB strategies yielded consistently higher returns than traditional TRB (Trading Range Breakout) strategies, with no significant results in profitability tests for all TRB strategies across the five futures markets.
To provide a clear picture, here's a summary of the daily returns for each market analyzed:
E-mini DJIA: See Table 1 from the research paper
E-mini S&P: See Table 2 from the research paper
E-mini NASDAQ and HSI: See Tables 3 and 4 from the research paper
TAIEX: See Table 5 from the research paper
The active hours, identified by peaks in PMMV and PMVR, played a crucial role in the strategy's success.
For instance, the E-mini DJIA showed peaks around 8:30 AM and 3:15 PM, coinciding with the opening and closing times of the underlying market. Similarly, peaks were observed for HSI around the opening, closing, and lunch break times.
█ Relationship Between TORB Signals and Trader Behavior
The study also examined the relationship between TORB signals and trader behavior, particularly in the TAIEX futures market.
It was observed that the daily volume for individual traders was about twice that for institutional traders. The returns of the TORB strategies were positively related to the net buy positions of institutional traders both before and after the breakout.
This suggests that by following the TORB signals, one could trade in the same direction as institutional traders and obtain positive returns.
Specifically, the returns of the TORB strategies were significantly and positively related to foreign investment institutions, both before and after the breakout, indicating that TORB signals align with the trading direction of the most informed traders in the Taiwan market.
█ Reference
Y.-C. Tsai, M.-E. Wu, J.-H. Syu, C.-L. Lei, C.-S. Wu, J.-M. Ho, and C.-J. Wang, "Assessing the Profitability of Timely Opening Range Breakout on Index Futures Markets," IEEE Access, vol. 7, pp. 32061- 32071 Mar. 2019.
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Disclaimer
*Our results are approximate. We encourage you to test the assumption yourself. We do not guarantee that you will get the same results. This is an educational study for entertainment purposes only.
The information in my Scripts/Indicators/Ideas/Algos/Systems does not constitute financial advice or a solicitation to buy or sell securities. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on evaluating their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
My Scripts/Indicators/Ideas/Algos/Systems are only for educational purposes!
Community ideas
Navigating Sympathy Plays: A Guide to Trading BITCOIN & COINBASE** Introduction **
Sympathy trading, a strategic approach rooted in both technical and fundamental analysis, capitalizes on correlated movements between assets to uncover profitable opportunities. In this article, we delve into the nuanced realm of sympathy trading using Bitcoin (BTCUSD) and Coinbase Global Inc. (COIN) as case studies, exploring how a blend of technical and fundamental analysis can enhance trading strategies.
** Understanding Sympathy Trading **
Sympathy trading hinges on discerning and exploiting the symbiotic relationship between correlated assets. It involves analyzing both technical indicators and fundamental factors to identify potential entry and exit points, as well as underlying drivers influencing price movements.
** BTCUSD and COIN: A Sympathetic Relationship **
BTCUSD and COIN exemplify a compelling case study in sympathy trading within the cryptocurrency domain. Bitcoin's price dynamics often exert a significant influence on Coinbase's stock value, reflecting the exchange's dependency on Bitcoin's performance and trading volumes.
Technical Analysis Insights:
Technical analysis provides crucial insights into price trends, momentum, and support/resistance levels. Key technical indicators for trading BTCUSD and COIN include:
1.Moving Averages: Analyzing moving average crossovers and trends helps identify potential entry or exit points. Golden crosses (short-term moving average crossing above long-term moving average) or death crosses (opposite) can signal trend reversals.
2.Volume Analysis: Monitoring trading volumes in both BTCUSD and COIN can confirm price movements and signal changes in market sentiment. An increase in volume accompanying price movements suggests stronger market conviction.
3.Chart Patterns: Identifying chart patterns such as triangles, flags, and head and shoulders formations can provide insights into potential price reversals or continuation patterns, guiding trading decisions.
Fundamental Analysis Insights:
Fundamental analysis delves into underlying factors driving asset valuations and market sentiment. Key fundamental factors influencing BTCUSD and COIN include:
1.Regulatory Developments: Changes in regulatory frameworks governing cryptocurrencies can impact investor sentiment and trading activity. Positive regulatory developments may boost confidence in BTCUSD and COIN, while regulatory uncertainties could lead to volatility.
2.User Adoption and Trading Volumes: Monitoring user adoption rates and trading volumes on Coinbase's platform can provide insights into the exchange's revenue prospects and growth trajectory. Increased user activity often correlates with higher revenues for the exchange.
3.Market Sentiment and News Catalysts: Market sentiment surrounding Bitcoin, such as institutional adoption, macroeconomic factors, or geopolitical events, can influence both BTCUSD and COIN prices. News catalysts, such as product launches, partnerships, or earnings reports from Coinbase, can drive short-term price movements.
** Crafting Sympathy Strategies: **
Sympathy trading strategies integrating technical and fundamental analysis may involve:
1.Confirmation of Technical Signals: Confirming technical signals with fundamental catalysts can strengthen trading convictions. For example, if a bullish technical pattern emerges in BTCUSD, traders may look for positive fundamental catalysts supporting the uptrend in COIN.
2.Event-Based Trading: Leveraging fundamental analysis to anticipate market-moving events, traders may position themselves ahead of key announcements or developments. For instance, if positive regulatory news is expected for cryptocurrencies, traders may preemptively buy COIN in anticipation of increased trading activity.
** Risk Management Considerations: **
Effective risk management is paramount in sympathy trading to mitigate potential losses:
1.Position Sizing: Determine appropriate position sizes based on risk tolerance, account capital, and trade conviction. Avoid overexposure to a single trade and diversify across multiple assets to spread risk.
2.Stop-Loss Orders: Implement stop-loss orders to limit potential losses and protect capital. Place stop-loss levels based on technical levels, volatility considerations, or predetermined risk-reward ratios.
** Case study in action **
Let's look at the charts, both on the 1W time-frame in order to catch and get an understanding of the bigger trends and see if the theory is applied on the price action.
Bitcoin has provided 5 excellent Sympathy Play signals for Coinbase in the last 2 years. Starting with a Bear Flag that was rejected on its 1W MA50 (blue trend-line), Bitcoin initiated a huge decline on Coinbase (red shape), proportionally much stronger that its own. Then as its was attempting to find a market bottom, it provided 2 recovery signals that gave a proportionally bigger rise on Coinbase. Then a BTC Bull Flag again turned into a proportionally bigger rise on Coinbase with the last signal coming on October 2023.
As you can see during this significantly sample, Bitcoin tends to provide strong early buy/ sell signals on Coinbase. It is worth noting that even though Coinbase is a stock, it follows Bitcoin's price movements more closely than the S&P500 stock index, which we have illustrated on the right chart by the grey trend-line. As you can see there have been numerous occasions where Coinbase failed to follow a big stock market rally and instead was tied to BTC with the most notable examples being recently in January 2024, March 2023 and October 2022.
** A few things to consider that distinguish Bitcoin from Coinbase: **
Market Factors: Bitcoin's price is influenced by various market factors such as supply and demand dynamics, investor sentiment, macroeconomic trends, regulatory developments, and technological advancements. Coinbase's stock price, on the other hand, is influenced by factors specific to the company, including financial performance, earnings reports, regulatory compliance, competition, and market sentiment towards the cryptocurrency industry.
Liquidity and Trading Volume: Bitcoin, being the largest and most well-known cryptocurrency, typically exhibits higher liquidity and trading volume compared to Coinbase's stock. As a result, Bitcoin may experience more significant price movements and volatility compared to COIN, which could impact their respective charts differently.
Correlation vs. Causation: While Bitcoin's price movements may influence sentiment towards Coinbase and vice versa, correlation does not necessarily imply causation. While there may be periods where BTC and COIN prices move in tandem due to shared market sentiment or external factors, they are ultimately distinct assets with their own fundamental drivers.
Market Participants: Bitcoin is traded on cryptocurrency exchanges by a diverse range of market participants, including retail investors, institutional investors, miners, and traders. Coinbase's stock, on the other hand, is traded on traditional stock exchanges and may attract a different set of investors, including institutional investors, hedge funds, and retail traders.
** Conclusion: **
Sympathy trading using BTCUSD and COIN as case studies demonstrates the synergy between technical and fundamental analysis in identifying trading opportunities and managing risk. By integrating insights from both disciplines, traders can enhance their trading strategies, navigate market dynamics with confidence, and strive for consistent profitability in the dynamic cryptocurrency market.
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TradingView and Coin Metrics: New Era in Crypto Asset AnalysisHello investors and trading enthusiasts!
Today, we bring you a great news that'll take your crypto analysis up another notch.
Coin Metrics, renowned in crypto financial intelligence, has now integrated its dataset into the TradingView platform. Coin Metrics brings robust data on crypto networks, enriching the decisions of traders and investors with accurate information.
Through this partnership, over 50 million TradingView users now have access to even more detailed and comprehensive information to analyze crypto assets.
How to access Coin Metrics data?
Type "COINMETRICS:" into the asset search field:
📈 Examples
Bitcoin - Sum of unique addresses that were active on a given day
Ethereum - Newly created addresses with a non-zero starting balance
This integration is more than just data; it is a strategic collaboration to explore new markets and create innovative use cases in the world of digital assets . For more details, visit the official Coin Metrics website .
We hope you found this as amazing as we did. We'd love to know in the comments what you think of this new integration.
Additionally, if you have any suggestions for future improvements or implementations on Tradingview, just drop us a message.
Congratulations on being part of the world's largest community of Traders and Investors!
- TradingView Team ❤️❤️❤️
What Is Stage Analysis in Trading?Stage analysis is a powerful technique in trading that segments market trends into distinct phases, each offering unique opportunities and challenges. Developed by Stan Weinstein, this method helps traders understand and anticipate market movements. This article delves into the four stages of this analysis, offering insights into how traders apply these concepts, particularly in the context of stock trading.
Understanding Stage Analysis
Stan Weinstein’s stage analysis, a concept introduced in his seminal work "Secrets for Profiting in Bull and Bear Markets," offers a structured approach to evaluating market phases. Stage analysis in stocks divides the market cycle into four distinct phases. Each represents a specific phase in a stock's lifecycle, characterised by unique price movements and investor behaviour.
Weinstein's methodology is rooted in the identification of these stages through technical analysis, focusing on price action and volume. By discerning the current phase of a stock, traders gain insights into its probable future trajectory. This analytical framework assists traders in making more informed decisions about entry and exit points, aligning their strategies with the market's natural rhythm. Notably, it can be used in both intraday trading and long-term investing.
Below, we’ll walk through the four stages of Weinstein’s methodology. To better understand the topic, consider following along in FXOpen’s free TickTrader platform.
Stage 1: The Basing Area
In Weinstein stage analysis, the basing stage, or stage 1, marks the beginning of a stock's life cycle. This period is characterised by a period of consolidation after a previous downtrend. Prices typically fluctuate within a narrow range, indicating a lack of clear direction as the market sentiment shifts from negative to neutral. This transition is often overlooked in stage analysis trading, as it doesn't present immediate opportunities for significant gains.
During the basing stage, trading volumes generally diminish, reflecting a reduction in selling pressure. As buying volume increases, accumulation-distribution tools like on-balance volume (OBV) tend to bottom out and move higher, typically in tandem with price. OBV helps in tracking volume flow, offering insights into whether the volume is flowing in or out of an asset.
Additionally, investors watch for a gradual flattening of the price’s moving averages, a sign that the downward momentum is waning. It's a period of accumulation for savvy investors who recognise the potential for future upside. However, traders are cautious as stocks can linger in this phase for an extended period, and premature entry can lead to capital being tied up in inactive investments.
Traders employing Weinstein's method use this phase to prepare for potential entry points, keeping a close watch on stocks that show signs of breaking out of their base. The successful identification of a market transitioning from Stage 1 to Stage 2 – the Advancing Stage – may position traders to capitalise on the early beginnings of a new uptrend.
Stage 2: Advancing
In stock stage analysis, stage 2, known as the advancing stage, is where investors may see the potential gains. This phase begins when a stock breaks out from the basing stage (stage 1) with notable volume. It signifies a transition from a neutral to bullish market sentiment as more investors start acknowledging the market’s potential.
A key characteristic of Stage 2 is the sustained upward movement in the stock's price, often accompanied by increasing trading volumes. This rise in interest confirms the growing interest and commitment from investors, reinforcing the trend's strength. During this phase, the price typically moves above its key moving averages, such as the 30-period moving average, which acts as a dynamic support.
OBV is also useful in this period. An increasing OBV alongside rising prices is a positive sign, indicating that the upward price movements are supported by strong volume, thus validating the trend.
Traders focus on stocks that maintain their price above key moving averages and show a consistent increase in OBV in this phase. Such alignment of price and volume dynamics provides a more robust confirmation for continuing the trade in the advancing direction.
Stage 3: Top Area
Stage 3, known as the top area, marks a significant shift in the stock's cycle. This phase signifies the transition from an uptrend to a potential downtrend, characterised by a levelling off of the stock’s price movement after its advance in Stage 2. It's a period of distribution where early investors start to take potential returns, and new investors may enter based on the stock's past performance, not its future potential.
During this phase, price movements become less definitive, often moving sideways and creating a resistance level that the stock struggles to exceed. Price begins to hover around its key moving averages, such as the 30-period moving average, without a clear direction. This indecisiveness in price action is a crucial indicator of the weakening momentum.
Volume analysis during Stage 3 is vital. A divergence between price and volume starts to emerge; while prices might still be high, interest often shows a noticeable decrease. This reduced volume hints at a lack of conviction among investors, assuming that the stock may not sustain its previous upward trajectory.
Traders monitoring stocks in Stage 3 should be cautious. It’s a time to closely watch for signs of a breakdown or a continuation of the trend, as the stock may either revert to Stage 1 or unexpectedly surge into a renewed Stage 2.
Stage 4: The Declining Phase
Stage 4 marks the declining phase, where a stock transitions from a period of distribution to a clear downtrend. This period is characterised by a sustained drop in the stock’s price, often initiated by a decisive break below key support levels and moving averages, like the 30-period moving average.
The declining phase is typically accompanied by increasing trading volumes, reflecting a growing consensus among investors that the stock’s peak performance is behind it. This phase can be accelerated by negative news or poor earnings reports, further driving down the price.
The on-balance volume (OBV) is again a critical tool in this phase. A declining OBV indicates that selling pressure is increasing, reinforcing the downtrend. This downtrend is marked by lower highs and lower lows in both price and volume, signalling weakening investor confidence and diminishing interest in the stock.
For traders, stage 4 is a period of high caution. It's often considered a signal to exit positions to avoid further losses. Short-selling strategies may be employed by more experienced traders who seek to capitalise on the market’s downward trajectory. However, it's essential to approach this phase with a clear risk management strategy, as the volatility can lead to rapid changes in price.
The Bottom Line
Mastering stage analysis may equip traders with a structured approach to navigate the stock market's ebb and flow. By understanding and applying the principles of each stage, traders can potentially make more informed decisions, aligning their strategies with market trends. For those ready to apply these insights in real-world trading, opening an FXOpen account offers a platform to implement stage analysis techniques effectively in a dynamic trading environment.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Understanding LIQUIDITYIn this video I try to explain liquidity as it pertains to training in a simple manner.
Liquidity are basically orders in the marketplace. Since trading is a zero-sum game, without liquidity, there is no trading. Simply put, If you wanted to BUY, then you would need someone to SELL to you, and vice versa.
Smart Money has deep pockets and needs a large amount of liquidity to facilitate their positions. They want to be able to get in and our of their trades, as well as to be able to trade with capital that would be worth the reward.
The largest pools of liquidity usually reside above swing highs and lows, and equal highs and lows (double/triple tops and bottoms). Support and Resistance ideologies dominate the market, and besides that, psychologically it makes sense to put stoplosses at such areas rather than at some random area within a range. There are also breakout traders who see price breaking out of an area as a sign of strength (or weakness if bearish) and they set their entries above/below these levels. This is how liquidity is "engineered" in the market and sentiment manipulated. These pools of liquidity can be seen as a magnet, drawing price to these levels, either to grab liquidity before reversing or continuing in its current direction.
- R2F
Mastering Trendlines: Navigating Bitcoin's VolatilityMastering Trendlines: Navigating Bitcoin's Volatility
In the ever-evolving world of cryptocurrency, Bitcoin stands as the pioneer, leading the charge in digital finance. However, its notorious price volatility can be a double-edged sword for traders and investors alike. To navigate these turbulent waters, one of the most effective tools at your disposal is the trendline. This simple, yet powerful technique in technical analysis can be your compass in the vast ocean of digital currency trading. Let's dive into the essence of trendlines and how you can use them to your advantage with Bitcoin.
Understanding Trendlines
At their core, trendlines are straight lines drawn on price charts to connect a series of prices. By identifying the direction and slope of these lines, traders can discern potential market trends, be they upward, downward, or sideways. The magic of trendlines lies in their simplicity and the profound insights they offer into market psychology and momentum.
Types of Trendlines
Uptrend Line : This bullish line connects a series of higher lows, indicating a growing demand for Bitcoin as traders are willing to buy at increasingly higher prices.
Downtrend Line : In contrast, this bearish line connects a series of lower highs, signaling a selling pressure on Bitcoin as traders are inclined to sell off their holdings at progressively lower prices.
Example of Uptrend
The Power of Support and Resistance
Trendlines can also highlight critical levels of support and resistance:
Support Trendlines suggest areas where prices find a floor, bouncing off these levels rather than breaking through them. For Bitcoin, a strong support trendline can indicate a good buying opportunity.
Resistance Trendlines point to ceilings where prices tend to peak and reverse. For traders, a resistance trendline nearing breach could signal a potential sell or a strategic point to go short.
Applying Trendlines to Bitcoin Trading
Bitcoin's price movements, marked by sharp rallies and corrections, make it a prime candidate for trendline analysis. Here's how to effectively apply this technique to Bitcoin trading:
Drawing Trendlines
Identify the Trend: Begin by observing Bitcoin's chart to determine the overall trend direction. Is it moving upwards, downwards, or sideways?
Select Key Points: For an uptrend, select the lowest lows; for a downtrend, pick the highest highs. These points will be the anchors of your trendline.
Draw the Line: Connect at least two key points with a straight line. The more points a trendline touches without breaking, the stronger it is considered.
Trading Strategies
Buying on Support: When Bitcoin's price approaches an uptrend line without breaking below it, consider this a potential buying opportunity. It suggests that the price is likely to bounce off the support and continue its ascent.
Example of buying at support
Selling on Resistance: Conversely, if Bitcoin's price nears a downtrend line but fails to break above, it might be time to sell or short, anticipating a price reversal.
Breakouts and Breakdowns: A price break through a trendline can signal a significant shift in market sentiment. A breakout above a downtrend line might indicate a bullish reversal, while a breakdown below an uptrend line could hint at bearish developments.
Advanced Tips
Volume Confirmation: Always look for volume confirmation when a trendline is broken. A breakout with high volume is more likely to signify a genuine shift in trend.
Combine with Other Indicators: For more robust analysis, use trendlines in conjunction with other technical indicators, such as moving averages or the Relative Strength Index (RSI).
Conclusion
Trendlines are a testament to the principle that simplicity often prevails in the complex world of trading. For Bitcoin enthusiasts, mastering this tool can enhance your ability to predict price movements and make informed decisions in the face of volatility. Remember, while trendlines provide valuable insights, they're most effective when used as part of a comprehensive trading strategy, combining technical analysis, fundamental analysis, and sound risk management practices. Embrace the power of trendlines, and let them guide you through the dynamic landscape of Bitcoin trading.
GBPUSD: Important Breakout Time To ShortPrice has broken out of a very solid support zone which price has been bouncing off multiple times.
As you can see, the price is making a pullback to the support turned resistance zone.
I believe a rejection from this zone could lead the price to fall towards the pullback support
I'm bearish biased
Bullion Ballet: Trading the Gold Platinum RatioGold is the favoured precious metal. Its demand reflects consumer consumption of jewellery, investment demand, and monetary policy conditions. In a previous paper , Mint Finance highlighted these factors in detail.
Platinum is also a precious metal, used to create jewellery and to a small extent as a form of investment. Crucially, unlike gold (6% industrial demand), platinum (73% industrial demand) is used more extensively for industrial applications.
As gold and platinum share the source of jewellery demand, their performance is generally positively correlated.
However, due to the distinct sources of demand as well as the extent to which each precious metal is used for each application, the correlation can break. These periods can offer tactical trading opportunities to benefit from the relative performance of CME Group’s precious metals suite. Particularly in a key ratio called the Gold to Platinum Ratio (“GPR”) which measures the price of gold relative to platinum.
WHAT DRIVES THE GOLD-PLATINUM-RATIO
The GPR is affected by monetary policy. Though the ratio does not show a distinct impact upon the first-rate cuts by Fed, rapid rate cuts in response to economic crises such as recessions can cause it to rally.
The GPR increases during recessions due to investor preference for gold during times of crisis.
Interestingly, the ratio has been rising since 2008 as gold price reaches new record highs, while platinum currently faces a cyclical downturn.
RECESSION MAY BE UNLIKELY
While the GPR faces the potential to increase during a potential recession, there are signs that a recession may be unlikely in the US. US spending remains resilient and has contributed to faster than expected GDP growth in 2023. While growth slowed heading into Q4 2023, it is still expected to expand at a strong 2% in the quarter.
Moreover, the January BLS nonfarm payrolls report showed a massive 353k new jobs added. Wage growth was strong at 0.6% MoM, double the analyst estimate. Strong labour market and consumer spending in the US point to a healthier than expected economy.
INDUSTRIAL SLOWDOWN WILL STILL HAMPER PLATINUM DEMAND
In 2023, 33% of platinum’s demand came from industrial sources according to data from the World Platinum Investment Council . Platinum is used as a catalyst for several crucial industrial chemical processes. In addition, automotive demand represents a further 40% of total platinum demand.
In the automotive industry, platinum is used in catalytic converters to reduce emissions. This has been a recent driver of platinum demand due to rising emissions standards and the so-called platinum-for-palladium substitution.
In short, palladium is a Platinum Group Metal (PGM) which can be used interchangeably in automotive applications. The surge in palladium prices prompted many automakers to replace it with platinum. These changes will be in place for the lifetime of a car’s production so this trend will benefit platinum for an extended period.
While platinum is a standout among the so-called Platinum Group Metals (PGM), the industry has been facing a downturn over the past 2 years with prices sharply lower. Ample above-ground inventories as well as low investment demand has hampered platinum performance.
This downturn may not be permanent. Higher automotive demand and growth in hydrogen vehicles are expected to be long-term growth drivers for platinum.
For 2024, the World Platinum Investment Council forecasts a smaller supply deficit than 2023. This is largely due to lower industrial and investment demand as well as improved supply.
Anglo American, one of the largest producers of refined platinum stated that it expects PGM production to improve, which means ample supply.
During 2023, production was hampered in South Africa. Going forward, PGM’s are meant to be a major driver for the mining giant, so efforts to improve production are under way and management also expects prices to recover. However, continued cost pressures may force miners to scale back production.
Overall, the slowdown in chemical and petroleum demand as well as ample supply will limit Platinum’s performance in 2024, though price does face upside potential in the medium-to-long term.
BENEFITS OF TRADING THE RATIO
Platinum faces a mixed outlook in 2024, while there are several long-term demand growth drivers pushing price up, it faces uncertain but bearish production and demand outlooks for 2024.
Similarly, gold is benefiting from heightened geo-political risk and strong central bank demand but faces resistance as prices reaches new record highs and a recession looks unlikely. Mint Finance covered some of these factors in detail in a previous post .
While the outlook for both precious metals alone is uncertain, a trade on the back of the GPR favours gold.
Not only has the ratio been on an uptrend for the past decade, it has outperformed both gold and platinum prices.
Moreover, the ratio is not prone to overly large corrections. The largest drawdown in the ratio was smaller than the largest drawdown in gold and platinum prices.
HYPOTHETICAL TRADE SETUP
To express a position on GPR, investors can opt to use CME Group’s suite of precious metals future. Margin offset of 50% is available for a trade consisting of 1 gold (GC) contract and 2 platinum (PL) contracts. Executing a trade on the May futures contracts (GCK2024 and PLK2024), requires margin of:
(Margin for Gold Leg + 2 x Margin for Platinum Leg) = (USD 8,300 + 2 x USD 2,800) = USD 13,900 – margin offset of 50% = USD 6,950.
CME options on gold and platinum point to a bullish outlook for both but gold positioning is more bullish than platinum. As of 5/Feb, Gold options have a put/call ratio of 0.48 while platinum options have a put/call ratio of 0.75.
Consider the following hypothetical trade setup:
Entry: 2.275
Target: 2.530
Stop Loss: 2.100
Profit at Target: USD 23,013
Loss at Stop: USD 15,803
Reward to Risk: 1.46x
This position benefits when:
• Gold price rises faster than platinum.
• Gold price falls slower than platinum.
The position loses when:
• Gold price rises slower than platinum.
• Gold price falls faster than platinum.
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
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Chainlink - Did We Just Witness Wykoff Accumulation?To all my fellow traders, speculators and gamblers, its been some time since my last post.
I hope you've all been well, and most importantly, bathing in huge profits :)
It seems like Chainlink followed textbook Wykoff Accumulation Schematics.
Not the most perfect schematics, notably PS ( Prelim Support) falling a little short of the soon to be Resistance Lines.
In addition, BU only touched the resistance turned support once before rocketing up.
However the first PS does line up with the BU and subsequent SOS (Show Of Strength)
Phase A includes a number of additional ST ( Secondary Test) which is common after the SC (Selling Climax) stage. The selling Climax should've marked the lowest point, but price action made a lower low after the AR (Auto Rally) But it was merely a 19c difference.
Price still stayed within the TR(Trading Range) and bounced from the support lines.
The AR also marked the highest point within the trading range.
These are all minor discrepancies as price action continued to follow Wykoff theory.
We had multiple touches of the Support / Resistance lines, along with a perfect Spring (Final Shakeout/Bear Trap), Test and LPS, followed by a BU + SOS.
It took approximately 533 days from the SC (Selling Climax) to the TR (Trading Range) breakout,
The longer the accumulation period, the stronger the "Spring".
Does this mean price will continue north? Not necessarily, we've all seen these schematics fail. After all, Chainlink is up over 305% since the $4.65 Spring/Shakeout/Bear Trap lows.
That would've made an awesome long entry.
However, price is still way below its $53 ATH, so anything is possible.
Having a quick look we could see that price is currently at resistance levels.
A break from the 19$ range could initiate further upside.
Like the majority of the market, the crypto king (BTC) will probably dictate Chainlinks next move.
If we are to follow Wykoff theory, we could expect further upside.
I made a post back in May 22' private post titled "Link... Whales have been accumulating"
I remember reading many articles at the time that stated big players were buying up Chainlink.
Price action also found support at various Fibonacci levels, in addition to strong buy signals.
RSI Levels were at record lows, in addition to a whopping 90% correction at the time.
Unfortunately, I never got around to publishing that idea, it would've made a fantastic post.
I am no expert on Wykoff theory, so I've included information taken from various online sources.
Hopefully it helps, Much love and lots of profits to you all.
What is Wyckoff Accumulation?
Each cycle in the market begins with accumulation. This phase is marked by a range trend, where the market is relatively stable and rangebound. During this phase, institutional investors buy the stock at lower prices. Also, the volume tends to decline in this phase because the buying interest gradually absorbs the selling pressure.
Another way to confirm accumulation is to look at the support level. You may notice higher lows, indicating that the buyers are gaining power. Slowly, the trading volume begins to rise. This is a key indicator of the shift in sentiment and suggests a breakout trend.
As the accumulation progresses, you may see signs of strength in the price action, where the asset breaks above the trading range’s upper boundary.
This breakout often indicates that the market is ready for an upward move.
During the Wyckoff Accumulation process, smart money builds substantial positions at favourable prices before the broader market realizes the potential for an upward move.
The accumulation may resemble a “compressed spring” on the chart.
The longer it is, the better the indication of a breakout.
Markup: The second phase of accumulation is the markup, which follows a breakout.
According to Wyckoff, traders should find entry points through the pullback zones in this phase.
Wyckoff Events
PS— Preliminary Support , where substantial buying begins to provide pronounced support after a prolonged down-move. Volume increases and price spread widens, signalling that the down-move may be approaching its end.
SC— Selling Climax, the point at which widening spread and selling pressure usually climaxes and heavy or panicky selling by the public is being absorbed by larger professional interests at or near a bottom. Often price will close well off the low in a SC, reflecting the buying by these large interests.
AR— Automatic Rally , which occurs because intense selling pressure has greatly diminished. A wave of buying easily pushes prices up; this is further fueled by short covering. The high of this rally will help define the upper boundary of an accumulation TR.
ST— Secondary Test , in which price revisits the area of the SC to test the supply/demand balance at these levels. If a bottom is to be confirmed, volume and price spread should be significantly diminished as the market approaches support in the area of the SC. It is common to have multiple STs after a SC.
Springs or shakeouts usually occur late within a TR and allow the stock’s dominant players to make a definitive test of available supply before a markup campaign unfolds. A “spring” takes price below the low of the TR and then reverses to close within the TR; this action allows large interests to mislead the public about the future trend direction and to acquire additional shares at bargain prices.
A terminal shakeout at the end of an accumulation TR is like a spring on steroids.
Shakeouts may also occur once a price advance has started, with rapid downward movement intended to induce retail traders and investors in long positions to sell their shares to large operators.
Test — Large operators always test the market for supply throughout a TR (e.g., STs and springs) and at key points during a price advance. If considerable supply emerges on a test, the market is often not ready to be marked up. A spring is often followed by one or more tests; a successful test (indicating that further price increases will follow) typically makes a higher low on lesser volume.
SOS — Sign Of Strength , a price advance on increasing spread and relatively higher volume. Often a SOS takes place after a spring, validating the analyst’s interpretation of that prior action.
LPS—Last Point of Support , the low point of a reaction or pullback after a SOS. Backing up to an LPS means a pullback to support that was formerly resistance, on diminished spread and volume. On some charts, there may be more than one LPS, despite the ostensibly singular precision of this term.
BU—“Back-Up” . This term is short-hand for a colourful metaphor coined by Robert Evans, one of the leading teachers of the Wyckoff method from the 1930s to the 1960s. Evans analogized the SOS to a “jump across the creek” of price resistance, and the “back up to the creek” represented both short-term profit-taking and a test for additional supply around the area of resistance. A back-up is a common structural element preceding a more substantial price mark-up, and can take on a variety of forms, including a simple pullback or a new TR at a higher level.
Each Phase Explained.
Phase A: Phase A marks the stopping of the prior downtrend. Up to this point, supply has been dominant. The approaching diminution of supply is evidenced in preliminary support (PS) and a selling climax (SC). These events are often very obvious on bar charts, where widening spread and heavy volume depict the transfer of huge numbers of shares from the public to large professional interests. Once these intense selling pressures have been relieved, an automatic rally (AR), consisting of both institutional demand for shares as well as short-covering, typically ensues. A successful secondary test (ST) in the area of the SC will show less selling than previously and a narrowing of spread and decreased volume, generally stopping at or above the same price level as the SC. If the ST goes lower than that of the SC, one can anticipate either new lows or prolonged consolidation. The lows of the SC and the ST and the high of the AR set the boundaries of the TR. Horizontal lines may be drawn to help focus attention on market behaviour.
Sometimes the downtrend may end less dramatically, without climactic price and volume action. In general, however, it is preferable to see the PS, SC, AR and ST, as these provide not only a more distinct charting landscape but a clear indication that large operators have definitively initiated accumulation.
In a re-accumulation TR (which occurs during a longer-term uptrend), the points representing PS, SC and ST are not evident in Phase A. Rather, in such cases, Phase A resembles that more typically seen in distribution (see below). Phases B-E generally have a shorter duration and smaller amplitude than, but are ultimately similar to, those in the primary accumulation base.
Phase B: In Wyckoffian analysis, Phase B serves the function of “building a cause” for a new uptrend (see Wyckoff Law #2 – “Cause and Effect”). In Phase B, institutions and large professional interests are accumulating relatively low-priced inventory in anticipation of the next markup. The process of institutional accumulation may take a long time (sometimes a year or more) and involves purchasing shares at lower prices and checking advances in price with short sales. There are usually multiple STs during Phase B, as well as upthrust-type actions at the upper end of the TR. Overall, the large interests are net buyers of shares as the TR evolves, with the goal of acquiring as much of the remaining floating supply as possible. Institutional buying and selling imparts the characteristic up-and-down price action of the trading range.
Early on in Phase B, the price swings tend to be wide and accompanied by high volume. As the professionals absorb the supply, however, the volume on downswings within the TR tends to diminish. When it appears that supply is likely to have been exhausted, the stock is ready for Phase C.
Phase C: It is in Phase C that the stock price goes through a decisive test of the remaining supply, allowing the “smart money” operators to ascertain whether the stock is ready to be marked up. As noted above, a spring is a price move below the support level of the TR (established in Phases A and B) that quickly reverses and moves back into the TR. It is an example of a bear trap because the drop below support appears to signal resumption of the downtrend. In reality, though, this marks the beginning of a new uptrend, trapping the late sellers (bears). In Wyckoff's method, a successful test of supply represented by a spring (or a shakeout) provides a high-probability trading opportunity. A low-volume spring (or a low-volume test of a shakeout) indicates that the stock is likely to be ready to move up, so this is a good time to initiate at least a partial long position.
The appearance of a SOS shortly after a spring or shakeout validates the analysis. As noted in Accumulation Schematic #2, however, the testing of supply can occur higher up in the TR without a spring or shakeout; when this occurs, the identification of Phase C can be challenging.
Phase D: If we are correct in our analysis, what should follow is the consistent dominance of demand over supply. This is evidenced by a pattern of advances (SOSs) on widening price spreads and increasing volume, as well as reactions (LPSs) on smaller spreads and diminished volumes. During Phase D, the price will move at least to the top of the TR. LPSs in this phase are generally excellent places to initiate or add to profitable long positions.
Phase E: In Phase E, the stock leaves the TR, demand is in full control and the markup is obvious to everyone. Setbacks, such as shakeouts and more typical reactions, are usually short-lived. New, higher-level TRs comprising both profit-taking and acquisition of additional shares (“re-accumulation”) by large operators can occur at any point in Phase E. These TRs are sometimes called “stepping stones” on the way to even higher price targets.
Who Was Richard Wykoff?
Richard Demille Wyckoff (1873–1934) was an early 20th-century pioneer in the technical approach to studying the stock market. He is considered one of the five “titans” of technical analysis, along with Dow, Gann, Elliott, and Merrill.
At age 15, he worked as a stock runner for a New York brokerage.
Afterward, while still in his 20s, he became the head of his firm.
He also founded and, for nearly two decades, wrote and edited The Magazine of Wall Street, which, at one point, had more than 200,000 subscribers.
Wyckoff was an avid student of the markets, as well as an active tape reader and trader.
He observed the market activities and campaigns of the legendary stock operators of his time, including JP Morgan and Jesse Livermore.
From his observations and interviews with those big-time traders, Wyckoff codified the best practices of Livermore and others into laws, principles, and techniques of trading methodology, money management, and mental discipline.
Mr. Wyckoff observed numerous retail investors being repeatedly fleeced.
Consequently, he dedicated himself to instructing the public about “the real rules of the game” as played by the large interests, or “smart money.”
In the 1930s, he founded a school that would later become the Stock Market Institute.
The school's central offering was a course that integrated the concepts that Wyckoff had learned about identifying large operators' accumulation and distribution of stock with how to take positions in harmony with these big players.
His time-tested insights are as valid today as they were when first articulated.
Speculative Setup, DYOR.
Best Editors' Picks of 2023We present our awards for the best Editors' Picks of 2023! This marks our second year of recognizing outstanding open-source Community scripts. From the 84 picks in 2023, our PineCoders have cast their votes, highlighting three exceptional indicator scripts and one outstanding library. Each author of these noteworthy entries will receive 100,000 TradingView coins.
The awardees:
• Intrabar Analyzer by KioseffTrading
• Machine Learning: Lorentzian Classification by jdehorty
• Harmonic Patterns Based Trend Follower by Trendoscope
• SimilarityMeasures by RicardoSantos
Congratulations to the winners, and a heartfelt thank you to all Pine Script™ coders who contribute their open-source publications to our Community scripts . We eagerly anticipate another year of remarkable scripts in 2024!
What are Editors' Picks ?
The Editors' Picks showcase the best open-source script publications selected by our PineCoders team. Many of these scripts are original and only available on TradingView. These picks are not recommendations to buy or sell anything, nor to use a specific indicator. Our aim is to highlight the most interesting recent publications to encourage learning and sharing in our community.
Any open-source Community scripts can be picked if they're original, provide good potential value to traders, include helpful descriptions, and comply with the House Rules.
TYPES OF ORDER BLOCKThis educational post is great for beginners who are just starting to grasp the concept of SMC. We've already talked about what an order block is. This time we'll talk about other types of blocks in trading.
✴️ Mitigation Block
Mitigation Block is a sell or buy zone, which is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side.
We all know that when the price is moving along a trend, it is better to open trades in the direction of this trend. The most optimal points for buying and selling are the price pullback. By this logic a mitigation block is formed.
Mitigation Block Sell Scheme
Mitigation Block Buy Scheme
Those who trade classical technical patterns will notice that it is anything but: a support zone becomes a resistance zone, and a resistance zone becomes a support zone. Institutional level traders understand the skills and knowledge of classical technical analysis traders, so they manipulate the price to generate and collect additional liquidity.
In this zone we have our block, an ordinary block, which becomes a mitigated block after an impulse breakout.
Schematically, the Mitigation Block in sell looks like this:
Schematically, Mitigation Block in buy looks like this:
✴️ Breaker Block Smart Money
Breaker Block is a sell or buy zone that is formed when the market structure (BOS) continues. In other words, it is a broken order block and tested, but from the other side. An important difference from a broken Block is that there is a change in market character (CHoCH).
As you have understood, the essence of sell zones and blocks remains the same as in Mitigation Block, but first there is a liquidity grab, and then there is a change in market character (change in market structure). It looks schematically as follows:
Breaker Block Sell Scheme
Breaker Block Buy Scheme
✴️ Rejection Block Smart Money
A Rejection Block is a selling or buying zone that appears on the chart as long candlestick tails at a market high or low.
As in all other cases, the block is formed only after liquidity is grabbed from the previous high/minimum or equal highs/minimums. This is classically referred to as a false breakout or sweep.
Bullish and Bearish Rejection Block
The logic of building and searching for a Rejection Block is very simple:
Bearish Rejection Block: Swing High, find the highest candle whose high and close are higher than the high and close of the neighbouring candles respectively. The tail (wick) of the candle will be the bearish order block.
Bullish Rejection Block: Swing Low, we find the lowest candle, the minimum and close of which are lower than the minimum and close of the neighbouring candles respectively. The tail (wick) of the candle will be a bullish order block. It does not matter what colour the candle is. At the maximum it can be not only bullish but also bearish, and at the minimum it can be not only bearish but also bullish. This is worth paying attention to. Look for the highest candle, with the highest open or close and with the highest wick (same in the opposite direction).
✴️ Vacuum Block Smart Money
A block stands out as a regular gap - from the high of the first candle to the low of the second candle in an up gap and vice versa, from the low of the first candle to the high of the second candle in a down gap.
We can expect 2 variants of price movement: in continuation, return to the gap zone to fill it partially or completely. This is based on the presence and size of the block order.
Complete gap filling
Complete gap filling of the price void can be expected if there is an order block that is above or below the Vacuum Block. The price can bounce from the beginning of Vacuum Block, but in order to reduce the risk it is better to wait until the block is fully closed and touched.
Partial filling of the gap
A partial filling of the price void can be expected if the order block is below or above the Vacuum Block, but they overlap. The price can rebound from the beginning of the Vacuum Block, as well as overlap it completely. This is shown schematically in the figure above.
✴️ Conclusion
You should realize that you don't need to click the "buy" or "sell" buttons where you see one of the block options. An order block is simply a price range where you can consider buying or selling, depending on your preliminary analysis and determining the context of the price movement. You will trade from every block a capital loss is guaranteed. Price moves for liquidity. This is the main analysis, and only then we look for the place (blocks) where we can jump from a less risky place.
BITCOIN forming the first 4H Golden Cross in 5 months!Bitcoin (BTCUSD) is about to form a Golden Cross on the 4H time-frame, which will be the first such formation in almost 5 months (since September 18 2023)! Regardless of the time that has passed since its last occurrence (which is a strong parameter), that pattern alone is a strong enough bullish signal for the short-term.
This can be the signal that can trigger a strong rally back to January's High but within the technical context of the dominant medium-term pattern that is none other than an Inverse Head and Shoulders (IH&S). That is a technical bullish reversal pattern that is formed on market bottoms.
It could be no coincidence that the last 4H Golden Cross (chart on the right) was formed while BTC was completing an Inverse Head and Shoulders. The standard target of such patterns is the 2.0 Fibonacci extension level. As you see on October 20 2023 that was exactly where the price consolidated and it happened to be a Resistance level from a former High.
The 2.0 Fib on the current IH&S happens to be only marginally above the 49000 Resistance and that is our Target for the short-term.
Do you agree that the emergence of a 4H Golden Cross and the Inverse Head and Shoulders can take the price back to January's High? Feel free to let us know in the comments section below!
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Trading Options: Setups and Rules In a previous video, I explained my share trading strategy, specifically for choppy markets (available here):
But many of you have asked about when I decide to take options over shares and what setups do I look for.
This video covers my own option rules and setup guidelines.
Key points from the video:
Always wait for re-tests of support and resistance. Second is good, third is best!
Always draw out intra-day trends via trendlines. This alerts you to changes in market condition.
Confirm breakouts by marking re-test highs and re-test lows (explained in more detail in the video)
Thanks for watching and as always, safe trades!
A simple guide to creating a solid portfolio.Hello,
Creating a solid portfolio can be a tough task for most investors. Understanding easy ways of beginning that journey can greatly improve your performance as an investor & greatly amplify your results.
The times of just buying the S&P and waiting for your money to keep growing is long gone & active investing can widen the gap between yourself and the normal investor. Below we will be guiding on how you can future proof your stock picks using the NAS100 as an example & point of beginning.
1: Understand the index
Understanding the index you want to begin with is the 1st point to look at. This will help you choose the correct index for your journey. In our case The Nasdaq 100 is an index of the hundred largest non-financial stocks listed on the NASDAQ stock exchange. The companies included in this index are often technology or biotechnology firms.
2: Do an analysis of where the index is trading at
A simple analysis of where the index is trading at guides you on where most of its components would be trading at. In our case the index is correcting giving as hope that we will easily find companies that are in great points for future buys. The health of the companies will be key in our choices.
The chart below shows that we are in correction
3: Know the components of your index
All the components of the NAS 100 can be easily found on the www.tradingview.com website via link www.tradingview.com A simple google search will also list all this companies for you. The NAS 100 has 100 components meaning that you have 100 companies to look at. For the purpose of this educational post we will be looking at the biggest 3 companies in the index.
We shall evaluate the 3 companies using both fundamental analysis & technical analysis. From fundamental analysis we shall look at key metrics in the balance sheet (does the company have debt), From the income statement (Are revenues steadily increasing over time) & Cashflow statement (Does the company have positive free cashflow). Please note that you can always get deeper with understanding the companies more. Companies that you can access their products are even better for retail investors.
Next, we shall evaluate the 3 companies from a technical view using wave analysis. We shall then make calls on whether we are looking for buys or sells or wait recommendations.
The 3 companies we shall evaluate are Microsoft, Apple & Alphabet.
Company 1: Microsoft
Microsoft Corp engages in the development and support of software, services, devices, and solutions. It operates through the following business segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.
Key metrics
1: Does the company have debt: (Yes) 2023: Total debt 79.44 billion : Total Debt represents all the interest-bearing obligations of the company, regardless of when these obligations are due for payments.
2:Are revenues steadily increasing over time? Yes ( 2021: USD 168 billion, 2022: USD 198.27 billion, 2023: USD 211.92 billion)
3: Does the company have positive free cashflow
Yes (2023: USD 59.48)
Technical analysis
Company 2: Apple
Apple, Inc engages in the design, manufacture, and sale of smartphones, personal computers, tablets, wearables and accessories, and other variety of related services.
Key metrics
1: Does the company have debt: Total debt: Total debt USD 123.93 billion : Total Debt represents all the interest-bearing obligations of the company, regardless of when these obligations are due for payments.
2:Are revenues steadily increasing over time? YES
2021: USD 365.82 B 2022: USD 394.33 B 2023: USD 383.29 B
3: Does the company have positive free cashflow: YES; USD 99.58 billion
Technical analysis
We have an alert for buy from USD 170.8 areas
Company 3: Alphabet
Alphabet, Inc is a holding company. It operates through the Google segment which includes its main Internet products such as ads, Android, Chrome, hardware, Google Cloud, Google Maps, Google Play, Search, and YouTube.
Key Metrics
1: Does the company have debt: YES USD 29.87 B
2: Are revenues steadily increasing over time? YES. 2022: USD 280.88 B, 2023: USD 307.16B
3: Does the company have positive free cashflow: YES. USD 69.50 Billion
Technical analysis
Buying at current place not good. Look for sell if price breaks trendline aggressively.
Below are our recommendations for the 3 stocks.
Microsoft: No trade setup
Apple: Look for buy from USD 170.8 areas
Alphabet: Buying at current place not good. Look for sell if price breaks trendline aggressively.
We will then look at all the other stocks that make the components of the index using the above metrics & choose the best stocks to invest in.
Good luck in your journey. We shall be sharing more educational content.
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Bitcoin REALISM I am definitely not going to win any popularity competitions with my comments and thoughts. But that's not the point when it comes to making money.
The main issue for me still in Crypto Land is the lack of realism. The image on the front cover was from a google search of "realism" I guess the confused face made my day. This is exactly how you need to be looking when you read these points below.
I have explained the logic of every major move over the last couple of years and this guys - is no different.
So let's start by exploring the reality of market cap for one. When you buy a stock you have a number of stocks in circulation times that by the price and you can get a market cap. Of course, unlike most companies on the exchange Bitcoin CANNOT just issue new stock. We have to remember some Bitcoin are gone and lost forever so this number will likely end up around 20million and not the full 21m.
The current Market cap is roughly 19,806,000 x $42,897.
Let's call it a little over 820 Billion.
At the ATH of $69,000 we saw $1.302 Trillion.
Lets look at what is needed and an angle of attack if Bitcoin was to hit $500k by Jan 25, 26, 27, 28 or 2029.
This is only one aspect of the story.
Prior to the ETF launch people were saying silly things like "Trillions coming in, $100k imminent"
Blackrock's largest ETF is roughly $354 Billion. This is the SP500 fund founded back in 2001. So 23 years old roughly now.
Here's the actual chart.
What does this mean?
Well, let's say Blackrock decided to close their biggest ETF and throw it all into Bitcoin. That level would still not take us back to the current ATH.
Bullish, Bullish, Bullish - we are still $25,000+ under the current ATH.
So what about other ETF's? Obviously the market is bigger than just Blackrock. Let's look at this aspect too.
Look at the end of 2021 as the ETF market collectively was at it's high. We are talking about $10Trillion in 8,552 ETF's.
I've posted several times about the current COT landscape.
Clearly social media Bitcoin is buzzing and everyone is about to become rich, it's different this time and so on. Well, COT says otherwise.
Back at the top when everyone was calling for $135,000 I said the reason for the drop would be liquidity.
So why is this different?
I said there were two likely scenario's on the table as we moved down. The first was we were in an early stage accumulation, we needed to go up to 32k and back down to the low 20's. This would allow us to travel much higher and sustain such a large move.
The second option was bearish.
Well, I guess the second move played out.
The momentum is still clearly not with us - we are still FWB:25K + under the current ATH - not what one would or should expect after 12 Bitcoin specific ETF's obtaining approval & launching.
Look at the momentum
People seem to fall into the echo chamber and all logic leaves the building. I have been at this game a long, long time. Seen it all before and I am sure I will see it again.
This does not mean I am Bearish or anti Bitcoin - not for one second. I am one of the lucky ones in at the right time, sold a lot on the way up and happy with the current holdings.
All I am trying to emphasis here - is don't get sucked into the void which is not supported by ANY sound logic.
I recently watched a couple of video's with Warren Buffet, another with Jim Rickards.
They both explained something very interesting in a very clear way. Although Anti Bitcoin - what they said made a lot of sense. The same lesson kinda applies to things like gold.
When you buy an asset, the asset can produce for you. So assume you buy a house - you get rental income each month and with the price of the property going up over time you make gains there. Buy a business same thing - Buffet explained this using a farm as the example. Sell grains, cows or whatever you farm. Over time you still hold the asset.
This isn't true for the likes of diamonds, gold or Bitcoin.
Hence it fits into the greater fool theory.
If I sell you my last bitcoin I picked up for less than $200.
You buy it all today at $42,850. You have to find someone else willing to pay you more than the $42,850 in the future. For me, this is the main reason I don't personally care up or down or sideways here. But many in the echo chamber do.
The average price across the breakeven addresses are around $37k - this is Breakeven not profit. So imagine majority of the retail crowd with an average entry after DCA'in at $37k.
These are all things to keep in mind when your playing shorter term moves. ETF's are structured in such a way long term growth can be expected, volatility get's somewhat reduced. You noticed what's happened on the weekends since the launch?
So whilst I expect it to go up in the long run. We need a healthy pullback as to be expected. This gives more time for real accumulation to happen - but this will also put some stress on that average (BE) level of $37k.
Just keep this in mind and one more thing if you want to comment on "oh your wrong - up only" give some logic to support it or I won't bother responding. This move will take time. For me, nothing has changed since 2022. We are not ready for new highs - YET...
Anyway enjoyed or not I thought it was worth another educational post.
Stay safe!
Disclaimer
This idea does not constitute as financial advice. It is for educational purposes only, our principle trader has over 20 years’ experience in stocks, ETF’s, and Forex. Hence each trade setup might have different hold times, entry or exit conditions, and will vary from the post/idea shared here. You can use the information from this post to make your own trading plan for the instrument discussed. Trading carries a risk; a high percentage of retail traders lose money. Please keep this in mind when entering any trade. Stay safe.
BTC Market Cycle | Repetitive and Predictable Market CycleThe Bitcoin market cycle can be easily predicted by studying historical data. Whenever you seek an idea of where the market is heading, you can always look at the past to gauge the future. However, this doesn't guarantee that the predictions stated here will unfold exactly as described; it's a PREDICTION, not a fact.
Let's examine the chart displayed here. The market cycle repeats itself every four years, with our chart divided into four cycles, the fourth being the current cycle we are in. Every four years, Bitcoin undergoes a major event known as Halving, where the number of blocks containing Bitcoins is halved every four years. We started with 50 Bitcoins released in a block every 10 minutes; in 2012, that amount was reduced to 25 BTC. In the following cycle, it was halved again, and this will continue to happen every four years until all Bitcoins are mined. Currently, we are heading towards the fourth halving event, which will see the number of blocks released reduced to 3.125 BTC.
Due to this event, the price of Bitcoin appreciates in value every four years. This is driven by supply and demand, as fewer Bitcoins are mined than in the previous four years (reduced supply), creating scarcity and increasing demand. The mining difficulty also increases, causing miners to be reluctant to sell the Bitcoins they've mined, contributing to the price increase.
On our chart, we have three completed cycles that look almost identical. The cycles consist of a bull market where the price experiences a significant increase, followed by a bear market where the price drops in the range of 80–85%. This is followed by the first expansion, where we see a slight price increase, followed by the first accumulation phase. Prices move up and down within a specified range during this phase, also known as the consolidation phase. We then move on to the second expansion and the second accumulation, usually forming just before or within the halving period.
This not only shows us that the market cycles are similar but also allows us to predict future events. At the time of writing this, we are three months away from the fourth halving, and it appears we have entered the second accumulation phase, as seen in the past three cycles. Prices should trade in a specified range for a few months after the halving. When you examine the halving events on the chart, you can observe that we usually enter the bull run somewhere between 6 to 8 months after the halving. Based on that, we can predict that the next bull run will start between October and December 2024, lasting until the fourth quarter of 2025.
In the past, the cycles have been accurate, and we can expect the same unless a global catastrophic event occurs, as seen in March 2020 during the COVID-19 pandemic. In that phase, there was no second expansion as all markets crashed. It is my opinion that this led to the bull run not reaching its full potential. Had we experienced the second expansion, the price would have moved slightly higher before the second accumulation phase, leading to an extended bull run pushing the price near or above $100k.
My price prediction at the end of the cycle, assuming world events stay normal, is to see Bitcoin in the range of $120–150K.
What do you think the price of Bitcoin at the end of 2025 will be? Like, share, and feel free to leave a comment. Let me know if you agree or disagree with this analysis.
Ultra-Fast Scalping Strategies in ForexUltra-Fast Scalping Strategies in Forex
Scalping is a high-speed trading strategy that targets quick profits from small price movements. It's a method that appeals to those who want a hands-on, immediate trading experience. This article delves into three of the best 1-minute scalping strategies: Heikin-Ashi Pullback, RSI Extremes, and Stochastic Oscillator Quick Signal, explaining their nuances and applications in a trading environment.
What Is Scalping?
Scalping is a trading strategy focused on capturing small price movements in financial markets. Traders employing this tactic aim to gain several pips – tiny increments in price – from each trade, often executing dozens or even hundreds of trades in a single day. Due to the high frequency of trades, transaction costs and speed are significant considerations.
This strategy requires a deep understanding of market trends, real-time data analysis, and a disciplined approach to risk management. While scalping is commonly used in forex markets, it's applicable to stocks, commodities, and other financial instruments.
To see how these ultra-fast scalping strategies work in practice, consider using FXOpen’s free TickTrader platform. There, you’ll find all of the tools discussed in this article waiting for you.
Heikin-Ashi Pullback
The Heikin-Ashi Pullback strategy focuses on identifying pullbacks within established trends using Heikin-Ashi candlestick charts. By pinpointing moments when the trend briefly reverses, this strategy offers traders an opportunity to enter the market with the anticipation that the dominant trend will resume.
Entry
Traders may observe a clear trend with consecutive Heikin-Ashi candles in one colour.
During a bearish trend with red candles, many traders wait for the candles to turn green, signalling a pullback. Entry is typically considered when a red Heikin-Ashi candle appears after one or more green pullback candles.
Conversely, during a bullish trend with green candles, traders often wait for the candles to turn red, indicating a pullback. Entry is generally initiated when a green Heikin-Ashi candle appears after one or more red pullback candles.
Stop Loss
A stop-loss is commonly placed at the high or low of the entry candle.
Alternatively, traders may set it above or below a nearby swing point for additional safety.
Take Profit
The position is usually closed when a single opposite-coloured candle appears.
Some traders opt to exit when the trend reaches a predetermined resistance or support level.
The Heikin-Ashi Pullback strategy capitalises on the market's natural ebb and flow. By entering during a pullback, traders aim to benefit from the market's tendency to resume its prevailing trend. This ultra-fast scalping strategy provides a structured approach to identify high-probability entry and exit points, making it a favoured choice among scalpers.
RSI Extremes
The RSI Extremes strategy is often highlighted as one of the best scalping strategies, especially when used as a 1-minute forex scalping strategy. It uses the Relative Strength Index (RSI) with a period setting of 7 to identify potential reversals at extreme overbought or oversold levels.
Entry
Traders typically use a 7-period RSI applied to a 1-minute chart.
An entry may be considered when the RSI crosses above 80 and subsequently moves back below, indicating a potential short position.
Similarly, an entry point can be seen when the RSI dips below 20 and then moves back above, suggesting a long position.
Stop Loss
A common approach is to place a stop-loss a few pips above or below the entry candle.
Alternatively, traders may opt for a stop-loss above or below a nearby swing high or low for additional risk management.
Take Profit
Take-profit levels are generally set near a key support or resistance level.
Another option is to exit the trade when RSI approaches the 50-level, signalling diminishing momentum.
The RSI Extremes strategy leverages the RSI's effectiveness in identifying market extremes. Traders capitalise on brief price reversals, providing a structured way to enter and exit trades in line with market momentum.
Stochastic Oscillator Quick Signal
The Stochastic Oscillator Quick Signal serves as an easy forex scalping strategy designed to capture short-term price movements. Using the Stochastic Oscillator, traders can identify overbought and oversold conditions to make timely entries and exits.
Entry
Many traders apply a Stochastic Oscillator with settings (14, 3, 3) to a 1-minute chart.
Entry points are often considered when the %K line (blue) crosses above the %D line (orange) and both are below 20, suggesting a long position.
Conversely, traders may look for an entry when the %K line crosses below the %D line and both are above 80, indicating a potential short position.
Stop Loss
A stop-loss is usually placed a few pips away from the entry point.
Alternatively, it can be set above or below a nearby swing high or low as an additional safety measure.
Take Profit
Many traders set the take-profit level when the Stochastic Oscillator reaches the opposite extreme.
Another approach is to close the position when a divergence occurs between the price and the oscillator.
This strategy employs the Stochastic indicator, an ideal 1-minute scalping strategy indicator, for detecting quick reversals in market momentum. By employing this indicator, traders aim to take advantage of brief oversold or overbought conditions to make rapid gains.
The Bottom Line
Navigating the fast-paced world of scalping can be challenging, but with the right strategies and tools, it's possible to find success. Each of the strategies discussed offers a unique way to approach the market and seek out profit opportunities. Still, it’s worth noting that they should be modified in accordance with a trader’s unique trading approach.
For traders eager to put these strategies into practice, consider opening an FXOpen account. You’ll gain access to hundreds of markets, competitive trading costs, and lightning-fast execution speeds – all crucial aspects for scalping trading success. Good luck!
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.
Trading Converging Chart PatternsWe discussed identification and classification of different chart patterns and chart pattern extensions in our previous posts.
Algorithmic Identification of Chart Patterns
Flag and Pennant Chart Patterns
In this installment, we shift our focus towards the practical trading strategies applicable to a select group of these patterns. Acknowledging that a universal trading rule cannot apply to all patterns, we narrow our examination to those of the converging variety.
We will specifically address the following converging patterns:
Rising Wedge (Converging Type)
Falling Wedge (Converging Type)
Converging Triangle
Rising Triangle (Converging Type)
Falling Triangle (Converging Type)
This selection will guide our discussion on how to approach these patterns from a trading perspective.
🎲 Historical Bias and General Perception
Each pattern we've discussed carries a historical sentiment that is widely regarded as a guideline for trading. Before we delve into our specific trading strategies, it's crucial to understand these historical sentiments and the general market interpretations associated with them.
🟡 The Dynamics of Contracting Wedge Patterns
Contracting Wedge patterns are typically indicative of the Elliott Wave Structure's diagonal waves, potentially marking either the beginning or conclusion of these waves. A contracting wedge within a leading diagonal may experience a brief retracement before the trend resumes. Conversely, if found in an ending diagonal, it could signal the termination of wave 5 or C, possibly hinting at a significant trend reversal.
The prevailing view suggests that these patterns usually precede a short-term directional shift: Rising Wedges are seen as bearish signals, while Falling Wedges are interpreted as bullish. It's essential to consider the trend prior to the formation of these patterns, as it significantly aids in determining their context within the Elliott Wave cycles, specifically identifying them as part of waves 1, A, 5, or C.
For an in-depth exploration, refer to our detailed analysis in Decoding Wedge Patterns
🎯 Rising Wedge (Converging Type)
The Rising Wedge pattern, historically viewed with a bearish bias, suggests that a downward trend is more likely upon a breakout below its lower trend line. This perception positions the pattern as a signal for traders to consider bearish positions once the price breaks through this critical support.
🎯 Falling Wedge (Converging Type)
The Falling Wedge pattern is traditionally seen through a bullish lens, indicating potential upward momentum when the price surpasses its upper trend line. This established viewpoint suggests initiating long positions as a strategic response to such a breakout, aligning with the pattern's optimistic forecast.
🟡 Contracting Triangle Patterns
Contracting Triangles, encompassing Converging, Ascending, and Descending Triangles, are particularly noteworthy when they appear as part of the Elliott Wave's B or 2 waves. These patterns typically signal a continuation of the pre-existing trend that preceded the triangle's formation. This principle also underpins the Pennant Pattern, which emerges following an impulse wave, indicating a pause before the trend's resumption.
🎲 Alternate Way of Looking into Converging Patterns
Main issue with historical perception are:
There is no clear back testing data to prove whether the general perception is correct or more profitable.
Elliott Waves concepts are very much subjective and can be often difficult for beginners and misleading even for experts.
So, the alternative way is to treat all the converging patterns equally and devise a method to trade using a universal way. This allows us to back test our thesis and be definitive about the profitability of these patterns.
Here are our simple steps to devise and test a converging pattern based strategy.
Consider all converging patterns as bidirectional. Meaning, they can be traded on either side. Thus chose to trade based on the breakout. If the price beaks up, then trade long and if the price breaks down, then trade short.
For each direction, define criteria for entry, stop, target prices and also an invalidation price at which the trade is ignored even without entry.
Backtest and Forward test the strategy and collect data with respect to win ratio, risk reward and profit factor to understand the profitability of patterns and the methodology.
Now, let's break it further down.
🟡 Defining The Pattern Trade Conditions
Measure the ending distance between the trend line pairs and set breakout points above and beyond the convergence zone.
🎯 Entry Points - These can be formed on either side of the convergence zone. Adding a small buffer on top of the convergence zone is ideal for setting the entry points of converging patterns.
Formula for Entry can be:
Long Entry Price = Top + (Top - Bottom) X Entry Ratio
Short Entry Price = Bottom - (Top-Bottom) X Entry Ratio
Whereas Top refers to the upper side of the convergence zone and bottom refers to the lower side of the convergence zone. Entry Ratio is the buffer ratio to apply on top of the convergence zone to get entry points.
🎯 Stop Price - Long entry can act as stop for short orders and the short entry can act as stop price for long orders. However, this is not mandatory and different logic for stops can be applied for both sides.
Formula for Stop Can be
Long Stop Price = Bottom - (Top - Bottom) X Stop Ratio
Short Stop Price = Top + (Top - Bottom) X Stop Ratio
🎯 Target Price - It is always good to set targets based on desired risk reward ratio. That means, the target should always depend on the distance between entry and stop price.
The general formula for Target can be:
Target Price = Entry + (Entry-Stop) X Risk Reward
🎯 Invalidation Price - Invalidation price is a level where the trade direction for a particular pattern needs to be ignored or invalidated. This price need to be beyond stop price. In general, trade is closed when a pattern hits invalidation price.
Formula for Invalidation price is the same as that of Stop Price, but Invalidation Ratio is more than that of Stop Ratio
Long Invalidation Price = Bottom - (Top - Bottom) X Invalidation Ratio
Short Invalidation Price = Top + (Top - Bottom) X Invalidation Ratio
🟡 Back Test and Forward Test and Measure the Profit Factor
It is important to perform sufficient testing to understand the profitability of the strategy before using them on the live trades. Use multiple timeframes and symbols to perform a series of back tests and forward tests, and collect as much data as possible on the historical outcomes of the strategy.
Profit Factor of the strategy can be calculated by using a simple formula
Profit Factor = (Wins/Losses) X Risk Reward
🟡 Use Filters and Different Combinations
Filters will help us in filtering out noise and trade only the selective patterns. The filters can include a simple logic such as trade long only if price is above 200 SMA and trade short only if price is below 200 SMA. Or it can be as complex as looking into the divergence signals or other complex variables.
Community challenge: Share Your Best Trading Idea!Hey there, fellow investors and trading enthusiasts!
We're starting the year with an exciting opportunity to reward the wisdom and experience that each of you brings to the table.
With markets reaching new highs, and the economy continuing its unpredictable nature, it's a perfect time to talk about the markets. After all, it's this volatility that makes the markets interesting, right?
Whether you're a seasoned veteran or a newbie eager to learn, your perspectives are incredibly valuable, and now you can even win an exclusive reward for sharing them!
What's your prediction for a breakthrough trade this year? Comment below and share your thoughts.
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Remember, if a comment resonates with you or sparks an idea, feel free to like or reply to it!
We can't wait to read your comments! 🔥
GBPCHF H4 | Bearish continuationGBPCHF could fall towards an overlap support and continue the downtrend, reversing to our take profit level.
Sell entry is at 1.09333 which is an overlap support level.
Stop loss is at 1.09998 which is an overlap resistance level.
Take profit is at 1.08063 which is a swing-low support that aligns with the 61.8% Fibonacci retracement level.
High Risk Investment Warning
Trading Forex/CFDs on margin carries a high level of risk and may not be suitable for all investors. Leverage can work against you.
Stratos Markets Limited (www.fxcm.com):
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 66% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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Trading FX/CFDs carries significant risks. FXCM AU (AFSL 309763), please read the Financial Services Guide, Product Disclosure Statement, Target Market Determination and Terms of Business at www.fxcm.com
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Losses can exceed deposits.
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Trade Planning: Learning Through Consistency and DisciplineIm going to do a series of posts that are all about trade planning and learning about consistency and discipline through a practice. In this exercise, I will be consistently planning, executing what I planned, and documenting 30 trades.
A trade plan consists of a method, trade management, position sizing, documentation and review. A trade plan should state ahead of time, exactly where to enter, where to place stop, how the trade is managed, where to exit, and position sizing. This kind of accountability and responsibility offers a contrast to the our normal ineffective emotional impulses that we usually make our trade decisions from so that we can make a choice. I will talk more about each part of the trading plan future posts.
This exercise is not about the method, a setup, picking the right stocks, being right, winning, loosing, or predicting markets. It doesn't matter if all the trades are losses. The purpose is to learn about consistency and discipline through your own personal insight.
Its through discipline and consistency that we begin to re-wire old ineffective habits and develop an effective mindset for trading markets. Doing something consistently also offers a bassline to compare and truly learn.
There is often resistance to this kind of responsibility. If you want to take up the guidelines of the practice, just step into it as much as your ready for and make it your own. This is not meant for you to follow my trades or worry about my method or setup. Its not important and besides, my setups lose most of the time anyways. Use your own method, there are plenty out there and work on making it as simple and objective as possible. I also suggest you start out sim trading this or using very small size.
Forex 3-Session Trading SystemForex 3-Session Trading System
In the dynamic world of forex trading, mastering session-specific strategies can be essential for your trading performance. The Asian, European and US sessions in forex have their own unique rhythms and opportunities. This article delves into three strategies tailored to these sessions, offering insights for traders to navigate the complexities of the forex market.
Understanding Forex Trading Sessions
In forex trading, being familiar with the different forex trading sessions is essential. These sessions correspond to the active hours of major global financial markets, each exhibiting distinct trading characteristics. Wondering what time does the Asian session start? Here’s a concise summary of the major sessions:
Tokyo Session Forex Time: Typically runs from 11:00 AM to 8:00 AM GMT. This session is the primary Asian session, with contributions from other significant markets like Sydney. It's noted for its relatively lower volatility.
London Session Forex Time: Active from 8:00 AM to 5:00 PM GMT (winter) and from 7:00 AM to 4:00 PM GMT (summer), this session encompasses European market activities. It is marked by high volatility and substantial trading volume, particularly during its overlap with other sessions.
New York Session Forex Time: Occurs from 1:00 PM to 10:00 PM GMT (winter) and from 12:00 PM to 9:00 PM GMT (summer), involving American markets. Characterised by high liquidity, its overlap with the London session is particularly notable for trading activity.
Below, you’ll find three session trading systems. To gain the best understanding, consider following along in FXOpen’s free TickTrader platform. Note that they’re considered to be best employed on the 1-minute to 15-minute charts, with the 5-minute being preferred.
Asian-London Breakout
Trading the Asian session can present unique opportunities, especially when combined with the increased volatility of the London session. The Asian-London Breakout Strategy capitalises on this dynamic.
During the relatively calm Asian session, traders often observe the formation of a tight price range. This range is defined by its high and low points, serving as critical markers for the strategy.
Entry
As the London session begins, around 7:00-8:00 AM GMT, traders may set buy/sell stop orders at both the high and low of the Asian session's range. This approach aims to harness the surge in volatility as European traders enter the market.
Stop Loss
Once an order is triggered, a stop loss may be placed above or below the opposing high or low of the range.
The other order that wasn't triggered is usually cancelled.
Take Profit
Traders may look to take profits at the end of the London session or extend into the New York session, targeting major support or resistance levels.
Alternatively, they may trail a stop loss above or below key swing points that emerge as the trading day progresses.
The rationale behind this strategy is that the Asian session's consolidation often leads to a breakout as the London session begins, with new volumes and market participants. By setting orders on both ends of the Asian session range, traders can potentially capture significant moves regardless of the direction.
London Range Retest
The London Range Retest Strategy is a popular method for traders focusing on the volatility and patterns of the London session. It involves identifying a specific range and capitalising on its breakout and subsequent retest.
This strategy focuses on the range formed typically between 7:30 and 8:30 AM GMT during the London session. Traders have the flexibility to adjust this timeframe, possibly extending it from 7:00 to 9:00 AM GMT to better suit their trading style.
Entry
Traders look for a breakout from this defined range.
Once a breakout occurs, they wait for a retest of the range. Entry points may be identified either at the high or low of the range, at the 50% retracement level (the midpoint between the high and low), or at a specific support or resistance level indicated on the chart.
Stop Loss
The stop loss might be set beyond the high or low of the range, potentially ensuring a level of protection against market reversals after entry.
Take Profit
Given that the entry may not be triggered until later in the day, traders might prefer to close the trade at the end of the New York session.
Alternatively, they may set their take profit at a suitable support or resistance level, aligning with the market’s momentum.
The strategy's rationale lies in leveraging the initial volatility of the London session for a range breakout, followed by a patient wait for a retest. This method offers a structured entry point while managing risk with a well-defined stop loss.
London-New York Reversal
The London-New York Reversal Strategy focuses on the trend reversals often observed at the start of the New York session. It combines technical analysis with timing, offering traders a method to capitalise on these shifts.
This strategy leverages the period between 12:30 and 1:30 PM GMT, a time when the New York session's commencement frequently triggers market reversals as the US stock market opens. The key tool here is the Relative Strength Index (RSI) indicator, which is particularly useful for spotting divergences.
Entry
Traders monitor the RSI for divergences with the price movement.
An entry may be considered when a divergence forms, coupled with signs of a market reversal. This might be indicated by a specific candlestick pattern, such as an engulfing candle, confirming the reversal.
Stop Loss
The stop loss may be placed above or below a nearby high or low, depending on the direction of the trade. This placement helps manage risk in case the expected reversal does not materialise as anticipated.
Take Profit
Profit targets might be set at the London opening range, a strategy that aligns with the previous session's initial movements.
Alternatively, traders may choose to take profits at another appropriate support or resistance level in line with the ongoing market trends.
The strategy's basis lies in the observation that the overlap of the London and New York sessions can result in trend reversals, particularly detectable through RSI divergences and specific price patterns.
The Bottom Line
In conclusion, these forex session-specific strategies offer valuable tools for traders. By understanding and applying these techniques, you may enhance your trading performance. To put these strategies into practice and experience the dynamic forex market firsthand, consider opening an FXOpen account. It’s a step towards applying these insights in a real-world trading environment, where theory meets practice.
This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice
