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Combined Staking and Shorting Strategy with Technical AnalysisThis strategy involves buying and staking cryptocurrencies during oversold conditions while shorting during overbought conditions to maximize profits from both price movements and staking rewards. Strategy Breakdown Buy and Stake 1. Identify Oversold Condition:    - Use technical indicators (like RSI or a combination of RSI and CCI) to identify an oversold condition on the 4-hour chart. 2. Wait for Support Reclamation:    - Wait for the cryptocurrency to reclaim a previously broken support level, indicating a potential price reversal. 3. Buy Cryptocurrency:    - Purchase the cryptocurrency at this point. 4. Stake Cryptocurrency:    - Stake the purchased cryptocurrency to earn staking rewards. Short and Profit 1. Price Breakdown:    - If the price breaks down below a new support level, initiate a short position. 2. Target Profits:    - Set profit targets based on the 30-period average price change on the 4-hour chart. Short and Hold 1. Identify Overbought Condition:    - Use technical indicators to identify when the price enters the overbought region. 2. Wait for Support Break:    - Wait for the price to break below a support level (or a previously broken resistance level), signaling a potential downtrend. 3. Go Short:    - Initiate a short position while still holding your staked positions to hedge against potential losses. Pros and Cons Pros 1. Earning Staking Rewards:    - Continues to earn staking rewards even when prices are volatile. 2. Capitalizing on Market Conditions:    - Gains from both upward (via staking) and downward (via shorting) price movements. 3. Risk Management:    - Hedging through short positions can protect against significant losses in a bear market. 4. Enhanced Profits:    - Potential for higher overall returns by combining staking rewards with profits from shorting. Cons 1. Complexity:    - Requires a good understanding of both technical analysis and market timing. 2. Transaction Costs:    - Multiple trades (buying, shorting, covering) can lead to higher transaction fees. 3. Market Risks:    - Volatility can lead to unexpected losses, especially if the market moves against your short positions. 4. Staking Risks:    - Staked assets might be locked for a period, limiting liquidity and flexibility. Using Leverage Leverage can amplify both gains and losses. It allows you to open larger positions than your capital would normally allow, but it comes with increased risk. How to Use Leverage 1. Careful Position Sizing:    - Use leverage sparingly. Consider using 2x to 5x leverage rather than extreme levels. 2. Risk Management:    - Always use stop-loss orders to limit potential losses. 3. Monitor Margin Levels:    - Keep a close eye on margin requirements to avoid liquidation. 4. Balancing Exposure:    - Maintain a balanced portfolio. For instance, if you use leverage to go short, ensure your staked positions are not excessively exposed to market downturns. 5. Leverage in Short Positions:    - Use leverage for short positions to maximize potential profits from price declines. For example, if you have $100 in staked assets, you might use $20 to $50 of your own capital and $20 to $50 of borrowed funds to short an equivalent value.
Education
by The_Bull_Trader
Growing Small Accounts Without High Risk### Growing Small Accounts Without High Risk #### What to Avoid: Do not rush to make massive gains in either pips or % returns. Do not open yourself to large risk in hopes of equally large returns or profits. Do not assume taking small risk-defined trades will not grow your account. Do not sacrifice trading equity due to poor planning or lack of planning. #### What to Aim For: Determine how to realistically anticipate a favorable reward-to-risk model. Learn to respect the risk side of trade setups more than the reward. Identify trade setups that permit three reward multiples to one risk or higher. Frame good reward-to-risk setups that have little impact if unprofitable. ### The Reality of Reward to Risk Ratios | Winrate | Minimum Ratio | |---------|---------------| | 75% | 0.3 : 1 | | 60% | 0.7 : 1 | | 50% | 1 : 1 | | 40% | 1.5 : 1 | | 33% | 2 : 1 | | 25% | 3 : 1 | If your winrate is 50%, you only need 1:1 Risk to be profitable.
Education
by SerenityEquity
Best Trend Following Strategies for Gold. XAUUSD Day Trading The recent bull run on Gold is a perfect example of a strong trending market. For traders, such sentiment always provides very profitable trading opportunities. In this article, I will share with you 3 best trend-following strategies for day trading Gold that showed extremely high performance this year. So what I did, I back tested 4H/1H time frame since the middle of February when the bull market started. I tested various strategies: price action, SMC, multiple indicators, candlestick patterns ; and I was looking for the ones that showed the highest accuracy and profitability. 1. Moving Averages Crossover The first strategy that showed a very high performance was based on a crossover of 2 moving averages. Exponential MA with 30 length. Simple MA with 9 length. For entry signal, Simple MA should cross Exponential MA from the downside and a candle should close above both MAs'. Stop loss will be below the closest horizontal support. The setup is considered to be profitable if, after the entry, the price moved up at least by pips distance from entry to stop loss. 13 setups we spotted. 9 of them were profitable. Total winning rate is 69%. 2. Trend-Following Patterns The second strategy that showed a very high performance was based on classic price action patterns. I was looking for bullish patterns like bullish flag, falling wedge, horizontal range, double bottom, head and shoulders, ascending triangle, cup & handle. Bullish confirmation was a breakout and a candle close above a neckline of the pattern. The pattern is considered to be losing if after the breakout of the neckline, the price dropped below its lows. The pattern is considered to be profitable if, after the entry, the price moved up at least by pips distance from entry to stop loss. From 14th of February to 8th of April, I found 37 bullish patterns. According to the rules that I described above, 31 pattern turned out to be profitable. That gives 83% winning rate. 3. Break of Structure (BoS) The Break of Structure strategy is very old and based on breakouts of current highs. In a bullish trend, after the price violates the levels of a current Higher High HH, a bullish continuation is expected. A long trade is opened after the candle closes above HH or on a retest. With such a strategy, Stop Loss is lying below the last Higher Low HL. The setup is considered to be profitable if, after the entry, the price moved up at least by pips distance from entry to stop loss For the same period, I identified 21 Breaks of Structure. According to the rules, 18 setups were profitable. Total win rate is 85%. Remember that you should not overestimate the performance of these strategies. They work perfectly only in times of a strong bullish market. Such periods are extremely rare. However, once you see a strong bullish season, these strategies will help you to get maximum from it. ❤️Please, support my work with like, thank you!❤️
OANDA:XAUUSDEducation
by VasilyTrader
10
ICT Breaker & Mitigation Blocks EXPLAINEDToday, we’re diving into two powerful concepts from ICT’s toolkit that can give you an edge in your trading: Breaker Blocks and Mitigation Blocks. There are one of my favourite PD Arrays to trade, especially the Breaker Block. I’m going to explain how I interpret them and how I incorporate them into my trading. Stay tuned all the way to the end because I’m going to drop some gold nuggets along the way" Ok, so first of all let’s go through what both these PD Arrays look like and what differentiates them, because they are relatively similar and how they are used is practically the same. On the left we have a Breaker Block and on the right a Mitigation Block. They both are reversal profiles on the timeframe you are seeing them on, and they both break market structure as you can see here. The actual zone to take trade from, or even an entry from, in the instance of this bearish example is the nearest down candle or series of down candles after price makes a lower low. When price pulls back to this area, one could plan or take a trade. The defining difference is that a Breaker raids liquidity on its respective timeframes by making a higher high or lower low before reversing, whilst a Mitigation Block does not do that. For this reason, a Breaker is always a higher probability PD Array to trade off from. As you should know by now if you are already learning about PD Arrays such as these is that the market moves from one area to liquidity to another. If you don’t even know what liquidity is, stop this video and educate yourself about that first or you will just be doing yourself a disservice. Alright, so let’s go see some real examples on the chart. Later on I’ll give you a simple mechanical way to trade them, as well as a the discretionary approach which I use. And of course, some tips on how to increase the probability of your setups.
Education
by Road_2_Funded
Price Action Fluency As A Second Language: Part TwoPlease watch my previously posted part one video to grasp the fundamentals. Now, let's dive into part two. Price action fluency involves more than just technical knowledge—it requires a deep understanding of your psychological behavioral responses. Your brain will have it as its prime objective to avoid pain. It will send signals to the eyes to ignore setups that don't perfectly align. Your eyes will only see what they want to see. It is essential to train your eyes to recognize every failed setup. To observe every detail of each area, and identify every possible entry point for both directions. Leave no aspect overlooked. The goal is for your brain to understand every nuance of price action intuitively and objectively. Just like when you read a book in a language you're fluent in, your brain doesn’t pause at every letter to decipher vowels, consonants, word meanings, or sentence structures. Instead, it processes a vast amount of information naturally and seamlessly. It doesn't skip letters or words out of fear; it treats every part of the language equally and objectively. Objectivity is purity. Objectivity is clarity. Objectivity is mastery.
KRAKEN:BTCUSDEducation
by EsotericTrading
1
Comparing the new SPYU to UPRO and SPXLI am not sure if anyone else noticed, because quite frankly I completely missed it, but there is a new leveraged share on the block that aims to track the S&P 500 ( SP:SPX ). That ticker is $SPYU. Now this isn’t a conventional leveraged share. Most leveraged shares are between 2 x to 3 x max. However, this one is 4 x. Yeah, you read it correctly, 4 x the S&P. So if the S&P moves 2%, your theoretical gains are 8%. Now there are inherent risks with leveraged share usage, which I have spoken about before. Now I am not going to get into the risks involved with over-leveraging yourself. I feel like there is enough cautionary tales, both from me and others, about such travesties. But what I want to cover in this post is really just an evaluation of SPYU vs the popular others, such as SPXL and UPRO. For me, my go to has always been UPRO; however, this new one intrigued me so decided to look at it a little more closely. Overview SPYU was launched in December of 2023. Surprisingly, despite being an ETF that tracks and American index and is listed on the NYSE, this leveraged ETF is managed by a Canadian institution, the Bank of Montreal. While it is a little strange to see the Bank of Montreal offering such an asset as an American asset, this bank is well known in Canada for offering multiple types of ETFs with exposure to both American and Canadian industries. I myself have many of their products and have been pleased with the returns! Owning to SPYU’s short-ish existence, its difficult to really make long term predictions about how this will hold up over time. But I have done some comparative analysis on SPYU, UPRO and SPXL, using SPY as a benchmark, to see how SPYU has performed in its short timespan. So let’s get into the results. Correlation: Generally, the first thing you want to look at when identifying a leveraged share is the correlation. If a leveraged ETF tracks the underlying well, you are going to see a high correlation. If it struggles to track the underlying well, you will see a correlation with a lot of ‘variance’. Variance just means deviation from what would be, generally, a statistically strong relationship. So let’s take a look at our 3 amigos in relation to SPY: In the chart above, we are looking at the correlation of SPYU, UPRO and SPXL in relation to SPY over a rolling 14 period lag (in other words, a 14 day time period). Purple represents UPRO, green SPXL and Aqua SPYU. In the legend on the right, you can see the max and min correlation of the various leveraged ETFs in relation to SPY. We see that UPRO and SPYU are pretty much on par with each other, with a correlation of roughly 0.97 to 0.98. This would equate to a variance of 0.04 (a perfect correlation has a score of 1, which would be the benchmark to compare the degree of variance or drift from the ability to track the underlying). This is, from a statistical perspective, fantastic! For most instances, we would say this is pretty much on par with a perfect correlation. The same is technically true for SPXL. SPXL has a min correlation of 0.96, which equates to a variance of around 0.05, only 0.01% more than the other 2 ETFs. Statistically, these tickers are indistinguishable and there really is no statistically significant difference observed between their ability to track the underlying. What about Slippage and Returns? Slippage, which can be the result of contango and other factors, refers to a type of “loss in value” so to speak (AKA DECAY!!!). Essentially what it means is, is the ETF delivering what it says to deliver. In SPYU’s case, it says it delivers 4 x that of the S&P (or SPY). No leveraged ETF will ever be able to perfectly match their quoted returned consistently, owning to normal market volatility. However, what we want to see in a good leveraged share is very little slippage. In other words, we want to see a leveraged ETF that more frequently returns what it promises than doesn’t. To measure this, we can use an indicator I developed a while ago called leveraged share decay tracker (). Let’s kick it off with SPY vs SPYU: In this chart, we can see that over a short period of time (under 100 days), the average slippage of SPYU is around 2.4%. For the most part. We can see this quantified in variance (the difference in correlation) and drift (the monetary measure of variance). This means that, at approximately 100 days, the variance in the potential loss or gain is around $1.72. At 30 days, it is $0.25. This means, theoretically, you could be down $1.72 per share, if you intended to hold for approximately 100 days. Now, this $1.72 could be meaningless if the ETF managed to offer around the quoted returns, and indeed, it seems that it does. At 100 days, the expected return would be 42.65%, based on SPY’s trajectory. The actual return was 31.88%. This is a 10.77% difference. Had you traded SPY directly, you would be up about 21%. So the 10% slippage kind of evens out in that sense, because you are still up more than 10% than the actual underlying itself. But wait, we need to check how the other leveraged ETFs perform. Let’s look at UPRO and SPY next: So, remember UPRO promises 3 x the leverage, so the returns will likely be less than the returns on SPYU, which offers 4 x the leverage. Looking at this, we can see the average % slippage is about 0.40%. The average monetary slippage is about 0.40$. And finally, if you held for 100 days, you would only have a slippage of around 3%. So had you invested in SPY in December of 2023 , your returns would have been about 21% and your returns on UPRO would have been about 28%. And finally, let’s take a look at SPXL: Remember, SPXL promises to deliver 3x the exposure to the S&P, similar to that of UPRO. You can see it’s pretty identical to UPRO: UPRO seems to drift a bit more than SPXL; however, the difference is not statistically significant. The $ amount is also equivalent, taking into account that SPXL is approximately 1.5 x the cost of UPRO. Cointegration And finally, the last way to visualize how effective leveraged shares are at tracking the underlying is by creating a co-integration regression. This uses the price of the leveraged share to predict the price of the underlying. A leveraged share with a good relationship will be on point in predicting the price of the underlying. One that struggles will have frequent drifts and deviations from the price of the underlying. Here is all 3 tickers, compared to SPY (SPY represented by the red dotted line): From here, we can see qualitatively that SPXL tends to have more dramatic swings in both directions, then UPRO or SPYU. However, SPYU and UPRO tend to perform identically. So what’s the verdict on SPYU and the Leveraged trio as a whole? My go to for trading SPY has been UPRO. As I just recently learned about SPYU I plan to make the shift here. The results of these analysis show that, from a statistical standpoint, the differences are marginal and not significant. If you want to nail it down to “which is the MOST significant within the significance” so to speak, the winners here can be grouped by desired outcome. Here they are: Returns focus: If its returns you want, its SPYU you should do. SPYU will deliver up and above the returns of UPRO or SPXL, even in light of the drift and slippage. Under 100 days, the slippage shouldn’t be objectively notable. It will only become apparent at the 100 day mark or longer; however, SPYU still manages to deliver returns that surpass both UPRO and SPXL at that time point. Risk Management: Risk management has to go to SPXL, for the lack of slippage associated over the longer term. While SPXL does have a little wider variance, it manages to have the lowest slippage in percent and money drift. SPXL frequently delivers on what it promises. And that’s it folks! Hope you enjoyed! Safe trades as always!
AMEX:SPYUEducation
by Steversteves
2
Understanding Market Volatility and Its Impact on BitcoinIntroduction Market volatility is a crucial aspect that every Bitcoin investor and trader must understand. In this section, we'll explore what market volatility is, how it affects Bitcoin, and strategies to manage it. What is Market Volatility? Market volatility refers to the rate at which the price of an asset, such as Bitcoin, increases or decreases for a given set of returns. High volatility means that the price of Bitcoin can change dramatically over a short period, both positively and negatively. How Does Volatility Impact Bitcoin? Price Swings: Bitcoin is known for its significant price swings, which can be driven by various factors such as market sentiment, regulatory news, macroeconomic trends, and technological advancements. Investor Behavior: Volatility often influences investor behavior, leading to increased buying or selling pressure. This can result in rapid price movements, creating opportunities and risks. Market Sentiment: Positive news can lead to a surge in Bitcoin prices, while negative news can result in sharp declines. Understanding market sentiment is crucial for predicting these movements. Managing Volatility Diversification: Spread your investments across different assets to reduce risk. Diversification can help cushion the impact of volatility on your portfolio. Risk Management: Use stop-loss orders to limit potential losses. Setting predetermined exit points can protect your investments during periods of high volatility. Stay Informed: Keep up with the latest news and trends in the cryptocurrency market. Being informed allows you to make timely decisions and react appropriately to market changes. Long-term Perspective: Focus on the long-term potential of Bitcoin rather than short-term price fluctuations. A long-term perspective can help you stay calm during volatile periods. Conclusion Understanding market volatility is essential for navigating the Bitcoin market. By recognizing how volatility impacts prices and adopting strategies to manage it, you can better position yourself to take advantage of opportunities while minimizing risks. Stay informed, diversify your investments, and maintain a long-term perspective to thrive in the ever-changing world of Bitcoin.
BITSTAMP:BTCUSDEducation
by moneymagnateash
2
Here's How You CONSOLIDATE Your Portfolio Into WinnersGoing through my entire portfolio to judge performance vs Solana, which has been my golden goose this cycle. I bought TSX:FIL in October 2023. If I put that money in Solana instead, I’d be up 345% vs breakeven right now. Obviously I’m selling that position here and flipping it into CRYPTOCAP:SOL How to compare: Jump onto TradingView and on the chart name type: BINANCE:SOLUSDT/BINANCE:FILUSDT You can swap out tickers and exchanges to compare your own portfolio.
Education
by jonnieking
Inverted Head and Shoulders: A Comprehensive GuideThe Inverted Head and Shoulders pattern is a popular and reliable reversal pattern that signals a potential shift from a downtrend to an uptrend. Understanding and identifying this pattern can provide traders with profitable trading opportunities. Anatomy of the Inverted Head and Shoulders Pattern. Left Shoulder: The price declines to a trough and subsequently rises. Head: The price falls again, forming a lower trough. Right Shoulder : The price rises once more before declining to a trough similar to the left shoulder. Identifying the Pattern To accurately identify an Inverted Head and Shoulders pattern, look for the following characteristics: Three Troughs: The head should be the lowest point, with the two shoulders on either side. Neckline: Draw a trendline connecting the peaks of the two shoulders. This line acts as a resistance level. Breakout Confirmation The pattern is confirmed once the price breaks above the neckline with increased volume. This breakout indicates a reversal of the previous downtrend and the start of a new uptrend. Trading the Inverted Head and Shoulders Entry Point Enter a long position when the price closes above the neckline. To reduce false breakouts, consider waiting for a retest of the neckline as support. Stop-Loss Place the stop-loss order below the right shoulder to limit potential losses. This level provides a cushion against false breakouts and unexpected market movements. Target Price The target price can be estimated by measuring the distance from the head to the neckline and projecting this distance upward from the breakout point. Example: Example Reference image of chart ONGC on Daily Time Frame shared below Distance from Head to Neckline: 62 points Breakout Point: 280 points Target Price: 342 points Practical Example of ONGC chart The neckline is drawn connecting the two peaks at 280 level. A breakout occurs at 280 level with increased volume and now candle closed bullish at 288 levels with Good intensity of Volumes. Key Points to Remember Volume: Volume should increase during the formation of the pattern, especially at the breakout point. Timeframe: The pattern can form over various timeframes, but it is more reliable over longer periods. Market Context: Always consider the broader market context and other technical indicators to confirm the pattern. Conclusion The Inverted Head and Shoulders pattern is a powerful tool for traders looking to capitalize on trend reversals. By understanding its structure and applying disciplined trading strategies, traders can enhance their ability to identify and profit from these patterns. I am not Sebi registered analyst. My studies are for educational purpose only. Please Consult your financial advisor before trading or investing. I am not responsible for any kinds of your profits and your losses. Most investors treat trading as a hobby because they have a full-time job doing something else. However, If you treat trading like a business, it will pay you like a business. If you treat like a hobby, hobbies don't pay, they cost you...! Hope this post is helpful to community Happy Trading! RK💕 Disclaimer and Risk Warning. The analysis and discussion provided on in.tradingview.com is intended for educational purposes only and should not be relied upon for trading decisions. RK_Charts is not an investment adviser and the information provided here should not be taken as professional investment advice. Before buying or selling any investments, securities, or precious metals, it is recommended that you conduct your own due diligence. RK_Charts does not share in your profits and will not take responsibility for any losses you may incur. So Please Consult your financial advisor before trading or investing.
NSE:ONGCEducation
by RK_Chaarts
2
Buy the Rumour, Sell the News: Trading Strategy in ForexBuy the Rumour, Sell the News: Trading Strategy in Forex and Crypto Navigating the volatile terrain of forex and cryptocurrency markets demands a strategic edge, one that ‘buy the rumour, sell the news’ can offer. This method, rooted in market psychology, plays on the anticipatory reactions of traders to unconfirmed information about significant events. In this FXOpen article, we explore this strategy, break down how to implement it, and look at an in-depth example. Understanding the Buy the Rumour, Sell the News Trading Strategy The concept of ‘buy the rumour, sell the news’ is a well-known approach in forex and cryptocurrency markets, encapsulating how traders act on information before it becomes public. This strategy revolves around the anticipation of events or developments that can significantly impact market prices. Essentially, it involves trading assets based on unconfirmed information or 'rumours' about upcoming events that are expected to have a given positive or negative effect on the asset's value. The logic is to trade while prices are still reacting to speculation, with the aim of potentially closing the position after the news breaks and the market reacts, typically when prices peak momentarily. The essence of this strategy lies in understanding market psychology and how speculation can drive prices. Traders often monitor various channels for hints of developments that could influence asset prices, such as policy changes, economic indicators, or other announcements in the forex and cryptocurrency sectors. Once the anticipated news is officially released and the initial market reaction occurs, it's common for prices to stabilise or even reverse as traders lock in their returns, having capitalised on the price movement generated by the speculation. Steps to Buy the Rumour and Sell the News In forex and crypto markets, the strategy of "buy the rumour, sell the news" doesn't come with a set playbook of entry and exit points. This is because the strategy hinges on market dynamics and sentiment, which are inherently difficult to analyse. However, traders can follow certain steps to better position themselves to take advantage of this phenomenon. Identifying an Important Market Event The first step is pinpointing an upcoming event that could significantly sway market prices. This involves focusing on events that are of paramount importance to the market, not just any minor news release. When it comes to ‘buy the rumour, sell the news’, examples may include: - Interest rate announcements by central banks - Release of major economic indicators (GDP, Non-Farm Payrolls, unemployment rates, inflation data, etc.) - Policy changes or economic forecasts by governments or financial institutions - Geopolitical developments - One-off events (e.g. COVID-19) The relevance of an event can vary; for instance, inflation data might be more crucial in times of high inflation vs. when the economy is grappling with slowed GDP growth. Likewise, it’s important to consider timing; significant events often lead to market movements in the days and weeks before the official announcement as traders assimilate and act on relevant economic data. On the other hand, an event with moderate importance, like PMIs, may see traders only begin to accumulate a position on the day of the event. While these economic events can be important in ‘buy the rumour, sell the news’ cryptocurrency strategies, given that many are paired against the US dollar, crypto is typically influenced more by idiosyncratic events. Examples of rumours include: - Bitcoin ETFs - Bitcoin halvings - Network upgrades - Adoption/integration with mainstream finance or platforms - Hacks - ‘Whale’ activity Forming a Directional Bias After identifying an event, the next step involves forming a directional bias. This typically requires analysing: - Related economic data and trends - Consensus expectations - Analyst reports - Market sentiment and positioning indicators, like Myfxbook's sentiment analysis, the Crypto Fear and Greed Index, or the Commitment of Traders reports In doing so, traders can align themselves with the prevailing market sentiment. Analysing the Market Trend Determining the prevailing market trend is crucial and is done with respect to the timeframe and context of the expected event. For short-term events, examining trends on 1-hour to daily charts may be best. Real-time price data, from 1-minute to monthly timeframes, can be found in FXOpen’s free TickTrader platform. The alignment of current price trends with market expectations can signal a good opportunity to position oneself in anticipation of the event. For example, if the consensus leans towards the Federal Reserve hiking interest rates due to high inflation and low unemployment, and this expectation is reflected in a strengthening USD, traders might find an opportune moment to position themselves accordingly. Technical analysis can similarly aid in pinpointing a precise entry point. Managing the Position With a position taken based on the anticipated event, the trader then looks to the market's reaction to carry the trade in the desired direction. As for exiting the position, one approach could be to do so just before the news breaks, pre-empting a potential reversal as the market digests the news. This strategy banks on the assumption that many traders will act similarly, leading to a swift change in market direction. An alternative approach involves trailing a stop loss, which could be activated by the increased volatility surrounding the news announcement. This method holds potential for gains if the news contains unexpected details that further fuel the initial market reaction, such as a more significant rate hike by the Federal Reserve or more hawkish language than previously anticipated. Forex Case Study: Bank of Japan Hikes Interest Rates Japan's economic landscape has historically been characterised by persistent low inflation, which regularly fell below its 2% target since the 1990s. This led to the Bank of Japan (BOJ) adopting a low interest rate, with rates dropping to 0% since late 2010 and -0.1% since 2016, aiming to sustainably push inflation back to 2%. Post-2008, many central banks maintained low interest rates. However, as inflation began to rise after the COVID-19 pandemic, most started a hawkish monetary policy. The United States, for instance, responded to record domestic inflation by raising interest rates to 5.5%. However, Japan was an outlier, maintaining its -0.1% rate. This led to a strong rally in the USD/JPY currency pair. The narrative around an exit from negative interest rates had been growing in 2024. However, the rumour hadn’t yet been credible enough to see the yen strengthen. This began to shift in late February 2024, with some suggesting the BOJ was reconsidering its prolonged negative monetary policy. On February 29th, BOJ board member Hajime Takata hinted at a potential policy shift away from negative interest rates, emphasising the central bank's attention on inflation and wage renegotiations as a determinant for exiting its accommodative stance. This statement initiated a notable decline in the USD/JPY rate. Further fueling expectations, core inflation data released on March 5th showed a 2.5% year-over-year increase. On March 8th, Japanese media outlet Jiji reported that the BOJ was considering scrapping its expansionary yield curve control program. According to Bloomberg, this led to market-implied odds of a BOJ rate hike surging from 26% at February's end to 67%. On March 13th, Nikkei, another reputed Japanese outlet, reported that the BOJ decision would come down to annual wage negotiation outcomes, which were due later in the week on the 15th. Despite the growing anticipation of a rate hike, the market's reaction was nuanced; USD/JPY began to rise prior to Nikkei’s report. After all, the expected shift from -0.1% to 0% interest rates would only slightly alter the significant interest rate differential with the US, maintaining a bullish outlook for USD/JPY. When wage negotiations concluded with a 5.28% increase on March 15th, a rate hike on March 19th became almost certain. USD/JPY had climbed from a low of 146.478 on March 8th to open the week on March 17th at 149.011. The meeting on March 19th saw the BOJ raise rates to 0%, as widely expected. Anyone still having long positions in JPY closed their position, and USD/JPY climbed significantly higher, reaching 151.816 just a day later. Buy the Rumour, Sell the News Meaning in This Scenario This case exemplifies the ‘buy the rumour, sell the news’ strategy's complexity. Initially, the yen strengthened on speculation and uncertainty surrounding the BOJ's policy shift. However, as the market began to realise a rate hike was a significant possibility, two pivotal developments occurred. - First, the certainty of a policy change grew. While there were a few unknown events, like the wage negotiations, the market massively increased its expectation for a hike in the week prior to the meeting, as evidenced by Bloomberg’s reporting. In hindsight, the anticipation of the end of yield curve control may have been the ‘news’ event that all but confirmed the hike for the market, leading to the rise in interest rates being priced in completely. - Second, traders recognised that the actual impact of the hike would be minimal on the fundamental USD/JPY relationship, given the still substantial interest rate differential of 5.5% vs the previous 5.6%. This scenario underscores the importance of considering the broader context and market expectations surrounding news events. While economic data releases tend to be more uncertain and may not be fully priced in, some events may offer strong clues well before the actual announcement. If the outcome of an event becomes all but a certainty thanks to these clues, the rumour may no longer be valid, leading to it being priced in as news. At this point, a trader could take an opposite ‘buy the news, sell the rumours’ approach, potentially capitalising on the market's expectation that this shift in fundamentals has already been baked into the price. The Bottom Line In a realm where information is king, mastering the "buy the rumour, sell the news" strategy could offer traders a competitive advantage in forex and cryptocurrency markets. This approach not only demands an acute sense of market sentiment and trends but also a disciplined approach to risk management. For those looking to navigate these waters with an experienced partner, opening an FXOpen account could be your gateway to informed and strategic trading in the dynamic world of forex and crypto CFDs. FAQs What Does It Mean to Buy the Rumour, Sell the News? ‘Buy the rumour, sell the news’ is a trading strategy in which traders buy or sell before an anticipated event and close trades once the event occurs or the news is released. Traders capitalise on price movements driven by rumours or speculation prior to the official announcement, then close position to lock in potential returns as the market reacts to the news, which may already be reflected in the price. How to Buy the Rumour and Sell the News? Traders can implement this strategy by staying informed about upcoming events that could impact market prices, such as economic announcements. Monitoring market sentiment and trends helps in forming a directional bias. Traders position themselves based on speculative anticipation, planning to exit their positions when the news breaks and the market adjusts. Should I Trade Based on the News? Trading on the news can be a viable strategy, especially for those adept at interpreting market sentiment and reactions to news events. However, it requires an understanding of how news impacts different markets and the ability to act swiftly on information. Risk management and a clear strategy are crucial, as markets can be highly volatile following news releases. At FXOpen UK and FXOpen AU, Cryptocurrency CFDs are only available for trading by those clients categorised as Professional clients under FCA Rules and Professional clients under ASIC Rules, respectively. They are not available for trading by Retail clients. 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.
Education
by FXOpen
2
You are (probably) using MAs wrongWhen it comes to moving averages, people tend to forget what they are. A moving average is just as the name suggests - an average of the chosen number of candles that moves (once a new candle prints). I know it seems obvious to most, but why then, when it comes to lengths we seem to be so confused about it? When choosing the length of a MA - what do you look for? "Magical" Fibonacci Numbers? Most common length 200, because you were told that's what everyone uses? But let's thing about it for a second. What is an EMA200, for example? It's an exponentially weighted average of the past 200 candles. So why would it be so "important"? MA200, if you're on a 15-minute timeframe represents two hundred 15-minute candles, or, in different words - an average price of the past 50 hours. MA200 on a 5-minute timeframe represents two-hundred 5-minute candles, which equals to about 16 and a half hours. Is there anything special about the average price of the past 16.5 hours? Of course not. The way moving averages should be looked at, in my humble opinion is by using them to look at an average price of the past periods that actually matter. Periods like Daily, Weekly, Monthly. If you're a scalper who trades 1-minute charts, perhaps you want to know what the average price of the past 15 minutes, 1 hour and 4 hours is. To do that you would divide 15 by 1, giving you MA length of 15 representing the average price of the past 15 minutes. If you're a day trader, like me, who loves trading 5 and 15-minute timeframes, I want to know the average prices of the past hour, 4 hours and Daily. Weekly and Monthly averages also give me potential targets, or potential areas of interest. Hence the length of forementioned moving averages would be 12, 48, and 288 (on a 5-minute chart) and 4, 12, and 96 (on a 15-minute chart). I recently created an Indicator that automatically calculates these lengths based on your chosen higher timeframes of interest and your current timeframe, so you don't need to calculate these lengths yourself. However, you can very easily do the same by making a simple calculation. How many of my current timeframe candles are in a higher timeframe that I want to know. You can use the same method in calculating length of other things, like a RSI, for instance. Perhaps you wondered, like I did, why the period 14 is used to calculate the RSI. Fortunately we can adjust these periods and perhaps find an edge in the market. Hope this short post clarifies some things. I will be publishing the Timeframe Based Moving Averages script soon. Cheers
PEPPERSTONE:BTCUSDEducation
by hundredtoamillion
The Psychology of Mass Behavior in Trading and How to Overcome Hello Traders, Understanding the psychology of mass behavior in trading is crucial for success in the markets. This post delves into key psychological phenomena and provides strategies to overcome these biases. Key Psychological Phenomena 1. Herd Behavior: Traders often follow the crowd without independent analysis. This can lead to bubbles and crashes. 2. Emotional Contagion: Emotions like fear and greed spread rapidly among traders, driving irrational market behavior. 3. Overconfidence and Optimism Bias: Traders overestimate their ability to predict market movements and believe they are less likely to face negative outcomes. 4. Information Cascades: Decisions are based on the actions of others rather than personal analysis. 5. Confirmation Bias: Traders seek out information that confirms their beliefs, ignoring contradictory data. 6. Availability Heuristic: Overestimating the likelihood of events based on recent news or experiences. 7. Loss Aversion: The pain of losses is felt more acutely than the pleasure of gains, leading to irrational decision-making. 8. Social Proof: Looking to others’ actions for cues in uncertain situations. 9. Fear and Greed: These emotions drive market movements, often leading to panic selling or speculative bubbles. How to Overcome These Biases 1. Risk Management: Implement strict risk management strategies, such as stop-loss orders and position sizing, to protect against irrational market moves. 2. Contrarian Investing: Consider taking positions contrary to prevailing market trends when there is a strong indication of herd behavior. 3. Diversification: Spread investments across different assets to reduce the impact of market volatility driven by mass behavior. 4. Continuous Learning: Stay educated about market psychology and remain aware of your biases. 5. Emotional Discipline: Develop a trading plan and stick to it, regardless of market noise. Meditation and mindfulness can also help maintain emotional balance. 6. Independent Analysis: Conduct thorough research and analysis before making trading decisions. Rely on your judgment rather than following the crowd. 7. Seek Feedback: Engage with a trading community or mentor to gain diverse perspectives and avoid confirmation bias. By understanding and mitigating the effects of mass behavior in trading, we can make more rational, informed decisions and improve our trading performance. Let’s strive to be mindful of these psychological factors and continue to learn and grow as traders. Happy trading!
OANDA:XAUUSDEducation
by efmarquez4