Kairi Relative Index - Oscillator

 Kairi calculates the deviation of the current price from its SMA as a percent of the moving average.

 If the percent is high and positive  Sell (Overbought )

If the percent is large and negative Buy ( Oversold )

The trading strategy is similar to RSI, but the upper and lower limits will be determined based on previous results and not like RSI at a certain level ( 30 or 70)

Traders Dynamic Index (TDI) indicator

 Traders Dynamic Index (TDI) indicator is a complex indicator that consists of the following indicators:

1. RSI (Relative Strength Index)
2. Moving Average  To smooth RSI
3. Bollinger Bands (BB)  Or in this case we should only refer to them as volatility bands

RSI helps us with:

1.       Trend recognition: trading in the direction of the trend

2         Overbought and oversold entry signals

MA helps us with:

1.       Smoothing RSI

Volatility bands help us with:

1.       Trend straight recognition

2      Trend direction

Pivot Points Strategy

 Pivot points can be used as entry points for new trades or as a close signal for the existing ones.

There are different types of pivot points with a different mathematical formula or simply using previous highs and lows.

How to trade Pivot points

The following scenarios work with the Traditional Pivot Points

For the Camarilla version normally R and S are closer to the price and we use a different setup.

Trading setup #1 (Not so strong trend): Open price is between R1 and S1

• Long when the price moves back above S1 after going below S1. Target will be P, R1, R2, .. levels.
• Place Stop loss at the S2 level
• 
  
• Wait for the price to go above R1 and then when it moves back below R1 again, go short.
• Profit target will be P, S1, S2 S3 levels and stop-loss above R2

Trading setup #2 (Normally very trendy bullish markets): Open price is between R1 and R2

• Buy or go long when the price moves back above R1 again after going below R1. Target will be R2,
• Place stop loss at R1
• 
  
• Wait for the price to go above S1 and then when it moves back below S1 again, sell or go short.
• Target will be  S2 levels, and the stop loss will be above P. 

Trading setup #3 ( Very trendy bearish market ): Open price is between S1 and S2

• Wait for the price to go above S1 and then when it moves back above S1 again, then go long.
• Target will be P, R1, R2 levels, and stop-loss below S2.
• Wait for the price to go below S4 and then when it moves below S2, go short.
• Place stop loss above S1. 

Trading setup #4 (High probability for a trend reversal or correction): Open price is above R2

• Buying can be risky at this level. Wait for the price to go below R2.
• As soon as the price moves below R1. go short.
• Place stop loss above R3. Target S1 , S2 or P

Scenario #5 (High probability for a trend reversal or correction): Open price is below S2

• Selling could be risky at this level as the price has opened with a big gap down.
• Wait for the price to go above S1.
• When the price moves above S1, buy
• Place a stop loss of S2. Target R1, R2, and P.

MILAN OSCILLATOR INDICATOR

The most important signals are related to the divergence.

A recap for divergence from previous lessons: 

Divergence and Hidden Divergence

Positive Divergence is bullish and occurs in a downtrend when the price action prints lower lows that are not confirmed by the oscillating indicator.

Negative Divergence is bearish and occurs in an uptrend when the price action makes higher highs that are not confirmed by the oscillating indicator.

Bullish Hidden Divergence occurs during a correction in an uptrend when the oscillator makes a higher high while the price action does not as it is in a correction or consolidation phase.

Bearish Hidden Divergence occurs during a reaction in a downtrend when the oscillator makes a lower low while the price action does not as it is in a reaction or consolidation phase.

Other Signals can be crossing 0 lines or confirmation of change of bars colour.

Acceleration Bands

 Acceleration Bands

• Serve as a trading envelope that factors

• The standard setting is 20 candles.

• They can be used across any time period as breakout indicators outside these bands.

• Acceleration Bands are plotted around a simple moving average as the midpoint, and the upper and lower bands are of equal distance from this midpoint.

• Can be used in both growth and value trading strategies to show the potential breakouts.

McGinley Dynamic Indicator

McGinley Dynamic Indicator:

• It was invented by John R. McGinley.
• It would automatically adjust itself in relation to the speed of the market.

This future can be very helpful as it is sometimes difficult to choose the right period for the MA. 

• It also helps to account for the gap that often exists between prices and moving average lines.
• Can't be used as a single indicator and we need to combine this with other indicators or another McGinley indicator.

Price actions respect moving averages because so many traders use them in their strategies.

Because of the formula, the Dynamic Line speeds up in down markets and moves more slowly in uptrends. One wants to be quick to sell in a down market, yet ride an up-market as long as possible. 

News trading strategy

 A news trading strategy takes into account:

• News and market expectations before news releases.
• News and market expectations after news releases.

News trading tips:

• News can travel very quickly on digital media, so you need to be quick.
• You should make a quick judgment to figure out if the news already fully factored into the price? 
•  If the price is not matching the expectations how far it is from the expected number?
• Use any news as an individual entry and if there is more than one news use your judgment for the combined outcome.
• Have a strategy for any specific news release.
• Market moves are based on demand and supply and demand is heavily affected by the news.
• Every day there is a lot of news so we have lots of opportunities to trade.
• The market normally gets volatile if the news is not as per expectations.
• Use stop-loss using the previous resistance and support lines.

Short Squeeze Strategy

#sell

#short

#squeeze

#buy

#long

#stocks

Triangles Patterns

We have 3 different main types of triangle patterns. Symmetrical Ascending Descending

Head and Shoulder Pattern

 Please watch the video to understand how this pattern shapes.

• A Head and shoulders pattern is described by three peaks, the outside two called left and right shoulders which are close in height and the middle is the highest named Head.
• A Head and shoulders pattern describes a specific chart formation that predicts a trend reversal or a price consolidation in a very trendy market.
• The head and shoulders pattern is believed to be one of the most reliable patterns.

Top-down or a Bottom-up basis to choose the best stocks for your portfolio

 Top-Down Active Management

Asset allocation

At this stage of the top-down process, asset managers try to determine which areas and asset classes are most likely to produce the most attractive risk-reward returns.

As an example, they may decide that the US stock market is going to outperform, so they allocate say 50% of the portfolio to the US stocks. ( We will talk about choosing the right stocks on next steps )

Also, they may decide that the Crypto market will enter another bull market and they also allocate say 5% to Crypto. The same for commodities $OIL  FOREX, etc.

Sector selection 

Depending on what stage of the economic cycle we are we should choose different stocks.

For example at the start of a bull run, banks could be a good sector while at growth phase leisure or airlines are the best and at the end of the bull market, we may look at pharmaceutical shares, etc.

Stock selection

After choosing the sectors you should use your fundamental or technical analysis skills to find the best stocks for your portfolio.

Fundamental analysis: For example by looking at companies' balance sheets, earnings reports, etc. to find undervalued stocks.

Technical analysis: By looking at charts and trends to find the best entry points.

Bottom-Up Active Management

The main focus here will be solely on the individual stock's unique attractions. The stock selection is based on specific criteria that asset manager applies to their strategy. For example, different fundamental ratios to find out the companies based on their value, growth at a reasonable price, momentum, and contrarianism.

For example:

• By looking at company reports they may find that $NAS is undervalued and could be a good investment.
• By looking at steady growth they may decide $AAPL should be included in the portfolio.
• By looking at a large increase in $STMP price, it will be selected based on the momentum.
• Or they may choose $HMMJ as they believe going against the trend will bring high returns.

I am a fan of the top-down method as it suits my strategy better and I feel more organised by implementing it.

By Nina

Technical and Fundamental Analysis

 TA Vs FA

Both Technical and Fundamental analysis seeks to evaluate an asset.

In my opinion, these 2 major analysis methods are similar more than you think!

Fundamental analysis

The FA involves the financial analysis of an asset by focusing on the underlying factors that affect that asset.

The assumption behind fundamental analysis is that the market does not always value assets (shares commodities, crypto, etc) correctly in the short term. Fundamental analysers try to identify the intrinsic value of assets to buy at a discount or sell at a high.

They believe their investment will pay off over time once the market realises the fundamental value of an asset.

Technical analysis:

The technical analysis seeks to evaluate a company by:

• Using historical price, and
• Using Volume data

 to assess where the price of a security or market will move in the future.

This means technical analysers are looking at past patterns and trends to see if they are repeatable in the future.

one of the most important items in TA is the trend which shows a continuation of the current situation.

Why do I think these 2 are very alike?

As mentioned, Fundamental analysis tries to identify the true value of an asset. For example for a company share price, FA will look at the company's balance sheet, cash flow statement, earnings reports, etc. 

The technical analysis considers that there is no need to do this hard work as a company’s fundamentals are already accounted for in the price, and the information is reflected in the company’s charts. So we need to look at charts and use indicators to find the best entry prices and the market will follow the trend.

Many times if a financial report surprises traders we will see a spike in the price and depending on the nature of that news and other reports price may change direction or continue the previous trend.

Best Candlestick Patterns

 

Long Wick (Shadow) Candle: Buyers or sellers tried to push the price further but failed

The inside bar: After a long wick could mean price change

Also engulfing is a reversal signal.

Momentum candle: 

Multiple rejections: Good resistance and sign of price rejection and reversal

Shrinking candles: Loss of momentum

3 consecutive candles in the same colour: indicate the start of a new trend.

Big red candle: bearish

Doji: Open and close are similar and we have shadows on both sides. Can be a signal for reversal if the next candle shapes in a different colour from the previous one.

Hammer: bullish 

Inverted hammer: bearish

Basic Terms

 

Currency Pair

It is the quotation of one currency unit against another currency unit.

Forex trading is very exciting. The market is on the move, and the smallest movement in the currency can mean a lot of profits and losses!

Let me explain this further.

8 of the most traded currencies in the Forex market are as follow:

As you see, we use short forms for currencies: euro is EUR, US dollar is USD, and Japanese yen is JPY.

United States Dollar	USD
Euro	EUR
Pound Sterling	GBP
Japanis Yen	JPY
Canadian Dollar	CAD
Swiss Franc	CHF
New Zealand Dollar	NZD
Australian Dollar	AUD

For example, the euro and the US dollar together make up the currency pair EUR/USD. The first currency (in our case, the euro) is the base currency, and the second (the US dollar) is the quote currency.
Forex is trading in pairs, which means, each transaction involves selling a unit and buying another unit. The following pairs are the 18 most popular pairs in the Forex market.

EUR/JPY	USD/CAD
EUR/CHF	EUR/USD
EUR/GBP	USD/CHF
AUD/CAD	GBP/USD
GBP/CHF	NZD/USD
GBP/JPY	AUD/USD
CHF/JPY	USD/JPY
AUD/JPY	EUR/CAD
AUD/NZD	EUR/AUD

Exchange Rate and Quote
When a pair of currency units are bought and sold, it has a bid-ask rate (for example):
Pair EUR / USD
Ask 1.5422
Bid  1.5420
This means that:

Buy pairs to bid rates or sell pairs to the asking rate ( Offer )

Buy Euro at $1.5422 Or Sell Euro at $ 1.5420

So what's your potential to gain profit?

The rate of pairs is constantly changing. One way to make money is to buy a pair at a rate and then close it at a higher rate. Another way is to sell a pair and then close the position at a lower rate.

Yes, in the FOREX market we can always make money by recognizing the trend. If we are in a bullish market we buy and if the trend is bearish we sell. Do not forget that trend is your friend! 

Spread

The bid is always lower than the ask. And the difference between the bid and ask is the spread.

• Fixed spread
• Variable spread

You may see different prices from different brokers. FOREX is a decentralized market. There is no central source. What you see as one price, is in fact the best price of hundreds of slightly different prices for different amounts of currency different market participants offer to buy from you or sell to you. 

Account Currency

It is the currency you choose when you open a trading account with your broker.

Pip

A pip is the smallest price change of a given exchange rate.

For example: if the currency pair EUR/USD moves from 1.2150 to 1.2151, that’s a 1 pip movement.

Most currency pairs have 4 decimal points.

The JPY has 2 decimal points.

Fractional Pip

Some brokers add one decimal point to the price. We call the last decimal place a pip fraction or tenth pip.

Lot

Lot is the unit of FOREX trading. Like kg when you buy potato! 

• One standard lot has 100,000 units of the base currency.
•  a micro lot has 1,000 units.

Pip Value

The pip value shows how much 1 pip is worth. 

An example:

Account currency: USD

Trade size 1 Standard lot

In the EUR/USD pair, 1 pip movement is .0001 USD.

0.0001x100,000=10USD with no leverage

Margin

Margin is the minimum amount of funds that you will need if you want to open a position and keep your positions open.

Leverage

Is the money your broker lends you so that you can trade bigger lots:

Equity

It is the total amount of money in your trading account, including your profit and losses. 

Margin Call

Margin calls are a major part of risk management: as soon as your Equity drops to a percentage of the margin used, your forex broker will notify you that you need to deposit more money if you want to maintain your position. Different brokers have different margin level requirements. 

Position

It is a trade that you have open.

Long Position

When you buy a base currency. for example, if you go long on EURUSD then you are buying EUR.

Short Position

When you sell a base currency. 

Order Types

Market Order / Entry Order

To buy or sell currency instantly at the current price.

Limit Order

It is an order placed away from the current market price. This will be executed if the price reaches your target or market opens etc

Take Profit Order (TP)

Will close your position if the price hits your target. 

Stop-Loss Order (SL)

Your position will be closed if the price goes against your analysis at a rate calculated by you.

Execution

It is the process of completing an order.

Known patterns in technical analysis.

 

1. Bat Pattern
2. Elliott Waves (EW) and how to combine them with the Fibonacci numbers.
3. Butterfly pattern Trading
4. Gartley Pattern Trading Strategy

Superstitions

 I have been talking to one of my friends today. He said he is going to close all of his shares before Friday the 13^th.

I have asked the reason.

I was expecting to hear things like the following items:

• ·         The factory data in the US is not as good as predicted. ( $GM stock? )
• ·         The China-US relationships. ( #BABA stock? )
• ·         Slower economy recovery. (#OIL price )
• ·         Cryptocurrencies regulations. ( #DOGE )

But he continued, I will reopen the next Monday.

I asked the reason and he said he saw a dream. Also, it is Friday the 13th!

How superstitious are you in trading?

This question is important because if too many people believe in the same thing, then this may cause an impulse wave or corrective wave. This is the main logic behind the Eliot wave and other harmonic trading analyses.

How superstitions can affect the stock markets?

1.      Friday the 13th

In the old days, the effect of superstitions was too high as on Friday 13^th we may have seen fewer trades and fewer returns/losses. But nowadays trading is automated, So, I say don’t worry about it.

2.      Witching hours!

Really! Between 2 and 3 PM is witching hours?

But we are trading globally how this even works? A witching hour here is not a witching hour in the US. So again, Not a chance we listen to this.

3.      Sell on the first day of Jewish New Year and buy on Yom Kippur

I am not sure about this one either. My Jewish friend says it works most of the time to sell on Rosh Hashanah!

My question is, what about Christmas? Oh, wait are the markets open on Christmas? At last, we can sell our Cryptocurrencies. #BTC

The list goes on depending on different cultures.

Some believe their lucky number or days is 7. Chinese say it is 8. Many people call 13 bad luck for trading.

The effect of Superstition in online trading is getting less and less due to the global village phenomenon. But for the individuals who are believing in it. These days will be days with a fewer turnaround.

So, what should we do?

Educate yourself, learn different types of trading styles e.g Technical, Fundamental.

By "Nina" eToro username: Trendchaser

Price Channel Trading Strategy

Characteristics:

• Channels are banded current trend-following indicators. 
• Similar to other indicators they lagging.
• They have an upper and a lower line.
• Upper and lower bands are at equal distance from a middle line. 
• The area between upper and lower lines is the channel. 

Signals:

• The upper or lower line breakouts.
• The upper and lower lines bounce backs.

Channels can be seen in trendy or sideways markets.

Different types of channels will be discussed in other videos like:

Donchain Channels

Keltner Channels

Fibonacci channels

.

.

.

Gartley Pattern Trading Strategy

• Gartley patterns are harmonic chart patterns based on Fibonacci numbers.
• The first stop-loss point is often positioned at Point  X and the take-profit is often set at point Fibonacci retracement numbers.
• I normally open 3 small positions or a big position and close partially at 0.618, 0.5 and 0.382 Fibonacci numbers.

Butterfly pattern Trading

 

Butterfly pattern

The Butterfly pattern:

1. Is a reversal pattern
2. It has four legs. (X-A, A-B, B-C, and C-D)
3. It shows a trend reversal point.
4. There are bullish and bearish versions.

How to identify the Butterfly pattern

See the price chart below for an example of what a bullish Butterfly pattern looks like:

• Very similar to the Gartley or Bat patterns
• Four distinct legs are labeled X-A, A-B, B-C, and C-D. 

X-A

The first leg forms when the price goes up sharply from point X to point A.

A-B

Change direction and retrace 78.6% of the distance covered by the X-A leg.

Please add Fibonacci to the chart to check!

B-C

Price changes direction again and moves back up, retracing 38.2% to 88.6% of the distance covered by the A-B leg.

C-D

• You would be looking to enter at point D of the pattern.
• Your trade entry order at the point where the C-D leg has achieved a 127% Fibonacci extension of the X-A leg. 

Place your stop loss

Place your stop loss just below the 161.8% Fibonacci extension of the X-A leg, as below:

Place your profit target

I suggest opening a few positions at the same time with small amounts ( Or an equivalent big order if your broker allows partial close)

Take profits as bellow:

1st: Point B

2nd, 3rd, 4th, and 5th TPs at Fibonacci retracements of XA leg ( 61.8%, 50%, 23.6%)

Points C and A also can be selected.

Summary

• The butterfly is a reversal pattern 
• It is similar to Bat pattern
• You should enter at point D
• Set the SL and TP based on Fibonacci numbers.

Elliot Wave Pattern and Strategy

 Here we want to give you a simple explanation of the Elliot Wave pattern.

The most important thing is to get yourself familiar with the shape and steps of formation of this pattern.

• Ralph Nelson Elliot back in the 1930s developed this theory.
• Based on his theory, price movements are very predictable because a large group of people behave in a predictable way.
• You probably heard of herd mentality. I will explain this a bit more; every crowd psychology moves between faces of optimism and pessimism. (That is how a revolution in the bigger picture happens in a country!) Moments of joy and sadness come one after another. This is part of human nature that we want to explain in the financial market.

So, when we are using Elliot wave theory we want to figure out if a stock follows a predictable pattern.

How Elliot Wave looks like:

1. During the first wave of the move, not many people notice the new trend. If you believe that this could be the start of another pattern then you can jump in on time.
2. The pull-back is very important as this will confirm the new trend by point 2 being above point 1.
3. Look for the signs for the end of pull-back and catch the train for the next wave which is the most important one. (Wave 3)
4. Wave 3 is the biggest wave and you can make the most out of following this pattern.
5. The fact that the crowd now noticed the pattern is something that makes this wave the biggest.
6. Second pull-back and again trend will resume. This is the time that every man and his dog is talking about this stock and the fact that we should by it which if they wait for half way it will be too late and the majority of people will lose their money if they do not know this pattern.

Some other points:

• Every leg up ( wave up) has its own smaller waves.
• Using Fibonacci numbers will help you to trace the waves more accurately.
• Waves 3 and 5 called impulsive waves. Fibonacci Ratio is useful to measure the target of a wave’s move within an Elliott Wave pattern. For example, in impulse wave:
• • Wave 2 is typically 50%, 61.8%, 76.4%, or 85.4% of wave 1
  • Wave 3 is typically 161.8% of wave 1
  • Wave 4 is typically 14.6%, 23.6%, or 38.2% of wave 3
  • Wave 5 is typically inverse 1.236 – 1.618% of wave 4, equal to wave 1 or 61.8% of wave 1+3

Williams %R or Williams Percent Range

 Williams %R or Williams Percent Range

1. This type of momentum indicator moves between 0 and -100
2. Measures overbought and oversold levels. 
3. The period typically sets to 14. I prefer 28 as it will reduce the noise.
4. The best results are in a range market in which you can use both buy and sell signals

• An overbought or oversold reading doesn't mean the trend will change. Overbought means the price is close to the highs of its recent range, and oversold means the price is near to the lower end of its recent range.

The Williams %R may be used to find entry and exit points in the market. 

Signals:

In a range market:

Buy if the indicator moves out of the oversold area.

Sell if the indicator moves below the -20 (overbought) line.

In a downtrend market:

Do not buy

Sell if the indicator moves below the -20 (overbought) line.

In an uptrend market:

Buy if the indicator moves out of the oversold area. (Above -80)

do not sell.

How does the stock price determines

It's all about supply and demand.

 For those of you who are actually curious about the exact mechanics, the open price is calculated by the stock exchange like the NYSE (the New York Stock Exchange) for example, or NASDAQ. (National Association of Securities Dealers Automated Quotations)

• NYSE is an auction market that uses specialists or designated market makers
• Nasdaq is a dealer market with many market makers in competition with one another. 

Dealer vs. Auction Market

• Dealer market: Market participants do not buy and sell to one another directly. Transactions go through a dealer which, in the case of the Nasdaq, is a market maker. More than 260 market-making firms provide liquidity for Nasdaq-listed stocks. This competition helps ensure buyers and sellers are getting the best prices.
• Auction Market: Before the market's official opening time, market participants can enter buy and sell orders starting normally at 3 hours prior to the official opening. These orders are matched, with the highest bidding price paired with the lowest asking price. At the NYSE, the job of maintaining markets falls to designated market makers (DMMs), formerly known as specialists. The DMM is the human point of contact for the listed company on the NYSE trading floor. DMMs provide stability by taking the other side of the trade when imbalances occur, buying when investors are selling, and vice-versa. They run the opening and closing auctions, using human input and algorithms to help promote price discovery when the volume is typically at its highest. According to the NYSE, DMMs provide a big amount of liquidity. (approximately 20%)



Automated pricing based on supply and demand. bid and ask:

• When you place an order to buy a share at a certain price that is called your “bid” and when you place an order to sell your shares at a certain price that’s called your “ask”.

• Every morning stock exchanges set the opening price by taking pre-opening orders and offers.
• The stock price is the highest amount someone is willing to pay for the stock, or the lowest amount that it can be bought for.
• The calculation of prices is completely automated, software-driven, and anonymous at the specific exchange, and the price is calculated by electronically matching bids and offers for a particular share recorded in an electronic limit order book (ELOB).
• The ELOB contains all the bids – asks for a particular share and the system matches the best bids and asks to execute an order. The price at which a transaction is executed is called the last traded price (LTP) and that’s what you see on TV screens. It’s usually the price that results in most stocks being sold.

Some people say we should add the dump and pump etc to the above, but at the end of the day these are part of supply and demand in larger scale.