JUST A REMINDER CHART FOR BEGINNERS

2023年11月8日

Here are some Educational Chart Patterns JUST A REMINDER CHART FOR BEGINNERS

I hope you will find this information educational & informative.

>Head and Shoulders Pattern
A head and shoulders pattern is a chart formation that appears as a baseline with three peaks, the outside two are close in height and the middle is the highest.
In technical analysis, a head and shoulders pattern describes a specific chart formation that predicts a bullish-to-bearish trend reversal.

>Inverse Head and Shoulders Pattern
An inverse head and shoulders are similar to the standard head and shoulders pattern, but inverted: with the head and shoulders top used to predict reversals in downtrends
An inverse head and shoulders pattern, upon completion, signals a bull market
Investors typically enter into a long position when the price rises above the resistance of the neckline.

>Double Top (M) Pattern
A double top is an extremely bearish technical reversal pattern that forms after an asset reaches a high price two consecutive times with a moderate decline between the two highs.
It is confirmed once the asset's price falls below a support level equal to the low between the two prior highs.

>Double Bottom (W) Pattern
The double bottom looks like the letter "W". The twice-touched low is considered a support level.
The advance of the first bottom should be a drop of 10% to 20%, then the second bottom should form within 3% to 4% of the previous low, and volume on the ensuing advance should increase.
The double bottom pattern always follows a major or minor downtrend in particular security and signals the reversal and the beginning of a potential uptrend.

>Tripple Top Pattern
A triple top is formed by three peaks moving into the same area, with pullbacks in between.
A triple top is considered complete, indicating a further price slide, once the price moves below pattern support.
A trader exits longs or enters shorts when the triple top completes.
If trading the pattern, a stop loss can be placed above the resistance (peaks).
The estimated downside target for the pattern is the height of the pattern subtracted from the breakout point.

>Triple Bottom Pattern
A triple bottom is a visual pattern that shows the buyers (bulls) taking control of the price action from the sellers (bears).
A triple bottom is generally seen as three roughly equal lows bouncing off support followed by the price action breaching resistance.
The formation of the triple bottom is seen as an opportunity to enter a bullish position.

>Falling Wedge Pattern
When a security's price has been falling over time, a wedge pattern can occur just as the trend makes its final downward move.
The trend lines drawn above the highs and below the lows on the price chart pattern can converge as the price slide loses momentum and buyers step in to slow the rate of decline.
Before the lines converge, the price may breakout above the upper trend line. When the price breaks the upper trend line the security is expected to reverse and trend higher.
Traders identifying bullish reversal signals would want to look for trades that benefit from the security’s rise in price.

>Rising Wedge Pattern
This usually occurs when a security’s price has been rising over time, but it can also occur in the midst of a downward trend as well.
The trend lines drawn above and below the price chart pattern can converge to help a trader or analyst anticipate a breakout reversal.
While price can be out of either trend line, wedge patterns have a tendency to break in the opposite direction from the trend lines.
Therefore, rising wedge patterns indicate the more likely potential of falling prices after a breakout of the lower trend line.
Traders can make bearish trades after the breakout by selling the security short or using derivatives such as futures or options, depending on the security being charted.
These trades would seek to profit from the potential that prices will fall.

>Flag Pattern
A flag pattern, in technical analysis, is a price chart characterized by a sharp countertrend (the flag) succeeding a short-lived trend (the flag pole).
Flag patterns are accompanied by representative volume indicators as well as price action.
Flag patterns signify trend reversals or breakouts after a period of consolidation.

>Pennant Pattern
Pennants are continuation patterns where a period of consolidation is followed by a breakout used in technical analysis.
It's important to look at the volume in a pennant—the period of consolidation should have a lower volume and the breakouts should occur on a higher volume.
Most traders use pennants in conjunction with other forms of technical analysis that act as confirmation.

>Cup and Handle Pattern
A cup and handle price pattern on a security's price chart is a technical indicator that resembles a cup with a handle, where the cup is in the shape of a "u" and the handle has a slight downward drift.

The cup and handle are considered a bullish signal, with the right-hand side of the pattern typically experiencing lower trading volume. The pattern's formation may be as short as seven weeks or as long as 65 weeks.

>What is a Bullish Flag Pattern
When the prices are in an uptrend a bullish flag pattern shows a slow consolidation lower after an aggressive uptrend.

This indicates that there is more buying pressure moving the prices up than down and indicates that the momentum will continue in an uptrend.

Traders wait for the price to break above the resistance of the consolidation after this pattern is formed to enter the market.

>What is the Bearish Flag Pattern
When the prices are in the downtrend a bearish flag pattern shows a slow consolidation higher after an aggressive downtrend.

This indicates that there is more selling pressure moving the prices down rather than up and indicates that the momentum will continue in a downtrend.

Traders wait for the price to break below the support of the consolidation after this pattern is formed to enter in the short position.

> Channel
A channel chart pattern is characterized as the addition of two parallel lines which act as the zones of support and resistance.

The upper trend line or the resistance connects a series of highs.

The lower trend line or the support connects a series of lows.

Below is the formation of the channel chart pattern:

>Megaphone pattern
The megaphone pattern is a chart pattern. It’s a rough illustration of a price pattern that occurs with regularity in the stock market. Like any chart pattern, there are certain market conditions that tend to follow the formation of the megaphone pattern.

The megaphone pattern is characterized by a series of higher highs and lower lows, which is a marked expansion in volatility:

>What is a ‘diamond’ pattern?
A bearish diamond formation or diamond top is a technical analysis pattern that can be used to detect a reversal following an uptrend; the however bullish diamond pattern or diamond bottom is used to detect a reversal following a downtrend.

This pattern occurs when a strong up-trending price shows a flattening sideways movement over a prolonged period of time that forms a diamond shape.
Detecting reversals is one of the most profitable trading opportunities for technical traders. A successful trader combines these techniques with other technical indicators and other forms of technical analysis to maximize their odds of success.

Technicians using charts search for archetypal price chart patterns, such as the well-known head and shoulders or double top /bottom reversal patterns, study technical indicators, and moving averages and look for forms such as lines of support, resistance, channels and more obscure formations such as flags, pennants, balance days and cup and handle patterns.

Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down the volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/ volume indices and market indicators. Examples include the moving average, relative strength index and MACD. Other avenues of study include correlations between changes in Options (implied volatility ) and put/call ratios with a price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc.

There are many techniques in technical analysis. Adherents of different techniques (for example Candlestick analysis, the oldest form of technical analysis developed by a Japanese grain trader; Harmonics; Dow theory; and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation.

Contrasting with technical analysis is fundamental analysis, the study of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all the underlying fundamental factors. Uncovering the trends is what technical indicators are designed to do, although neither technical nor fundamental indicators are perfect. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.

Trade with care.
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2023年11月9日

註釋

"Welcome to a fascinating journey into the world of trading with the Volatility Breakout Strategy – a method that offers you a glimpse into the wisdom of legendary trader Larry Williams. In this comprehensive guide, we'll unravel the strategy's intricacies step by step, giving you the tools to incorporate it into your own trading style.

Disclaimer: Before we dive in, a word of caution. This is not financial advice. It's designed for educational and entertainment purposes only. Your investment decisions should always be made with due diligence, and you bear the responsibility for any profits or losses incurred. Trade and invest wisely.

The Volatility Breakout Strategy

This time-tested strategy, crafted by the legendary Larry Williams, centers around the idea that trends tend to persist. In other words, what goes up often continues its ascent. The beauty of this strategy lies in its simplicity:

Strategy Breakdown:

Range Calculation: Begin by calculating the range, which is the difference between the daily high and low prices (Range = High - Low).

Base Price: Determine the base price or entry price for the next day. It's calculated as the previous day's candle close plus a constant multiplier (K) times the range. Typically, K hovers around 0.6 to account for market noise.

Entry Signal: If the current day's price surpasses the calculated base price, it's your signal to enter a position.

Exit: The following day, sell all your positions at the market's open price.

Let's Illustrate with an Example:

Consider an asset with a daily range of $100. Calculating the base price gives us $1020. If the asset's price surpasses $1020 on the second day, you buy and ride the momentum. On the third day, you sell all positions at the market open. If the price reaches $1100 on the third day, that's a remarkable 7.84% return. Even if it retraces to $1000 at the opening, you still incur only a 1.96% loss. This showcases not just an attractive risk/reward ratio but also a statistical edge thanks to following the trend.

Strengths of the Volatility Breakout Strategy:

This strategy's strengths lie in its ability to sidestep the emotional rollercoaster of market psychology. By focusing on volatility and executing short-term trades with precise entry and exit points, it enables traders to tune out market noise. Trends, which reflect market psychology, become our allies rather than foes. Unlike reversal strategies, this approach provides a statistical edge and an appealing risk/reward ratio.

Conclusion:

While applying this strategy directly in today's markets may require some adjustments, understanding how legendary traders like Larry Williams approached the market is invaluable. The key takeaway is to remove emotion from your trading equation, maintain strict rules, and define clear invalidation points. These principles are fundamental to finding success in the dynamic world of trading.

If you found this educational post insightful and engaging, don't forget to hit that like button and follow for more high-quality content. Feel free to share your thoughts and questions below—let's navigate the exciting world of trading together!"

This chart is just for information

Never stop learning
I would also love to know your charts and views in the comment section.
Thank you

2023年11月9日

註釋

2023年11月10日

註釋

"Squid Game, the sensational Netflix series that has taken the world by storm, offers a gripping mirror to human psychology, reflecting the intricate dance of emotions and decisions that we often encounter in the world of finance. Just as unsuspecting individuals are lured into the deadly games by the enigmatic subway stranger, many novice investors are drawn into the stock market by tales of friends striking it rich, often diving in headfirst without a hint of the rules of the game.

It's a rollercoaster ride from beginner's luck to the perilous cliffs of attribution bias. Beginner's luck, that elusive phenomenon where newcomers seem to outshine the experts, can be an enticing trap. It leads to overconfidence, a misplaced faith in gut feelings, and an overzealous desire to trade that often ends up costing a small fortune in fees. These overconfident traders become engrossed in their own world, neglecting the wisdom of statistics and putting all their eggs in a single, precarious basket.

Attribution bias, another insidious cognitive bias, rears its head as traders concoct explanations for their successes and failures. Profit? They're geniuses with uncanny foresight. Loss? Blame it on market conditions or mere bad luck. The mind constantly seeks excuses for every twist and turn.

Even great minds like Isaac Newton, who could unravel the mysteries of the cosmos, fell victim to the madness of financial markets, a glaring example of attribution bias in action.

In Squid Game, the players, after witnessing horrifying tragedies during 'Red Light Green Light,' are given a choice to continue playing or not. Overconfidence and attribution bias grip the survivors as they believe they are destined for victory, much like many traders who cling to the belief that improbable outcomes are within their grasp.

Mob psychology and the bandwagon effect rear their heads in the story, too. The players form alliances and teams based on earlier factions, mirroring the tendencies of investors to follow the crowd rather than adhere to their own strategies and analyses. Panic buying, selling frenzies, and susceptibility to pump-and-dump schemes ensue.

In the financial world, these psychological phenomena can lead us astray, costing us dearly. But unlike the brutal Squid Game, financial markets aren't a zero-sum game. With a solid understanding of market characteristics, rules, and diligent research, you can gain a statistical edge. As a trader, I'd argue that technical knowledge accounts for less than 5% of the equation; it's all about mastering your cognitive biases and maintaining emotional control.

So, just as the surviving players in Squid Game strive to outlast their competition, investors and traders should strive to outsmart their own psychological pitfalls. In the end, success in the market isn't about luck but about mastering the intricacies of the human mind in a complex financial world.

If you found this insightful, don't forget to like and follow for more quality content! Feel free to share your thoughts and questions below—let's navigate this financial journey together!"

This chart is inspired by Michael_Wang_Official

2023年11月11日

註釋

📈 Unleash Your Trading Potential with These Proven Strategies! 🚀

Hello, Aspiring Traders!

Are you ready to embark on the exciting path to trading success? Trading isn't just about making profits; it's a disciplined business, an art form, and a psychological challenge. The keys to success are deceptively simple but often overlooked.

✨ Trading is NOT Gambling!
Bid farewell to unrealistic expectations and the notion that trading is akin to rolling the dice. To steer your journey in the right direction, follow these steps:

🚀 Set and Maintain Risk-Reward Ratios.
Never risk more than 1% of your deposit on a single trade. Ensure control over your risk exposure by using variable lot sizes, regardless of market conditions.

🚀 Steer Clear of the "All-In" Approach.
Resist the urge to place your entire account balance on a single trade in the hopes of recouping losses. Trading is about learning, not desperation.

🚀 Safeguard Your Capital with Stop Loss Orders.
Utilize Stop Loss (SL) orders consistently. Avoid relying on manual closures, as emotions can lead to costly decisions.

🚀 Establish Daily and Weekly Loss Limits.
Set sensible limits. If you encounter three consecutive losses in a day, take a break. If your losses exceed 10% of your account within a week, step back for the following week. This break is crucial for your growth as a trader.

✨ Maintain a Calm and Collected Demeanor
Successful traders exhibit a unique blend of discipline akin to a robot and the intuitive faculties of a human. Remember, entering the market too early or too late is just as detrimental as being wrong. Maintain your composure:

🧘 Keep Emotions in Check.
Euphoria and panic are your adversaries. Emotions belong in the casino, not in trading.

🧘 Steer Clear of FOMO (Fear of Missing Out).
Don't trade out of fear or impatience. Premature entries driven by FOMO can lead to losses.

🧘 Forge Your Own Path.
Resist the temptation of herd mentality. Successful traders are independent thinkers.

🧘 Cultivate a Diverse Watchlist.
Focus on instruments with setups you understand work. Avoid inventing trades that don't align with your strategy.

✨ Consistency is the Key to Triumph
Steady gains are far superior to volatile boom-bust performances. Here's your roadmap to consistency:

📊 Discover Your Trading Strategy.
Thoroughly research and select a trading strategy that aligns with your personality and comprehension.

📊 Employ Paper Trading and Backtesting.
Test your strategy in real-time and refine it through paper trading and the analysis of historical data.

📊 Monitor Your Trades.
Maintain meticulous records to pinpoint your strengths, weaknesses, and recurring patterns in your trading.

📊 Codify Your Rules.
Establish a precise algorithm for your trading strategy to minimize emotional decision-making.

🚀 In Conclusion: Embrace the Journey!
Trading is a long-term endeavor, not a shortcut to wealth. Along the way, you'll face challenges, losses, and setbacks, but when you succeed, you'll unlock the path to financial freedom!

🙌 Show your support for these strategies with a LIKE and share your thoughts in the COMMENTS! Let's navigate the world of trading and reach success together! 🌟

2023年11月12日

註釋

Hello traders, today we will talk about Types of market days

Some crucial aspects significantly influence technical analysis. The type of the market day is one of those crucial elements. Any trader who is actively trading in stocks, indices, cryptocurrencies, forex, derivatives, etc. may gain an advantage by properly analysing the type of market day.

Today, we'll talk about "6 different types of days" that could occur in the market. Please be aware that the six days differ greatly from one another. These patterns are not inviolate, thus they should only be used as a general indicator rather than a precise one for any given trade.


Types of market days:
# Trend day
# Double distribution trend day
# Typical day
# Expanded typical day
# Trading range day
# Sideways day

#Trend Day
The 'Trend day' is typically a volatile trading day with a definite bullish or negative momentum. On a day with a positive trend, the beginning candle typically represents the day's bottom, and the market subsequently slowly rises throughout the day. The day's high is typically marked by the opening candle on days with a negative trend, and the market then progressively decreases during the day.
Typically, a quiet day with range-bound movements comes before the trend day. Gives the possibility of a significant reward if correctly identified. Rarely, perhaps only a few times every month, do such trending days occur.

#Double distribution trend day
The 'Double distribution trend day' is a slightly complicated but incredibly effective strategy for executing aggressive trades. Because of this, institutions and experienced traders make extensive use of this method.
It is typically distinguished by being undecided at the start of the session. On a day like this, the market first moves in a narrow range. An initial balance is another name for it. The reference points are the initial balance high (IBH) and initial balance low (IBL). The day of the Double Distribution trend is quiet to start. The price eventually moves away from this range and tends in the direction of a new value, driven by buyers or sellers. When the market's momentum has subsided, another range-bound movement develops.Due to the fact that the majority of trading activity takes place at either extreme, this is where the phrase "Double Distribution trend day" originates.
Wide initial balances are more difficult to break than narrow initial balances.

#Typical Day
It is distinguished by a significant rise or fall at the start of the trading day. It might be a reaction to any significant macroeconomic news. Then, by adopting opposing positions, the market participants drive the price back in the opposite direction. The market simply trades within the range it generated earlier in the trading session when a broad range was formed in a relatively short period of time.

#Expanded Typical Day
It resembles that of the 'Typical Day' that was previously addressed. The beginning balance is not as large as on a "Typical Day," but the early price fluctuation is less erratic. This gives market participants the chance to break this constrained range. When this range is violated, either by an increase in selling pressure or purchasing pressure, the market then moves strongly in that direction.
The initial balance in this situation is greater than on a Double Distribution Trend Day but less than on a "Typical Day."

#Trading Range Day
Prices are being deliberately pushed up and down by buyers and sellers. Buyers and sellers who are responsive will try to enter at the extremes, driving prices back to the starting position. This kind of day offers both sides fantastic trading opportunities.

#Sideways Day
A "Sideways day" is one in which there is little movement in the price. As neither party makes any bold directional trades today, it is somewhat of a day of indecision for both parties. Option sellers typically enjoy trading on days like this since they can profit from time decay due to the non-directional, subdued action.

Although the Trading Range Day and the Sideways may appear to be identical, they differ greatly from one another. On a "Trading Range Day," both buyers and sellers are quite prevalent; however, this is not the case on a "Sideways Day."

Never stop learning
I would also love to know your charts and views in the comment section.
Thank you

2023年11月13日

註釋

2023年11月13日

註釋

Hello traders, today we will talk about EMOTIONAL STATES OF A TRADER

#1 Optimism – Everything starts with a positive outlook or a hunch that will lead traders into buying a stock.

#2 Excitement – Things start to move the way we want them to you feel giddy because of it. This is where we start hoping and anticipating that we are possibly making a success story in the stock trading world.

#3 Thrill – The market is continually going in the direction favorable to you. At this point, you are starting to feel that you are too smart. This is the stage where we are fully confident with the trading system that we have.

#4 Euphoria – This is the point where both the maximum financial risk and maximum financial gain are marked. As the investments you made start to turn to easy and quick profits, we simply ignore the risk’s basic concept. At this stage, we start trading at every opportunity we see with the aim of making bucks.

#5 Anxiety – The market starts to turn around. The market is starting to get back your hard-earned gains. However, this is new to us, we still believe with the trend we have seen before and still trade.

#6 Denial – We still think that the market simply does not turn as quickly as we hoped. There must be something wrong is what we keep on believing.

#7 Fear – Reality finally sets in and you now realize that you are not that smart after all. From being confident, you are now confused. We know that we should start getting out with a small profit but we just cannot bring ourselves to move on.

#8 Desperation – At this point, all of your gains are lost. Without knowing what to do, we attempt to do things that will leverage our position again.

#9 Panic – This is the most emotional stage as this is where we are hopeless and clueless. We feel like we lost control and now are left at the mercy of the market.

#10 Capitulation – This is where we reach our braking point and start selling our position for whatever price so as we can get out and lose no more.

#11 Despondency – After our exit, we now view the market as something not for us and we develop a phobia of buying stocks.

#12 Depression – We drink, pray or cry. We think we are so dumb and we start to analyzing where we went wrong. This is where true traders are born.

#13 Hope – We realize that the market has a cycle, which then renews our hope and we believe that we can still do it.

#14 Relief – The market turns positive once again. We are seeing the coming back of our prior investment and we now have our faith in it back.

The cycle will then start all over again and it is up to you how to play it this time.

This chart is just for information
Never stop learning
I would also love to know your charts and views in the comment section.

Thank you

2023年11月15日

註釋

Good day, traders.

I'd like to use this opportunity to advise both new and experienced traders alike that holding (hodling) your position is not recommended beyond a certain point. According to percentage calculations, the return required to recover to break-even increases at a considerably faster pace when losses grow in size (due to compound interest). It goes downward after a loss of 10% because a gain of 11% is required to make up for it.When the loss is 20%, it takes a 25% gain to make up the difference and return to break-even. To recoup from a 50% loss, a 100% gain is needed, and to reach the initial investment value after an 80% loss, a 400% gain is needed.

Investors who experience a bear market must understand that it will take some time to recover, but compounding returns will aid in the process. Think about a bear market where the value drops by 30% and the stock portfolio is only worth 70% of what it was. The portfolio increases by 10% to reach 77%. The subsequent 10% increases to 84.7%. The portfolio reached its pre-drop value of 102.5 percent after two further years of 10 percent gains. Consequently, a 30 percent decline requires a 42 percent recovery, but a four-year compounding rate of 10 percent returns the account to profitability.I will be doing a second part to this post on the idea of "DOLLAR COST AVERAGING" (DCA).

The math behind stock market losses clearly demonstrates the need for investors to take precautions against significant losses, as depicted in the graphic above. Stop-loss orders to sell stocks or cryptocurrencies that are mental or limit-based exist for a reason. If the market is headed towards a bear market, it will start to pay off once a particular loss threshold is reached. Investors occasionally struggle to sell stocks they enjoy at a loss, but if they can repurchase the stock or cryptocurrency at a lesser cost, they will like it.

Never stop learning
I would also love to know your charts and views in the comment section.
Thank you

2023年11月16日

註釋

Hello traders, today we will talk about WHY TRADERS LOSE MONEY

BIAS
WHAT IT MEANS…
HOW IT INFLUENCES TRADERS
Availability People estimate the likelihood of an event based on how easily it can be recalled. Traders put too much emphasis on their most recent trades and let recent results interfere with their trading decisions.

After a loss, traders often get scared or try to get back to break even. Both mental states lead to bad trading quickly.

After a win, many traders get over-confident and trade loosely.

You must be aware of how you react to recent results and trade with a high level of awareness.

Dilution effect Irrelevant data weakens other more relevant data. Using too many tools and trading concepts to analyze price could weaken the importance of the core decision drivers.


I wrote about redundant signals and how to combine the right tools here: click here

Gambler’s fallacy People believe that probabilities have to even each other out in the short term. Traders misinterpret randomness and believe that after three losing trades, a winning trade is more likely. The probabilities don’t change based on past results.


Even after 10 losses in a row, the next trade does not have a higher chance of being a winner.

Anchoring Overestimating the importance of the first available piece of information. Upon entering a trade, people set their whole chart and analysis in reference to their entry price and don’t see the whole picture objectively anymore.


You must always have a plan BEFORE you enter a trade.

Insensitivity to sample size Underestimating the variance for large and small sample sizes. Traders too often make assumptions about the accuracy of their system based on just a few trades, or even change parameters after only a few losers.


A decent sample size is 30 – 50 trades. Do not alter anything about your approach before you have reached this number. And make sure that you follow the same rules to get an accurate picture of your trading within the sample size.

Contagion heuristic Avoiding contact with objects people see as “contaminated” by previous contact. Traders avoid markets/instruments after having a large loss in that instrument, even when the loss was the fault of the trader.
Hindsight We see things that have already occurred as more probable than they were before they took place. Looking back on your trades and fishing for explanations why the trade has failed, even though those signals weren’t obvious at the time.


Do not change your indicator or setting after a loss to come up with explanations or excuses. Accept that losses are normal and always follow your plan.

Hot-hand fallacy After a successful outcome on a random event, another success is more likely. Traders believe that once they are in a winning streak, things become easier and they can “feel” what the market is going to do next.


I wrote about the hot-dand-fallacy in trading before: click here

Peak–end rule People judge an event based on how they felt at the peak of the event. Traders look at a losing trade and only see how much they were in profit at the maximum, but don’t look at what went wrong afterwards.


Do not change your reference point when in a trade and have a plan for your trade management and when to exit before entering a trade.

Simulation heuristic People feel more regret if they miss an event only by a little. Price that missed your target only by a little bit, or a trade where you got stopped out just by a few points can be more painful than other trades.


The outcome is out of your control and you cannot influence the price movements. The only thing you can do is manage your trade within your rules.

Social proof If unsure what to do, people look for what other people did. Traders too often ask for advice from other traders when they are not sure what to do – even when other traders have a completely different trading strategy.


You must take responsibility for your actions and results. And not rely on someone else.

Framing People make decisions based on how it is presented; a gain is more valuable than a loss and a sure gain is more valuable than a probabilistic greater gain. Traders close profitable trades too early because they value current profits more than a potentially larger profit in the future.


Cutting winners too soon is a huge problem. If this is an issue for you, reducing screen time can be helpful. Do not watch your trades tick by tick.

Sunk cost We will invest in something just because we have already invested in it. before Adding to losing trades because you are already invested, even though no objective reason to add exists.


You must define your stop loss in advance and then execute it without hesitation when it has been reached.

Confirmation Only looking for information that confirms your beliefs, ideas and actions. Blanking out reasons and signals that don’t support your trade and just looking for confirmation.


Especially when traders are in a loss, they only look for supportive information. Stay objective!

Overconfidence People have a higher confidence than what their level of skill actually suggests. Traders misjudge their level of expertise and skill. Consistently losing traders don’t see that it’s their fault.


Analyze your results objectively and get a trading journal to add even more accountability.

Selective perception Forgetting those things that caused discomfort. Traders forget easily that their own mistakes and wrong trading decisions caused the majority of their losses.


Do not blame the marjets, unfair circumnstances, your broker or any other outside event. You are the one who is responsible for making it work. It’s totally up to you and blaming others won’t help you make progress.




Which bias is the one that is causing you the greatest troubles? What are you workin on right now? Let me know in the comments below and I will answer with tips and ideas on how to overcome your struggles.

This chart is just for information
Never stop learning
I would also love to know your charts and views in the comment section.

Thank you

2023年11月17日

註釋

Hello traders, today we will talk about 5 TYPES OF ELLIOTT WAVE PATTERNS



( FIRST SOME BASIC INFO )

What is Elliott Wave Theory?
The Elliott Wave Theory suggests that stock prices move continuously up and down in the same pattern known as waves that are formed by the traders’ psychology.

The theory holds as these are recurring patterns, the movements of the stock prices can be easily predicted.

Investors can get an insight into ongoing trend dynamics when observing these waves and also helps in deeply analyzing the price movements.
But traders should take note that the interpretation of the Elliot wave is subjective as investors interpret it in different ways.

(KEY TAKEAWAYS)
The Elliott Wave theory is a form of technical analysis that looks for recurrent long-term price patterns related to persistent changes in investor sentiment and psychology.
The theory identifies impulse waves that set up a pattern and corrective waves that oppose the larger trend.
Each set of waves is nested within a larger set of waves that adhere to the same impulse or corrective pattern, which is described as a fractal approach to investing.
Before discussing the patterns, let us discuss Motives and Corrective Waves:

What are Motives and Corrective Waves?
The Elliott Wave can be categorized into Motives and Corrective Waves:
1. Motive Waves:
Motive waves move in the direction of the main trend and consist of 5 waves that are labelled as Wave 1, Wave 2, Wave 3, Wave 4 and Wave 5.

Wave 1, 2 and 3 move in the direction of the main direction whereas Wave 2 and 4 move in the opposite direction.

There are usually two types of Motive Waves- Impulse and Diagonal Waves.

2. Corrective Waves:
Waves that counter the main trend are known as the corrective waves.

Corrective waves are more complex and time-consuming than motive waves. Correction patterns are made up of three waves and are labelled as A, B and C.

The three main types of corrective waves are Zig-Zag, Diagonal and Triangle Waves.

Now let us come to Elliott Wave Patterns:



In the chart I have mentioned 5 main types of Elliott Wave Patterns:
1. Impulse:
2. Diagonal:
3. Zig-Zag:
4. Flat:
5. Triangle:





1. Impulse:
Impulse is the most common motive wave and also easiest to spot in a market.

Like all motive waves, the impulse wave has five sub-waves: three motive waves and two corrective waves which are labelled as a 5-3-5-3-5 structure.

However, the formation of the wave is based on a set of rules.

If any of these rules are violated, then the impulse wave is not formed and we have to re-label the suspected impulse wave.

The three rules for impulse wave formation are:

Wave 2 cannot retrace more than 100% of Wave 1.
Wave 3 can never be the shortest of waves 1, 3, and 5.
Wave 4 can never overlap Wave 1.
The main goal of a motive wave is to move the market and impulse waves are the best at accomplishing this.




2. Diagonal:
Another type of motive wave is the diagonal wave which, like all motive waves, consists of five sub-waves and moves in the direction of the trend.

The diagonal looks like a wedge that may be either expanding or contracting. Also, the sub-waves of the diagonal may not have a count of five, depending on what type of diagonal is being observed.

Like other motive waves, each sub-wave of the diagonal wave does not fully retrace the previous sub-wave. Also, sub-wave 3 of the diagonal is not the shortest wave.

Diagonals can be further divided into the ending and leading diagonals.

The ending diagonal usually occurs in Wave 5 of an impulse wave or the last wave of corrective waves whereas the leading diagonal is found in either the Wave 1 of an impulse wave or the Wave A position of a zigzag correction.




3. Zig-Zag:
The Zig-Zag is a corrective wave that is made up of 3 waves labelled as A, B and C that move strongly up or down.

The A and C waves are motive waves whereas the B wave is corrective (often with 3 sub-waves).

Zigzag patterns are sharp declines in a bull rally or advances in a bear rally that substantially correct the price level of the previous Impulse patterns.

Zigzags may also be formed in a combination which is known as the double or triple zigzag, where two or three zigzags are connected by another corrective wave between them.‘




4. Flat:
The flat is another three-wave correction in which the sub-waves are formed in a 3-3-5 structure which is labelled as an A-B-C structure.

In the flat structure, both Waves A and B are corrective and Wave C is motive having 5 sub-waves.

This pattern is known as the flat as it moves sideways. Generally, within an impulse wave, the fourth wave has a flat whereas the second wave rarely does.

On the technical charts, most flats usually don’t look clear as there are variations on this structure.

A flat may have wave B terminate beyond the beginning of the A wave and the C wave may terminate beyond the start of the B wave. This type of flat is known as the expanded flat.

The expanded flat is more common in markets as compared to the normal flats as discussed above.




5. Triangle:
The triangle is a pattern consisting of five sub-waves in the form of a 3-3-3-3-3 structure, that is labelled as A-B-C-D-E.

This corrective pattern shows a balance of forces and it travels sideways.

The triangle can either be expanding, in which each of the following sub-waves gets bigger or contracting, that is in the form of a wedge.

The triangles can also be categorized as symmetrical, descending or ascending, based on whether they are pointing sideways, up with a flat top or down with a flat bottom.

The sub-waves can be formed in complex combinations. It may theoretically look easy for spotting a triangle, it may take a little practice for identifying them in the market.

Bottomline:
As we have discussed above Elliott wave theory is open to interpretations in different ways by different traders, so are their patterns. Thus, traders should ensure that when they identify the patterns.


This chart is just for information
Never stop learning
I would also love to know your charts and views in the comment section.

Thank you

2023年11月19日

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