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How often have you looked at a chart and tried to determine whether or not the market is really trending? How many times have you been fooled by your Stochastics or RSI indicators? How many times have you sold because your oscillators were screaming overbought then watched the market dip a little and then continue higher, stopping you out for another loss? One of the most important things you are probably trying to figure out with any given market is if it is in a trend, and in which direction that trend is moving.

 

Find the trend and make friends with it

 

Swimming upstream is difficult, and that kind of battle is probably why you’ll often hear traders say, “The trend is your friend.” But spotting a real trend can be tricky, especially for first time traders and chart observers. You don’t need really fancy calculations or trading software to spot a trend in a market, and if you find it, don’t fight it.

Guess who bought the dip? That's right, the floor traders and the other professionals

 

If a market is really trending, there will always be reactions against the prevailing trend. Those are the signals most floor traders love. They know that many investors in the general public will fall for the "fade" nearly every time. So how do you know whether or not what you are seeing is a real trending market or not?

The basics are very simple. A market in an uptrend will likely have higher highs and higher lows. The opposite is true for a downtrend. Lower highs and lower lows tell you when the market is in a downtrend.

 

You never want to go against these situations.

 

IMPORTANT TRADING RULES:

 

1) We never get long or buy in a downtrending market.

2) We never sell or go short in an uptrending market.

 

It's just like stepping in front of a freight train.

 

A market on a move higher will attract new buyers and selling forces will help establish higher highs. When the price dips, more buyers will come in on what they perceive as a value entry point, delivering those higher lows. On the downside, selling pressure will cause lower lows and any move above those results in more sales, topping off those lower highs.

 

Find support and resistance and find trading opportunities

 

Once you have determined the overall trend, you can look for support and resistance points. Knowing these price levels can help you follow the trend, buying on dips in a market that might be trending higher or selling on pops when the prevailing trend is likely lower. It doesn't get any better than that!

 

Best trades to you,

 

Larry Levin

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My question is what the following sentence really means: "They know that many investors in the general public will fall for the "fade" nearly every time."

So does "falling for the fade" mean that in an uptrend if there is a pullback the general public is taking this to be a trend reversal, and entering short while the smart money "knows" this is just a pullback and they are going long on the pullback's low. So the smart money is buying from the gen pops short selling.

Do I have this right? Or am I all wet???

If I do have this right what are the signals then that this is a pullback to the prevailing trend as opposed to a true trend reversal?

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What does 'Trending' mean? If up trending means one higher high, then the trader needs to wait until the next higher high to believe that an uptrend has started. The next higher high means that there have been two highs. So I've already missed both those highs.

 

If the downtrend has not ended until the uptrend has started, then do I need to wait to exit the short until the next higher high? How do you trade that situation? If I wait to exit the short until the next higher high, in a lot of situations, I could be back to breakeven or even at a loss. That doesn't make any sense to me.

 

Explaining market behavior in terms of 'Trends' can be extremely misleading. What a trend is could mean different things to different people. And even if there was a consensus about what the definition of a trend is, it's still all meaningless unless the trader understands what usually makes price do what it does. There needs to be a positive correlation between what price does and some underlying reason. For example, price doesn't do anything because the close just crossed an MA line. Maybe if enough people THINK that price SHOULD do something because the close crossed an MA line, then something will happen. But that is because of human behavior, not the trend line. Trend lines don't make the price do anything. My point is, that we all get caught up in thinking that price is going to do something for reasons that have absolutely nothing to do with why the price is really doing what it's doing.

 

It's meaningless to come up with trading rules unless a trader has some knowledge about what makes the price do what it does. Unless I read about the reasons for price doing what it does, and it is then proved to me, then there is no point learning the strategy rules. Why learn strategy rules and have no idea what the rules are based on?

 

It's absolutely meaningless to talk about trends unless there is a specific definition for what a trend is. And then the strategy rules need to fit the trend definition.

 

If a definition of a trend is that the price is going in one direction for "quite a while", then by the time you identify it as a trend, then "quite a while" has already gone by. It's a "Catch 22" situation. By the time the price has met that definition of a trend, it could be ready to start moving the other direction. So depending upon a trader's definition of a trend, and what the rules are to the strategy, you could always be late to enter.

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if you are trend trading you will need your own definition for what constitutes a trend and this is needed for your systems entry and exits.....but you dont necessarily need to know why it is trending.

Having a philosophy/theory of the way the markets work in terms of overall structure is important to understand how you intend to capture profits from the markets, however the in depth analysis of these people are buying here, those people are selling here for these or those reasons is largely irrelevant....just like magical trend lines. The market does not care why people are doing things, it merely reports that they are being done.

 

If you really think you can track why people are doing things as opposed to how market patterns seem to repeat and continue and how you can put the probability of those patterns repeating in your favour then become an economist.

If you choose trend following then it is simple - you think the market will continue in the same direction you think it is trending in....the rest becomes money management. Worrying about missing the first two higher highs is missing the point if you think those higher highs will continue.

 

The markets are always trending - it depends on YOUR time frame.

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The markets are always trending - it depends on YOUR time frame.

 

This is exactly right and what I refer to as fundamental truth. I believe good trading strategies are built on fundamental truths because, when things go bad, and they always seem to sooner or later, fundamental truths are always still the same. It seems like when you base a strategy on fundamental truths you gain confidence.

 

In my mind the most important part is not just being able to determine if the market is really trending by identifying higher highs or lower lows, but being able to identify the trend early on rather than after the fact.

 

I've found that almost always a trend can be can be identified on the smaller time frame first using the same method of identifying higher highs or lower lows. Then I draw a hard trend line across the bottom/support of an up trend or the top/resistance of a down trend. In order to do this there has to be at least two retracements.

 

Then I wait for it to come back one more time and retest my trend line. If it holds then I take the trade. From there on its about stop loss management. I try to do that on the larger time frame moving to just below or above my trend line as the trend develops.

 

I seems like if I try to wait until the trend is clearly recognizable on the larger time frame most of it has already passed me by.

 

I also try and get a feel for why the market is moving. For example; If Italy just announced that they may default on their debt there's a pretty good chance we're going to trend until the end of the day!

 

It also seems like we have longer faster moving candles in the direction of the trend and short slow moving candles in the retracement.

 

That's what seems to work for me, but I'd love to hear what others do to identify a trend early on.

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What does 'Trending' mean? If up trending means one higher high, then the trader needs to wait until the next higher high to believe that an uptrend has started. The next higher high means that there have been two highs. So I've already missed both those highs.

 

If the downtrend has not ended until the uptrend has started, then do I need to wait to exit the short until the next higher high? How do you trade that situation? If I wait to exit the short until the next higher high, in a lot of situations, I could be back to breakeven or even at a loss. That doesn't make any sense to me.

 

Explaining market behavior in terms of 'Trends' can be extremely misleading. What a trend is could mean different things to different people. And even if there was a consensus about what the definition of a trend is, it's still all meaningless unless the trader understands what usually makes price do what it does. There needs to be a positive correlation between what price does and some underlying reason. For example, price doesn't do anything because the close just crossed an MA line. Maybe if enough people THINK that price SHOULD do something because the close crossed an MA line, then something will happen. But that is because of human behavior, not the trend line. Trend lines don't make the price do anything. My point is, that we all get caught up in thinking that price is going to do something for reasons that have absolutely nothing to do with why the price is really doing what it's doing.

 

It's meaningless to come up with trading rules unless a trader has some knowledge about what makes the price do what it does. Unless I read about the reasons for price doing what it does, and it is then proved to me, then there is no point learning the strategy rules. Why learn strategy rules and have no idea what the rules are based on?

 

It's absolutely meaningless to talk about trends unless there is a specific definition for what a trend is. And then the strategy rules need to fit the trend definition.

 

If a definition of a trend is that the price is going in one direction for "quite a while", then by the time you identify it as a trend, then "quite a while" has already gone by. It's a "Catch 22" situation. By the time the price has met that definition of a trend, it could be ready to start moving the other direction. So depending upon a trader's definition of a trend, and what the rules are to the strategy, you could always be late to enter.

 

Hi Tradewind

A thought provoking post

So if you dont enter after the second higher high, when are you going to enter?

 

regards

bobc

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The markets are always trending.

 

Just true.

 

Means: There are always big orders being worked.

When there are only small orders price isn't moving / there is no volume.

 

 

IMPORTANT TRADING RULES:

1) We never get long or buy in a downtrending market.

2) We never sell or go short in an uptrending market.

 

Maybe true for some ways to trade.

 

 

The way I found most profitable is just opposite:

- In an uptrend set your short entry at the price where trend may reverse.

- If price moves against you immediately (which happens rarely if using appropriate method) reverse trade (to long)

- If price moves into green move stop loss to break even (never let winner turn into looser)

- Let winners run

 

This usually takes 2-3 tries until you succesfully jumped into the (new) trend.

 

 

Vice versa for downtrend.

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.........................................

- If price moves against you immediately (which happens rarely if using appropriate method) reverse trade (to long).............................................

.

 

May I ask what is the appropriate method

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J

 

Maybe true for some ways to trade.

 

 

The way I found most profitable is just opposite:

- In an uptrend set your short entry at the price where trend may reverse.

- If price moves against you immediately (which happens rarely if using appropriate method) reverse trade (to long)

- If price moves into green move stop loss to break even (never let winner turn into looser)

- Let winners run

 

This usually takes 2-3 tries until you succesfully jumped into the (new) trend.

 

 

Vice versa for downtrend.

 

How do you determine where the trend will reverse?

How do you let the winners run if you are trading against the trend?

Why when you are trading against the trend as it so profitable would you cut and reverse?

 

Basically - Why make it so hard for yourself trading against the trend, if you rarely have any losers using the appropriate method, why not make it easier for yourself and use the same techniques trading with the trend?

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What does 'Trending' mean? If up trending means one higher high, then the trader needs to wait until the next higher high to believe that an uptrend has started. The next higher high means that there have been two highs. So I've already missed both those highs.

 

If the downtrend has not ended until the uptrend has started, then do I need to wait to exit the short until the next higher high? How do you trade that situation? If I wait to exit the short until the next higher high, in a lot of situations, I could be back to breakeven or even at a loss. That doesn't make any sense to me.

 

Explaining market behavior in terms of 'Trends' can be extremely misleading. What a trend is could mean different things to different people. And even if there was a consensus about what the definition of a trend is, it's still all meaningless unless the trader understands what usually makes price do what it does. There needs to be a positive correlation between what price does and some underlying reason. For example, price doesn't do anything because the close just crossed an MA line. Maybe if enough people THINK that price SHOULD do something because the close crossed an MA line, then something will happen. But that is because of human behavior, not the trend line. Trend lines don't make the price do anything. My point is, that we all get caught up in thinking that price is going to do something for reasons that have absolutely nothing to do with why the price is really doing what it's doing.

 

It's meaningless to come up with trading rules unless a trader has some knowledge about what makes the price do what it does. Unless I read about the reasons for price doing what it does, and it is then proved to me, then there is no point learning the strategy rules. Why learn strategy rules and have no idea what the rules are based on?

 

It's absolutely meaningless to talk about trends unless there is a specific definition for what a trend is. And then the strategy rules need to fit the trend definition.

 

If a definition of a trend is that the price is going in one direction for "quite a while", then by the time you identify it as a trend, then "quite a while" has already gone by. It's a "Catch 22" situation. By the time the price has met that definition of a trend, it could be ready to start moving the other direction. So depending upon a trader's definition of a trend, and what the rules are to the strategy, you could always be late to enter.

 

The first thing you learn in trading is that no one has ever come up with a universally accepted definition of a trend that has any real value. Some "trends" only last for a couple of cycles while others can last a great deal longer. One trader's uptrend can occur in another traders downtrend...which can both occur in yet another trader's uptrend. Who's right? Does it matter?

 

Mr. Levin did a superb job of creating an interesting post title without providing any useful information concerning trends. What is the specific moment when a market move becomes a market trend? How can we identify when a trend is actually over?.

 

Tradewinds makes some interesting points, but the questions raised have a thousand answers. What is a trend? I have more definitions than you'd believe. What makes price do what it does? To answer that, you'd have to tell me what specific market and what precise moment in time are referenced...and then give me a year or more to research the thousands of variables and market forces that were exerting their influence at that particular time on the market. Sort of like the "Butterfly Effect", if you will. After all that work, you would have a huge list of thousands of random events and their individual effect on thousands of traders that caused the market to move up or down for a few bars or cycles.

 

Imagine two identical leaves at the top of a tree one inch apart. Both fall at exactly the same moment from the same height. Why will they never land one inch apart? Why, with all the computing power in the world, can we not predict exactly where they will land? If you understand the unpredictability of the leaves, then you'll understand the difficulty of predicting the markets when so many random forces are affecting it simultaneously.

 

The market does what it does because it is the cumulative result, moment by moment, of the fear and greed of every single participant. If anyone had the unique ability to access that information and know at any given moment what the resultant market reaction will be, they would own the world. Traders who try to "trade on news" are usually wrong more times than right.

 

The point I'd like to make here is that a universally accepted definition of a trend is actually not that important nor is knowing specifically what is making a market do what it is doing. That's the wrong approach. Many traders do just fine just knowing that the market will go up and it will go down and why is not important. Traders who have a decent understanding of charting, market behavior (specific patterns) and proper use of strong Technical Analysis techniques can enjoy good, long-term consistent success. The market will tell you the precice moment when a trend is born and when it's exhausted. Takes work and a lot of practice, though.

 

But, for what it's worth, if I do happen to discover the "one and only definition of a trend", I'll pass it along. Then I'll be glad to show you why you don't really need it.

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How do you determine where the trend will reverse?

How do you let the winners run if you are trading against the trend?

Why when you are trading against the trend as it so profitable would you cut and reverse?

 

Basically - Why make it so hard for yourself trading against the trend, if you rarely have any losers using the appropriate method, why not make it easier for yourself and use the same techniques trading with the trend?

 

 

It's all about finding the soft spots:

Where are the points that have a high probability that price does either

turn against current direction or continue?

But no matter which direction it goes it should do it for some time and shall not return before it makes at least some significant move.

 

Hit such a soft spot this morning at 01:58 EST in EUR/USD.

So far +110 pips.

 

 

I never know when price will reverse.

There are only high probability turning/continuation points.

At some point usually I get it right and jump on the train.

(Btw it's not hard - just try and error. But error with small penalty. )

 

Going with the trend is much more unprecise in my approach.

It is more that I always let a small portion of the position stay over longer time frames (up to 10 days) and sometimes this results in a nice surprise.

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... But, for what it's worth, if I do happen to discover the "one and only definition of a trend", I'll pass it along. Then I'll be glad to show you why you don't really need it.

 

Any chance you would open a thread and show why you don't really need it before you discover the one and only definition of a trend?

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It's all about finding the soft spots:

Where are the points that have a high probability that price does either

turn against current direction or continue?

But no matter which direction it goes it should do it for some time and shall not return before it makes at least some significant move.

 

Hit such a soft spot this morning at 01:58 EST in EUR/USD.

So far +110 pips.

 

 

I never know when price will reverse.

There are only high probability turning/continuation points.

At some point usually I get it right and jump on the train.

(Btw it's not hard - just try and error. But error with small penalty. )

 

Going with the trend is much more unprecise in my approach.

It is more that I always let a small portion of the position stay over longer time frames (up to 10 days) and sometimes this results in a nice surprise.

 

well done - if you only traded once for 110 pips in a range of about 130....multiple trades maybe different but still well done.... however ....

how is going with the trend more unprecise?

 

I am sorry - but if you can find the soft spots - the high prob turning points - who cares how (there are many ways to do it) and are happy to let things run -, then what you say does not make much sense.

I ask as it goes against prevailing wisdom - plus what works for me,- and the fact that you let things run when you say you are better at picking turning points would suggest that it would make more sense to pick those turning points that give you the greatest possible gains would it not? Maybe trading around with taking profits and re-entering can add to that, but how is going with the trend more unprecise?

thanks.

(of course I am assuming you are going long the EURUSD (6.58 UK time 1.58 EST time appears to be the low for the day--- and I believe that its in a downtrend of late)

Edited by SIUYA

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Markets, like people have much in common AND also have characteristics that set them apart as "individuals".

 

Trend is sustained directional movement....simple...and depending on the individual market that sustained movement can be a few ticks or 20 points....Does it matter?....I would suggest that if you do not understand your target market.......yes it does.....however to the extent that you DO understand your target market.....then no....it matters not....in fact to the extent that a participants really KNOWS a market, all that matters is identifying when that market is getting ready to reverse direction....

 

For folks who understand markets.....eventually they get to the point where they recognize a circular logic that operates on every level...

 

reversal.....continuation.....trend......reversal.....continuation....trend.....and so on

 

The point I make is that if you understand (really understand your market) then all you have to have is an entry or starting point (mine is the reversal)...and the rest takes care of itself....

 

In my case I can anticipate or "see" the reversal and knowing that it is going to happen provides me with a point of entry at a reasonable risk....once that happens, all I care about is whether the subsequent "continuation" (which eventually turns into a trend).....lasts long enough to pay me reasonably well. In the case of my market of choice (the S&P Futures) once I have my entry, I am know I am going to have one of four outcomes....3 point win.....5 point win...10 point win or 2 point loss.....

 

The attached chart shows a recent reversal point...my students use a similar process and they tell me that they are right about 50% of the time....for this orientation, I am seeing about 65% winners...(defined as hitting at least one of my profit targets).

5aa710b5f0240_ReversalEntry.thumb.PNG.96b9977b642efa4bf3ea3dd24e2a0c7d.PNG

Edited by steve46

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Here is the trade as it stands now...at 10:47 PST

 

I am really tired and will cut this one short, even though it is not quite at my 10 point target

 

Clearly not all of them work out like this but...this is one example of how one can use the concept of reversal, continuation, trend and then reveral....as the basis of a systematic approach to markets.

 

Now I need to get some sleep

 

Best of luck to all

5aa710b60a510_ConclusionofReversalTrade.thumb.PNG.fca2c7f024fe0085b57bce2b0e9a87fa.PNG

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The Best Way to Determine When the Market is Really Trending (up) is to take a (short) position.

The Best Way to Determine When the Market is Really Trending (dn) is to take a (long) position.

 

:smilie for that not invented yet:

 

:)

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The Best Way to Determine When the Market is Really Trending (up) is to take a (short) position.

The Best Way to Determine When the Market is Really Trending (dn) is to take a (long) position.

 

:smilie for that not invented yet:

 

:)

 

Dear zdo

You are still talking in riddles

Kind regards

bobc

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Dear zdo

You are still talking in riddles

Kind regards

bobc

 

The VERY Best Way to Determine When the Market is Really Trending (up) is to take a (short) position.

The VERY Best Way to Determine When the Market is Really Trending (dn) is to take a (long) position.

 

 

Mischievous maybe, but no riddles. Take it literally

(and I should preface my remarks with this: In no way am I demeaning any of the methods or any of the posters above. Seriously - I appreciate their contributions)

 

One up (or dn) bar, one outside close, etc. IS a trend.

It may last only this or a couple more bars or it may last for years - literally. So re "determining" - Even if you know where all the “big orders” are, etc. you still can’t know when more and /or even bigger countervailing orders are coming, etc…. same with SR etc., same with ALL the tricks for “finding” trend, etc.. (and, yes, some methods are better than others ...)

 

And the one bar "trend" is as ‘strong’ a trend, in each moment, ( ie now ), as is a trend that has 5 higher high and higher low ( or vice versa for dn) swings behind it - because each one of these trends, the one bar ‘trend’ and the ‘established’ ‘trend’, could end on the very next tick.

 

From this moment of needing to determine when the market is really trending, you could do further analysis, projections, calculate targets and zones, apply multi methods, etc. to “Determine When the Market is Really Trending” or if it is apparently in an uptrend, just short it :rofl: and find out / "Determine When" for sure

 

:haha: Just ask zdo. He’s been shorting the yen for over 18 months now and can without any hesitation tell you he has determined without any doubt at all it is still in an uptrend. ZERO DOUBT! (… and also no doubt that this particular trend could end tomorrow )

 

 

yogi said it best “when you get to the fork in the road, take it”

Edited by zdo

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for bobc - rephrasing “The VERY Best Way…”

Shorting a ( possible) uptrend is a slightly better way of determining when the market is trending than is going long in a (possible) uptrend (and vice versa for possible dn trends)… better because of increased internal ‘sensitivity’

:the wry smilee hasn’t been invented for this one yet either:

 

 

re: “and can without any hesitation tell you he has determined without any doubt at all when it is still in an uptrend”

by the same token, that’s also how I started getting long PM’s pre 2000…

and added to the positions many times during subsequent “downtrends” over the years.

and recently lifted PM hedges, especially in Silver

 

…learning to keep it simple. In trend trading – which I’m not very good at (and fortunately don’t have to be) – keeping it simple is simple. With trend trading, the outliers literally ARE the edge!

 

 

 

“The markets are always trending”. … most often they are trending sideways :jaded: :smilee:

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Interesting discussion.

 

From a novice trader viewpoint I use the simple HH HL/LH LL rule applied to the timeframe being traded, and honestly I don't want to sound trite when I say that.

 

I trade intraday so my main focus is on the shorter trends but that doesn't mean I can't also be aware of the bigger picture. Often my entry plan into one of these intraday trades needs to expand as the outlook has become more favourable and the risk needs to be taken to maybe leave 1 or 2 lots on to run. Recent EURUSD short from 1.3750 down to 1.3470 that I got stopped out of yesterday as an example.

 

My intraday trade may have ended but the higher TF is still trending in my favour so I try and keep with it and ride it a bit further. Same definition different timescale.

 

As I said I find this an interesting discussion, but personally in my own trading world I need a black and white definition that I can apply without hesitation, like an on/off switch.

Sometimes it takes me out to early, sometimes it saves my bacon but either way it is unconditional and keeps my trades framed and safe from my trading ego.

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...continuing...

 

The second Best Way to Determine When the Market is Really Trending (up) is to take a (long) position.

The second Best Way to Determine When the Market is Really Trending (dn) is to take a (short) position.

 

:duh smilee that's not doh concussining his forehead:

 

"When you get to the fork in the road, take it" Yogi B

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… continuing…

(In my own experience…)

The third best way to Determine When the Market is Really Trending

is to measure if and how closely price is moving in phase with (a properly selected and constructed summation of activated) cycles.

 

:wtf? smilee:

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    • Date : 23rd January 2020. How To Improve Your Trading Mindset 23rd January 2020.Our Head Market Analyst, Stuart, explains how to improve your Trading Mindset. Understand the importance of emotional control and discipline through an unmissable Q&A session.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Bitcoin: Upcoming Halving And What To Expect Bitcoin’s upcoming halving will be one of the most followed crypto-related occasions in the year 2020. Thousands of cryptocurrency enthusiasts will be observing the markets eagerly to witness what effect this year’s halving will have on the cryptocurrency. Many believe that the occasion would have a positive effect on BTC’s price as has been observed in the past. On the other hand, some are expecting the price to drop dramatically after the occasion. Whatever the result may be, it is apparent that this occasion will be a defining juncture for Bitcoin. In this review, we breakdown what the Bitcoin halving is all about, some effects of this occasion, historic occurrences, and what to anticipate from this year’s halving occurrence. Bitcoin was built on a system that mandates regular halving (also known as Halvenings) to sustain its value. The halvings are programmed to happen every 4 years. Already, Bitcoin has witnessed two halving processes, the first in 2012, and the other in 2016. The next halving process is scheduled for the 20th of May 2020. Bitcoin’s Value Preserving Strategy Bitcoin runs on a deflationary economic model which ensures that over time, lesser and lesser Bitcoin tokens will be created until finally, the creation of new Bitcoin tokens will end. BTC’s total supply is capped at 21 million, meaning that it is impossible to have more than that exact number of Bitcoin token in circulation at any point in time. It has been estimated that the very last Bitcoin token will be mined in the year 2140. Bitcoin’s deflationary model predisposes it to scarcity which increases in demand, thereby causing its value to increase as well. This model is different from traditional fiat which is based on an inflationary model, this means that banks can instruct for the printing of more banknotes at will. This is not an ideal practice per se as a boost in the volume of banknotes in circulation could result in the devaluation of that currency. Bitcoin’s “Block Reward” System New Bitcoin tokens are pumped into the market through a popular process known as cryptocurrency “mining”. Bitcoin miners get rewarded with a Bitcoin “block” allotment every time they successfully solve transactions. The blocks are allotted by the Bitcoin algorithm. The block rewarding process happens every ten minutes. So in fact, ten minutes from this moment, new Bitcoin tokens will be created. Mining is not an easy process. It requires a certain level of expertise, specific hardware, and a serious quantity of electricity. After the inception of Bitcoin, the first mining reward was fifty Bitcoin. This meant that every ten minutes, a Bitcoin miner received fifty Bitcoin tokens for solving transactions. That number has since been halved, twice, and is now at 12.5 Bitcoin token per block reward. By May this year, the halving will bring that figure down to 6.25 Bitcoin token per block reward. This feature has been pre-programmed into Bitcoin’s system. What This Could Mean for Mining Lesser block rewards are not the only reason Bitcoin is scarce. It has gotten significantly harder to mine Bitcoin and receive rewards. This is because mining is now more difficult as more miners are entering the system thereby increasing competition. Consequently, an increase in competition means miners require more sophisticated tools to solve cryptographic Algos. Over the years, miners have created what is known as “mining pools” to better handle the rising competition of mining. Mining pools are a network of miners, collectively working towards achieving block rewards. Block rewards in mining pools are distributed according to the percentage of effort put into earning a block. Improved Stock-To-Flow Ratio Halvings have several profitable impacts on Bitcoin. One such effect is that it boosts the Stock-To-Flow ratio of Bitcoin. A commodity’s STF ratio is calculated by dividing the quantity of the asset held in reserves, by the quantity manufactured in a year. The greater the STF ratio, the lesser the annual inflation on that asset. Commodities like gold possess a very impressive STF ratio as its available quantity is limited. Presently, Bitcoin has a significantly lesser STF ratio, unlike gold. Regardless, more halving occasions will boost the Bitcoin’s STF ratio. It is even believed that someday, Bitcoin will surpass gold in the STF ratio rating and will be an even better store of value. This is probably why Bitcoin is dubbed “digital gold”. After-Effects of Previous Halvenings 2012’s Halving The first Bitcoin halving happened on the 28th of November. On that day, the cryptocurrency recorded a 6.5% trade range. Regardless, to the surprise of many, the price remained at a consolidated state months after the occasion. This was partly because Bitcoin was still in its infancy and so, not many people were engaged with it. Also, media coverage at the time was not what it is today, which means many people were not informed of what was going on. Based on the information on Bitcoin’s BNC Liquid Index, the price of BTC attained a high of about $32 on the 8th of June 2011. The price of BTC never broke above the $32 mark until the 28th of February 2013 (4 months later), where price witnessed a climb to $260 after which a drop was experienced and the price stayed below that level for several months. Fast forward to the 30th of November 2013 (close to a year after the 2012 halving), Bitcoin rallied dramatically and peaked at $1,167, which was a whopping 9,686% increase from the initial price of $11 on halving. 2016’s Halving On the 9th of July 2016, the second halving, the price peaked at $664 but did not maintain that uptrend instead fell to $626 on the same day. Subsequently, the price continued on that downward trajectory for about three months. However, things started looking up for Bitcoin from the 27th of October 2016 when price closed above the previous halving’s high of $664. Bitcoin later proceeded to smash its last all-time high of $1,167 on the 23rd of February 2017. This spike started the famous bull rally of 2017 through 2018, which witnessed a peak at $20,000 sometime in December 2017. 2016’s halving shot Bitcoin’s price from $664 to $20,000 which was a growth of 2,912%. Possible Outcomes of this Year’s Halving? In the crypto sector, the Bitcoin halving is undoubtedly among the most talked-about and anticipated occasions of the year. Presently, there are mixed expectations as to what the outcome of the 2020 halving may be. Many in the crypto sector are very optimistic and believe that, just as in the past, the price will soar dramatically either before or after the occasion. Creator of Kraken, Jesse Powell expects the price of Bitcoin to rise close to $100k or 1 million after the halving. The CTO of Morgan Creek Digital Assets also shares the belief of Jesse and expects Bitcoin to reach the $100,000 mark by 2021. He says that scarcity is a driving force for the demand of any commodity. He explains that the 2020 halving will cause Bitcoin to be more scarce. Other crypto players believe that this year’s occasion will not have a similar trajectory with past occasions and would, instead, mar the price of Bitcoin. Another possible scenario that has been observed over time is the “buy and dump” case. This scenario usually plays out when there is a highly anticipated occurrence. It works exceptionally well when the upcoming occasion is sure to have a quantifiable effect on supply and demand dynamics. The price of the asset in question experiences a huge spike just days or a few weeks to the main event. This transpires because investors stock up on the asset towards the event. After the event, however, the price of the said asset drops significantly. This kind of activity has transpired frequently in the cryptocurrency space. One such occasion was the Bitcoin futures trading releases for the CBOE and CME. Just a few days to the CME’s release, the price of Bitcoin rallied from $6,400 and peaked close to its all-time high of $20,000 in a day. Not surprisingly, the price dropped considerably in the period that followed those releases. Furthermore, some cryptocurrency experts believe that the aftermath of the halving has already been priced in. It has been observed that demand is “missing” in the Bitcoin market, this could be a clear indication that the halving has been priced in. Usually, months before a halving, a boost in demand and price of Bitcoin is always noticeable. This time, however, no increase can be observed in neither of the stated areas. In this case, it could lead to a lateral trading period which might be a good thing for traders. At the moment, Bitcoin is still struggling to break above the $7,200 mark and there are no signs of a reversal happening soon. Whatever the result may be one thing is for sure, the price of Bitcoin is set to experience drastic changes this year.   Source: https://learn2.trade 
    • Your All-Round Guide To Security Token Offerings Security token offerings (STOs) are one of the most revered investment options in the crypto space at the moment. It has even been termed the “future of fundraising”. But what exactly are STOs and what is the rave all about? This article aims to break down STOs, what it is all about, and how it can be beneficial to you. What Exactly is a Security Token Offering? STOs, simply put, provide a means of tokenizing fungible financial assets such as stocks, bonds, and REITs, and introduces the tokens to the public through regulated channels. STOs are a lot like ICOs as they generally involve the same processes. However, the differentiating factor between STOs and ICOs is in the tokens being sold. With ICOs, the tokens are usually non-descriptive and could range from anything digital currencies to utility tokens. With STOs however, the token is a “security”, meaning that it is exchangeable and possesses a set monetary value. Breakdown of Security Tokens Security tokens function as digital versions of the assets they represent. Here’s a list of some popular security token representations: 1- Capital markets: Firms can convert their shares into tokens, allowing investors to own parts of the firm. In some cases, owners of tokens receive dividends and can execute votes on the affairs of the firm. 2- Equity funds: Equity funds can also tokenize their shares for sale. 3- Commodities: Commodities like gold, natural gas, coffee can be tokenized. 4- Real estate: The equity of this asset class can be tokenized, much like how REITs function. STOs do not change the underlying securities, instead, it makes these assets more readily accessible on a digital platform. Unlike other digital assets, security tokens can only be traded on certain regulated exchanges. Some exchanges require interested investors to meet some set qualifications. Advantages of STOs STOs are formulated with regulatory-compliance in mind, unlike ordinary token sales. Security tokens provide its owners with several legally binding rights. Some security tokens even bestow its owners with rights to dividends or other defined streams of income. Security tokens are also beneficial to their issuers. From the onset, the entities issuing the tokens are aware that their tokens are being purchased by accredited and verified investors and so, they don’t have to worry about the credibility of their investors. Other advantages of STOs include: 1- It is adequately regulated: Entities issuing security tokens must operate under the guidance of designated regulatory agencies in the region like SECs and FTCs. 2- You can rest assured that STOs won’t falter in the future: Unlike ICOs that cannot be guaranteed, STOs are sure to always deliver because it is properly regulated. 3- STOs offer great convenience: Procuring security tokens is easy, straightforward, and stress-free. All you need to do is to adhere to the STO requirement in your jurisdiction and you’re good to go. 4- It can be programmed: Security tokens are programmable and can be facilitated by smart contracts. 5- Automated dividend disbursement and voting: Some security tokens are structured to send dividends automatically through smart contracts. Also, some security tokens provide the bearer with exclusive voting rights in the affairs of the entity offering the tokens. 6- It is a globally accessible investment vehicle: Investors across the globe can procure security tokens regardless of their location. 7- It is not susceptible to manipulation: Considering the mode of operation STOs are run by, big players cannot manipulate its movements. 8- STOs are very liquid: It is a very promising investment option as it has an impressive liquidity quality and can be traded easily. With benefits like these, STOs are for sure transforming the fundamentals of the financial sphere. Disadvantages of STOs As with every other form of investment, security tokens has its limitations and shortcomings. Some of these limits are: 1- It is considerably more costly than utility tokens: STOs, unlike ICOs, hosts many organizations in their fundraising campaigns. Also, regulatory fees are not cheap which makes it more capital-intensive to host STOs. 2- Investor Qualifications: Countries like the US have certain qualifications an investor has to scale before becoming eligible to engage STOs. According to the SEC to be an “Accredited investor”, you must have an annual income rate of $200k and above or a minimum of $1 million in the bank. 3- Specific trading conditions: STOs can only be traded on certain designated exchanges. Also, these tokens are time-bound meaning that you are allowed to trade these tokens between investors for a set period after the STO. The Howey Test Usually, tokens are said to be securities, by law, when they pass certain thresholds. One such way to identify a security instrument is by applying the “Howey Test”. But first, let’s look at a piece of quick background information on how the Howey test came to be. In 1944, a citrus plantation called the Howey company of Florida leased out a large portion of its land to several investors in a bid to raise funds for much-needed developments. The buyers of the land were not skilled or versed in citrus farming in any way and decided instead to just be “speculators” and let the experts do their jobs. The lease was made on the premise that profits would be generated for the investors by the lessor. Not long after the business transaction the Howey company was sanctioned and accused by the United States SEC of failing to register the sale with the authority. The SEC maintained that the company was dealing with unregistered security. Howey denied the claims however, assuring that what it offered wasn’t a security. After much debate, the case ended up in the Supreme Court, which later ruled in favor of the SEC that Howey’s land leasing were undoubtedly securities. It remarked that investors were purchasing land mainly because they saw an opportunity to make a profit off the deal. Howey was then ordered to register the sale. This was the story of the enactment of the Howey test. Today, per the Howey test, anything is deemed to be a security if it satisfies the following criteria: 1- The investment included money. 2- The investment was made on an enterprise. 3- Profit will be made from the efforts of the providers of the investment. The Howey test has become a stronghold name in the crypto space. In 2017 and 2018 (during the “Heydey boom”), many ICO providers were completely consumed with scaling the Howey test as it was a major determinant used in ascertaining the legality of an ICO by the SEC. Failure to pass the test meant the offering was illegal and was sanctioned by the authorities. Some ICOs even advertised their tokens as investment instruments that had no value, describing their tokens as “utilities” used only for interactions on the platform. The Inception of STOs The very first STO was released by Blockchain Capital on the 10th of April 2017. The release pooled about $10 million in one day. Several STOs have been released following the first event including tZero, Sharespost, Aspen Coin, Quadrant Biosciences, and many more. STOs have since gained widespread acceptance and relevance in today’s market. Understanding the Distinction Between Security Tokens and Tokenized Security Confusing security token for tokenized securities is a common trap that people fall into. The main distinction between the two is that the former is usually a recently issued token that functions on a distributed ledger system while the latter is just a digital manifestation of pre-existing financial instruments. Apart from similarities in appearance and nomenclature, security tokens have absolutely nothing in common with tokenized securities. What Entities are Involved in an STO Issuance? Assuming a business entity plans on issuing security tokens as an embodiment of equity in its establishment, the next necessary step for that business would be to involve certain players and follow certain directives. It has to formally contact an issuance platform to serve as a medium for issuing the tokens. Popular issuance platforms include Polymath and Harbor, which consist of service providers like custodians, broker-dealers, and legal entities to carry out secure processes. Who Can Invest in STOs? STOs are available to the general public for the taking, regardless of location. However, as mentioned previously, the US has certain rules guiding STO investments. In the US, it is mandatory to be an “accredited investor” before you can invest in this instrument. An accredited investor is an individual with an annual cash flow of $200k and above for at least 2 years or a net worth of $1 million and above. More nations are starting to adopt the United States’ classification method and have begun restricting certain classes from investing in STOs. It is advisable to always research on the STO rules and regulations of the jurisdiction you’re planning on investing with. Final Word STOs provide businesses with the prospect of raising funds in an easy and regulated setting. It gives both investors and issuers a good deal of benefits, while also ensuring insurances against fraudulent or malicious practices, unlike ICOs. Issuers are not limited to any industry, they can vary from several sectors including real estate, VC firms, and small and medium enterprises. Moving forward, we will likely witness prominent firms venture into the STOs.   Source: https://learn2.trade 
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    • Good news is my posts no longer seem to need moderator approval! Beginning tomorrow, I will be day-trading two currency pairs: EUR/JPY and GBP/USD. I'll trade during the morning and afternoon hours, New York time.  I'll be using an Oanda "core pricing + commission" account. I plan to trade a "practice account" through the end of January, then a small "live" account beginning February. I've set my charts up to closely resemble the format popular in the RCRT thread (NinjaTrader + MetaTrader). My trading style will primarily consist of what I've learned from that thread. I'll track my performance in terms of R-multiples.  The purpose of this thread is just for a little fun with some bonus accountability. I've got nothing to sell/teach, and I will probably lose money! 😁
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