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How to Use Stop Loss Orders in Trading?Stop loss order is the order that automatically closes your trade once it reaches a specified price target. Learn all about it here. Table of Contents: 🔹What Is a Stop Loss Order? 🔹Why Stop Loss Orders Matter? 🔹Setting Stop Loss Levels 🔹Types of Stop Loss Orders 🔹Adjusting Your Stop Loss Orders 🔹Summary In trading, reducing risks is oftentimes all that matters to achieving success. One of the essential tools to protect your investments from steep or unexpected losses is the stop loss order. Understanding how to use stop loss orders can unlock your path to profitability by allowing you to balance your risk and reward ratio. In other words, with the right stop loss setup, you can shoot for asymmetrical risk returns by keeping your drawdown small and letting your profits run. Let’s dive into the exciting world of trading and see how stop loss orders can be your greatest ally in trading. 📍 What Is a Stop Loss Order? A stop loss order is an essential risk management tool used by traders to limit potential losses on a trade. By using a stop loss order, you instruct your broker to automatically sell the asset you’re holding when it reaches a predetermined price level that is below your purchase price, or entry. A stop loss order allows you to control your losses and protect your investments so you don’t have to sit glued to the screen all the time. 📍 Why Stop Loss Orders Matter Stop loss orders play a big role in risk management. These easy-to-set trading tools help traders stick to predefined risk tolerance levels by limiting the amount of money they are willing to lose on any given trade. Without a stop loss order in place, traders may give in to emotional decision-making during periods of market volatility, leading to potential losses. If you have a hard time cutting your losses If you have a hard time cutting your losses when —ok, we get it, you're a bigshot— IF positions go against you, setting a stop loss when you enter the market will do the hard work for you. ➡️ Risk Management: One of the primary reasons stop loss orders are essential is because they help traders manage risk effectively. This is crucial in volatile markets where prices can fluctuate rapidly, as it prevents significant losses that could otherwise occur if trades were left unattended. ➡️ Emotional Control: Trading can evoke strong emotions such as fear and greed, which can lead to irrational decision-making. Without a stop loss order in place, traders may be tempted to hold onto losing positions in the hope that the market will reverse in their favor. ➡️ Peace of Mind: Knowing that there is a safety net in place can provide traders with peace of mind. Stop loss orders allow you to do your thing in the market without obsessively watching charts and tickers. Set your stop loss orders and focus on other aspects of your market study like catching up on the latest market-moving news and analysis . ➡️ Preventing Catastrophic Losses: In extreme market conditions, prices can experience sudden and significant declines. Without stop loss orders, traders risk experiencing catastrophic losses that could wipe out a significant portion of their capital. ➡️ Enforcing Discipline: Successful trading requires discipline and adherence to a well-defined trading plan. Stop loss orders help enforce discipline by striving to ensure that traders stick to their predetermined risk management rules. If trading is about discipline and consistency, then stop loss orders are the stepping stone to success. 📍 Setting Stop Loss Levels Choosing the appropriate stop loss level is a critical aspect of using stop loss orders effectively. Traders should consider various factors, including their risk tolerance, investment objectives, market conditions, and the volatility of the asset being traded. A common approach is to set the stop loss below a significant support level or a recent low in an uptrend (if you have a long position) and above a significant resistance level or a recent high in a downtrend (if you have a short position). Example: Suppose you purchase shares of a company called X (not Elon Musk’s privately held X Corp., which he created by rebranding Twitter) at $50 per share. You estimate that a 5% decline in the stock price would indicate a potential trend reversal. Therefore, you set your stop loss order at $47.50 per share to limit your potential loss to 5% of your investment. 📍 Types of Stop Loss Orders There are several types of stop loss orders that traders can utilize, each with its own special characteristics. The most common types include: ➡️ Market Stop Loss: a type of stop loss order that triggers a market order to sell the instrument at the prevailing market price once the stop loss level is reached. ➡️ Stop Limit: with a stop limit order, you have to deal with two types of prices. The first one is the price that will trigger a sell and the limit price. But instead of converting your order into a sell based on current market prices, you set a limit price. ➡️ Trailing Stop Loss: A trailing stop loss order is dynamically adjusted based on the movement of the instrument’s price. It allows traders to lock in profits while giving the trade room to move in their favor. Example: You purchase shares of a big tech company at $100 per share, and the stock price then rises to $120 per share. You set a trailing stop loss order with a 10% trail. If the stock price declines by 10% from its peak, the trailing stop loss order will trigger, selling the shares at prevailing market prices. 📍 Adjusting Stop Loss Orders While setting stop loss orders is essential, monitoring and adjusting them as market conditions evolve is equally important. Traders should regularly reassess their stop loss levels to account for changes in volatility, price action, and overall market sentiment. Additionally, as profits accumulate, trailing stop loss orders should be adjusted to protect gains and minimize potential losses. 📍 Summary In conclusion, stop loss orders are one of the most essential and effective tools for traders seeking to manage risk and preserve and grow capital in the challenging world of trading. By understanding how to use stop loss orders effectively, you can rein in emotional decision-making, protect your investments, and increase your chances of long-term success. Whether you're a novice or an experienced trader, integrating stop loss orders into your trading strategy is a smart approach to navigate the twists and turns of the financial markets. Remember, trading involves inherent risks, but with proper risk management techniques like stop loss orders, you can tilt the odds of success in your favor. ❓Do you use stop loss orders when trading? Which type ? Let us know in the comments ⬇️
Editors' picks
COINBASE:BTCUSDEducation
by TradingView
12
Diversification: What It Is, Why It Matters & How to Do ItDiversification is a market strategy that enables you to spread your money across a variety of assets and investments in pursuit of uncorrelated returns, hedging, and risk control. Table of Contents What is portfolio diversification? Brief history of the modern portfolio theory Why is diversification important? An example of diversification at work How to diversify your portfolio Components of a diversified portfolio Build wealth through diversification Diversification vs concentration Summary 📍 What is portfolio diversification? Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns. While it may sound complex at first, portfolio diversification could be your greatest strength when you set out to trade and invest in the financial markets. As a matter of fact, once you immerse yourself into the markets, you will be overwhelmed by the wide horizons waiting for you. That’s when you’ll need to know about diversification. There are thousands of stocks available for trading, dozens of indices, and a sea of cryptocurrencies. Choosing your investments will invariably lead to relying on diversification in order to protect and grow your money. Diversifying well will enable you to go into different sectors, markets and asset classes. Together, all of these will build up your diversified portfolio. 📍 Brief history of the modern portfolio theory “ Diversification is both observed and sensible; a rule of behavior which does not imply the superiority of diversification must be rejected both as a hypothesis and as a maxim. ” These are the words of the father of the modern portfolio theory, Harry Markowitz. His paper on diversification called “Portfolio Selection” was published in The Journal of Finance in 1952. The theory, which helped Mr. Markowitz win a Nobel prize in 1990, posits that a rational investor should aim to maximize their returns relative to risk. The most significant feature from the modern portfolio theory was the discovery that you can reduce volatility without sacrificing returns. In other words, Mr. Markowitz argued that a well-diverse portfolio would still hold volatile assets. But relative to each other, their volatility would balance out because they all comprise one portfolio. Therefore, the volatility of a single asset, Mr. Markowitz discovered, is not as significant as the contribution it makes to the volatility of the entire portfolio. Let’s dive in and see how this works. 📍 Why is diversification important? Diversification is important for any trader and investor because it builds out a mix of assets working together to yield returns. In practice, all assets contained in your portfolio will play a role in shaping the total performance of your portfolio. However, these same assets out there in the market may or may not be correlated. The interrelationship of those assets within your portfolio is what will allow you to reduce your overall risk profile. With this in mind, the total return of your investments will depend on the performance of all assets in your portfolio. Let’s give an example. 📍 An example of diversification at work Say you want to own two different stocks, Apple (ticker: AAPL ) and Coca-Cola (ticker: KO ). In order to easily track your performance, you invest an equal amount of funds into each one—$500. While you expect to reap handsome profits from both investments, Coca-Cola happens to deliver a disappointing earnings report and shares go down 5%. Your investment is now worth $475, provided no leverage is used. Apple, on the other hand, posts a blowout report for the last quarter and its stock soars 10%. This move would propel your investment to a valuation of $550 thanks to $50 added as profits. So, how does your portfolio look now? In total, your investment of $1000 is now $1,025, or a gain of 2.5% to your capital. You have taken a loss in Coca-Cola but your profit in Apple has compensated for it. The more assets you add to your portfolio, the more complex the correlation would be between them. In practice, you could be diversifying to infinity. But beyond a certain point, diversification would be more likely to water down your portfolio instead of helping you get more returns. 📍 How to diversify your portfolio The way to diversify your portfolio is to add a variety of different assets from different markets and see how they perform relative to one another. A single asset in your portfolio would mean that you rely on it entirely and how it performs will define your total investment result. If you diversify, however, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns and decreased overall risks. You can optimize your asset choices by going into different asset classes. Let’s check some of the most popular ones. 📍 Components of a diversified portfolio Stocks A great way to add diversification to your portfolio is to include world stocks , also called equities. You can look virtually anywhere—US stocks such as technology giants , the world’s biggest car manufacturers , and even Reddit’s favorite meme darlings . Stock selection is among the most difficult and demanding tasks in trading and investing. But if you do it well, you will reap hefty profits. Every stock sector is fashionable in different times. Your job as an investor (or day trader) is to analyze market sentiment and increase your probabilities of being in the right stock at the right time. Currencies The forex market , short for foreign exchange, is the market for currency pairs floating against each other. Trading currencies and having them sit in your portfolio is another way to add diversification to your market exposure. Forex is the world’s biggest marketplace with more than $7.5 trillion in daily volume traded between participants. Unlike stock markets that have specific trading hours, the forex market operates 24 hours a day, five days a week. Continuous trading allows for more opportunities for price fluctuations as events occurring in different time zones can impact currency values at any given moment. Cryptocurrencies A relatively new (but booming) market, the cryptocurrency space is quickly gaining traction. As digital assets become increasingly more mainstream, newcomers enter the space and the Big Dogs on Wall Street join too , improving the odds of growth and adoption. Adding crypto assets to your portfolio is a great way to diversify and shoot for long-term returns. There’s incentive in there for day traders as well. Crypto coins are notorious for their aggressive swings even on a daily basis. It’s not unusual for a crypto asset to skyrocket 20% or even double in size in a matter of hours. But that inherent volatility holds sharpened risks, so make sure to always do your research before you decide to YOLO in any particular token. Commodities Commodities, the likes of gold ( XAU/USD ) and silver ( XAG/USD ) bring technicolor to any portfolio in need of diversification. Unlike traditional stocks, commodities provide a hedge against inflation as their values tend to rise with increasing prices. Commodities exhibit low correlation with other asset classes, too, thereby enhancing portfolio diversification and reducing overall risk. Incorporating commodities into a diversified portfolio can help mitigate risk, enhance returns, and preserve purchasing power in the face of inflationary pressures, geopolitical uncertainty and other macroeconomic risks. ETFs ETFs , short for exchange-traded funds, are investment vehicles which offer a convenient and cost-effective way to gain exposure to a number of assets all packaged in the same instrument. These funds pull a bunch of similar stocks, commodities and—more recently— crypto assets , into the same bundle and launch it out there in the public markets. Owning an ETF means owning everything inside it, or whatever it’s made of. ETFs typically have lower expense ratios compared to mutual funds, making them affordable investment options. Whether you seek broad market exposure, niche sectors, or thematic investing opportunities, ETFs are a convenient way to build a diversified portfolio tailored to your investment objectives and risk preferences. Bonds Bonds are fixed-income investments available through various issuers with the most common one being the US government. Bonds are a fairly complex financial product but at the same time are considered a no-brainer for investors pursuing the path of least risk. Bonds have different rates of creditworthiness and maturity terms, allowing investors to pick what fits their style best. Bonds with longer maturity—10 to 30 years—generally offer a better yield than short-term bonds. Government bonds offer stability and low risk because they’re backed by the government and the risk of bankruptcy is low. Cash Cash may seem like a strange allocation asset but it’s actually a relatively safe bet when it comes to managing your own money. Sitting in cash is among the best things you can do when stocks are falling and valuations are coming down to earth. And vice versa—when you have cash on-hand, you can be ready to scoop up attractive shares when they’ve bottomed out and are ready to fire up again (if only it was that easy, right?). Finally, cash on its own is a risk-free investment in a high interest-rate environment. If you shove it into a high-yield savings account, you can easily generate passive income (yield) and withdraw if you need cash quickly. 📍 Build wealth through diversification In the current context of market events, elevated interest rates and looming uncertainty, you need to be careful in your market approach. To this end, many experts advise that the best strategy you could go with in order to build wealth is to have a well-diversified portfolio. “ Diversifying well is the most important thing you need to do in order to invest well ,” says Ray Dalio , founder of the world’s biggest hedge fund Bridgewater Associates. “ This is true because 1) in the markets, that which is unknown is much greater than that which can be known (relative to what is already discounted in the markets), and 2) diversification can improve your expected return-to-risk ratio by more than anything else you can do. ” 📍 Diversification vs concentration The opposite of portfolio diversification is portfolio concentration. Think about diversification as “ don’t put your eggs in one basket. ” Concentration, on the flip side, is “ put all your eggs in one basket, and watch it carefully. ” In practice, concentration is focusing your investment into a single financial asset. Or having a few large bets that would assume higher risk but higher, or quicker, return. While diversification is a recommended investment strategy for all seasons, concentration comes with bigger risks and is not always the right approach. Still, at times when you have a high conviction on a trade and have thoroughly analyzed the market, you may decide to bet heavily, thus concentrating your investment. However, you need to be careful with concentrated bets as they can turn against your portfolio and wreck it if you’re overexposed and underprepared. Diversification, however, promises to cushion your overall risk by a carefully balanced approach to various financial assets. 📍 Summary A diversified portfolio is essentially your best bet for coordinated and sustainable returns over the long term. Choosing a mix of various types of investments, such as stocks, ETFs, currencies, and crypto assets, would spread your exposure and provide different avenues for growth potential. Not only that, but it would also protect you from outsized risks, sudden economic shocks, or unforeseen events. While you decrease your risk tolerance, you raise your probability of having winning positions. Regardless of your style and approach to markets, diversifying well will increase your chances of being right. You can be a trader and bet on currencies and gold for the short term. Or you can be an investor and allocate funds to stocks and crypto assets for years ahead. Potential sources of diversification are everywhere in the financial markets. Ultimately, diversifying gives you thousands of opportunities to balance your portfolio and position yourself for risk-adjusted returns. 🙋🏾‍♂️ FAQ ❔ What is portfolio diversification? ► Portfolio diversification is the strategy of spreading your money across diverse investments in order to mitigate risk, hedge and balance your exposure in pursuit of uncorrelated returns. ❔ Why is diversification important? ► Diversification is important for any trader and investor because it creates a mix of assets working together to yield high, uncorrelated returns. ❔ How to diversify your portfolio? ► The way to diversify your portfolio is to add a variety of different assets and see how they perform relative to one another. If you diversify, you will have a broader exposure to financial markets and ultimately enjoy more probabilities for winning trades, increased returns, and decreased overall risks. Do you diversify? What is your strategy? Do you rebalance? Let us know in the comments. 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Editors' picks
SP:SPXEducation
by TradingView
4
CHFJPY Short Analysis + Trade IdeaCHFJPY 4HR Analysis + Trade Idea by OfficialKieranTrewick Looking for a 4HR fractal pivot rejection off 170.750-171.000 to provide good entries for shorts down to 169.500 - 167.000, The daily trend is very strong with chfjpy ongoing since 2021 and with multiple recent rejections off the latter side it seems it may be loading up for the surge into ATNH but with how strong of a resistance there has been at 171.500 i am not sure if this will be anytime soon, and with how strong the trend has been there is definitely room for some exhaustion down to 165-163 without affecting any long term market structure. Currently where the inner trend meets the underside of the largescale trend within a large range zone block trapped between 50% and a strong resistance level, the key here is just patience and waiting for the right confirmations to play out. On friday I already entered a short position with my VIP group from around 170.850 with various take profits levels down to 170.750, 170.500, 170.250, and 169.250.
Short
by OfficialKieranTrewick
Gold xauusd intraday signal 14-09-23R3 LRS 1924 R2 MRS 1915 R1 HRS 1910 S1 HRB 1909 S2 MRB 1906 S3 LRB 1898 BUY> If the price gets rejection from 0.0%/1905 then an entry around 1906 otherwise buy around 1898-1903 SELL> If the price gets in touch with 38.20%/1913 and Sma44 aligns with it then selling will be essential around 1912-15 FOLLOW UP D1 Sma200 acted as support for three days 1917-18-19 and now at resistance 1920 W1 Sma44 1910 Now will serve as Resistance MN 38.2%/1903 Macro Fibo as Support OBSERVATIONS: The green marked arrow act as support for the whole day at 1909. There are more resistances in larger time frames present in fibo range than support H1 is in down trend so a sell entry is much safe. However as retracement is always due we cannot over look buying opportunity also.
FXOPEN:XAUUSD
by wajidalikhan2123
Gold xauusd intraday signal 13-09-23By the Grace of All Mighty Allah. Alhamd o Lillah, it is being second month of my posted signals that we are in consistent winning ratio of 7:10. After taking multiple TPs from 23 and 28 entries. Only one in sell at 1928 is still active. Finally D1 showed the first way point as price crossed the strong hold of Sma200 in it. W1 Sma44 was kissed at 1910 and penetrated a bit also. MN 1903 is nearing day by day. Keeping all facts of larger time frames, here is the work plan for Wednesday. The black path line is showing a possible DB at 0%/1907 and may lead the price towards 50%/1919 where Sma200 of D1 at 1920 has become resistance. This is the point of sell. Consequently there is a good buy position at 0%/1907 if rejected. However if the DB fails and 0%/1907 got broken then on return from 38.2%/1903 MACRO FIBO a rejection may occur at 0%/1907 making a sell opportunity. Subsequently an immediate sell can be initiated at 23.6%/1913 also. My work plan is to wait for the price to get rejected from 1907 to take a buy or on break of 1907 wait further for the price to return from 1903 to be rejected from 1907 to take a sell. However Wednesday is also a big news day so our very first option is to avoid any un necessary entry. The work plan is affordable well before this news event.
FXOPEN:XAUUSD
by wajidalikhan2123
Gold xauusd Intraday Signal 12-09-23Please do not get bored from the review I gave for our last trade session. It is a learning process for all of us to review and revise our achievements and mistakes. Well, Monday blues turned out to be a happy day, my previous sell entry and sell at 1920 got BE hit respectively but buy at 1917 gave the TP. Later on our group decide to jump in on a confirm rejection at 1929 and we took 1928 and 1923 sells. I have TP my 1928 sell first lot and again second is on BE. However 1923 is still open. D1 Sma200 defended well for the fourth day and kept the price above 1918 and now it is serving at 1919. However the upper side long wicks made are a sign of selling pressure. W1 and MN TFs are still near their respective supports. Fellows must be wondering why I am so much observing larger time frames because all of the work plan is being done on H1 TF for Intraday. Here is the answer, when larger TFs are near to their SNRs, a possible reversal or retracement could happen and it helps a lot to decide more confirmed entries secondly it also help to decide TP for the second lot we take. For example D1 support is falling between our well tested ranged SNR 1918-23. Ok for Tuesday session, a sell chance is at 50.0%/1923.60 where Sma44 is also aligned. For a buy opportunity we still have 100.0%/1916.51 and the D1 support 1919. Also SMC demand/buy range falls in between. So the work plan is to place PO at 1823 for sell and 1918 for a buy but on rejection from 100.0%/1916.51 level. Due to down trend in H1 a confirmed rejection is required to pick a buy entry.
FXOPEN:XAUUSD
by wajidalikhan2123
Gold xauusd Intraday Signal 11-09-23I remember on Thursday we got two BE hits and we rested and call the day off. Friday turned out to be profitable and we got two TP hits but it was only due to group discussion and a team work. Very realistic live market trading. My second lot in sell at 1926.91 is still intact. Lets have an over view of market position as it is a week end and we have a break to relax and cover up all TFs. So, in monthly TF the price is leaning towards its support area 1903/38.2% MACRO FIBO. W1 TF is also dropping towards Sma44 support 1907. So the D1 TF is going to play a vital role in clarifying the way point because its Sma200 have supported the price at 1917 and now it is serving as support at 1918. We may see last three candles were well kept online with it. Now we can observe our H1 TF for our work plan. Having in mind all those large TF support areas, The SMC indicator is showing demand/buy area from 100%/1916 to 78.6%/1919 provided Sma44 is aligned with 61.80%/1921. So we are range bound on our tested 1918-23 Ranged SNR. It will be also Monday, price may hover around 1916-21. We have to enter the market with BE technique. On Break/Rejection at 1921, I will BE it on reaching 1919 in sell and 1923 on buy. Similarly on Break/Rejection at 1916, I will BE it on reaching 1914 in sell and 1918 on buy. Set your alarms as Trading View for two points 1921 and 1916 and then act accordingly. Don’t waste your time watching the monitor unless you are a Scalper. My sentiments are more towards selling. Do not enter blindly, compare your work with mine and if you feel unity in them, go for it. Good luck.
FXOPEN:XAUUSDShort
by wajidalikhan2123
3
Gold xauusd Intraday Signal 06-09-23What a day of twist n turns. Well we are happy to get that second lot chance to tp 1952 and 1945 at 1935. A lottery that gave 100 and 170 pips in bonus. This is the result of taking 2 lots every time. Get one TP at 50pips to relax your nerves and feel nourished and keep other on BE for a chance to get some more pips. Trust me once or twice a month you will enjoy this bonus as we did rite now. Ok for the next session, nothing is clear. Price is at the bottom but SMAs in H4 TF has already crossed and about to initiated Golden cross, H1 is already bullish but with a slight bend and the momentum has gone bearish. Still there are chances of a speed buy to come as it happened for a while from 28 to 34 in minutes but halted. I simply don’t have a clear vision for a LRS or LRB. So the day might end up in observation and waiting. I will wait for the Sma44 and Sma200 to join at one of the fibbo level to make a SNR for the day and then might choose an entry if the price tests them as support or resistance. However SMC is indicating 1938 and 1946 sell area in H1 and 1915 buy area in H4. Lets wait and watch which one comes first. Take care.
FXOPEN:XAUUSD
by wajidalikhan2123
2
understanding how to analyze observing the charts aren't always easy , its ok to walk away until you find the perfect entry. Main thing is to always have a game plan for execution , you must have a set amount you looking to make ; get it and go and also Over trading can be very dangerous. when i start my observations i go from the 5min chart all the way to the 1 day chart to see which way i want to go with , today i went with shorts ( market going downward direction ) mind you im trading with 1500 contracts , its safe to start with 1-3 contracts and build your confidence from there.
CME_MINI:ES1!Short
by residuallife13
Demo Accounts are "Rigged" against us all!But not by any of the brokers..... They are rigged by OUR OWN MINDS Let me explain..... You start learning how to trade, all the lingo, and even some strategy. You start a demo account, doesn't matter where, and just start trading You do it just like you learned, from where ever you learned it. Indicators, check, do the analysis, check, major levels, check, and so on. You place the first trade, with stop and take profit. It wins. You do it again, and again. Maybe lose here or there, but for the most part you keep winning. You look at the balance finally, and wow, it's up an insane amount. Maybe it was luck, reset and do it again. You don't pay much attention to the profit or loss of each trade, and even further you may not even pay attention to floating profit and loss (unrealized gain or loss). Money is not important, it's just a demo and you are only trying to test and make sure you know what you're doing, and you won't be trading 100k, it's just practice. You just missed something that is critical..... "Money is not important" It's fake who cares, the strategy and just getting familiar with trading is all you are trying to do. All this fake money doesn't count, it doesn't matter, and you won't watch it at all, or maybe even check after every trade just to feel good about it going higher and higher, but not how much because of trade sizing. Now you have a lot of confidence, so hey, let's toss $1000 from savings in there and do it for real. You get a spread only account, because that's the starter account. Account is set up and you don't even bother to see what you can trade with, the margin, none of that. You just do what you did in demo. Everything is set, you apply indicators, what ever you want to do. "This is going to make me rich" you think, and you place your first trade for 1 lot, because you could place 100 of those in demo, and didn't lose much so it's fine. Order filled Immediately, -$23 is all you see. But the trade just opened.... It's now too late, your mind has officially rigged yourself. That instant red number will stick with you. The price nudges down, only about 4 pips, and you begin to only focus on the floating P&L, The real money you earned, and right now that's $60 in the red, Close it! Close it! Close it! Don't lose it! Whew, got out of that one. Try again Place another trade, another red $23, now it moves 3 pips against you, oh no, losing again! close it now! ok that's two, but I only have $900 left oh my god, that was fast! This one has to win, because hey, it worked in demo right? Place another trade. You know it's red as soon as it opens now, so you wait. Price moves up 4.5 pips, Green, Profit! close it! wow a win finally. Only $35, but a win, going up now. Place another trade, and because you figure this is when it works like demo, you you think the next one is big. It reverses and takes out the stop loss. You did better but stopped out, lost another big chunk of the account. What's this? price just shot back up and past my target! GGRRRRRRR! It's going to keep on heading up, buy! You don't do the stop loss because it's gone! it has to go, then boom liquidity sweep and it wipes out your account. But you won in demo, what's wrong!?!?!?! Let's try again. Repeat the process. You may do this several times with the same broker, or the different brokers, but you will do the same thing repeatedly. Human nature eventually leads us to believe demo accounts are rigged. You are 100% correct, but the brokers are not the ones doing it. When you trade a demo account YOU DON"T CARE about the money.... It's not real, so why bother, just make sure the strategy works. Check This is how your mind will "rig" the demo against you. In demo it's only strategy, testing, trying things out, not the money. Live account, it's all about the money, because that's what you want out of it of course. And you worked for it, the hard way. Then, after a few more trades, you see your demo account balance just keep rising again. Go back to live, Deposit more, and now look harder at the P&L constantly going down, not realizing you tossed the rules out the window again, and you are not trading real the same as when you traded for fake. The money is real and you don't want to lose..... This is how demo is rigged. In order to beat it You must trade your real account the same as you would a demo account. When you do this, you will notice it won't matter (near as much) which you trade after, you will get the same results. Demo money is not real, it's a made up unit in a game. If you can manually set the value of your demo, it is best to set it to the same account size as what you intend to trade for real with. This way, you can see the actual P&L, see the real results of backtesting/forward testing, and you can be familiar with the numbers you can expect to see when you use your real money. It is also much less "Traumatic" to our minds as we go to real money from a fake account of the same size, and makes the demo seem more realistic. If you step down from 100k to 1000 is about the same as going up from trading 1000 to 100k, that's a giant leap in sizing, results, in progress expectations of what it looks like for drawdown and P&L floating, and so on. Just a massive trauma to our mental system. Not having proper and matching expectations is another way our mind will rig the demo against us. If you find yourself constantly looking at P&L, instead of the trade, it would be good practice to just stay in the demo account until it's boring. The reason you do it to a point of boredom is so you will train yourself to trade by sticking to your strategy and rules as a habit, not just an emotion because the money is real this time. Once real money gets involved, all the rules "go out the window" even if you don't realize it. It becomes all about the money, and not about repeating the results. Things won't seem the same as they were before, you think. Things are in fact exactly the same as before, minus one key element: The real money. And that is how you rig the demo accounts against yourself. Forget about the money in the real account, and just focus on making the trade. Trust your risk management and your math to find the right risk size, set the order and target/stops, and let it rip just like you did in demo. If they don't feel the same, real or live, be careful you are not looking too hard at money, and not hard enough at the actual trade the market is presenting to you and your strategy. Been there and done that. I agreed with the crowd for a long time, until I did one day demo, one day live, one day demo, one day live, back and forth back and forth, and finally, it hit me, and I got mostly out of it. I still look at money sometimes, but because of journaling and tracking my trades with tradingview, I can see, most of the times I have the right Idea, I just didn't wait long enough. This makes me think back to my demo days, and how the argument around it today is. Yes brokers want your money, but they don't get the money you trade. They are not "hunting your specific stop just because they don't like you" no. They make money by fees on trades you place. That's it. If they make money on your trade by taking the other side of your trade, that is not a reputable broker, and I only advise reputable brokers to work with, not some new company in the Kaiman isles or something out of jurisdiction of any law, but that's a topic for another time..... *I've had this argument for the case against how demos are rigged for a long time, just never posted it. Thought here would be a great place to put it, and maybe help some others out of the trap I was in with so many other traders having the same attitude to demo account trading. Yeah it's definitely rigged. To what degree depends on the mind who is using it at the time.....
Education
by ForexStoryteller
How to start Trading?I'm very active in a few communities (the Tradingview official Discord for example) and one of the most asked question is: How do I start trading? Let me try to give you a blueprint on what to do to at least get some foot in the ground! Lets make something clear: you are learning a new job here! thread it that way and you will have the best chances! (No job on this planet can be learned in just a few weeks, you need months and years to get on a level you can be sell-employed) I give you a fast-track on certain things but make sure you research every point more then I provide still, this is just the blueprint. After that, its you that has to study. no one can help you there.. --- Candles --- OHLC (Open High Low Close) is all you need, its the founding blocks on 99% of TA out there! Open and Close are the values when the candle opened/closed on the timeframe you are on. High and Low is the highest and lowest value trades were happening while in the timeframe (also called: Wicks). Volume is also something you hear a lot and is important to know, it shows how much was traded in that candle (shows the power~) --- TA (Technical Analysis) --- With TA we try to predict a probability in future prices to find opportunities in the market. Across Tradingview there are thousands and thousands of indicators available to you, we just need to focus on the biggest and most common ones for the start. RSI MACD Moving Averages (simple, exponential, smoothed, and so on..) Price trends Support and Resistance Volume Start with those 6 and work your way through all of them, analyse how they work, what they mean, where they come from and you have a good knowledge for future improvements. (yes, you probably don't need all of them, its just a good base to have) --- Trading Terms and there meaning --- Learn the following words and what they mean in the sense of trading: - Long / Short - Bid / Ask (combined with spread below) - Crypto, Forex, CFD, Stocks, Options (Bonds, Shares, Indices...) - Market Order / Limit Order (Stoploss, Profit Target) - Leverage - Margin - Spread / Slippage (related to News) there are a lot more to learn, but this will get you suited for the next few points. --- Find your way --- Find what you can do and what you can't do (some of us have family, a 9to5 job, other things) that will not let you trade every way. Make yourself a time-table, a budget plan and then research on this criteria how you want to spend your trading-time. (If you have a 9to5 job, you probably cant watch the chart on a minute timeframe, so strategies involving this is not suited) --- Risk Reward --- Calculate how much you need and with that information backtest your strategy to find out how profitable it is and then set your risk:reward ratio to the calculated risk you can afford to lose to still make the profit you need in the end. Example: If you lose 2 trades with a RR of 1:5 and win another one, you won 3R (Lost 2 = -2R, Won 1:5 so + 5R = 3R - its not precise, as there is slippage and commissions). If you are happy with 2R, then thats the way you trade from now on. Keep this always the same as the math dont lie but your feelins will try to betray you (thats the psyochology part that comes up next) This point is very, very important to understand and to learn and to adapt to your circumstances. if you don't do that, you will fail no matter what! --- Psychology --- Well, thats one of the major points and its very, very big. Do a lot of research on this part and also use papermoney as kind of a challenge for yourself so if you lose it, you still get "mad". baseline is: dont have feelings! it has to be all mathematical and mechanical. --- Paper Trade --- Yes, don't use your own money in the beginning, you can paper trade on Tradingview for free without any risk and you can test all the strategies/indicators on this planet for free and see how they perform. Make challenges for yourself (so psychology is also trained). Don't underestimate this point, paper trade for at least 6 month every day 6h to really grasp what you are up to, what you are doing, how to improve everything and to get the feeling for everything! Once you went through those points you are given a toolbelt with a lot of tools, now its time to figure out what tool to use in what situation. Research a lot of strategies and find something that works for you.. and then melt it into something useful!
Education
by Swiss_Traders
Selection & how to operateThe obvious part if you've understood all the previous posts. It's easier to start with how Not to trade . Wrong - cherry picking "strong" levels. Every level is a level, not better & not worse than another one. Choosing the supposedly strong levels is a subjective thing that reduces expected value & consistency. Right - operating at each level on a given resolution, you either expect a level to repel prices or to be consumed, you operate accordingly at every level. The more you operate, better for the market, higher your revenues. If there too many levels for you, instead of cherry picking you just move to a lower resolution. Some levels can be effectively skipped because of risk & sizing consideration, but skipping levels an cherry picking levels are 2 completely different mindsets. Wrong - stopping operation after N loosing trades. Right - controlling equity as explained in "Sizing & how to manage risk". If you're making loosing trades in a row, you don't stop, you just hit zero size, then you imagine trades or execute on simulator, when your size comes back to a non-zero value you come back to the real account. More you operate - better for the business. Wrong - waiting for a "confirmation". If you don't have a firm expectation whether a level will repel prices or will be consumed, you don't know what you're doing, read all the posts and understand how it all works. Right - knowing in advance what you gonna do at each level & keep reevaluating it in real time. Wrong - making reentries. The activity around levels, especially how levels get cleared, is very well defined. After the scaling in is complete, you either exit at loss/at breakeven when a level gets cleared / positioned in the unexpected side. Or, you scale out while being in the money. Right - unless there was a mistake caused by a misclick or smth like dat, reentries is an irrelevant concept. Wrong - working out insurance after the entry. Right - a hedge should be bought BEFORE scaling in, same goes about placing the stop-losses. How to operate Asset selection Not many people think about it, but it makes sense not only to provide liquidity when & where there's not much of it, but also to consume excessive liquidity when & where there's too much of it, because both cases are unhealthy for the markets. So, we have 2 types of trading instruments then: 1) overquoted ones, such as GE, ZN, or ES many years ago; 2) underquoted ones, such as CL, NQ; How to distinguish dem? One way is to take a look at volumes on highest resolution cluster/footprint chart, and compare em with the actual number of bid/asks in the DOM. ZN for example is hugely overquoted, you'll notice that: it has aprox 1000 contract at every bid/ask price, but when these limit orders start to get consumed at one price, the rest orders at the same price just gets cancelled, and you see lesser values on your footprint/cluster chart. The opposite happens on underquoted instruments, they need liquidity. Why it matters? You operate the same way on both under and overquoted vehicles, but: 1) on underquoted vehicles you mainly use limit orders, you provide liquidity; 2) on overquoted vehicles you mainly use market orders, you remove liquidity; Exits at loss vs attempting to get out around breakeven Both are legit, the latter gives more freedom, but implies not using stop-losses so you have to know 4 sure what's happening and what you're doing. That's how you trade with stoplosses. 1) In case of trading pops from positioned levels, you simply exit when the support/resistance gets cleared, in case of clearing by price it means you'll have an L, no big deal tho; 2) In case of trading pushes through positioned levels (aka trading clearings aka trading consumptions), same, you're getting an L if you hit the invalidation point. The invalidation point for these trades is the opposite border of the positioning sequence. This border is found the same ways as the front level, just at the opposite side; 3) Trading during a positioning itself. Makes least sense to trade with stop-losses, but in theory: taking an L at the next level past the level you expect to be positioned this or that way. If there is no level past you current level, you try to make a projection, smth like its shown on ZN chart of this post, imagine you were trading positioning of 112'19. Without stops it's almost the same, it's just instead of taking an immediate loss after an invalidation event, you exit at breakeven when price comes back to the entry zone (in most cases it does). If prices don't go back and hit another level, you simply continue trading there, if that new level you're working with now is supposed to act in the opposite direction from the previous one, you simply reverse your position. If that new level is supposed to work in the same direction as the previous one, you're holding your position further. This kind of operation assumes very high win rate, low RR ratio and very rare but significant losses. However, if the unexpected happens 2 times in row, chances are the problem is on your side xD Finally 1) Monitor non-market data in order not to be caught against the momentum surges (eg unless you're a DMM, trading at Jobless Claims release is a BAD IDEA); 2) Pick your main resolution that way you'll be satisfied with the frequency of your operations; 3) Work with all the levels there; 4) Never approach the next level while having a full position, always offload risk on the way, unless you expect the next level to be cleared/positioned in the same direction; 5) Always control risks; 6) Understand that it's all about doing the right thing, and it's totally possible to understand what is right by gaining all the info from all the data. You should end up trading 100% of positioned levels, trading 50% of positioning processes demselves, and rofl never try to trade smth that looks like "a new level is forming now".
CBOT:ZN1!Education
by gorx1
HOW-TO: Adjust Default Parameters in MLC for Intraday TradingThe default parameters in Master/Last Candle (MLC) indicator are used for the standard timeframe 1D. Due to the difference in nature between bars of intraday timeframes and bars of day-and-above timeframes, some settings could be changed as below to make the indicator tailored to your case. • Increase default Max Volume Drop % from 25 to 30. We have seen a case in timeframe 30m that requires deeper volume drop than 25% to catch the big move. If you also find a big move that is not captured by MLC, try to adjust this measure as we do. If it is not your case, ignore this item and keeping the old default value as 25. Before After • Other parameters: Percentile % , Min Price Breakout % . Before After increasing Percentile % of Cx candles from 50 to 60 After increasing Min Price Breakout % from 20 to 25
Education
by SupersafeTrader
Tutorial On How I Look For Entries/Exits Each Day - ATOMUSD - 1DHello traders, I meant to publish this in the morning but I got pulled away on something else. It seems my analysis would have been correct, so I'll share this now. This method is just one of many ways a trader can identify trend direction and entry/exit points at the beginning of each day. To start... I identify all patterns and indicator setups that indicate something bearish (the ones in red) or bullish (the ones in green). I put a +1 tally next to each of them. After identifying all the setups I can, I count the tallies for bullish/bearish bias. Today, even though the immediate term was looking bullish, there were more bearish signals than bullish ones. For good measure I then like to do a left to right scan across the chart to see which ones are most prominent to the right (i.e. currently). I saw the breakdown of the trendline on the right side of the chart, and paired with the bearish signals outnumbering the bullish signals.. I opened a short which was very profitable.
COINBASE:ATOMUSDEducation
by cache_that_pass
Don't be like Bully Maguire...If you are feeling the emotional swings of Bitcoins price and you want to trade with confidence then this is for you. The following things I am about to talk about drastically changed the way I approach trading. They are so powerful in their application... No need for cheap gimmicks and fancy tricks. So here it goes: Operate on first principles. Millions of traders have SOS... Shiny object syndrome. They chase every "new" technique that hits the market, it doesn't matter if it works, aslong as they got to try it and didn't miss out on anything they will be happy - for a time. It is marketing 101 to rile up those emotion in traders, don't fall for it. Be stoic, hold your ground and stick to first principles. If you don't I can tell you in my experience (9 years), you will chase strategies and ideas like they are a sold gold brick but they will just turn out to be gold dust that will fall through your fingers at a moments notice. You will move throughout life with a chip on your soldier, negatively affecting those around you like a cheap knock-off Bully Maguire meme. So... What are the first principles of trading? And how do you act from first principles? I am not allowed (house rules) to provide you with a link to these questions so instead use your deduction methods Sherlock to find your answers.
by NinjaTradingServices