Forex Option Expiries Over $100,000,000 – The 10 am New York Cut part 2
Hello everybody, and thank you for joining us for the daily FX expiries briefing video for the 10 am New York cut today.
If it is your first time with us, the FX currency options market runs in tandem with the spot FX market, but where traders typically place Call and Put trades on the future value of a currency exchange rate and these futures contracts typically run from 1 day to weeks, or months.
Each day we bring you details of the notable FX option expiries where they have an accumulative value of a minimum of $100M + and where quite often these institutional size expiries can act as a magnet for price action in the Spot FX arena leading up to the 10 am cut.
We will also plot the levels on to the relevant charts at the various exchange rates where there are due to expire, and also identify the levels which are in play, and where we believe there is a greater chance of the expiry maturing based on technical analysis at the time of writing, we will label them as hot, warm or cold.
So today we have Option Expires for the EURUSD Pair We have one notable expiry which is in play at 1.0820 for €557M and a Cold expiry which is out of play for €508M at 1.0980
Also, there are also Options expiring for USDJPY pair with a Hot expiry at 1.0750 for $3.2 B in USD value and a cold expiry at 1.0799 for $428M
There is one expiry for the GBPUSD at 1.2400 and is Hot for £291M
We also have a Hot expiry for the NZDUSD pair at 0.6050 for 352M In new Zealand dollar value.
Of the notable option expiries which we brought you yesterday: price action gravitated to the 107.00 level on USDJPY, just before the New York cut. We listed this as Hot
ERUGBP gravitated towards the 0.8700 level. We listed this as Hot too.
EURUSD had several options, and we listed 1.0820 as being Hot and where traders who purchased a Put, for this expiry level would have been in the money.
We suggest you take the levels and plot them onto your own trading charts and incorporate the information into your own trading methodology in order to use the information to your advantage.
Remember, the higher the amount, the larger the gravitational pull towards the exchange rate maturity at 10:00 am Eastern time.
For a detailed explanation of FX options and how they affect price action in the spot forex market, please follow the link to our educational video.
This part of the cryptocurrency passive income guide will talk about earning passive income by using lending platforms.
Lending platforms
There has been a big expansion in the industry of lending platforms that allow you to leverage your cryptocurrencies and make a passive income.
There are two types of lending platforms, custodial and decentralized ones.
Custodial services are the beginner-friendly way of doing the lending, as they take your money and lend it out to borrowers. They automatically pay you the interest, but you lose control of your assets.
The other side of the coin is the fully decentralized services, where you never give away the custody of your funds. Your funds are stored in smart contracts and accessible at any time. Borrowers can get your loan only when they put up to 150% of the borrowed amount as collateral. This incentivizes them to pay you back, while the interest rate incentivizes you to loan them the crypto in the first place.
Both of the lending platform types offer attractive interest rates for the lenders.
There is another (additional) way of earning interest by lending your cryptocurrencies, which is custodial by nature but safer than most custodial platforms, and that would be lending your money via cryptocurrency exchanges. Most cryptocurrency exchanges offer some form of a service where users themselves can lend the cryptocurrencies to other users for the purposes of increasing trading leverage.
Projects you can check out
The most popular custodian lending platforms include BlockFi, Celsius, Nexo, Cred, Crypto.com, and more.
When it comes to exchange platforms, you can check out Bitrue, Bitfinex, Poloniex, Binance Lending, and Coinbase.
Non-custodial decentralized lending platforms include names such as Nuo, Dharma, Lendf.me, Compound, dYdX, and fulcrum.
Check out our cryptocurrency lending videos to learn more about various lending platforms, as well as their pros and cons.
Conclusion
Many crypto enthusiasts use the HODL method and keep their cryptocurrencies in their wallets for long periods of time, without their funds ever moving. By utilizing their funds in some way, they can create a passive income stream for themselves. Lending is certainly one great option, but you have to do your research and pick the right exchange and the right type of platform for you.
The British Pound has been affected greatly by the Coronavirus outbreak. As per the slide of the GBPUSD daily chart, the 7-day period at the beginning of March saw price action collapse from a level of 1.32 to 1.14. However, it has had a phenomenal rebound up to current levels of 1.25, and so what has led this recovery? And is it sustainable?
First, we have to factor in that in the early stages of March, where Britain was hard hit by the coronavirus, and the government decided to close the bulk of the business sector down by putting the country into lockdown in order to try and curtail the effect of the coronavirus. It implemented financial strategies to inject capital into the markets in order to try and protect small to medium businesses, while also agreeing to make financial payments to individuals who were on lockdown. This has created a debt bubble.
The shock wave to the financial system was huge and sent the Pound crashing against counterparts and especially the dollar. But also at this time, the United States was in the early stages of the pandemic, and this would have influenced investors and currency traders to buy the dollar against the Pound.
However, during the later stages of March, we can see that price action is heavily supported around the 1.1400 and 1.1500 key levels, as the United States becomes more susceptible to the virus with increased numbers of people being infected there and as the death rate begins to rise.
Analysts will also argue that the huge amounts of dollars being injected into the markets by the Federal Reserve, their slashing of interest rates and their huge overnight repurchase program which effectively provides more stimulus has greatly helped liquidity in the financial markets where the UK is heavily dependent within its huge financial services sector, thus giving the Pound a lift. But from 1.1400 to 1.2500, in six days? Wow, who saw that coming. Not many traders and analysts I expect, especially with the country in lockdown, with increasing unemployment, businesses going to the wall, and Government debt growing exponentially while essentially propping up the country.
Now we have to factor into other critical components as to why the Pound is so elevated. Firstly we have the USA in a similar situation, where a majority of the industrial sector has also been shut down and where the majority of the population, excluding essential and key workers, have been put in lockdown. Of course, these workers do not contribute to the country’s gross domestic product, and as such, they make a negative contribution to GDP due to salaries and equipment that they need which all comes from the Federal Government, again, this bad for the US economy, and so we would expect a bounce in exchange rates to take some of this into consideration.
However, I suspect one of the key reasons that the GBPUSD exchange rate is elevated at the moment is because investors envisage that the British government will not be able to effectively negotiate the terms of the new trading agreement with the European Union where Britain’s transition period ends at the end of December 2020. Although this is enshrined in law, analysts and investors are predicting that the government will have to find a way to extend this period by 1 or 2 years, simply because the pandemic has meant the British companies are not in a position to effectively be able to implement any new trade deals that the government negotiates with the EU by December, thus forcing the government to extend the transition period. And this, of course, would mean that uncertainties surrounding negotiations will be pushed back, thus alleviating pressure on the Pound.
There is one more thing to consider, that the pandemic, which is forcing the global economy into recession is almost unprecedented on this scale, and where we see large swings in currency pairs such as we have seen in cable, where huge volumes of stop losses will have been incurred by vast amounts of traders and institutions, and often you will find in the circumstances volume begins to dry up in currency terms as investors stay on the sidelines, which causes high levels of volatility, and vacuums, where are traders, cannot predict levels of resistance and support, because there is a lack of historical technical analysis levels of support and resistance, which further fuels uncertainty.
Therefore we should expect more volatility in this pair. However, as price action consolidates, we will likely see more levels of support and resistance being observed by traders looking for signs that the pandemic is easing, before finding more clarity with regard to directional bias.
During the fall of the Roman Empire, Romans of wealth, including high-level soldiers, melted down silver Roman coins because they could see the end of the empire coming. They were effectively converting out of cash and into a precious metal. They knew the value of silver, no matter what.
A few months ago, when the Covid-19 virus started to take hold in China and especially when it hit Italy, sharp investors bailed out of stock markets and converted their investments into US treasury bills and also cash. INSERT B: Shortly afterwards the main Stock indices crashed with the biggest hit to the Dow Jones 30, which tanked from above 29.000 to 18.200 at its low point. The Federal Reserve, along with other major Western governments, acted quickly and reduced interest rates and pumped as much money as possible into economies to try and limit the damage, where the majority of the world was in a state of lockdown, and all but essential business were closed. The global economy was flatlining, going into recession, and is currently facing the biggest economic disaster which this world has ever known.
And yet, in the last few weeks global indices, especially the Dow Jones, INSERT 1 S&P 500, the INSERT 2 German Dax and INSERT 3 the FTSE INSERT 4 have rebounded off of their lows and incredibly are in what can only be termed as a bull run. With no end in sight to the Covered-19 crisis and no cure on the horizon, and where economic production and gross domestic product are tanking, how can stock indices be riding on a high?
This can be down to a couple of reasons, f o m o: Fear of missing out, where investors are diving back and picking up what they see as cheap stocks under the old adage; buy at the bottom and sell at the top, and where Executives have also picked up stock in their own firms. Another reason can be put down to automatic trading algorithms which simply have no rationale when it comes to fundamentals, they have no empathy with people that are affected by this disease, they have no consideration of flatlining economies and negative GDP’s, they are simply programmed to buy and sell on whatever technical trading criteria the programmer sets.
The upshot is that a bubble has been created in these indices, where artificially inflated stocks are floating well above where they should be, in some kind of helium bubble. And we all know what happens to bubbles: they burst.
Stock markets, and the companies which are contained within, grow on consumer demand and while consumers are currently buying their necessities like food, medicine, electricity, gas; the basics, in other words, they certainly are not buying luxury items including cars, holidays abroad including airline flights, on cruise liners, or requiring hotels. And they are not going out to restaurants or cinemas, and they are not buying petrol for their cars because most of them are in lockdown. They aren’t moving house, and the financial services sector, in terms of lawyers and mortgage underwriters, are affected. And of course, all of this has a knock-on effect on those companies, which means they cannot grow, and which means that essentially their stock value should be crashing through the floor. And yet here we are in a bull run.
There is an old adage: the writing is on the wall, and when oil prices crashed this week and turned negative for the first time in history, it sent a chill through the spines of investors that told them that the financial markets were on borrowed time. While the oil market crash was said to be on a technicality, due to a futures contract for May which established that there was insufficient oil storage capacity, which sent oil prices to minus $40 Per barrel for West Texas Intermediate, and where we have seen a slight rebound in June contract prices, what do you think is going to happen when this maturity comes up.
There will still be an oversupply of oil in a marketplace that doesn’t need it because it’s in lockdown, there will still be a lack of storage capacity in a purpose-built facility such as Cushing, Oklahoma and around the world, so expect more jitters there. And of course, the longer the Covid-19 virus continues, the more likely that the stock market bull run is going to end with a flash bang wallop.
And of course, because all of the financial markets are so closely interconnected, we can only expect extreme volatility to spill over into the foreign exchange market.
This part of the cryptocurrency passive income guide will talk about earning passive income by providing market liquidity.
Market Making Liquidity
Providing liquidity to certain markets was always an important part of trading. The cryptocurrency market, just like traditional markets, requires liquidity in order to run smoothly.
If the liquidity was low, traders would experience “slippage,” an event where the expected prices differ from the executed prices though to sharp turns in the market.
Market-making algorithms, as well as liquidity pools, are another in the line of crypto passive income-generating opportunities. The main concept of this method is that the users act as market makers, therefore providing liquidity to the market. In return, they get rewarded based on the trading volume. This way of generating passive income is greatly dependant on the price volatility.
While market making is not as stable as staking or lending, their returns are often much greater. The returns on this way of generating passive income fluctuate around the 10% mark. The higher return is, of course, an incentive for taking a bigger risk.
This method is of generating passive income is still both underrated and underdeveloped. Somewhere in the ballpark of $40 million in assets act as productive market-making capital in the crypto market. When compared to some more developed methods such as staking, market making is still quite small.
While the incentive for market making is profit, one should distinguish between profit and benefits. Exchanges often provide benefits for market makers in terms of trading fee discounts. However, these are not exactly profits.
Projects such as Uniswap and Kyber Network reward market makers in the true sense of the word, so anyone remotely interested in this way of creating passive income should take a look at these two projects.
Check out our next cryptocurrency passive income guide to learn more ways of creating passive income by leveraging your cryptocurrencies.
The sixth part of the cryptocurrency passive income guide will talk about Masternodes and Work Tokens as a way of providing passive income.
Masternodes
Our previous videos have talked about Proof of Stake as a method of earning passive income. Masternodes work in a similar fashion, though they are not the same.
A masternode is a form of a node that is well-connected. It is mandatory that this node has a set minimum amount of collateral in coins that is usually quite large. These coins must be staked in order to become a Masternode. Masternode staking is often paired with regular consensus algorithms such as Proof of Stake or Proof of Work. There quite a few masternode hosting as well as shared masternode services such as Gentarium and Gin.
One thing to note is that you have to be cautious with masternodes because coins that use these kinds of nodes often have extremely high inflation. This is because the earnings of a masternode are usually instantly sold off for quick profits, as masternode investors put so much in being eligible to become a masternode that they want the returns ASAP.
There are quite a few websites that track masternodes, their profitability, and volume. The most well-known examples of masternode cryptocurrencies are DASH, PIVX, Horizen, Zcoin, and Waltonchain.
Work Tokens and Resource Provision
Work tokens are, just as masternodes, a form of staking. They represent a combination of staking alongside the ability to perform various tasks or provide certain resources to the network. The aforementioned work or resources include storage, transcoding, data, and computational resources provision. A provider of such work or resource earns fees in the form of rewards or fees.
Work tokens create a blockchain-powered marketplace that connects supply (which includes the aforementioned storage, transcoding, data extraction, computation) with the demand.
Most of these cryptocurrencies have relatively high inflation rates as an incentive to bring resources and work supply to the network as well as to accommodate future scaling.
The most well-known examples of masternode cryptocurrencies are Storj, Livepeer, Chainlink, Golem, Augur, and Wagerr.
Check out our next cryptocurrency passive income guide to learn more ways of creating passive income by leveraging your cryptocurrencies.
Hello everybody, and thank you for joining us for the daily FX expiries briefing video for the 10 a.m. New York cut today.
If it is your first time with us, the FX currency options market runs in tandem with the spot FX market, but where traders typically place Call and Put trades on the future value of a currency exchange rate and these futures contracts typically run from 1 day to weeks, or months.
Each day we bring you details of the notable FX option expiries where they have an accumulative value of a minimum of $100M + and where quite often these institutional size expiries can act as a magnet for price action in the Spot FX arena leading up to the 10 a.m. cut.
We will also plot the levels on to the relevant charts at the various exchange rates where there are due to expire, and also identify the levels which are in play, and where we believe there is a greater chance of the expiry maturing based on technical analysis at the time of writing, we will label them as hot, warm or cold.
So today we have Option Expires for the EURUSD Pair The levels are all in Euro amounts and are as follows:
• 1.0760 599m
• 1.0800 1.1bn
• 1.0820 504m
Also, there are also Options expiring for USDJPY pair!
The levels are all in US Dollar amounts:
USD/JPY: USD amounts
Also, there are also Options expiring for EURGBP pair Just one key level which is in EURO amount
• 0.8700 775m
As stated, we have color-coded the levels on the chart from COLD WARM HOT with regard to the likelihood of the exchange rate reaching these levels at the 10 a.m. cut based on technical analysis at the time of writing.
We suggest you take the levels and plot them onto your own trading charts and incorporate the information into your own trading methodology in order to use the information to your advantage.
Remember, the higher the amount, the larger the gravitational pull towards the exchange rate maturity at 10:00 a.m. Eastern time.
For a detailed explanation of FX options and how they affect price action in the spot forex market, please follow the link to our educational video.
How do forex option expiries affect price action in the spot FX market?
In this video presentation, we are going to be looking at how forex option expiries affect price action in the spot FX market.
We will be exploring how forex options work, although we will not be concentrating too much on the technicalities of how they are traded because we are more interested in how FX options expiries can be of great benefit to traders in the spot FX arena.
So what are FX Options, and what is the significance of their expiries?
FX options are essentially another way of trading forex. In effect, they are different branches of the same entity. One is traded on the spot FX, thus known as the Spot FX market, which most of you will be familiar with, and the one we are discussing today is the Future’s FX Options market, where trades are made based upon the price of a currency exchange rate at some point in the future.
So what are FX options? Options traders purchase what is called a premium, which is a contract and which gives them the right, but not an obligation to buy or sell an FX currency exchange rate at a specified price. This exchange rate is called a strike. Typically these contracts will be purchased for a future date, typically days, weeks, or even months in advance and where the contract is purchased from a market maker, which is usually an institution that offers futures contracts trading, unlike banks and brokers which offer spreads in spot forex. Contracts expire on the date that the trader chose and always at 10:00 a.m. in New York, USA. This is known as the New York Cut.
If a trader wishes to purchase a premium, for a future date, for an FX Option, where he or she believes that a chosen currency pair’s exchange rate will be above that at the time of the purchase, he or she buys a Call Option. This is an option to buy. Alternatively, if the trader wishes to purchase a premium for an option where he or she believes that the future currency pair’s exchange rate would be below that at the time of the purchase, he or she buys a put option. This is an option to sell.
So how much does the premium contract cost a trader? This will vary depending on the size of the contract and also so how far the future currency exchange rate is from the current one and the length of the future expiry date. However, futures traders often prefer this type of exposure in the FX market because they take a long term view of where exchange rates will be. And rather than swing trade to these levels in the spot FX market, they prefer to pay the price or premium for the contract upfront, and this then becomes their risk and exposure, unlike spot FX traders whose level of risk fluctuates with price action.
How do options traders make money? If on the day of the maturity of the FX options contract at 10 a.m. for the New york cut the strike rate, or currency exchange rate, Is it at or above the exchange rate for a call option, or at or below the exchange rate for a put option, then the trader is known as being in the money. If a currency exchange rate is not hit, they are out of the money. If they are out of the money, the option expires, and the contract is worthless to the buyer, and he loses the premium.
If, however they are in the money, the buyer will get to exercise the option and create a position in the market. And the seller of the contract will be the counterparty in the ongoing trade. The seller of the contract also gets to keep the premium.
So who trades FX currency options? Anybody can trade FX options, but typically we will find institutions, high net worth individuals, forex traders looking to hedge positions, forward forex traders, speculators, exporters, banks, institutions, companies with exposure in the foreign exchange market generally.
So how do FX currency options affect the spot FX market? Interestingly, when FX options expiries accumulate into large amounts, typically $100 million +, we often find that these accumulated amounts at a set currency exchange rate have somewhat of a magnetic effect to spot FX Trader in the run-up to the 10 a.m. new york cut. Although these huge amounts of options expiring at a particular level occur on an almost daily basis, it does not definitely mean that price action pertaining to a particular pair will hit the strike rate. However, some of the traders who are involved in FX options will also use the Spot FX market to hedge some of their own positions, thus using the Spot market to try and move price to where they need it to be.
Also, these currency options expiry levels with the accumulated amounts are available via certain brokers and commentators before the expiries. Thus this publicly available information is used by Spot FX traders to keep an eye out in the market in the period leading up to the expiry. Remember, the larger the amount of the expiring contracts, the more it would seem that there is a gravitational pull towards these exchange rates.
Forex.Academy will be making these levels available to you, free of charge, and they can be accessed on the options drop-down menu of our home page. For your convenience, as and when option expiries become available almost each day, we will also plot them onto a chart, as per this slide, and you will be able to view them there for your convenience.
This part of the Cryptocurrency Passive Income guide will talk about Lightning Network nodes, one of the ways that will become important in the future, even though they aren’t as profitable at the moment.
The Lightning Network
In order to be able to scale and handle mainstream adoption, Bitcoin has launched the lightning network, a side-layer solution that enables users to send cheap and fast payments and even make money. To be quite frank, the amount you can earn from running a lightning node at the moment is low. However, there is a possibility that this will be more lucrative in the future, which is why we are covering it.
Today’s average lightning network (LN for short) fee stands at about one satoshi, which is worth just a fraction of a cent. Though the profits are not what you are looking for from a passive income source at the moment, they could show how the network will develop as time passes.
Problems with the Lightning network
In order to run a lightning node, one would have to download Bitcoin’s entire transaction history, which is over 200GB of data. On top of that, you would then have to download the lightning software on top of that. However, 200 to 300 GB of storage might not pose a problem to some.
There are currently over 12,000 lightning network nodes, with the cumulative capacity of around 1 Bitcoin.
Fees on the LN will keep existing
While it is impossible to know how the market will adapt and evolve at this point, many developers believe that there are several beneficial reasons for allowing fees on the network, the main one being that people won’t “become” nodes out of the kindness of their heart, but rather because of financial incentive. If this is true, then the fees will match the requirements of the miners in terms of profits versus obligations towards the network.
Conclusion
While turning your device into a lightning network node is not profitable at the moment, it may become at some point. It is important to know many ways to earn passive income, but also to know what will be profitable in advance.
Check out our future parts of Cryptocurrency Passive Income to learn more ways of earning passive income with crypto.
How Is Fundamental Analysis Affecting Forex During Covid-19
There is absolutely no doubt about it since the coronavirus took hold in Europe, the United Kingdom, and the USA, and to a degree at the height of the epidemic in China, where previously markets had shrugged off off the disease as being contained there, the way that markets are now observing fundamental analysis has been completely turned on its head.
Before the virus, the markets were doing very nicely, with record strong economic growth, particularly in the west, and definitely in the USA, which had hit a record for the lowest number of unemployment, and stock indices which were at all-time record highs, and where within a few weeks the country has flipped into a state of record amount of unemployment of over 16 million, and growing, and is facing the worst depression in U.S. history.
Naturally, the financial markets are in a state of pandemonium because this situation is almost unprecedented. Of course, we had the banking crisis in 2008, which sent shock waves through the financial markets, and we have had other virus outbreaks such as Sars, Avian Flu, Swine Flu, and Ebola, which all caused some degree of market turbulence, but nothing on the scale of what we are seeing at the moment.
Normally financial markets, including Forex, Oil, Gold, and Commodities, turn to stock market indices for guidance because they present a good gauge of economic activity. But of course, while most countries are in lockdown, the majority of business sectors are closed, and economies have essentially flatlined. And so GDP, a key area of fundamental analysis, is now useless. In fact, any economic data releases coming out of major western countries right now can only tell us varying degrees of catastrophic failings.
Where once currencies would rise and fall in exchange rates based upon strong data which only fluctuated in relatively small varying degrees, and where markets were able to predict such data releases within a narrow band of expectation, now analysts are gauging the value of one currency against the next on which country is suffering the fewest fatalities and sometimes this causes see-sawing of price action on an hour by hour and day by day basis.
As China slowly begins to come out of the virus and starts opening for business, we should not be surprised to see countries such as Australia and New Zealand, who export heavily into China, to be amongst the first countries to start to bounce back from the virus, especially as they are recording lower numbers deaths at the moment.
This would mean that their currencies strengthen against counterparts and we are seeing that against the U.S. Dollar right now, INSERT B, where 17-year lows of $0.5500 for AUDUSD pair, has recovered to $0.6360 and where the NZDUSD pair hit an eleven-year low of $0.5460 before recovering to $0.6025 currently.
While countries such as the USA, which was the last continent to be affected, are directly in an area of focus right now because of the exponential death rate and the fact that it is the largest economy on the planet. And although so it might end up being the most severely affected country, both in terms of people suffering and dying from the condition and also its economy taking a huge hit, in both unemployment and its GDP going into the minus territory, the thing that is stopping a complete stock market annihilation is the fact that the Federal Reserve acted quickly to slash interest rates and enter into one of the biggest quantitative easing programs in history in order to bolster the finances of small to large businesses across the United States, to try and stave off mass bankruptcies, and the offer of financial relief to the majority of its population.
This has helped us stock indices to bounce off their lows and steady themselves to a certain extent. And, surprisingly, the U.S. dollar index is actually higher than before the crisis. So are people now looking at the U.S. Dollar as being a safe haven currency? Probably. So what now? Well we know that for at least the next few months economic data coming out of Western countries is going to be bad with economies flatlining and grinding into negative territory across the board with gross domestic product tanking in each country
Also as we have seen in recent economic data releases coming from the United States, such as the weekly unemployment numbers, which are getting worse week on week, the markets are largely discounting this information, while betting that the U.S. economy will fare better than most in the long term once things start to recover. Therefore analysts are predicting that all western countries will record high levels of unemployment, and negative gross domestic product numbers, but the hope is that these will be short shocks and that as long as the virus is contained in a short period of time, those economies are likely to bounce back and grow strongly.
And so, the big question is how to trade the foreign exchange markets based on fundamental analysis? The best advice that we could give you is to expect the unexpected which you should do anyway, but even more so right now. Because we know that data numbers coming for all countries are going to be bad to horrendous, and some of the big players out there will completely be ignoring the data and strategize their forex trading based on technical analysis only, and that would be our advice to you too. Stay out of the market during times of economic data releases especially, reduce your trading size, and tighten your stop losses.
The one common thing that all traders have is the desire to enter a trade that turns into an extended rally and bags an awful lot of pips. In reality, it doesn’t often turn out like that. Trends run out of momentum, price action turns abruptly, sometimes without any clear indication as to why it happened. And Traders become frustrated with the number of stop-outs they have to endure while waiting for the profitable trades to materialize.
So what are the main reasons that trends end?
This is a screenshot of the GBPUSD pair on a 1-hour time frame. Firstly we note the extended rally of 483 pips to the upside. The rally ends at the end of the US trading session, Where us Traders will have no doubt taken their profits before the end of the session. And we’re at the start of the Asian session price action begins to fall lower. In fact, it falls 200 pips and where this trend finishes due to the US retail sales economic data figure which was released at 1:30 GMT on the 15th of April and which was – 8.7% month-on-month, and where this very poor number was seen as a fallout from the coronavirus pandemic.
Price action then turns north, where we have another rally to the upside of 138 pips and which runs out of steam at the end of the European session and part way into the US session.
Here we have a 1-hour chart of the US dollar to Swedish Krona, or USDSEK, The first trend we see is a 220 pip move to the downside, which would have been considered as oversold and where price action is reversed in a classic v-shape reversal pattern.
Price action consolidates before falling again and fading into a consolidation phase before we see a bullish trend up to a key level of resistance and where that key level is 10.000.
The next trend is lower, where we can see a lot of tails, both of the bullish and bearish candlesticks, which usually means that there is uncertainty in the market. And eventually, price action moves higher up to and above the previous key level of resistance and where this reversal is a classic v-shape reversal pattern.
Another common reason for trends to end is areas where price action stalled and reversed previously, such as this low, and previous low, which is also known as a double bottom, or an area of support.
Or areas such as double tops, where traders see that price has previously been an area of resistance and where the price will be rejected multiple times as the area is seen as a barrier.
In this example, we can see that the trend is reversed on three occasions at very similar areas of resistance and where after the third move, higher price action aggressively gets sold.
These are the types of trend fade-outs and reversals that you will regularly see on charts. But where else might you expect to see trends end? Well, there are many different reasons that trends end, but the most common reasons are time zone change over, because of technical analysis such as signs the pair is overbought or oversold or just prior to or just after an economic data release, or perhaps because of profit-taking after price action begins to fade. It might be due to the run-up to a key policymaker speech, or in the aftermath of a key policy maker’s speech. Or a reversal in price subsequent to an economic data release, an emergency or unplanned data release, or even because of rumors circulating in the market.
It might also be because of unexpected events in another financial sector, including oil or the stock market, or perhaps there are not enough buyers or sellers to maintain the momentum.
A classic sign of the end of a trend is when price action begins to consolidate into a sideways motion, and you might see this during lulls in the market or at the end of the Asian, European, or US sessions.
Traders buy and sell a pair based on their trading portfolio requirements, if they trade for large institutions, or perhaps as speculators or because their balance sheet requirements have a need to add or sell off a particular currency. Maybe they have import and export requirements. They may have just seen a good trend and jumped on it, but when their session came to an end, they closed out their interest and took their profits. The bottom line is that we never know when the balance of buyers or sellers is dominating the price action, which in turn results in price action shifting one way to the other. But technical analysis is usually a very good tool to be able to determine when price action trends are coming to an end. So keep an eye out for long tails, the possible reversal in price action, small candlesticks, consolidation, sharp v-shaped reversal patterns, time zone sessions coming to an end, or beginning. And be very careful with regard to entering a trend that has gone on for a considerable number of pips, especially in the hundreds, because if you are not correct, you could see a sharp price action reversal leaving you looking at a financial loss making the trade.
This part of the Cryptocurrency Passive Income guide will talk about one of the most known ways of creating passive income with cryptos, mining. This is also one of the first, if not the first, method of earning a passive income with cryptocurrencies, as this was the only way you could passively earn money when there was only one cryptocurrency, Bitcoin.
Mining – history
In the early days of Bitcoin, anyone could mind from almost any device. Mining Bitcoin on an everyday PC Central Processing Unit (CPU for short) was a completely viable solution. However, as Bitcoin gained traction, mining on regular CPU’s became harder. As the competition increased, so did the mining difficulty, and most miners swapped to mining with their Graphics Processing Units (GPU s for short). However, the competition kept increasing, and certain companies started developing specialized miners that were used exclusively for mining. These miners were called Application-Specific Integrated Circuits (ASICs). They are tailor-made for one specific purpose – mining – and are extremely effective at it.
Mining – overview
As miners mine cryptocurrencies almost exclusively on specific mining hardware, the entry fee for this way of earning a passive income has increased. Besides the initial hardware costs, which often go above $1000 per unit, a miner would have to pay for the electricity that the hardware uses. This is why it is extremely important to check the electricity prices in your country before starting to mine.
Bitcoin mining has mostly become a business ran by corporations rather than a way of earning passive income for regular individuals.
However, Bitcoin is not the only minable cryptocurrency. Mining lower hash rate coins that use the Proof of Work algorithm can still be a great source of passive income. On these smaller networks, using GPUs is still somewhat viable. Mining lesser-known coins are quite risky and speculative, but also potentially highly rewarding in the long run. These coins might be worth something one day, and completely worthless the other. However, they can also get adopted by the community and exponentially rise in price and value.
Conclusion
Mining is certainly one of the ways to earn passive income with cryptocurrencies, but it is far from the safest, easiest, or the most profitable one. It requires some technical knowledge, initial investment, profitability calculations as well as picking the proper coin. Though it can be highly profitable, it is not something crypto beginners should do.
How do forex option expiries affect price action in the spot FX market
In this video presentation, we are going to be looking at how Forex option expiries affect price action in the spot FX market.
We will be exploring how forex options work, although we will not be concentrating too much on the technicalities of how they are traded because we are more interested in how FX options expiries can be of great benefit to traders in the spot FX arena.
So what are FX Options, and what is the significance of their expiries?
FX options is essentially another way of trading forex. In effect, they are different branches of the same entity. One is traded on the spot FX, thus known as the Spot FX market, which most of you will be familiar with, and the one we are discussing today is the Future’s FX Options market, where trades are made based upon the price of a currency exchange rate at some point in the future.
So what are FX options?
Options traders purchase what is called a premium, which is a contract and which gives them the right, but not an obligation to buy or sell an FX currency exchange rate at a specified price. This exchange rate is called a strike.
Typically these contracts will be purchased for a future date, typically days, weeks, or even months in advance and where the contract is purchased from a market maker, which is usually an institution that offers futures contracts trading, unlike banks and brokers which offer spreads in spot forex. Contracts expire on the date that the trader chose and always at 10:00 a.m. in New York, USA. This is known as the New York Cut.
If a trader wishes to purchase a premium, for a future date, for an FX Option, where he or she believes that a chosen currency pair’s exchange rate will be above that at the time of the purchase, he or she buys a Call Option. This is an option to buy. Alternatively, if the trader wishes to purchase a premium for an option where he or she believes that the future currency pair’s exchange rate would be below that at the time of the purchase, he or she buys a put option. This is an option to sell.
So how much does the premium contract cost a trader?
This will vary depending on the size of the contract and also so how far the future currency exchange rate is from the current one and the length of the future expiry date. However, futures traders often prefer this type of exposure in the FX market because they take a long term view of where exchange rates will be. And rather than swing trade to these levels in the spot FX market, they prefer to pay the price or premium for the contract upfront, and this then becomes their risk and exposure, unlike spot FX traders whose level of risk fluctuates with price action.
How do options traders make money?
If on the day of the maturity of the FX options contract at 10 a.m. for the New york cut the strike rate, or currency exchange rate, Is it at or above the exchange rate for a call option, or at or below the exchange rate for a put option, then the trader is known as being in the money. If a currency exchange rate is not hit, they are out of the money. If they are out of the money, the option expires, and the contract is worthless to the buyer, and he loses the premium.
If, however they are in the money, the buyer will get to exercise the option and create a position in the market. And the seller of the contract will be the counterparty in the ongoing trade. The seller of the contract also gets to keep the premium.
Anybody can trade FX options, but typically we will find institutions, high net worth individuals, forex traders looking to hedge positions, forward forex traders, speculators, exporters, banks, institutions, companies with exposure in the foreign exchange market generally.
Insert G: So, how does FX currency options affect the spot FX market? Interestingly, when FX options expiries accumulate into large amounts, typically $100 million +, we often find that these accumulated amounts at a set currency exchange rate have somewhat of a magnetic effect to spot FX Trader in the run up to the 10 a.m. new york cut.
Although these huge amounts of options expiring at a particular level occur on an almost daily basis, it does not definitely mean that price action pertaining to a particular pair will hit the strike rate. However, some of the traders who are involved in FX options will also use the Spot FX market to hedge some of their own positions, thus using the Spot market to try and move price to where they need it to be.
Also, these currency options expiry levels with the accumulated amounts are available via certain brokers and commentators before the expiries. Thus this publicly available information is used by Spot FX traders to keep an eye out in the market in the period leading up to the expiry. Remember, the larger the amount of the expiring contracts, the more it would seem that there is a gravitational pull towards these exchange rates.
Forex.Academy will be making these levels available to you, free of charge, and they can be accessed on the options drop-down menu of our home page. For your convenience, as and when option expiries become available almost each day, we will also plot them onto a chart, as per this slide, and you will be able to view them there for your convenience.
This part of the Cryptocurrency Passive Income guide will talk about one often forgotten way of earning money, which is at the right place in the right time. The focus of this part of the guide will be Airdrops, Forks, Burns, and Buybacks.
Right-time Right-place
While most passive income strategies recover preparation, work, skill, and taking risk, this one does not. All it takes is to either be lucky or bring yourself to the right place at the right time in order to collect the reward.
Airdrops
Airdrops are events when certain exchanges (or projects directly) send certain cryptocurrencies directly to your wallet. The amount sent varies based on your contribution to the project in terms of sharing, liking, etc.
Looking for airdrops in order to earn an income is quite a viable way, even though it is inconsistent. You never know how many projects will do the airdrop, nor do you know when that will happen too much ahead. This moves the long-term planning out of the game. Not many people consistently utilize airdrops as a way of getting additional income while they could. Ultimately, this is “free money” and should be taken seriously.
Forks
Forks are when a cryptocurrency splits into two versions of “itself” due to an update, upgrade, or disagreement between developers or the community. If you own the original cryptocurrency at the time of the form, you will receive the holdings on the new blockchain as well. The prime example of this was when Bitcoin forked into Bitcoin Cash.
Using forks as a way to generate passive income is as easy as holding a certain cryptocurrency at a certain time. There is no skill or risk involved. The main thing to care about when being involved in a form is deciding what to do with the then-received cryptocurrency. While it is sometimes better to hold both cryptocurrencies, you will most likely sell the cryptocurrency that has less community support.
Burns and buybacks
Burns and buybacks are quite rare but could be a good addition to the options you have when it comes to earning passive income with cryptocurrencies. Burns and buybacks are, as the name says when the cryptocurrency creators buy back the cryptocurrency from the current owners and then burn the supply.
The prime example of a buyback and burn is the Bitfinex exchange and its LEO token.
Bonus: Collectibles
There are certain blockchains that have created certain “games” through which you can earn a lot of money. One such “game” is Cryptokitties. This “game” has a supply of collectibles that “live” on the Ethereum blockchain. They can be collected, breed as well as sold.
Make sure to watch the rest of the Crypto Passive Income series, where we will talk about other ways of earning a passive income through cryptocurrencies.
This part of the Cryptocurrency Passive Income guide will talk about crypto trading bots and how they work, as well as if they can be profitable.
What are crypto trading bots?
As the name suggests, they are automatic robot trading algorithms that trade for you. All you need to do is give them 24/7 internet access and a trading strategy, and they will do the work for you.
There are several types of bots available on the market, depending on what you want to do. They include regular trading bots that trade on the desired exchange as well as arbitrage bots, which make a profit off of the price difference between exchanges.
Are crypto trading bots profitable?
In order to start profiting from bot trading, you will ideally need a healthy stack of crypto to start with. If you are running an arbitrage bot, you would need cryptocurrencies on multiple exchanges. ,
While some people have made a fortune passively through these bots, many have lost their crypto investments as well. It all depends on how you adapt the bot to the market. There are strategies that work well for bullish markets but do poorly in bearish markets, and vice versa. For this reason, you need to develop or copy strategies and then switch them out based on the major trend.
Which trading bot to pick?
Quite a few crypto trading bots have recently emerged on the market, claiming they can ensure massive profits. While there is no doubt that utilizing machine learning can make a profit if done well, we can conclude that bots only enable the possibility of passive income while creating it has to do with you creating your own strategy (or copying one).
A couple of most well-known cryptocurrency trading bots on the market are: Gunbot, which offers trading on eight different exchanges. It costs 0.02 BTC up to 0.15 BTC to buy it.
Haasbot is an automatic trading bot that comes with monthly subscriptions that start from 0.073 BTC.
Profit Trailer is a bot that specializes in average-down strategies. It starts at $35 per month.
Ultimately, you should pick your bot based on the exchange you want to use it on, the monthly fee as well as based on if the strategy you want to use is available on the particular bot.
Should you use a crypto trading bot?
The reality is that bots are here to work as tools rather than as fully independent entities that just earn massive profits. If that were the case, everyone would use them. Using trading bots can be extremely profitable, but only with the right strategies.
The best crypto trading bots that earn the best profits are certainly ones that you have never heard about, nor you will. Traders who use such bots have absolutely no incentive to share the information. However, there are many possibilities when it comes to earning a passive income through bots, and many strategies can be viable. Backtesting is a major key in finding the strategy that suits you and the market cycle at that particular moment.
Make sure to watch the rest of the Crypto Passive Income series, where we will talk about other ways of earning a passive income through cryptocurrencies.
Crude oil, which is sold by the barrel in the future’s market where buyers take delivery on a monthly basis, reached a peak of $65 per barrel just a few weeks ago.
The May contract, which expires today 21st of April 2020, had been hovering around the $20 per barrel level yesterday for one of the producers, West Texas Intermediate, or WTI. However, it became increasingly apparent that buyers for this contract were hard to come by because of a lack of storage facilities. And when the Chicago Mercantile Exchange or CME issued a warning statement yesterday that it was possible for oil prices to go into negative territory, it sent a shock through the oil markets.
While producers remained extremely eager to sell and buyers were left standing on the sidelines, and with just hours remaining until the May contract expired, panic selling set in and, as we can see on the graph, the price of a barrel of WTI, fell through zero into minus territory. And where this had happened for only the first time in the history of the crude oil market.
We can also see on the chart that the price did recover some upside to just over $1 per barrel, but where it currently hovers slightly underneath zero at around – $2 per barrel at the moment. This price action in crude oil is unprecedented, and, as I mentioned previously, has never happened before. So what exactly is going on, and what does this tell us about the oil and financial markets in general?
First, we need to take a step back just a few short weeks ago when the world was hit by the Covid-19 pandemic. People all over the world remain in lockdown, businesses are closed, the airline industry has almost flatlined, cars are off the road because nobody is going anywhere. And every one of these sectors uses by-products of oil in the form of petrol, diesel, gasoline, jet fuel, cooking oils, lubricants, plastics, etc. Springtime has hit the west, and with the warmer weather, we need less heating oil.
An old adage springs to mind, and has never been more appropriate: supply and demand: we have too much supply and too little demand. I think it’s safe to say that we just don’t need oil right now.
Storage facilities, including Cushing in Oklahoma in the United States, are at almost 80% capacity of barrels of oil, which are only trickling out to refineries, which are also busting to overflow with the by-products that they have produced including petrol and diesel, etc.
All the time I’m big oil-producing countries such as Saudi Arabia and Russia, the USA and others keep pumping out oil, in defiance of nations asking them to ease production and where the governing body, OPEC, seems not to have enough clout to force countries such as the belligerent Russia to do so.
However, when prices of oil go into negative territory, which many of us have never even considered before, a sudden realization occurs, that producers of oil, which falls into negative pricing during a futures contract, are forced to pay buyers to take oil off of their hands at the market rate. This will be extremely painful for oil producers, who are producing a product which they cannot store because of a lack of storage facilities, and where they are hiring – at great expense – barges, and cargo ships and huge tankers, many of which are languishing in ports and offshore while waiting to go into ports to be
offloaded, and which becomes a further expense to producers. Surely now the writing’s on the wall, and that the longer this pandemic goes on, the less oil we are going to need, and therefore we should expect production to fall even further.
But is there an underline message here? Well yes, this kind of unprecedented crash in a major financial sector, albeit a blip, will send out warning signs to investors that the financial markets remain extremely unstable during the virus pandemic, and that the longer this goes on for we should expect volatility to spill over into other markets such as stocks, currencies – and especially where those countries are producers and exporters of oil, is the United States, Canada, Russia Saudi Arabia, and oil, and of course markets will be keeping a close eye on future oil contract expires.
In forex trading, a term that is used quite often in technical analysis is market or price action ‘noise.’ Quite often, we find that price action in Any Given currency pair spends an awful lot of time sideways or consolidation motion. Or where price action seems to be rising and falling in small increments, but where these moves tend to form the basis of a trend. However, the lower you go on a time frame and especially with regard to the 1-minute and 5-minutes time frame, the more difficult it becomes in ascertaining exactly where the trend is going, whether it be a part of a bullish move or a bearish move or if it is a part of a consolidation phase.
Insert A: This is a section of price action on a 5-minute chart of the USDCAD pair. We have added two vertical bars because this is the period that we want to drill down on a little bit more.
Insert B: This is the same section, but we have added 2 points on the charts at position a and b, and where the interest rate differential is 64 pips. That is to say, had you gone short at position a the maximum you would have made had you got out at position B would have been 64 pips less your spread. And of course had you bought the pair at position A and still being in the trade at position B you would have been offside by 64, pips plus your spread.
Insert C: In this section, we have added our own channel, where we can see a lot of rise and fall and tight consolidation in periods where the price is contracting within the range, but this in itself would become difficult to trade, especially if looking for trends.
Insert D, Now scalpers, while incorporating technical tools such as statistics, might argue that a few pips could be made here and there possibly based on highs with higher highs and lower lows, etc.
Insert E, But this type of technical analysis can quickly fall out of kilter in areas such as where we have highlighted we suddenly have a lower or high which is followed by buy a higher low, where we would need a lower low in order for the pair to remain in a bearish price pattern.
Insert F. This is also complicated in the area where we have highlighted where we see candles grouped together, which are both bullish and bearish and where several are more wick than candle telling traders that neither bulls nor the bears have this pair under control at this time. This is market noise. And while such noise can be seen in all time frames, the trick is to move up to a higher one to find out where directional bias might be heading.
Insert G. However if we moved to a higher time frame, such as the 1-hour time frame here and again, look at the price action within the two horizontal lines we get some more clarity about what is really happening to this pair over the time period which we have highlighted.
Insert H, And here we can see that the price action is consolidating after a rally to the upside and where we have a V-shaped potential reversal pattern within our highlighted area.
There is an old saying which I’m sure you’ve heard of that sometimes you can’t see the wood for the trees. Well, this is a perfectly good example, where in order to avoid the noise of the lower time frames, we must always look to the higher time frames to try and ascertain what the general bias is, even if you prefer to trade the lower ones.
People from all around the globe started investing in cryptocurrencies due to their great long-term potential in transforming the world both in terms of technology and wealth distribution. While most focus on instant big gains, some people would like to stay on the safer side and look for passive income in the crypto space.
There are many ways to earn a passive income with cryptos, and we will cover most of them in a series of videos. This video will show you how you can earn a passive income by utilizing the Proof of Stake consensus algorithm.
What is Proof of Stake?
Instead of investing the users’ computing power to process transactions, PoS transactions are validated by the nodes that stake their own coins as a form of insurance. Those that stake their coins are trusted because they have put their coins on the line, so they have no incentive to scam.
Everything is quite simple — just stake the coins by keeping them in your wallet, and you will receive rewards for this.
The process is, in terms of how you get passive income, very similar to the principle of bank deposits, which have a reward over the deposit time.
Choosing the right coin to stake
First off, the currency you want to select has to support the PoS. After you are sure that the particular crypto works on PoS, just hold that crypto in your wallet and give the wallet a 24/7 access to the internet. Being connected to the internet 24/7 is the only way for staking to work, as you need it both to validate transactions and receive rewards.
Pros of the PoS system
The key difference between Proof of Work and Proof of Stake is the formation of any block. While PoS has a random selection of block validators, PoW uses computing power, which chooses only the computers which solved the validation puzzle (the better gear you have, the more you will earn). This makes staking cheaper in terms of initial costs as well as the costs of running it.
Cons of the Proof of Stake system
When using staking for passive income, you should focus on two things:
Safety
Profit
There is a reason safety comes first. It doesn’t matter if the profit is big on paper if you lose it all in the end. You need to set your account up with 2-factor authentication, use only trusted software, and never disclose any personal info to third parties.
Besides safety risks, there are other risks, mainly regarding the price volatility. Since you get paid out in the staked coin, if it drops in value – you get less money.
Always take into consideration all forms of risks before stepping into any investment.
Which cryptocurrency should you stake?
There are many cryptocurrencies you can stake, but we will name a couple you could take into consideration.
Dash — one of the first large cryptocurrencies that introduced staking
Decred (DCR) — a cryptocurrency that uses a hybrid of PoW and Pos and considers decentralized management as its main priority
NEO – often called the Ethereum of China
Zcoin (ZCX) – works on user privacy and gives great returns (17% per annum)
Ethereum (ETH) — second-largest cryptocurrency in the world, that will soon switch to PoS.
Make sure to watch the rest of the Crypto Passive Income series, where we will talk about other ways of earning a passive income through cryptocurrencies.
The second part of the Elliot waves guide will talk about the use of Heikin Ashi candles, wave degrees as well as how to trade the Elliot wave in general.
Heikin Ashi and Elliot wave trading
If you seem to get confusing results from the chart, it’s most likely a miscalculation as far as following the rules of the Elliot wave go.
However, there is a way to track and read the chart better.
Heikin Ashi candles pair up extremely well with the Elliot wave pattern reading as they help recognize red or green candles that create a trend. This makes you respond to the market movement and distinguish trends easier.
Wave Degrees: The Waves Within Waves – explained
Each wave of the five Wave Elliott Principle consists of one larger timeframe wave. Each wave can consist of larger market cycles that even take decades to complete.
The degrees of the wave patterns have different names:
Subminuette: lasts minutes
Minuette: lasts hours
Minute: lasts days
Minor: lasts weeks
Intermediate: takes weeks to months
Primary: takes several months to a few years
Cycle: takes one to several years
Supercycle: takes multiple decades (40–70 years)
Grand Supercycle: takes multiple centuries
When it comes to cryptocurrencies, and knowing that it is a young market, large wave degrees do not exist yet. However, we have seen a pattern as big as Primary during the rise and fall of Bitcoin’s price in 2017 and 2018.
Trading the Elliot wave
Entries and Exit points
The best entry point would ideally be the start of the first wave. However, that is quite unrealistic as it can be hard to spot and recognize a wave so early. Most traders start at the bottom of the second or the start of the fourth wave. These waves are much easier to spot. As a word of caution, try not to ever buy near the top of the third wave or fifth wave.
The best exit point would be the end of the third corrective wave. However, timing this can be quite hard as these final waves might retrace to 100% of the initial pattern. For this reason, most traders choose a safer exit position, which is the place where consolidation breaks outside of the final corrective wave.
Conclusion
The Elliott Wave Principle is a highly useful chart pattern that is used by many veteran traders. It is mostly used to recognize the beginning and end of a certain trend.
Do your own research before attempting to buy and sell anything. Happy trading.
One of the biggest areas where new traders fall down is chart hopping. They flip flop from one chart to another looking for the opportunity which will give them a chance to bag a couple of hundred pips
without fully appreciating all of the dynamics involved in technical analysis. They think they spot a trend and jump right in and execute a trade, thinking only of the money they could make. They often make the mistake of buying at the top of the market or selling at the bottom. Think they may have spotted a trend, and perhaps they have, or it might be that some news has just come out, and they make a split second impulsive decision to buy or sell a currency pair simply based on what they’ve seen or heard.
And although they may indeed have spotted a nice trend, it could be that that trend is about to stop dead in its tracks and about to turn.
Such traders will not even bother to implement the most basic of technical analysis. It’s trading on a wing and a prayer and is tantamount to gambling.
No matter how much you think or believe that a currency pair may or may be trending, in any given direction, do not execute a trade until you have backed up your theory with tried and tested technical analysis methodology.
So when are trends likely to end? Why do trends finish reverse or go into periods of consolidation? Typically trends will start to fade and finish at the end of trading sessions, such at the end of the Asian, European or US sessions, where those traders had been buying or selling a pair based on their trading needs or beliefs pertaining to market conditions or possibly due to their balance sheet requirements or even because they are influenced due to their own country’s import and export requirements. They may have just seen a good trend and jumped on it, but when their session came to the end, they closed out their interest and took their profits.
Or it might be that they are rebalancing their portfolios by getting in and out of positions to cover market volatility in Risk on and Risk off scenarios. And where the sentiments of one session, which is ending may be completely different to the sentiment of those traders coming into a new session in a new country where they have their own various sets of requirements and beliefs about where currencies should be in relation to one another.
Of course, it could just be that trends fade for no apparent reason. It might come at the end of a 15- minute candlestick or an hourly or daily candle, which is enough to tip the balance and reverse a trend. Or it might be that a currency pair is deemed to be overbought or oversold due to technical analysis. Impending economic data releases is also another time when trains can stop for no apparent reason, or around the times when key policymakers are due to make policy statements or speeches.
One critical mistake is where traders will hop on a trend, which is absolutely great if they have done their homework and all the above mitigating circumstances are taken into consideration, but may not have factored in that perhaps a currency pair has already moved a couple of hundred pips in which case it is
quite dangerous to jump on and expect that trend to continue without some kind of pullback.
So our advice is: do not make impulsive trades based on hopping from one chart to the next. Always do your technical analysis research and make sure your timing is correct and that you have considered all of the above before you execute each trade.
Insert A, The stochastic oscillator is used in technical analysis and was invented by George Lane in the late 1950s. The indicator measures the opening price of a financially traded asset and compares it to the closing price over a predetermined period of time. Because the data uses historical calculations and plots them in the form of two moving averages, the k-line, and the D-line, this is considered to be a lagging momentum indicator. The actual mathematical complications for the tool are very complex, and we will not be going into them in this session. The basic and generally widely used settings for the stochastic oscillator will automatically be set by your broker at 5 3 3. More experienced Traders are able to adjust the settings to their preference. However, we will be leaving them at the standard settings, and that way, we will be very much going with the crowd as it were in this example.
Insert B, The stochastic oscillator is widely used by professional traders and will be offered on almost every trading platform. It can simply be dragged straight onto your trading chart and will sit at the bottom, as in our example.
Insert C: The basic principle is that the Kline which is calculated over a slightly longer time period than the D line and when both of these lines are above the 80% Overbought line, the currency pair is considered to be overbought, and when the K and D lines are below the 20 % oversold line, the pair is said to be oversold.
Insert D, traders look for the ‘k’ and D lines to have been above the 80% line in the overbought area and then dipped below the 80% line where the K-line has crossed over the d line, at which point they will go short on the currency pair.
Insert E, Conversely, traders look for the K and D lines to have been below the 20% oversold line, and where the K-line has crossed above the D-line, they use this as a signal to buy a currency pair.
One of the biggest areas that new Traders falling into a trap is that they take the stochastic signal has been gospel and trade it accordingly and then wonder why they are losing money.
And so, is the stochastic indicator a friend or foe? First, we have to remember that all indicators, and especially lagging indicators, are just that: indicators. They are an indication that the market, in this example, might be overbought and ready to turn lower, or that the market is oversold and it might be ready to move higher.
Let’s drill down a little bit more by going back to our 4-hour chart of the EURUSD pair. The longer the time frame, the more likely, the longer trend will become apparent, and that’s where the more pips will be realized, and of course, that translates into more money-making opportunities.
Insert F: By drawing a vertical line at position A, we can follow that down and see that the stochastic k and D lines have both moved above the 80% overbought area, and that’s the k-line has crossed below the d line, and both lines have moved below the 80% overbought line. This is represented by the price action which has been falling.
Insert G: Traders who sold the pair on this signal and stayed in the trade would have seen an overall pip movement in their favor of 390 pips, which is huge. The stochastic was a true friend at this point.
Insert H, However traders who abandoned the trade as soon as the stochastic became oversold, as per the example on your screen now at position B, because the K & D lines in the oversold area under the 20% line and where the k-line has crossed above the d line, they would have been extremely disappointed as the market continued to trend lower. While they would have made around 40 pips, they would have lost out on 350.
But one of the biggest problems we find with new traders is that they will buy a currency pair in a situation like this, where their trade goes immediately against them and falls
hitting them with losses of over 350 pics on this occasion because they have not supported their trade with a stop loss, due to poor risk management. In this example, the stochastic indicator would have been a foe.
Insert I, Let’s return to our chart at position C, we can see that the stochastic is oversold, and more importantly, it is staying or remaining very close to the oversold 20% line as the market trends for lower.
And so the lesson here is that if the market is overbought, it does not necessarily mean that it will automatically fall, and which is clear from how example today if a pear is oversold, it does not necessarily mean that they will turn around and move higher.
So remember indicators are simply an indication that something might happen and not that it definitely will happen. Incorporate good risk management and money protecting tools such as stop losses in your trading plan. Learn to use price action as the definitive trendsetter, while incorporating other technical indicators to more reliably established entry points for your trades. And what is most important, which I’m sure you’ve heard many times, is to let the trend be your friend and I never trade against it.
The theory behind the Elliott wave principle is based around the price movements, which typically do not move in a straight line, but rather in a series of waves. Every action has an equal and opposite reaction, which is the case both in life and in any financial market (including cryptocurrencies). When the price goes up, a contrary downward movement will follow eventually.
Price action in any financial marketplace is often divided into separate trends as well as corrections. Price going up or down will showcase the direction of a trend, while the corrections will move against the trend. Ralph Nelson Elliott was the man that first discovered the repeating patterns that are better-known as impulsive and corrective waves. He noticed that these trend-following impulsive waves tend to respond in five waves. Even on a smaller scale, these impulsive waves can continue to repeat themselves inside the larger Elliott wave. This “waves within waves” theory is labeled as “wave degrees.”
Elliot waves – explained
Human social nature shows repetitive patterns due to the manner of human psychology, which is completely predictive. As mentioned above, Elliot waves have two different phases: the trend and corrective phases. The first phase forms three advancing waves of 1, 3, and 5. The corrective waves are comprised of 2 and 4.
During the corrective phase, two receding ways labeled A and C will almost always be present, as well as a counter wave labeled B.
The rules behind the trend waves are:
Wave 2 will never move below the starting point of wave 1. Wave 3 is never the shortest wave
Waves 2 and 4 might sometimes alternate in form, meaning that they will sometimes be presenting themselves in a zigzag or flat motion.
One of the trend waves will be much longer than the other two waves. The third wave will almost always be the longest out of the three.
Rules for the corrective waves are:
Wave B ends at or below the starting point of Wave A. Wave C ends below Wave A
In the crypto market, corrective waves often claim more than 60% of the all-time high price (which is at the top of the 5th wave)
Once we know what Elliot waves are and how to read them, we can move to the trading strategies. Check out part 2 of our Elliot wave crypto trading guide to learn more.
We will take a look at a Heikin Ashi cryptocurrency high-low breakout trading strategy. We will need to go through several steps in order to fully execute the strategy.
Identifying three consecutive bullish candles without any lower wicks.
After switching to the Heikin Ashi candlestick chart on your preferred trading platform, you will need to identify three consecutive bullish candles. It is mandatory that all three candlesticks have no lower wicks.
This is because bullish candlesticks with no wicks indicate a strong trend to the upside and a further increase in price. Once that is done, we need to check the location of the candles.
There have to be less than five consecutive bearish candles before the three consecutive bullish candles.
Trading Heikin Ashi candlesticks are very trend-oriented, so each of the little bits of info the chart gives, we have to take.
We need the location of the pattern, meaning that we can’t count more than five consecutive bearish candles prior to the three bullish candles spotted in the first step.
Now that we established the trend direction as well as the position of the pattern, we can look for buy opportunities.
Making an entry position at the 4th candle opening
To initiate a position, make an entry at the 4th candle opening, right after the three consecutive bullish candles have finished forming.
Get ready to pull the trigger near the finish of the 3rd candle, so you can be ready for the 4th candle opening.
Placing your Stop-Loss below the most recent swing low
As with every trade you will take, there is a chance of it going the opposite direction to what you predicted. That’s why setting stop-losses is extremely important. The strategy behind setting stop-loss with Heikin-Ashi is quite simple.
The protective stop-loss should be placed just below the most recent swing low, or ultimately below the three bullish candlestick pattern. However, placing it below the three bullish candlestick patter might be risky as you can be taken out of the trade prematurely.
Taking Profit
Depending on how strong the trend is, you would want your take profit to be two or three times more than you stop-loss. By doing so, you are trying to maximize your reward to risk ration.
Conclusion
Using the Heikin Ashi candles to determine the trend direction and set up trades can be extremely lucrative. It is important to make sure the position of the pattern is correct before entering trades, so that should not be compromised. This guide has hopefully taught you a trading strategy you can add to your toolset and possibly use.
Cryptocurrencies have made many people millionaires, and they will yet again. One of the biggest and fastest wealth distribution events in modern history is exactly the creation of cryptocurrencies. Events that severely impact the supply or demand of an asset are rarely known in advance, which is not the case with Bitcoin. Bitcoin’s halving event is widely known, and that makes Bitcoin extremely unique.
Bitcoin Halving
The event called the halving makes the supply of new Bitcoin coming onto the market cut in half. This is by design and happens approximately every four years. Shrinking supply, when combined with growing demand, is a proven recipe for a price increase. The halving presents an opportunity for regular people to invest a small amount of money and walk away with hundreds or thousands of dollars.
We know the Bitcoin halving will happen in May, and that the supply of Bitcoin will shrink as miners will be rewarded 50% less than up until then. Each time the halving happened, the prices soared. The first halving in 2012 brought Bitcoin’s price up 2,135%. The second halving in 2016 managed to propel Bitcoin’s price 3,122% over the next 18 months.
While most investors know about the halving, they don’t look into its track record when it comes to massive gains. On top of that, even fewer people know that altcoins might be the assets they should be looking for as the Bitcoin halving approaches. After Bitcoin’s first halving, Litecoin (which is called “Silver to Bitcoin’s Gold” soared more than 7,000%. The second Bitcoin’s halving happened, and an altcoin called verge shot up an astonishing 1,362,400%.
Conclusion
While it is true that altcoins are separate projects and that each one of them has something unique, it is undeniable that they are connected and correlated to Bitcoin. Investing in altcoins with the most promising technology might be the way to go before the halving happens.
There are many effective strategies for trading cryptocurrencies, and each trader needs to find its own comfort zone when it comes to technical analysis and trading. For that reason, it is important to know as many available strategies so you can pick the one that suits you best. Heikin-Ashi technique is used to forecast the price of a cryptocurrency and is considered one of the most effective trading strategies when trading traditional assets.
The Heikin-Ashi strategy revolves around the Heikin-Ashi candles, which are another form of looking at the charts. They can be applied to any time frame without restrictions, so it can suit any trading style. While they were initially designed for trading commodities and stocks, Heikin-Ashi had great success in trading cryptos as well.
The Heikin–Ashi Charts
Heikin–Ashi can be translated from the Japanese language, and means “average bar.” These candlesticks are different than the typical Japanese candlesticks that traders mostly use, even though they look alike. The difference between the two is the formula used. While the regular candlestick uses a form of open-high-low-close (OHLC), Heikin-Ashi uses a modified version of close-open-high-low (COHL).
Once we know the way Heikin–Ashi candlesticks work, we can understand how to use this trading strategy. There are two primary signals that traders can identify through the Heikin-Ashi candlestick:
1. Bullish candlesticks that have no or very small wicks indicate a strong move to the upside and good buying opportunities.
2. Small candlesticks that have a small body and big upper and lower wicks show us a potential reversal.
When it comes to bearish signals, the same applies but in reverse:
1. Bearish candlesticks that have no or very small wicks indicate a strong move to the downside and good short-selling opportunities.
2. Small candlesticks that have a small body and big upper and lower wicks show us a potential reversal.
Now that we learned how Heikin-Ashi candlesticks work and how we can read them, we are ready to move on to trading strategies. Check out part 2 of our Heikin Ashi Crypto Trading to learn more about using this strategy for crypto trading.
This video is the beginner’s guide to candlesticks,
where we will teach you what a candlestick is, and identify its basic properties.
Insert B:
Candlesticks are one of the more preferred methods of showing the price of a currency pair in technical analysis.
Insert C Bar charts
Insert D
line charts are also used by traders but are somewhat more simplified versions of expressing price action as a visual representation on a screen.
See Insert B! Each candlestick tells a story of where price has been and where it is likely to go during the particular time frame that it is viewed upon. It is, therefore, essential that new Forex
traders learn how to read them because they are applicable in every currency pair that you may wish to trade.
The shape and size of a candlestick, and the color, will help you to determine if a trend in either direction is in play, or if a trend has stalled and is about to reverse, or the amount of volume being traded, which will tell you you the interest from participants at any given time, and this, of course, will help you chose your entry into a trade and of course your exit, either with a profit or as defined by a stop loss.
Insert E, Candlesticks can be the color of your preferred choice. In this example, we are using a blue candlestick to denote price ascending and a red candlestick to denote price falling. There are three parts that make up a candlestick.
Insert F, the open price.
Insert G, the closing price.
Insert H and the wicks, which are also known as shadows, and which will appear on the majority of candlesticks.
Insert I
candlesticks will turn blue if the price of a currency pair moves above the exchange rate price when the candlestick first opened.
Insert J
and the candlestick will turn red if the exchange rate moves lower after the candlestick form opens.
Insert K
A blue candlestick is also known as a bullish candlestick, and a red one is known as a bearish candlestick. As mentioned previously, your broker may give you the option to change the candlestick’s colors, and this isn’t important, as long as you know which color represents the bullish or bearish direction.
Re-insert B, No matter which time frame you chose to trade on, be it a 5 minute, 15-minute, 1-hour, or daily, the candlestick will remain open for the duration of that specific time period.
Insert L
the candlestick will provide you with information on the first price traded on opening and then price direction during the particular time frame for which it is currently open. In this example, we have chosen the 5 minute time frame. And so, each candlestick will remain open for 5 minutes each. When closed it can also provide a host of information regarding the historical price action, including the last price traded for that candle, and which then can be used in conjunction with previous candlesticks to determine price direction and specifically trend formations, the end of a trend and possible reversals in price action. This is the key information that traders require to successfully utilize candlesticks in their technical analysis.
Insert M
In the context of a real chart, we have two examples, one of a bullish or blue candlestick where we can see where the price opened during the five-minute period and where it eventually closed. And also the second bearish red candlestick, showing where that opened and eventually closed.
Insert N
Initially, the price of a candlestick may change colors several times during the time frame, but the key information is left after the time frame has ended. However, the wicks or shadows, tells the trader that at some time during the time frame price may have gone above all below the initial open. Therefore, the wicks tell the trader the complete range of price action during any given time frame.
Insert O
As a general rule of thumb, a new candlestick will open at the exchange rate, where the previous candlestick closed. Gaps can appear in volatile sessions and also sometimes when there has been a break in trading, such as after the weekend break.
The beauty about candlesticks is that forex market professionals all rely on certain formations which are well recognized and offer reliable entry points into the forex market because of the high probability that certain shapes or groups of patterns of candlesticks, which repeat themselves time after time and tells traders about the state of a particular currency pair and how it is performing and whether or not there will be a reversal in price action or if a trend is forming.
So how do we use candlesticks to trade Forex? Well, we are always looking for high probability setups because it is this which differentiates traders from gamblers, and if we know that certain candlestick formations offer a high probability of future directional bias, it will be in our favor to incorporate them into our training methodology.
Insert Q
Here are just a few candlesticks that traders look out for, the spinning top, the Doji, the Hanging Man, the hammer, and the shooting star. All of these are firm favorites and offer reliable information to traders about future potential price direction.
Reading candlesticks is like reading a story, and they should always be read from left to right on your chart in order to tell you where price has been, and whether it is faltering in any particular direction. It can tell you if the market is flat or if the market is extremely volatile, and it can predict with a high degree of accuracy future price direction. Understand your candlesticks and use them like a detective, by analyzing them in great detail and using them to tell you what is happening currently with regard to price action and where to enter and exit your trades.
Top Facts You Need To Know Before Trading Major Currency Pairs
Insert A: In this video presentation, we will be looking at trading the major currency pairs. Like all currencies which are trading in pairs, the major currencies are traded against the US dollar.
The quotes are the same as other currency pairs, but because the major currency pairs are more popular, this means there is more volume going through when they are traded than other currency pairs, and we, therefore, tend to find that the spreads are tighter on the majors.
Before we look at which of the pairs are considered the major currencies, we should just establish what a currency pair is. All financial traders look to speculate on the changing value of a particular asset, for example, precious metals such as gold and silver and stocks and shares.
The only difference in forex trading is that you are speculating on the value of one currency against another. And this is where the value of the first currency is expressed in units against the value of the second. These units are known as the exchange rate, and the exchange rate moves up and down and is measured in pips.
Insert B: If the Euro is being valued against the US dollar, the current exchange rate is 1.09, where 1 Euro is equal to $1 dollar and nine cents. Easy enough. The best way to learn how to gauge currencies and their value against one another is to open a demo account and spend some time looking at screen charts and seeing how currencies are quoted against each other. You can even play some trades at no risk to see how the spreads differ and look at historical price action of the pairs while experimenting with some of the many technical analysis tools which are available to help try and determine future price direction. This is the safest way to learn how to trade using virtual money in real market conditions.
Insert C: Let’s look at some examples now to learn how to read major currency pairs. This is one of the most commonly used trading platforms; it’s called the MetaTrader MT4 and is widely available via most brokers.
On the left of the screen, we can see the market watch section, which is home to all the currency pairs that your broker will offer you. We have highlighted one pair, which is one of the most widely traded major currency pair, the EURUSD, by clicking on the pair in the market watch window, we can open a trading chart and drag it onto our screen which we have done here.
Insert D, each currency is denoted by its three-letter ISO, Which stands for International organization for standardization.
Insert E, The following ISO’s makeup the major currency pairs, so JPY for the Japanese yen GBP for the British pound, USD for the United States dollar, CHF for the Swiss franc, EUR for the Euro, cad for the Canadian dollar, AUD for the Australian dollar, NZD for the New Zealand dollar, and finally SEK for the Swedish krona.
Insert F, If we believed next fundamental reasons such as the European Union was about to increase their interest rates, which might be attractive to investors in Euros, we might expect that the Euro would rise in value you against the US dollar, as in this example, and where we would execute a buy trade in the hope that the Euro would rise in value against the dollar in which case we would make money.
Insert G, If only, on the other hand, we expected that the US Federal Reserve was going to increase their interest rates, which would be attractive for investors to then buy dollars, we might expect the price to fall all in this pair, in which case we would sell it.
There are a whole host of different reasons why currencies rise and fall against each other as well as economic conditions such as the strength of a country’s economy. There are technical reasons as well, and whereby traders use a system called technical analysis to tell them when the price of a pair might move higher or lower, and this would be based on factors including a currency being overbought or oversold.
Therefore traders bet against these exchange rate fluctuations where each movement is measured in pip value and where traders bet and amounts in value against the rise and fall of the exchange rate. So if a retail trader betted that the exchange rate would move up 10 pips and they bet $1 per pip, and they were correct, they would make $10. However, if the market moved down and therefore against them by 10 pips, they would lose $10 and so on.
When the unit value of the dollar is higher than an equal unit of a counter currency, the US dollar will be quoted first, such as the USD JPY pair. However, currency values can go from parity to inverted, but we’re typically the format will remain the same. The first quoted currency ISO is called the base currency. In this example, that’s the US dollar, and whereby the second currency is the quote currency.
Base currencies can be quoted as quote currencies on other pairs and vice versa, depending on which pairs are traded. Remember, currency pairs form the largest amount of volume going through the market at any given time, and this means there is a great deal of liquidity in these pairs. And liquidity and volume mean price movement. And movement means opportunities to make money trading Forex.
It is no coincidence that the major currencies belong to those countries which are amongst the richest on our planet. This means that they have a high gross domestic product due to the amount of goods and services which they provide across the world, and which has made them wealthy. Investors, traders, and providers of goods and services are continually driving exchange rate fluctuations, and this is why the best training opportunities are available on the major currency pairs.
The Morning Star pattern is a three-candle candlestick pattern that signals a bullish reversal and appears at the bottom of a downtrend. It signals a trend slowing down and a large bullish move laying the foundation for a new uptrend.
Identifying the Morning Star Pattern
Identifying the Morning Star on cryptocurrency charts requires more than just identifying the three main candles. It also requires knowledge of the previous price movement. The pattern should be identifiable if these five things occur:
The market should be posting lower highs and lower lows prior to the Morning Star formation.
The large bearish candle shows up as a result of large selling pressure as well as a continuation of the existing downtrend. Traders should be looking to take only short positions as there are no signs of a reversal yet.
The second candle is a small-bodied candle (sometimes even a Doji candle) is the first sign of market showing downtrend fatigue. This candle often gaps lower and makes a lower low. It does not matter whether the candle ends up being bearish or bullish, as it is only supposed to represent market uncertainty.
The first real sign of bullish pressure is this exact candle. It should be a big green candle followed by an increase in volume.
After a successful reversal, traders will start to enter long positions as the market posts higher highs and higher lows. However, make sure to manage the risk through the use of well-placed stops-losses.
Trading the Morning Star Pattern
The chart on the screen shows us the formation of a Morning Star pattern, where an established downtrend is leading up to the formation of the Morning Star reversal pattern.
Once the formation has completed, traders are looking for an entry point at the open of the next candle. If a trader is more conservative, they could delay their entry point until they are satisfied with how the pattern plays out.
Targets should be placed at previous resistance levels or previous areas of consolidation. Stops-losses should be placed right below the recent swing low. As there are no guarantees of this pattern playing out correctly, traders should always maintain a positive risk to reward ratio to avoid taking any substantial risk of ruining their portfolio.
Morning Star Pattern reliability
The Morning Star pattern, just like any other candlestick pattern, should be used alongside other trading tools available to the traders. Even though this pattern occurs frequently and has a fairly high chance of playing out correctly, one has to take all precautionary measures to protect oneself from the risk.
Forex Education Platforms: A Route To Income Or A Get Rich Quick Scam?
There is an old saying in the United Kingdom: Where there is muck, there is brass. Essentially, what that means is that in any aspect of our lives, no matter how grimy, there are money-making opportunities to be made. And when the forex space opened up to retail traders after the advent of the internet, one huge area opened up regarding forex education, and where so-called experts, with very little experience of how the forex market operates, decided to set themselves up as educational gurus in order to exploit would-be traders looking to make a successful go at making money in Forex.
Be warned, if you have across people offering to teach you how to trade Forex, where they tell you that you will make a truckload of cash or fast cars, perhaps showing themselves in their luxury plane, or maybe sunning themselves in a far off exotic location, it is highly likely they are scammers looking to sell you a get rich scheme with very little substance behind it.
A great deal of these so-called forex educators make their money by getting you to subscribe to their educational platforms, where they might offer you a few videos, where you can see almost identical ones for free on YouTube, and in any case, have very little backbone to them, and where often these will be trading strategies that they guarantee will make you money, and in fact, most of them will fail.
The majority of these scammers set themselves up on platforms such as Instagram, Facebook, Twitter, and the like, while relying on the pictures of their so-called wealth made from their success as forex traders in order to subdue and entice you. When, in fact, they tend to be skilled marketers, but poor traders.
In fact, the forex space is littered with many types of fraudsters. One of the biggest areas where scammers made money was in binary options, where traders were asked to bet on the rise and fall of the forex market via binary options platforms, over certain time periods which were typically anything from 1- minute up to one hour, but where the prices were manipulated on the platforms, which operated almost like a casino, where the house always won. Regulators clamped down on this very quickly and shut them down.
Weigh more and more people ripping off newbie traders by offering them comprehensive educational experiences and where most of the information provided is inadequate or not at all comprehensive, in which case could we expect that the educational space will soon become regulated? It seems to be gathering a lot of interest in a space that is beginning to resemble the Wild West.
One thing is for sure, here at Forex Academy, we will not ask you to pay for the educational material which we provide on this website. What’s more, we offer a comprehensive educational experience and cover all the aspects that you need to be a proficient trader. And the people that write our educational material and present it to you are market professionals, some of them having come from an institutional background in the forex space. And so you can rest assured that the educational material we provide is professional, and comes with a wealth of real market experience behind it.
Forex is not a get rich scheme; there are no shortcuts to becoming a successful trader; it takes time, effort, and practice.
The Evening Star candlestick pattern is a three-candle bearish reversal formation that appears at the top of a bullish trend. It signals that the market is slowing down and that a bearish move is laying the foundation for a new trend.
Identifying an Evening Star
Evening Star pattern has been extremely popular in forex trading, but has increased in popularity in other markets, crypto included. Using this pattern when trading cryptocurrencies has proven to be extremely lucrative if done properly. Identifying the Evening Star on crypto charts involves more than just identifying the three main candles that constitute this pattern. While the Evening Star is just a three-candle pattern, one needs to understand the previous price action before trading it.
The market should be exhibiting higher highs as well as higher lows. The large bullish candle occurs as a result of large buying pressure as well as a continuation of the existing uptrend. Traders should be looking only for long trades at this point, as there is no evidence for any type of reversal yet.
The second candle is a small candle (sometimes even a Doji candle) that is the first sign of trend fatigue. This candle often gaps higher as it makes another higher high. It doesn’t matter if the candle ends up being bearish or bullish, as this candle only shows a lack of determination.
The first real sign of a trend reversal and big selling pressure is the big red candle.
After a successful reversal, we will be able to observe lower highs as well as lower lows.
Trading the Evening Star pattern
The chart shows an established uptrend that leads up to the formation of the Evening Star reversal pattern. Once the pattern formation has completed, traders are looking for an entry point at the open of the next candle. If traders are more conservative, they could delay their entry point to a slightly lower price.
Targets should be placed at previous support levels of consolidation levels. Stops, on the other hand, can be placed right above the recent swing high.
Evening Star pattern reliability
The Evening Star, like every other candlestick pattern, should be traded along with other trading tools available to the trader. While they are quite reliable, failed reversals can happen if a trader only uses the Evening Star pattern to trade.
The last part of the Bitcoin futures price gap trading is dedicated to the types of gaps and what they represent. Not all gaps are the same, and knowing which one is which will help with using them for trading.
Types of gaps
There are four types of price gaps, and while they might look alike, they are all traded differently. It is essential for traders to differentiate between them.
Breakaway gap
These gaps occur when the price makes a strong and sharp directional move from the consolidation area. This type of gap is particularly powerful when combining it with clear patterns such as trading ranges and patterns (that we covered in previous videos). A breakaway gap that is followed by a significant volume increase is a sign of a strong trend. This gap is somewhat unlikely to be filled, at least in the short term. A low volume move is more likely to see the price returning to the area it was previously in. To sum it up, breakaway gaps are not the best for trading as they are less likely to be filled than some other types of gaps.
Common gap
Also known as area gaps, temporary gaps, and pattern gaps, they are most often seen in sideways moving markets. They are almost always filled, but the problem is that they offer very little information in regards to what price will do after this occurs.
Exhaustion gap
This type of gap is mostly viewed as a signal for trend reversals. They occur around the end of a price pattern, signaling a final attempt to hit new highs or lows. These gaps occur in markets with rapid upswings or downswings, often on a large move up or down. They are usually preceded by a heavy spike in volume. These are the gaps with the biggest likelihood of being filled.
Measuring Gap
Also known as runaway or continuation gaps, they occur in the middle of a price pattern. They are considered a signal that buyers or sellers are flocking and trading in the same direction. Measuring gaps will not occur during consolidation periods. They occur only during rapid price upswings or downswings. These gaps are not normally filled for quite some time as the push in one direction is too strong.
Mistakes when trading Bitcoin price gaps
Common mistake traders make when using gaps to trade Bitcoin is confusing exhaustion gaps with measuring gaps. This can cause a trader to position himself in such a way that they will miss significant gains that occur in the last half of an uptrend. Exhaustion and measuring gaps are quite different as they predict moves in completely opposite directions.
Keeping track of volume can help with finding the clue for distinguishing measuring gaps from exhaustion gaps. A noticeable heavy volume would suggest an exhaustion gap, while the lack of heavy volume would indicate a measuring gap is happening. It is also important to note that the filling of the gap rarely stops as there are no immediate support or resistance areas within it.
Dominate Price Action To Amplify Your Trading Arsenal
In this video presentation, we will be looking at price action. If you want to be a successful forex trader, you need to understand what price action is. If we had to strip forex training down to 1 single most important feature, then price action would be it. Today we are going to show you how it is applied in forex trading.
All areas of the financial markets capture the movements of any specific asset, including Forex, on a chart and where this is recorded historically. These movements can be represented as candlesticks, line charts, or bar graphs, And can be observed over varying time periods from 1-minute or 5-minute time frames, all the way up to monthly charts. This data reflects the beliefs of market participants at any given time, whether they are human or algorithm-based traders, which is shown on the charts in the form of price action.
Price action is the methodology of applying all your decisions from a price chart while adhering to some basic trading principles. Price action is often called naked trading because traders rely on the price itself in order to denote when to enter and exit trades. However, by adding a couple of moving averages and some support and resistance lines, it becomes much more easy to identify key levels of support and resistance to trade around. Ideally, as a trader, we want to try and identify tops, bottoms, and trends. And this methodology is an extremely important feature in identifying these key areas.
A couple of old adages come to mind which lends themselves very nicely to forex trading: the first one is that sometimes you can’t see the wood for the trees, and where that can be applied to Forex in so far as sometimes traders overload their screens with technical tools and they cannot really clearly identify what is happening with the price action because they are too focused on too many technical tools. And the other adage is sometimes less is more, and that applies for the same reason: by stripping away technical tools, we can only rely on price action itself, which is a key leading indicator in its own right. While in this example of the EURUSD pair, we can quite safely say that during this period of the 1-hour chart, the general trend was to the downside, but how can we pick this out by utilizing price action itself?
Example B, the Price action of a pair is in continuous motion apart from interruptions during the weekends. Otherwise, price is consolidating or moving in a sidewards direction, or it is trending higher or lower. As traders, we should be looking at what is happening with price action at any given time and then try to establish if the price is trending, or if it is in a period of consolidation, or even a pullback before a trend continuation.
Price action alone can help us determine these areas, but by adding a couple of visual supports such as some trend Lines, it just makes it more easily identifiable. For this example, we have just added two very simple lines that help us to more clearly identify levels of support and resistance. Here we can see a period of consolidation, which is qualified by price action touching, or is very close to touching at least two areas of support and resistance, which are clearly identifiable such as drawn onto our chart.
One thing is for sure that price action will breach this area at some future point. This is a key area of interest for traders.
Example C, Here we can see that the support line has been breached by a strong bearish candlestick. Traders will jump on this opportunity to go short on the pair at this point.
Example D, We subsequently see another area of consolidation and a further breach to the downside, and where traders would expect that a downtrend is in process, and they would be looking for opportunities to go short.
Whilst stochastics, MACD, and moving averages are widely used throughout the trading community, many traders feel that price alone can be relied on for identifying trade opportunities, and certainly, these couple of examples would support that.
But of course, as cautious traders, we like to stack the odds in our favor, and if that means adding a couple of extra visual technical tools that will help us well, what’s the harm in that?
Example E, Here, for example, we have added a simple 30 period moving average. Notice how the price action tends to bounce lower off of this line, while price action continues in its trend lower.
Example F, I know the world price continues to consolidate and punches lower through support lines and where support lines become lines of resistance, but all the while price is bouncing lower from the 30-period ma.
Example G, Price action also throws up another favorite for traders: highs with lower highs and lows with lower lows which identify a downtrend, and where the opposite would apply for an uptrend, where they would be looking for highs with subsequently higher highs and lows with subsequent higher lows. But again, these key areas are clearly evident on the screen, even with price action alone.
Example H, Price action Traders will also observe higher time frames, in this example, we are looking at a 4-hour chart of the EURUSD pair, traders try and establish what is going on with price action on the longer time frames because this will filter through to the lower time frames and where they will look for opportunities to jump on the overall trend should there be one.
Price action becomes repetitive, and this is because human nature in trading tells us that certain things are likely to happen at certain levels, typically key levels or round numbers, and if these things are recurring on a regular basis, human emotion would suggest that they are likely to continue to recur and therefore trading sometimes becomes a self-fulfilling prophecy where certain price action events, in the absence of fundamental reasons, is likely to continue in this vein. Price action levels become significant because market participants give significance to them.
In summarising price action who is the most significant aspect of Forex trading, and where by just using the minimum amount of technical tools you can more easily see areas of price consolidation, within resistance and support levels, and when these areas are breached we may see a continuation in price action in the direction of the breach, and by incorporating a simple moving average it can more easily help us to identify a trend. And that these very basic mechanisms are highly favored by professional and institutional traders.
While the previous part explained what price gaps in the Bitcoin futures market are, this part will show how to trade them and what to expect when doing so.
Why do price gaps fill?
There are a few explanations as to why most gaps fill. If the spike was too optimistic or too pessimistic, it might lead to a correction afterward. Another possible explanation might be that the price action was too sharp and did not form any support or resistance levels, making the correction more likely to occur.
Gaps and Bitcoin price
While there is no hard evidence of Bitcoin’s price being directly affected by the price gaps in the futures market, lots of people seem to believe so. In cases where the CME Bitcoin futures price flash crashes in just a few seconds, many people (analysts included) believe that manipulation is occurring.
Traders and Bitcoin price gaps
When looking at the price gaps in the Bitcoin futures market, one might conclude that a large majority of them get filled extremely fast. Some traders are even incorporating the futures chart as a necessary tool for their technical analysis. However, doing this could be quite dangerous if not executed properly.
When trading the traditional markets, using gaps as indicators is a lot more transparent. As an example, some traders use strategies such as buying stocks in the after-hours if the company releases an earnings report showing positive results. However, since Bitcoin never stops trading on other exchanges, using this strategy could be trickier than it initially seems.
That’s why we need to know a few rules to trade Bitcoin based on the futures market gaps.
When a significant gap appears, it usually removes the immediate support or resistance levels, meaning that the gap is more likely to get filled. Make sure to trade in the overall direction of the market on a higher timeframe.
The price usually retraces to the original resistance level. The gap will be filled, while the prior resistance will be turned support.
The risk management while trading should be symmetrical (1:1), as almost all gaps eventually close.
Conclusion
Trading Bitcoin while using the CME Bitcoin futures chart gaps as indicators of price direction may be a lucrative strategy. When paired up with good key level analysis, this way of trading might be one of the safer ones. However, one must set its goals (to the upside and downside) correctly to prevent any unnecessary losses.
Check out part 3 of Bitcoin gap trading to learn more about the types of gaps and what they represent.
While there are many similarities in cryptocurrency trading and traditional asset trading, there are just as many differences. That’s why we are covering regular market strategies, but appropriately adjust them according to the specifics of the cryptocurrency market. Price gaps are almost a regular occurrence within traditional markets. With the Bitcoin futures market, we can already see that they are becoming a factor in Bitcoin price analysis too.
What Are Price Gaps?
A gap is a part of the chart where an asset’s price rises or falls from the previous day’s closing price without any trading occurring in between.
While this cannot happen in crypto markets since they don’t stop trading on Friday and run 24/7, we can see these gaps in the crypto Futures markets.
Gaps in Bitcoin’s charts
Bitcoin reached nearly $20,000 in a major rally in 2017, which caught the attention of almost everyone in the world. This extended to major institutional players as well.
With such rising interest, two Chicago-based brokers launched Bitcoin futures trading, which allowed contracts to be cash-settled against the US Dollar. The first one was Chicago Mercantile Exchange (or CME), while the second one was the Chicago Board Options Exchange (or CBOE).
As CME and CBOE are regulated establishments, they have to operate and trade only between certain hours within the weekdays. While CBOE no longer offers Bitcoin futures, CME still does.
Even though the CME Bitcoin futures market closes every week on Friday, regular Bitcoin trading doesn’t stop. This can, among other things, create a big disparity in prices.
As we can see in the example, when a sharp move happens during the CME downtime, we can usually expect a gap on the next trading day.
Bitcoin price gap filling
While there are a few cases with gaps not being filled, almost every gap gets closed in a very short time (up to a week). Recent data shows that out of 100-weekend gaps, 95 got filled or closed. We can expect somewhere around 50% of the gaps to be closed on an opening day, while an additional 30% or so will be closed within the same week. On the daily chart, we can see several examples of price closing the previous gap.
Check out part 2 of the Bitcoin futures gap trading to learn more about how to trade these gaps and make a profit.
Time frames And Trading Windows Tricks – Maximize Opportunities With Overlap
In this video presentation, we are going to be looking at time frames and trading windows. Although these two subjects are separate by looking at them together, we hope you will see the importance of combining them in one section.
When it comes to time frames, new traders are often confused about which time frames to trade and why. So let’s look at three different types of time frames and traders who prefer to use them.
You will most likely be trading on a short-term, medium-term, or long term time frame, depending on your preferences, including your strategy, lifestyle, and the size of your trading account. Everybody is different, and some traders may use a one-time frame or a combination of all three.
But this can cause a lot of confusion for new traders when they begin to develop their trading strategy. Many new Traders tend to want to be in and out of a trade very quickly, which means they fall into the group known as scalpers and tend to use 1-minute and 5-minute time frames.
Other traders tend to want to look for longer-term trends, but do not want their trades to roll over from one day to the next, in which case they might prefer to use 15-minute to 1-hour time frames, and these are known as intraday traders, and larger professionals, including institutional traders, will have a longer-term view and look at 4 hour time frames up to daily, weekly and even monthly time frames. These are commonly referred to as swing traders.
Scalpers team to only use 1-minute and 5-minute they might only be in a trade for 1 to 2 minutes. Whereas day traders might be in a trade all day long, and institutional long-term or swing traders might be in a trade for days, weeks, months, or even years.
One of the reasons why trading can be inherently difficult is because all of these traders have different ideas about where the price of a pair is heading based on the various time frames that are used by the various groups of time frames, and therefore the majority of them will all be trading at odds with each other, not only within their own time frame but the other time frames as well.
No matter what time frame you choose to use, it is always advisable to look at the longer-term time frames before you place a trade and then filter down to the time frame that you want to use because a great deal of price action sentiment can be gained from doing so. This is the only way that you will be able to see if trends are developing and trade accordingly. You may have heard of the phrase let the trains be your friend, well this is the best way to find a trend, by looking at a higher time frame than the one you want to use and then filter down once you have established what is happening to price action overall.
Example A. Traders can look to the higher time frame, such as the daily or weekly charts.
Example B. In order to establish what is happening with price action and to find out if trends are available or forming and then simply move down to their preferred time frame. By doing this, they will also be able to more clearly see prominent support and resistance areas which may be being observed by institutional traders, because, after all, this is where the real money is. Institutional traders are the ones that move the market. And so it is always advisable to know what they are doing at the higher time frames.
In summary, the type of time frame that you choose is dependent on the type of trader that you want to be, whether it is a quick in and out scalper style, or perhaps to take a longer longer-term view. But however, you trade it is always advisable to look at other time frames especially, especially longer-term ones than your preferred time frame, in order to help you pick your trade entry more easily.
Next, we are going to look at trading sessions. The forex market is broken up into major trading sessions.
Example C. The Sydney session, the Tokyo session, the London session, which includes Frankfurt and a New York session. The forex market is open between 10 p.m. Sunday evening GMT and runs all the way through until 10 p, GMT on Friday, non-stop. However, the main centers will typically open at around 7 a.m. their time and finish at around 5 p.m. In other words, business hours. And where we can see on the graph that some of the sessions overlap.
That more centers overlap means that there are more players in the forex market at that time, and this means extra volume and liquidity and, therefore, greater moves in price action or potentially happen during these overlaps.
In summary, the best times I’m two trees are when two sessions overlap, and most volume and liquidity is provided during the London session, which includes Frankfurt and is also known as the European session, and where this overlaps with New York. This is the time of most activity. Generally speaking, in the forex market. Please remember to adjust your trading to reflect the seasonal changes due to daylight saving hours. The middle of the week tends to be the busiest because this is where we find more economic data releases normally. These affect market volatility.
With the worst times to trade being Sundays and Fridays, especially after the US session, public holidays where markets are thin, and volume is low, which means spreads will be at their widest, and during major news events where the markets can be extremely volatile.
Profiting from the crypto market – Hammer pattern trading
Hammer Candlestick – explained
A hammer is a candlestick price pattern charting that occurs when a cryptocurrency trades significantly lower than its opening but quickly rallies within the candle period to near-opening price. This looks hammer-shaped candlestick, where the lower shadow is at least double the size of the real body. The candlestick body represents the difference between the open and close prices, while the shadow represents the highs and lows within the period.
Reading the Hammer Candlestick
A hammer occurs after a cryptocurrency has been declining, implying that the market is attempting to create a bottom. Hammers signal that sellers might have capitulated.
Hammers are most effective when the least three or more declining candles precede them. A hammer should look somewhat similar to the letter “T.” However, one thing to note is that a hammer candlestick doesn’t indicate a price reversal until it is confirmed.
Confirmation of the hammer pattern occurs if the candle following it closes above the hammer’s closing price. Candlestick traders will mostly look to enter their long positions or exit their short positions during or after the confirmation candle appears. Traders that are entering new long positions can benefit from setting a stop-loss below the low of the hammer’s shadow.
A doji candle is another type of candlestick with a small body. A doji candle signifies indecision as it has both an upper and a lower shadow. Dojis, depending on the variation, may signal a price reversal or a trend continuation. This differs from the hammer candle, which occurs after a price decline and signals a potential upside reversal, and only has a long lower shadow.
Things to consider
As with any technical analysis tool, there is no assurance that the price will do as expected, even after the confirmation of the pattern. A long-shadowed hammer paired with a strong confirmation candle may push the price high for some time due to market instability. This may not be the best spot to buy because the stop-loss is far away from the entry point.
Hammer pattern also doesn’t provide a price target, which makes setting up a profit target quite difficult.
Unlock The Hidden Secrets Of The Forex Economic Calendar
In this video presentation, we will be looking at the economic calendar pertaining to the forex market and how It can be extremely useful to traders who implement the knowledge in their fundamental analysis.
Example A, The economic calendar is a fundamental resource that tells traders about economic data releases, which are due to be released by governments or independent research establishments, which collate statistics pertaining to the economic activity of a country and whereby these statistics are released daily, weekly, or monthly. Such data varies in importance to the market from low risk to medium and high risk. The higher the risk, the greater potential for extra volatility impacting those associated currencies whose countries have released the data, and of course, this will likely affect every pair traded and even, on some occasions, have a knock-on effect on other currency pairs as markets adjust to risk sentiment post-release.
Economic calendars are widely available, and where most brokers will provide one. Here we are looking at the economic calendar as provided by the broker EagleFX.
Traders keep a careful eye out for the events in the economic calendar, which are scheduled for release because these events can help traders plan trades throughout the days, weeks, and months, depending on their style of trading. They use the released data to set up trades while also mitigating against risk.
The most keenly observed data releases and the ones which potentially cause the largest amount of volatility post-release are gross domestic product updates, interest rate decisions by central banks, and on the first Friday of each month nonfarm payrolls, which relate to unemployment in the United States.
Learning you to navigate the economic calendar will save you time. It is generally displayed in a linear fashion, on an hour by hour and day by day basis.
Example B, Information is key when trading currencies, and economic calendars are a fantastic tool to keep you informed of major news events in the diary and will potentially greatly enhance your trading.
Example C, In this example, we can see that on Tuesday, April 7th, the Royal Bank of Australia is to make an interest decision at 4.30 AM GMT and where the importance is signified by the red lines, which indicates this as a high-risk event. Traders will be keeping a close eye on the Australian dollar and associated currency pairs being traded against it leading up to and just after any announcement by The Royal Bank of Australia.
Example D, The flag beside the type of economic data release denotes the country that is releasing the data, in this case, Germany.
Example E, And the time of the release is usually on the left-hand side of the calendar. This is typically the time of the source of the release.
Example F, So here we can see that in this example, the Netherlands will be releasing its consumer price index year on year for March 2020 and where this information will be released as low importance and is not likely to affect market volatility.
Example G, In this example, the Japanese will be releasing leading economic index preliminary data for February and whereby this information is medium risk and Michael’s market volatility.
Example H, Another important feature of an Economic Calendar data release information which is highlighted here. The previously released data pertaining to the country in question is available on the calendar in the lead up to the current release, and also some brokers will show a market consensus of the data as suggested by various analysts who suggest what they believe the figure will actually be. Upon data release, the actual figure will be updated on the calendar in a timely fashion. The majority of data releases are subject to an embargo where institutions are not allowed to benefit from data, which could cause insider dealing in the markets. While all of this may seem slightly daunting to new traders, it is important that you understand the significance of fundamental data releases and how they will help you to become a better trader.
Example I, As you become more knowledgeable, you will learn how to filter out various parts of the economic calendar which you may deem as not so important, and these can be reduced to certain countries data releases, and therefore their currencies being emitted to your calendar or even filtering it down to only high-risk news events being shown on your calendar.
Example J, Here we have filtered out all currencies apart from the Great British pound and the United States dollar for our calendar for next week. This is a great option for traders who only trade the GBPUSD pair, also known as cable. The economic calendar is, therefore, a customizable tool for your convenience.
Failing to observe the release of economic events is inherently risky. If economic events happen and you are not aware of them, it could dramatically affect any open trades or trade ideas which you may be about to set in place.
Therefore it is vitally important that you incorporate the economic calendar into your daily trading routine. Make a habit of checking it in the morning, and in the evening, It will pay dividends in the long run.
Profiting from the crypto market – Doji candle trading
Doji candlesticks
The Doji star, better known as the Doji candlestick, is a unique candle that signals indecision in the crypto market. It shows that neither the crypto bulls nor bears are in control. However, not everything is that simple. The Doji candlestick has five variations. Each one of them shows something different. This is why it’s important to understand how to spot and read different Doji candle variations.
The Doji candlestick is characterized by its cross-like shape. This happens when a cryptocurrency pair opens and closes at the exact same level leaving a very small or even non-existent body while also exhibiting upper and lower wicks of equal length. While Doji mostly represents indecision in the market, it can also indicate a slowing momentum of an existing trend.
Doji candle in technical analysis
The Doji candle can be a very important piece of information as it can provide crypto traders with a moment to stop trading and reflect. However, it is important to consider the Doji candle in conjunction with other tools when timing your market exit point.
Doji candle variations
While the traditional Doji star shows indecisiveness, other variations can have different implications.
The picture on the screen will show different variations of the Doji candlestick, as well as its outcomes.
Trading the Doji candlestick
Traders use various ways to trade various Doji candlestick patterns. However, they all look for signals that complement the Doji candlestick in order to execute high-probability trades.
Trading the Doji star
The chart shows the Doji star appearing right at the bottom of an existing downtrend. This Doji pattern suggests that neither bulls nor bears are in control, meaning that a trend reversal is possible. At this point, it is crucial to take a look at supporting signals from other tools and indicators. This example makes use of the stochastic indicator, which is currently in the oversold territory, which adds to the bullish bias.
A popular Doji trading strategy involves looking for Dojis, which appear near support and resistance levels. The chart highlights the Dragonfly Doji, which appeared near trendline support. In this case, the Doji doesn’t appear at the top of the uptrend, so it doesn’t mark a trend reversal. The Dragonfly Doji, in this case, shows the rejection of lower-level prices. This potential bullish signal is further supported by the candle appearing near the trend support.
Generate profit trading cryptocurrencies – Three Line Strike
Many traders rely only on indicators, while only a few take into consideration patterns that appear in the market. Even fewer people are spotting small candlestick patterns, which they might think of as insignificant. However, they are far from insignificant.
Three Line Strike
A three-line strike represents a continuation group of candlesticks that is formed by three candlesticks in the direction of a trend, then followed by a final candlestick that pulls back to the starting point.
There are two versions of a three-line strike: Bullish/Bearish
The bullish three line strike consists of three strong bullish candlesticks that close higher than the last one, then followed by a final candle, also known as the strike candle. The strike candle goes in the opposite (bearish) direction and opens at or higher than the third candlestick, but closes below the open of the first candle in the pattern.
A bearish three line strike is everything, but in reverse, three strong descending candles that close progressively lower followed by a bullish strike candlestick. The strike candle opens at or lower than the third candle close and closes above the first candlestick open.
Validating the pattern
To validate this pattern, we need to confirm that the first three candles are at least of average size. They need to have a defined stair-case like appearance in order to be reliable.
A bullish three line strike should be treated as an extension of the three white soldiers pattern, while a bearish three line strike as an extension of the three black crows pattern.
Market Sentiment
The assumption behind the three-line strike amongst traders is that the strike candle shows a temporary correction that will not be prolonged, while the main trend will follow the first three candles. The pullback of the strike candle is a reaction to the strong move to one direction in the first part of the pattern.
Buyers should use the low point of the pattern to create an entry opportunity. Sellers, on the other hand, should use the high point of the pattern to create an opportunity to sell high.
Three Line Strike Reliability
The three-line strike is not a very common pattern in cryptocurrencies. However, it is quite reliable when paired up with volume indicators, and traded with the larger time frame trend. A thing to note is that the bearish three line strike is slightly more reliable than the bullish one when it comes to crypto trading.
While the bearish pattern was accurate over 60% of the time, the bullish one was accurate, only 50% of the time.
Bullish Three Line Strike – Example
The example will show a chart which created a bullish three line strike. The first three candlesticks lined up in a three white soldiers formation, signaling reliability.
A buy signal was confirmed when the low of the strike candle reached below the first candle open.
Bearish Three Line Strike – Example
This example will show a chart that illustrates a bearish three line strike. The high of the strike candle does not reach the open of the first candle, but remains within tolerance levels, and is close enough to be classed as a bearish continuation.
Combine Fundamental & Technical Analysis To Master The Forex Market
In this video, we will be looking at combining fundamental and technical analysis, which are the yin and yang of forex trading. Professionals, including institutional traders, tend to take a balanced approach when incorporating fundamental and technical analysis into their trading. Whereas some professional traders will lean towards fundamental analysis and incorporate technicals into where they see price action going based on current or future economics. However, many retail traders tend to lean towards technical analysis.
Traders who wish to be more rounded need to take both of these into consideration in order to be more consistent, and this involves having a good knowledge base of both.
Fundamental data releases can offer us the directional bias when trading. As well as waiting for the release, markets will often anticipate price action direction leading up to an economic data release, especially if analysts believe the data is going to be above or below expectations. And therefore, it is important to try and second guess what the markets are expecting in the run-up to the release and then where price action will go once the data has been delivered into the market. For example, sometimes market data might be worse than expected by the markets, and yet price action goes in the reverse direction as you might expect. This is one of the reasons we see a lot of volatility surrounding high-level data releases, which is because people have varying opinions on the effects of the data.
However, traders are advised to play the probability game; i e., if the market data release is bad, we should expect bearish price action, and if the market data is good, we should expect bullish price action. If technical indicators subsequently work in line with the data, and in line with the fundamentals of the data release, then we should trade accordingly Having pinpointed an ideal entry. This way, we will be stacking the odds in our favor for a successful trade.
There are many ways to incorporate fundamental and technical analysis into your trading, but in this video, we will be looking at three methods.
Method 1, Involves breakout trading with fundamental analysis, which capitalizes on training when a section breaks outside of its trading range.
Example A, the catalyst for range breakouts is usually due to the release of market data news events And where such data causes extra volume to come into a particular currency pair yeah and push it outside of a consolidation range into new highs or new lows depending on the nature of the release. Because data releases can cause extra market volatility, it is always wise to air on the side of caution when trading around such events. Previous support and resistance levels can be breached, and a great deal of uncertainty can enter into the market, and at this time, it is always advisable to use tight stop losses.
Example B, Once our support or resistance line, is breached on an economic data release we can assume that the market has taken the data in one of two ways, and in this example, we have a dovish stance towards the Canadian dollar and whereby this particular pair, the USDCAD, has reacted in a bullish direction. Therefore we have bad economic data coming into the market about the Canadian economy, and this is supported by a price action breaching the line of resistance and where price action subsequently moves in an upward direction and whereby we should only be considering a buy trade.
By planning around data releases, we can look for technical breakouts, adjust positions accordingly incorporating tight stop losses, and even utilize the data release to leave us in a trade in order to maximize profits. Remember, the art of trading is to latch onto trends because that is where the most amount of pips are to be gained.
Method 2 combines range-bound trading with fundamental analysis.
Example C, Range bound trading involves identifying a trend with the use of a couple of simple Lines, which show us support and resistance levels and areas where the price is likely to bounce off of the support or resistance in order to maintain the price action range.
Traders use the support and resistance lines to buy at the support line in an ascending trend and to sell at the resistance line in a declining trend. Example D, This example shows a chart with a strong bearish trend.
We do not want any news data release to potentially adversely affect our descending trend and interfere with our profitable trade. Therefore, ideally, we would look to not have open trades surrounding data releases, especially if they are potentially of a high impact nature. Therefore precautions should be taken to avoid trading around high impact news events, but if you find yourself in an open and profitable trade with a looming data release, which might be of high impact in nature, we suggest you close the trade, or partially close the trade, or insert tight stop losses in order not to reverse the profits you have made on a successful range bound trade.
Method 3, Using oscillators with fundamental analysis. Example E, Oscillators are often used in technical analysis. They are often used to establish overbought or oversold conditions. Here, in this chart, we can see one such oscillator, the RSI, or relative strength indicator.
Example F, By incorporating oscillators such as the RSI, we are easily able to identify areas where price action might reverse having been oversold or overbought, and if these coincide with support and resistance lines on our chats, we must be aware of this and be prepared to take the necessary action. However, should these also coincide with new data releases, we should give them extra emphasis because even if the data goes in line with our chart, and yet our charts are telling us that the market is overbought or oversold, we could see conflicting price action.
Therefore please take all of these into consideration when setting up your next trade and consider adopting some of these methods into your trading strategy. Remember that new data releases, especially of a high-impact nature, can cause extreme market volatility.
Example A In this video, we will be looking at The process of making income in the forex market, It’s processes Methods for doing so and whether or not it is a viable method for you to increase your income, Including the risks involved in doing so.
Example B, So what is the difference between passive and active income? Active income is something where you might expect to earn money in regular employment, whereas passive income is irregularly made income, which requires little or no effort. In this context, it would mean that minimal effort is made by the trader in order to earn extra income outside of their normal job. Examples of passive income would be profits made from gambling, stock markets, Interest on investments, or capital gains are just some of the examples, where some definitions, especially with regard to taxation, will change from country to country.
Example C, Active income within the forex arena is where a trader will spend a long time looking at economic data while carefully assessing fundamentals and then checking technical patterns on charts before executing a trade in order to earn income.
Example D, Passive trading is where you want to make money in the forex market. But you do not actually want to go through the processes of learning everything about it and also spend time analyzing the markets via your charts, keeping on top of fundamental analysis. In this case, you may have to pay a third party a monthly fee. And unlike active traders, your trading will fit around your job and lifestyle.
Example E, Let’s look at the pros and cons of active vs. passive trading. Obviously, with passive income, the most important benefit is the amount of time you would have to commit to trading, which would be less than that of an active trader. However, this will often result in earning less money than an active trader. However, opting to spend less time monitoring your trades might expose you to extra risks. It might also be detrimental should you desire to follow a signal service that offered signals with timeframes that did not suit or fit in with your lifestyle. Unfortunately, the Forex Marina is often fitted with scam artists who operate Ponzi schemes and offer signals that are completely unreliable, and these should be avoided at all costs when considering passive trading.
Example F, So how can we earn money passive trading the forex market? One example is automated trading technology which is a trading robot that can be downloaded onto your computer and automatically places trades, setting its own stop losses and take profit levels. These are also known as EA’a or expert advisors. Some of them are very reliable, while some of them are not and you will need to do a lot of research before investing in the right EA for you. Banks and institutions are using these automated trading systems more and more and they are becoming extremely powerful tools with learning capabilities that adjust to various market conditions. It’s just a matter of finding one that suits your budget and expectations. And while the human brain can only analyze a few opportunities to trade during the day, a sophisticated algorithm can filter out profitable trades many many times each day, once a predetermined criterion has been met by the software program.
Example G, Of course, no matter which automated trading robot you decide to invest in, it will still need to be closely monitored. You would not want it to run away with itself losing you money. And while many people are skeptical about these automated trading robots, it is a statistical fact that over 75% of trades on the New York Stock Exchange are now made by these robots, and 70% of banks and institutions now opt for automated trading systems in Forex.
So if you are confident to take the next step and invest in an automated trading robot, we suggest that you carefully monitor it and make sure that it is operating within the perimeters that it was advertised to do and meet your criteria. It would also be a good idea for you to turn the EA robot off during times of high impact news, especially in the current climate where the COVID- 19 pandemics is sending trading shockwaves through the forex market on an almost hour-by-hour basis. Yet the trading robots are still in action while making money for their owners.
The accessibility of EA’s is now so Commonplace that even active Traders are able to program their own trading robots to open and close trades based on the parameters that they set. Some software developers will also work with you on a personal basis in order to develop such an algorithm once again that meets your criteria. This is certainly a growth area that he said to expand within the forex arena.
Example H, Next, we have copy trading. Again this is very suitable for passive traders where they simply subscribe to a copy trading service such as Signal-start or ETorror, and where their accounts can be automatically set to copy the trading accounts of traders who offer their services on their platform. In effect, every trade that they take on will be automatically copied onto your trading account, and where you will mirror their trades. If they win, you win, and if they lose, you lose. You can, however, adjust your risk parameters around their trading, and if they consistently make money, then you can increase your leverage to maximize your profits. The copy trading platforms offer a detailed trading history of their traders, and it is advisable to filter through each trader and seek out the one that is consistently making money while being risk-averse, and where this can be established by the level of drawdown that they are prepared to accept on their account. The lower the percentage of drawdown equals means the lower their risk tolerance is. You would typically pay a success fee to the copy trading platform, and perhaps a monthly fee and the trader will require a monthly fee also and sometimes this will be based on a percentage of winning trades and sometimes this will just be a monthly fee whether they make money or not, and sometimes this is a blended fee structure.
The example I, While this might seem like a perfect solution to a passive train, there are risk factors to consider. The forex market is fraught with risk, and again the current market climate pertaining to the COVID-19 pandemic is very relevant. Even Traders with an exceptional track record can make mistakes, and this could lead to your account being wiped out or even sending you into negative equity on your account if your trading platform does not protect you from this.
That might mean that they will be sending you an invoice for any monies that have been lost on your account due to a negative balance situation.
Therefore choose your trader carefully, as mentioned earlier, a few aggressive wins might give you peace of mind initially. Still, if this flips around into massive losses, it will adversely affect you, not only monetarily, but also psychologically as you tried to come to terms with losing money.
Example J, The next thing that passive traders utilize is forex trading signals. These services are offered via websites, text, and social media platforms. These forex signals are used by passive traders to enter trades based on the information that they receive or observe via one of these platforms and where they then manually use that information to place trades in the forex market.
While some signals are sent out by reliable, professional traders, many such service providers have little or no clue about the forex market, and some of these will be scams where they ask you to subscribe on a monthly fee-paying basis only to send you unreliable trading signals. Therefore do your homework about the signal provider, and if they charge a fee ask for a free initial trial, I’ll and watch for the reliability of the signals and only use them when you are able to ascertain that the information is consistently reliable.
Here at forex Academy, we offer a free signal service and where the signals are provided by professional traders and whereby we offer a detailed analysis with visual representations of why the trades have been taken, or in the case of pending orders why they should be taken. Most of these setups will be centered around professional and widely accepted and used technical analysis skills and sound fundamental analysis. And what is more, this service is offered absolutely free of charge.
In conclusion, passive income in the forex market is an extremely attractive option with many various ways to implement strategies such as copy trading, EA’s, and professional trading signals. And while there is a lot of research to do to establish which area is suitable for your lifestyle, after some detailed homework we are sure that you will find opportunities that suit you.
Profiting from the crypto market – Three Black Crows pattern
Three black crows are a pattern that indicates a bearish reversal of an uptrend. The black crow formation consists of three consecutive candlesticks that each opened within the read body of the previous candle and closed at a lower price than the previous candle. Traders often use this pattern in conjunction with other tools and indicators to confirm a reversal.
Three Black Crows – Explained
Three black crows is a visual pattern, which means that there are no calculations included to create the indicator. This pattern occurs when the bears overtake the bulls during a trending market. It is important to note that the candlesticks should have short to no shadows.
Being a visual pattern, three black crows are best used as a sign to seek further confirmation from other trading tools. The confidence a trader can put into the pattern greatly depends on how well-formed the pattern actually forms. If the shadows are long, it may simply imply that a minor shift in momentum will occur between the bulls and the bears.
Using volume indicators can make the three black crows pattern much more accurate. Volume during the uptrend that leads up to the pattern should be relatively low, while the three candle black crow pattern comes with high volume.
Three Black Crows vs. Three White Soldiers
Three black crows pattern has a complete opposite, which is the three white knights pattern. This pattern looks and acts exactly the same, but is completely reversed. It signals a bear to bull reversal and has three bullish candles instead of bearish ones.
Notable info
If the three black crows pattern formation involves a significant move to the downside, traders should be careful and look for oversold conditions caused by market instability. To mitigate this threat of pattern failure, we have to use an oscillator that can help with confirmation of the market reversal.
Profiting from the crypto market – Three White Soldiers pattern
Three white soldiers is a candlestick pattern used to predict current downtrend reversals in a pricing chart. The pattern is made of three long-bodied candlesticks that open within the previous candle’s body and close over the previous candle’s high. The candlesticks should not have long shadows.
The three white soldiers pattern suggests a strong market sentiment change. If a candle is closing with small to no shadows, it suggests that bulls have taken over the price and kept it at the top of the range.
Trading the three white soldiers pattern
As the three white soldiers is a bullish visual pattern, it is mostly used as an entry or exit point. Traders wanting to short a cryptocurrency look to exit, while traders who want to go long on a crypto see three white soldiers as an entry point.
When trading the three white soldiers pattern, make sure to take into consideration that the strong move higher might create temporary overbought conditions. That’s why this pattern should be paired up with oscillators, which may confirm the market reversal.
Three White Soldiers vs. Three Black Crows
The three white soldiers’ opposite pattern is the three black crows pattern. Three black crows have all the same attributes of the three white soldiers but in reverse. It consists of three consecutive candlesticks that open within the real body of the previous candle while closing lower than the previous candlestick. While three white soldiers mark a reversal from bear to the bull trend, three black crows show market reversal from bullish to bearish.
Things to consider
Three white soldiers might also appear during periods of consolidation, rather than during a trend. This is an easy way to fall into a trap, so one should take a good look at the longer time frames before trading Three white soldiers. One of the key things to take note of is the volume that supports the formation of this pattern. Any pattern is susceptible to failing in low volume conditions.
There has been an explosion in interest in forex trading since the advent of the retail Forex market, which opened up after the internet was born.
Example A, Much hype has been made of people making fortunes from forex trading in the retail space. So is it all true, or is it a fabrication, and is it really easy to make money trading Forex? Unfortunately, wherever there is money involved, there will always be fraud, and therefore you will find a lot of scams in the forex retail space within social media sites such as Youtube and Facebook and Instagram, etc. People upload videos onto YouTube telling you that they will help you make a fortune and then, of course, they want to be paid money for their education programs or perhaps trading on your behalf with your money, when in actual fact they are ill-equipped and do not care about making a profit for you, they are simply out for your subscription fee or investment funds.
And so the forex world may conjure up ideas of easy money and wealth, with flash cars, luxurious houses, jet-set lifestyles, and exotic holidays. That is the reality Far from the portrayal that many of these scammers would lead you to believe?
In truth, the forex market is a skilled profession. There is a steep learning curve to go through to understand how this industry works. It is a highly complex and extremely fluid marketplace, Where over 5 trillion dollars are traded every day and which is interconnected throughout the financial markets With other asset classes such as stocks bonds, precious metals commodities, and oil. You would not strip a car engine down if you had not been to college to learn about car mechanics and you would not attempt to build a house without first learning how to do so, and you would not try and operate on a human being without first learning all the processes, having been to university. And the forex market is exactly the same: you must learn about economics and the fundamentals surrounding the government’s financial policies of the countries whose currencies you wish to trade in. You will need to learn how to look at trading charts, in what is called technical analysis, to learn how currencies, which are always traded in pairs, are moving against each other, in order to successfully find the trends and trade them accordingly.
Therefore the effort that you put into accumulating the relevant knowledge is the only way that you will be able to successfully and consistently make money trading Forex. Once you have learnt everything that you need to be able to trade successfully, you will then need to backtest your results and forward test them on a demo account before you risk losing your hard-earned money trading in the marketplace for real. Therefore there is no quick fix strategy on how to make money trading; anything short of what is necessary means that you will simply be gambling. And the forex market can be deadly if you slip up.
So how does this market work? The Forex or FX market is an international exchange that is un-centralized, which means that nobody is in charge of it, and where currencies are bought and sold against each other in pairs. We are over 5 trillion dollars being traded from Monday to Friday, 24 hours a day. It is the most liquid business on the planet. There are specific windows when the volume is higher than at other times during the day, and these are the best x to seek out trans in currency pairs and where traders look to latch onto a trend because this is where the real money can be made due to the increased volume going through at these particular times.
Example B, Just like other commercial areas, fluctuations in currencies are largely driven by supply and demand. If you have too much of a product, it tends to be cheaper, and where a product is difficult to obtain, it becomes more expensive, and this can be true with currencies.
Example C, So when there is a surplus of a particular currency, it becomes cheaper to obtain And may fall against a particular counterpart currency.
Example D and the opposite is true when demand for a currency increases and there are fewer sellers, in which case the price of the currency will become more expensive against its counterpart currency, and the value of the currency will therefore rise.
So how do we apply this demand and supply scenario to the forex market? Each time a currency is bought, surplus demand is created within the market, which subsequently pushes the price of balance, and the price will rise.
And each time I currency is sold, a surplus supply is created. And this time the opposite is true, it throws the market price off balance and pushes the price down.
The Amount that the price moves up or down during these situations is dependent on the amount of volume going through at any particular time, and this fluctuates during the day, and where during those periods where extra volume is experienced during the busiest times of the trading day. Therefore the biggest likely market moving generators tend to be central banks, large financial institutions, large hedge funds, sovereign wealth funds, and whereby the retail sector has a much smaller impact on price fluctuations due to the fact that they only make up a very small part of the forex market.
These constant price fluctuations in the forex market are the main driver for how traders make money in trading. The economic events in the world are constantly changing, where government policymakers adjust their financial policies in relation to the swings in the fortune of their countries’ which affects their gross domestic product and whereby economic data releases, which come out on a weekly and monthly basis are the main drivers as to why there are consistent movements in price action pertaining to the balance of supply and demand for each currency.
Because currencies are always traded in pairs when trading, you are betting on the value of one currency against another moving up or down based on the underlying supply and demand for each currency.
Make money in Crypto by spotting the Cup and Handle pattern – part 2/2
Picking a Profit Target
Determining the profit target is quite simple with this pattern; all you need to do is add the height of the cup to the point of breakout.
There will be times when the left side of the cup is a slightly different height than the right side. In this case, you should use the smaller height to stay on the conservative side, or the larger height for an aggressive approach.
In addition to using the cup and handle formation, you can use the Fibonacci extension indicator to create a great crypto trading strategy (as seen on the chart). Draw the extension tool from the low of the cup to the high on the right side of the cup. Then, connect the tool down to the handle low. The 1, or 100%, level represents a conservative price target, while the 1.618, or 162%, and represents a very aggressive target. The possible targets can then be placed anywhere in between 1 and 1.618.
Things to consider
Traditionally, the cup has a pause at the bottom of the cup built in the formation, where it moves sideways or forms a rounded bottom. This movement shows that the price found a support level and will not drop below it. However, this pattern can also have a so-called V-bottom.
A V-bottom occurs when the price drops and then sharply rallies. Some traders like trading this form of a cup and handle, while others do not. The argument of V-bottom traders is that the sharp reversal of the downtrend shows that buyers stepped in aggressively, signaling strength. Opponents of the V-bottom say that the price didn’t stabilize before bottoming, therefore making the price unstable and susceptible to retesting the level.
When trading this pattern, always look for additional confirmation. It can be found by looking for the bottom of the cup and seeing if it aligns with a longer-term support level. Consider using indicators and tools to determine the support and resistance levels and check if they align or interfere with the cup and handle targets.
Trading Crypto using Double Top and Bottom patterns
This year has brought many uncertainties in all aspects of the world, especially health and finance. Cryptocurrencies have not been an exception, either. For the past couple of months, the sentiment has changed from very bullish to very bearish. The trend changed as quickly and sharply as the sentiment did. This is why we will cover the patterns which signal a trend reversal, called “double top” and “double bottom.
Double Top pattern
This image represents a double top pattern. After a cryptocurrency’s has trended upward for a while, it will create a top in price. Investors will often close their positions during this pause of the market, thus creating a downward trend in price. Shortly after that, the value rises again, reaching a second top at almost the exact same price as the previous one. These two tops form a double top pattern, which is essentially a test of the market.
The market is tested in terms of whether the price is susceptible to be nudged higher or not. The downward trend after the second top shows that the market does not have enough of a drive to go further up and that it will trend downward again. In a nutshell, the distinct shape of a double top that is quite similar to the letter M represents a bearish move.
Double Bottom pattern
As expected, the double bottom represents everything that the double top represents, but in reverse. Rather than testing the upside of a cryptocurrency, the market testing comes after a downward move and tests if the market is ready to go further down. The double bottom pattern is recognized by the two inverted peaks that are formed at approximately the same price level.
When it happens that the downward trend has been tested twice, and the bottom has been found, then the market will reverse, and the uptrend will start. In a nutshell, the distinct shape of a double bottom that is quite similar to the letter W represents a bullish move.
Additional information
The double top pattern and the double bottom patterns are price reversal indicators. However, there is always the risk that you will encounter a false reversal, meaning that the price movement will play out just the way you want for a very short amount of time, and then do the complete opposite. That’s why it is important to mitigate the risk by doing a couple of things. First, set the stop-loss below the double bottoms or above the double tops. Second, make sure to wait for a candle close in your direction to get a confirmation of the trend reversal. Ultimately, you can pair trading this pattern with candlestick analysis, indicators, and other tools at your disposal.
As the last piece of advice, try to make trades where the double bottom or top will show a trend reversal to a direction of the longer time-frame trend. This way, you will trade alongside the long-term trend, which is much safer than trading against.
In this presentation, we will be looking at the speculative sentiment index and its significance in the forex market. If you have been researching some of the technical indicators that Traders use, such as the stochastic oscillator or perhaps the Bollinger bands or MACD, you will realize that the majority of them are lagging indicators. That is to say that the data they imprint on our computer screens are based on the previous or historical data, which it uses to plot the various graphs, moving averages and plot lines onto our charts.
Although this information, when carefully analyzed, helps us to determine to a great degree the potential future movements of price action, the very nature of such lagging indicators does not necessarily tell us what is happening at this very moment in time. Whereas price action, which is itself one of the only few leading indicators of price direction, does.
Although this does limit our trading ability to a certain extent, professional traders learn to marry the two together in order to tip the scales in their favor when it comes to pulling the trigger on trades.
Of course, the absolute perfect solution would be if we all traded the same way at the same time. This would be a perfect solution, but of course, it does not happen like this, because of the many different time frames being traded and the many different types of traders, from scalpers to intraday and swing to long term traders. But what if we could take a snapshot of what other traders are doing at any given time, and if we knew what they were doing, and if we could see statistically whether they were more long or more short on a particular pair, this would give us an added advantage, would it not?
This is exactly where the speculative sentiment index comes into play. It should be considered as a leading indicator, along with price action, and incorporated with your other technical tools to help you decide when to trade. So let’s take a look at how it works.
Example A, The speculative sentiment index or SSI is the accumulative trading positions data, which is captured in real-time by various brokers, as there is no central exchange.
Example B, The broker will then filter the information and offer it in graph format where each pair tells traders whether there are more buyers than sellers or vice versa. The information is provided as a ratio between the two groups.
Example C, If we know that there are more buyers or sellers on a particular currency pair that we are interested in trading, it can help to influence us either to take the trade or maybe even to wait on the sidelines. But one of the problems with the SSI is that the information will very likely differ from broker to broker, and from time frame to time frame, in which case it might be advisable for you to check two or three SSi’s on various brokers to help give you a clearer overall picture of which way price action is leaning.
Example D, Some SSiI’s provide more information than others. For example, you might expect to see the positioning, including the ratio of long to short.
Example E, The open interest
Example F, And the change between long and short positions
The more information, the better your decision-making processes will be.
Example G, Next we are going to look at how to use the SSI.
Example H, The positioning statement is one of the most utilized aspects of the SSI report.
Example I, Here we can see the numbers of traders who are long or short on a pair, and in this example, we can see that this broker offers the change in open interest, which is currently – 2.8% for the EURUSD pair. So for every one trader that is holding a long trade in this pair, there are 2.81 traders who are holding short positions. Any position that shows a minus in front of the number represents the number of short positions, while readings that are above zero represent the number of traders who are net long in the pair.
Although the SSI is a leading indicator, it is considered to be contrarian, that is to say, that the information that is supplied by the broker should be used to trade against the retail traders with currently open positions.
Example I, The rationale behind the contrarian aspect of this indicator using the 2.8% of EURUSD traders as an example who are short, means that eventually, the sellers will need to close those positions – by buying the pair to exit and because we know there is only one buyer for every 2.8 sellers, this position will eventually turn as the sellers close out their traders and leave a buying void behind them. And the opposite would apply if there were more buyers than sellers. To maximize the reversal potential of this indicator, it is advised to use it when there is a high ratio of change between the buyers and sellers.
Please remember to check SSI’s on a regular basis because some of them will be updated by the broker on a daily time frame basis, whereas some will update them once an hour or even every 20 minutes. It is important that if you decide to use this information to trade that it is as up-to-date as possible. Only then will it help you to determine whether a particular currency pair is bullish or bearish.
Make money in Crypto by spotting the Cup and Handle pattern – part 1/2
Chart patterns occur on charts when the movements of the price of an asset resemble a common shape. In this case, we will be talking about the cup and handle formation. These patterns are a visual tool that helps traders make their market decision. Cup and handle provide a logical entry point, a stop-loss target for managing risk, as well as a price target for exiting a profitable trade.
The Cup and Handle
The cup and handle pattern is a strong tool for both small time frames (such as one-minute charts) and in large time frames. It occurs when the price trends down, then have a stabilizing period, then followed by a rally of approximately equal size to the aforementioned decline. This creates a U-shape, which is the “cup” in the “cup and handle” formation. However, this is only a part of the pattern. The price then moves sideways or goes down within a channel, which forms the handle. The handle can also take the form of a triangle.
An important rule to keep in mind is that the handle should always be smaller than the cup. Ideally, the handle should stay in the upper third of the cup. If it is too deep, it will erase most of the gains of the cup, which makes it quite an unsafe bet when it comes to trading on this pattern.
A cup and handle chart may signal one of two things! A reversal pattern, or A continuation pattern. A cup and handle signals a reversal pattern when the price is in a long-term downtrend. If a cup and handle pattern is formed during that time, it will signal a trend reversal. However, if the cup and handle formation occurs during an uptrend, then the pattern would signal trend continuation.
How to trade the cup and handle pattern Determining the Entry point
In order to trade this pattern well, wait for a handle to form and the full pattern to play out. The handle often goes sideways, descends, or creates a triangle. The entry point should be when the price breaks above the top of this channel or triangle. As soon as the price moves out of the handle, the pattern should be considered complete. However, you might want to wait for a full candle to form outside of the pattern, so you get a real confirmation of the move, rather than blindly entering a false breakout.
Setting up a Stop-Loss
A stop-loss order is a risk-control measure on the trade. It works by selling the position if the price goes the opposite way and declines enough to invalidate the pattern. The stop-loss should be put below the lowest point of the handle or below the most recent swing low (only if the price oscillated up and down often).
Since the handle occurs within the upper half of the cup, a stop-loss that is properly placed should not end up in the lower half of the cup. If the stop-loss happens to be below the half-way point of the cup, try to avoid the trade if possible. Ideally, the stop-loss should be placed in the upper third of the cup pattern.
Check out part 2 of our Cup and Handle crypto trading guide to learn more about setting profit targets as well as some other important info regarding this candlestick formation.
Using pennants correctly in Crypto trading – spotting the difference between flags, pennants, and triangles
The pennant formation is a formation that looks much like a flag pattern but is triangular in shape. These formations tend to appear at the halfway mark of a trend. When a pennant forms, the trading volume tends to contract, while increasing only after the breakout. To simplify it even further, pennants look like a small triangle sitting on a long pole.
Pennants are a variation of a flag pattern, which means that it is made up of a body and a pole, much like the flag. Just like with the flag pattern, the pole height can be used to create a price target after a five-wave breakout from the body of the formation.
They are associated with very mild volatility alongside limited price fluctuations, which differentiates them from flags and triangles.
Difference between a triangle and a pennant
While pennants are most similar to flag formations, it is quite easy to distinguish one from another. On the other hand, triangles and pennants can be mistaken for one another due to the similarity of the pattern if we are not careful. However, they have some key differences which can be used to determine which one is which.
Difference 1 – the Flagpole
The symmetrical triangle and the pennant both have conical bodies which are formed during a period of consolidation. The price consistently fluctuates between higher lows and lower highs, therefore creating two converging trendlines. However, the part which many people know but tend to miss during a live trading session is that the pennant includes a flagpole at the start of its pattern, which is not the case with the symmetrical triangle. The flagpole is a sharp move accompanied by heavy volume, which marks the beginning of an aggressive move to the upside or downside. Price then pauses and forms the body of the pennant, before breaking out.
Difference 2 – the Duration
Another difference between the symmetrical triangle and the pennant would be the difference in their durations. The pennant is considered a short-term pattern that forms over a period of hours, days, or weeks. A triangle pattern, on the other hand, can take much longer, sometimes months or years. If a pennant pattern lasts for several weeks, it can be considered as a triangle as the flagpole is no longer important.
Difference 3 – the Breakout
The breakout after a pennant formation should occur at or near the point of trendline converging, which is called the apex. However, symmetrical triangles usually break above or below the trendlines a bit sooner, namely one half to three-quarters of the way through the pattern. Therefore, triangles almost never reach its apex.
Using patterns in Crypto trading
Pennants are a universal formation, which means that trading using this formation should be no different than using it to trade other assets. However, due to the volatility of the crypto market, one has to consider the duration of the formation itself. As the crypto market is much more volatile, the pattern formations tend to resolve quicker. Pennant formations, when trading regular assets, are not considered important on extremely short time frames, while that is not the case with the crypto market. They also grow into a triangle only after 12-13 weeks of not breaking out with traditional asset markets, rather than just a few weeks with the crypto market.
Conclusion
Recognizing pennants while trading cryptocurrencies can, just like with any other formations, be an effective way to improve your odds of profiting on a trade by determining the direction of the trend as well as the profit target.
In its effort to help traders learn while profiting from the Forex markets, Forex Academy is proud to offer its users our premium Live Signal table at an unbeatable price: 100 percent free!
The fact it is free to all who subscribed to our notification service does not mean ours is a C-quality service. We have a team of top traders who will continuously watch the market to deliver top-quality trade ideas for you. The resulting trades can be monitored live in our signals section, which will show you the current situation of live trades and the total pip count gained or lost by our traders.
Table guide
In the image, we can see the information provided:Date/time shows the Date and time when the trader created the signal. But that does not mean the signal is live. That will depend on the order type of the signal.
We can create several order types. These are shown in the Order Type column.
The different orders are the following:
Spot buy, Spot Sell: these two are market orders. In this case, the signal is live at the moment shown by the Date/Time column.
Buy Stop, Sell Stop: These are pending orders meaning the order is pending until the price reached the stop level. The price on a buy-stop order is placed above the current market level, whereas a Sell-Stop order is placed below the current market price. a Stop order is a usual way to capture a breakout.
Buy Limit, Sell Limit: These are also pending orders. In this case, a limit order intends to capture an entry at a pullback of the price. That means a buy limit order is usually below the current price, and a sell limit is above the current price.
To recap: If the order is spot, the signal becomes live immediately. If the order is pending, it is, well, pending, and it will be live at the moment the stop or limit condition is fulfilled.
The Asset column tells the information of the currency pair
The Method column will link to the article explaining the trade idea, which will describe the technical details and main levels. We also will include the risk per lot, mini- and micro-lot, so you can adapt the position size to your current trading account balance.
Then the table shows the price entry, stop-loss, and take profit levels. This will completely define the trade.
The R/R column is the Reward-to-risk ratio. This is a key metric for the long-term profitability of any system, and we like our signals to show ratios higher than one, preferably two or more. However, if the likelihood of the trade is high, we can present R/R of 1.
Price shows the current live price of the assets of the table. Closing Date/time will show the closing time of the trade. If the trade is closed, the price column will display its closing price. If the trade is still open, the field shows nothing.
The Pips column shows the total pips gained or lost.. If lost, the price box is red-colored. On assets with positive pips, the box is green-colored. The figures shown are updated in the current live trades. On closed trades, it shows the final pip count.
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Forex.Academy will be making these levels available to you, free of charge, and they can be accessed on the options drop-down menu of our home page. For your convenience, as and when 
Here we have a 1-hour chart of the US dollar to Swedish Krona, or USDSEK, The first trend we see is a 220 pip move to the downside, which would have been considered as oversold and where price action is reversed in a classic v-shape reversal pattern.
They flip flop from one chart to another looking for the opportunity which will give them a chance to bag a couple of hundred pips
They think they spot a trend and jump right in and execute a trade, thinking only of the money they could make. They often make the mistake of buying at the top of the market or selling at the bottom. Think they may have spotted a trend, and perhaps they have, or it might be that some news has just come out, and they make a split second impulsive decision to buy or sell a currency pair simply based on what they’ve seen or heard.
So when are trends likely to end? Why do trends finish reverse or go into periods of consolidation? Typically trends will start to fade and finish at the end of 
Insert E, The following ISO’s makeup the major currency pairs, so JPY for the Japanese yen GBP for the British pound, USD for the United States dollar, CHF for the Swiss franc, EUR for the Euro, cad for the Canadian dollar, AUD for the Australian dollar, NZD for the New Zealand dollar, and finally SEK for the Swedish krona.
The pennant formation is a formation that looks much like a flag pattern but is triangular in shape. These formations tend to appear at the halfway mark of a trend. When a pennant forms, the trading volume tends to contract, while increasing only after the breakout. To simplify it even further, pennants look like a small triangle sitting on a long pole.
