FxPro vs. Dukascopy Forex Broker Comparison

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5 Most Volatile Forex Pairs To Trade (And How To Find Them)

5 Most Volatile Forex Pairs To Trade (And How To Find Them) submitted by AlphaexCapital to AlphaexCapital [link] [comments]

Have any of you tried forex trading with a foreign broker? Are you allowed to trade in more than the NSE-permitted 4-5 pairs by using a foreign broker like Exness or Octa FX?

Since FX trading has very less scope here with the exchange permitting only 4-5 currency pairs, I was wondering if using a foreign broker like Exness or Octa FX will let me trade other pairs. Apart from this, the flexible 24-hour market would be extremely beneficial to students or people with full-time jobs.
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forex market forecast pair usd/chf by sigma forex trader

forex market forecast pair usd/chf by sigma forex trader submitted by familymod to forexmarketviews [link] [comments]

Xmaster Formula mt4 Indicator : Review | Xmaster Formula mt4 Indicator is a universal Forex indicator that is suitable for any time-frame, any currency pair. Xmaster Formula mt4 Indicator shows in the highly volatile pairs during the London session.

Xmaster Formula mt4 Indicator : Review | Xmaster Formula mt4 Indicator is a universal Forex indicator that is suitable for any time-frame, any currency pair. Xmaster Formula mt4 Indicator shows in the highly volatile pairs during the London session. submitted by mt4indicators to u/mt4indicators [link] [comments]

What pair in Forex sees the most volatility?

What pair in Forex sees the most volatility?
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Creating a trading plan a step by step guide

Creating a Forex Trading Plan: Step by Step Guide
Whether you’re an experienced forex trader or just getting started, having a solid trading plan can help you stay organized and develop successful strategies. A good trading plan includes your risk management strategy, objectives, psychological state of mind, and how you will measure success. Here’s a step-by-step guide to creating a forex trading plan.
Step 1: Set SMART Goals Your goals should be Specific, Measurable, Achievable, Relevant and Timely (SMART). It’s important to define what success looks like for you. Your goals should be realistic and not overly ambitious. Consider factors such as the amount of time you have available to trade each day or week and the amount of capital you have available to invest.
>> Suggestion: Most trader will take two to three years to get a good grip on the basics of trading, so be prepared to grind toward progressively getting better.
Step 2: Define Your Risk Management Strategy Risk management is essential for any successful trader. You need to determine what percentage of your account balance you are willing to risk on each trade as well as how much leverage you will use when opening trades. Also consider setting stop-loss levels that limit your losses if the market moves against you.
>>Suggestion: It is standard practice to risk 1 or 2 percent of you account on any one trade. And I like to keep the total risked capital on any basket(total of all open trades) of trades at 10% or below
Step 3: Identify Your Preferred Currency Pairs When trading forex, it’s important to focus on currency pairs that match up with your goals and risk tolerance level. Learn about the different currency pairs so that you can identify which ones may be more profitable for you in the long run. Consider volatility levels and liquidity when choosing which currency pairs to focus on - these factors can have a big impact on your profitability over time.
>>Suggestion: Start out trading the forex majors ex: EURUSD, USDJPY, GBPUSD
Step 4: Research Different Strategies Just like any other business venture, success in trading forex comes down to having an effective strategy in place. Before entering any trades, it’s important for traders to do their own research on different strategies they may want to use in order to increase their chances of success. There are many different strategies available out there depending on what kind of trader you are (for example, swing traders or day traders); doing some research into these strategies beforehand can help make sure that your trading plan is tailored specifically for your particular needs. Additionally, it’s always wise for traders to backtest any strategy they intend on using before putting real money at risk - this will give them an idea of how successful their strategy might be under certain market conditions.
>>Suggestion: Start with pulbacks and breakout strategies.
Step 5: Choose Entry Points & Exits Once you know which currency pairs are best for your trading style, it’s time to identify entry points and exits from each trade. Use fundamental analysis (economic data) or technical analysis (price patterns) to determine when is the best time to enter or exit a position in order to maximize profits or minimize losses depending on market conditions at that time.
>>Suggestion: Trigger fundamentally, enter and exit technically
Step 6: Choose Your Trading Style When it comes to creating a forex trading plan, there are several different styles which can be used depending on your risk appetite and experience level as a trader. For example, swing traders may prefer shorter term positions with smaller gains or losses over longer term positions with larger gains or losses, while day traders may prefer taking multiple trades throughout the day rather than holding positions overnight or longer term. Determine which style best fits your personality before designing your strategy around it.
>>Suggestion: Trader types are Scalping, Day Trader, Swing Trader, Position Trader. That is from hardest to easiest difficulty I think most trader should start at swing trader. Start on the higher timeframe then work your way down as you gain experience.
Step 7: Journaling forex trades can offer tremendous insight into how you operate as a forex trader. By simply recording both successful and unsuccessful trades, forex traders can gain valuable information about the psychology of trading, their risk management strategies (like stoploss and takeprofit levels), which currency pairs were successful for them, and how well their strategy played out with different types of market conditions. With trading journals becoming increasingly accessible with digital platforms, forex traders of all levels now have the opportunity to track their progress over time while also learning from their successes or failures.
>>Suggestion: you'll hate journaling at the start (its boring), but it is necessary to do if you are going to learn from mistakes.
In conclusion, Creating a forex trading plan is an important step towards becoming a successful trader. By following these steps and understanding your own personal goals and risk tolerance level, you will be better equipped to develop strategies that work for your individual needs and ultimately increase profits over time while minimizing losses in volatile markets. Remember - no two traders are alike; make sure that your trading plan reflects this fact!
Knowledge is Power!
submitted by ForexMilitia to Forexstrategy [link] [comments]

Hyperinflation is Coming- The Dollar Endgame: PART 5.1- "Enter the Dragon" (SECOND HALF OF FINALE)

Hyperinflation is Coming- The Dollar Endgame: PART 5.1-

(Hey everyone, this is the SECOND half of the Finale, you can find the first half here)

The Dollar Endgame

True monetary collapses are hard to grasp for many in the West who have not experienced extreme inflation. The ever increasing money printing seems strange, alien even. Why must money supply grow exponentially? Why did the Reichsbank continue printing even as hyperinflation took hold in Germany?
What is not understood well are the hidden feedback loops that dwell under the surface of the economy.
The Dragon of Inflation, once awoken, is near impossible to tame.
It all begins with a country walking itself into a situation of severe fiscal mismanagement- this could be the Roman Empire of the early 300s, or the German Empire in 1916, or America in the 1980s- 2020s.
The State, fighting a war, promoting a welfare state, or combating an economic downturn, loads itself with debt burdens too heavy for it to bear.
This might even create temporary illusions of wealth and prosperity. The immediate results are not felt. But the trap is laid.
Over the next few years and even decades, the debt continues to grow. The government programs and spending set up during an emergency are almost impossible to shut down. Politicians are distracted with the issues of the day, and concerns about a borrowing binge take the backseat.
The debt loads begin to reach a critical mass, almost always just as a political upheaval unfolds. Murphy’s Law comes into effect.
Next comes a crisis.
This could be Visigoth tribesmen attacking the border posts in the North, making incursions into Roman lands. Or it could be the Assassination of Archduke Franz Ferdinand in Sarajevo, kicking off a chain of events causing the onset of World War 1.
Or it could be a global pandemic, shutting down 30% of GDP overnight.
Politicians respond as they always had- mass government mobilization, both in the real and financial sense, to address the issue. Promising that their solutions will remedy the problem, a push begins for massive government spending to “solve” economic woes.
They go to fundraise debt to finance the Treasury. But this time is different.
Very few, if any, investors bid. Now they are faced with a difficult question- how to make up for the deficit between the Treasury’s income and its massive projected expenditure. Who’s going to buy the bonds?
With few or no legitimate buyers for their debt, they turn to their only other option- the printing press. Whatever the manner, new money is created and enters the supply.
This time is different. Due to the flood of new liquidity entering the system, widespread inflation occurs. Confounded, the politicians blame everyone and everything BUT the printing as the cause.
Bonds begin to sell off, which causes interest rates to rise. With rates suppressed so low for so long, trillions of dollars of leverage has built up in the system.
No one wants to hold fixed income instruments yielding 1% when inflation is soaring above 8%. It's a guaranteed losing trade. As more and more investors run for the exits in the bond markets, liquidity dries up and volatility spikes.
The MOVE index, a measure of bond market volatility, begins climbing to levels not seen since the 2008 Financial Crisis.

MOVE Index
Sovereign bond market liquidity begins to evaporate. Weak links in the system, overleveraged several times on government debt, such as the UK’s pension funds, begin to implode.
The banks and Treasury itself will not survive true deflation- in the US, Yellen is already getting so antsy that she just asked major banks if Treasury should buy back their bonds to “ensure liquidity”!
As yields rise, government borrowing costs spike and their ability to roll their debt becomes extremely impaired. Overleveraged speculators in housing, equity and bond markets begin to liquidate positions and a full blown deleveraging event emerges.
True deflation in a macro environment as indebted as ours would mean rates soaring well above 15-20%, and a collapse in money market funds, equities, bonds, and worst of all, a certain Treasury default as federal tax receipts decline and deficits rise.
A run on the banks would ensue. Without the Fed printing, the major banks, (which have a 0% capital reserve requirement since 3/15/20), would quickly be drained. Insolvency is not the issue here- liquidity is; and without cash reserves a freezing of the interbank credit and repo markets would quickly ensue.
For those who don’t think this is possible, Tim Geitner, NY Fed President during the 2008 Crisis, stated that in the aftermath of Lehman Brothers’ bankruptcy, we were “We were a few days away from the ATMs not working” (start video at 46:07).
As inflation rips higher, the $24T Treasury market, and the $15.5T Corporate bond markets selloff hard. Soon they enter freefall as forced liquidations wipe leverage out of the system. Similar to 2008, credit markets begin to freeze up. Thousands of “zombie corporations”, firms held together only with razor thin margins and huge amounts of near zero yielding debt, begin to default. One study by a Deutsche analyst puts the figure at 25% of companies in the S&P 500.
The Central Banks respond to the crisis as they always have- coming to the rescue with the money printer, like the Bank of England did when they restarted QE, or how the Bank of Japan began “emergency bond buying operations”.
But this time is massive. They have to print more than ever before as the ENTIRE DEBT BASED FINANCIAL SYSTEM UNWINDS.
QE Infinity begins. Trillions of Treasuries, MBS, Corporate bonds, and Bond ETFs are bought up. The only manner in which to prevent the bubble from imploding is by overwhelming the system with freshly printed cash. Everything is no-limit bid.
The tsunami of new money floods into the system and a face ripping rally begins in every major asset class. This is the beginning of the melt-up phase.
The Federal Reserve, within a few months, goes from owning 30% of the Treasury market, to 70% or more. The Bank of Japan is already at 70% ownership of certain JGB issuances, and some bonds haven’t traded for a record number of days in an active market!
The Central Banks EAT the bond market. The “Lender of Last Resort” becomes “The Lender of Only Resort”.
Another step towards hyperinflation. The Dragon crawls out of his lair.

QE Process
Now the majority or even entirety of the new bond issuances from the Treasury are bought with printed money. Money supply must increase in tandem with federal deficits, fueling further inflation as more new money floods into the system.
The Fed’s liquidity hose is now directly plugged into the veins of the real economy. The heroin of free money now flows in ever increasing amounts towards Main Street.
The same face-ripping rise seen in equities in 2020 and 2021 is now mirrored in the markets for goods and services.
Prices for Food, gas, housing, computers, cars, healthcare, travel, and more explode higher. This sets off several feedback loops- the first of which is the wage-price spiral. As the prices of everything rise, real disposable income falls.
Massive strikes and turnover ensues. Workers refuse to labor for wages that are not keeping up with their expenses. After much consternation, firms are forced to raise wages or see large scale work stoppages.

Wage-Price Spiral
These higher wages now mean the firm has higher costs, and thus must charge higher prices for goods. This repeats ad infinitum.
The next feedback loop is monetary velocity- the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.
The faster the dollar turns over, the more items it can bid for- and thus the more prices rise. Money velocity increasing is a key feature of a currency beginning to inflate away. In nations experiencing hyperinflation like Venezuela, where money velocity was purported to be over 7,000 annually- or more than 20 times a DAY.
As prices rise steadily, people begin to increase their inflation expectations, which leads to them going out and preemptively buying before the goods become even more expensive. This leads to hoarding and shortages as select items get bought out quickly, and whatever is left is marked up even more. ANOTHER feedback loop.
Inflation now soars to 25%. Treasury deficits increase further as the government is forced to spend more to hire and retain workers, and government subsidies are demanded by every corner of the populace as a way to alleviate the price pressures.
The government budget increases. Any hope of worker’s pensions or banks buying the new debt is dashed as the interest rates remain well below the rate of inflation, and real wages continue to fall. They thus must borrow more as the entire system unwinds.
The Hyperinflationary Feedback loop kicks in, with exponentially increasing borrowing from the Treasury matched by new money supply as the Printer whirrs away.
The Dragon begins his fiery assault.

Hyperinflationary Feedback Loop
As the dollar devalues, other central banks continue printing furiously. This phenomenon of being trapped in a debt spiral is not unique to the United States- virtually every major economy is drowning under excessive credit loads, as the average G7 debt load is 135% of GDP.
As the central banks print at different speeds, massive dislocations begin to occur in currency markets. Nations who print faster and with greater debt monetization fall faster than others, but all fiats fall together in unison in real terms.
Global trade becomes extremely difficult. Trade invoices, which usually can take several weeks or even months to settle as the item is shipped across the world, go haywire as currencies move 20% or more against each other in short timeframes. Hedging becomes extremely difficult, as vol premiums rise and illiquidity is widespread.
Amidst the chaos, a group of nations comes together to decide to use a new monetary media- this could be the Special Drawing Right (SDR), a neutral global reserve currency created by the IMF.
It could be a new commodity based money, similar to the old US Dollar pegged to Gold.
Or it could be a peer-to-peer decentralized cryptocurrency with a hard supply limit and secure payment channels.
Whatever the case- it doesn't really matter. The dollar will begin to lose dominance as the World Reserve Currency as the new one arises.
As the old system begins to die, ironically the dollar soars higher on foreign exchange- as there is a $20T global short position on the USD, in the form of leveraged loans, sovereign debt, corporate bonds, and interbank repo agreements.
All this dollar debt creates dollar DEMAND, and if the US is not printing fast enough or importing enough to push dollars out to satisfy demand, banks and institutions will rush to the Forex market to dump their local currency in exchange for dollars.
This drives DXY up even higher, and then forces more firms to dump local currency to cover dollar debt as the debt becomes more expensive, in a vicious feedback loop. This is called the Dollar Milkshake Theory, posited by Brent Johnson of Santiago Capital.
The global Eurodollar Market IS leverage- and as all leverage works, it must be fed with new dollars or risk bankrupting those who owe the debt. The fundamental issue is that this time, it is not banks, hedge funds, or even insurance giants- this is entire countries like Argentina, Vietnam, and Indonesia.

The Dollar Milkshake
If the Fed does not print to satisfy the demand needed for this Eurodollar market, the Dollar Milkshake will suck almost all global liquidity and capital into the United States, which is a net importer and has largely lost it’s manufacturing base- meanwhile dozens of developing countries and manufacturing firms will go bankrupt and be liquidated, causing a collapse in global supply chains not seen since the Second World War.
This would force inflation to rip above 50% as supply of goods collapses.
Worse yet, what will the Fed do? ALL their choices now make the situation worse.

The Fed's Triple Dilemma
Many pundits will retort- “Even if we have to print the entire unfunded liability of the US, $160T, that’s 8 times current M2 Money Supply. So we’d see 700% inflation over two years and then it would be over!”
This is a grave misunderstanding of the problem; as the Fed expands money supply and finances Treasury spending, inflation rips higher, forcing the AMOUNT THE TREASURY BORROWS, AND THUS THE AMOUNT THE FED PRINTS in the next fiscal quarter to INCREASE. Thus a 100% increase in money supply can cause a 150% increase in inflation, and on again, and again, ad infinitum.
M2 Money Supply increased 41% since March 5th, 2020 and we saw an 18% realized increase in inflation (not CPI, which is manipulated) and a 58% increase in SPY (at the top). This was with the majority of printed money really going into the financial markets, and only stimulus checks and transfer payments flowing into the real economy.
Now Federal Deficits are increasing, and in the next easing cycle, the Fed will be buying the majority of Treasury bonds.
The next $10T they print, therefore, could cause additional inflation requiring another $15T of printing. This could cause another $25T in money printing; this cycle continues forever, like Weimar Germany discovered.
The $200T or so they need to print can easily multiply into the quadrillions by the time we get there.
The Inflation Dragon consumes all in his path.
Federal Net Outlays are currently around 30% of GDP. Of course, the government has tax receipts that it could use to pay for services, but as prices roar higher, the real value of government tax revenue falls. At the end of the Weimar hyperinflation, tax receipts represented less than 1% of all government spending.
This means that without Treasury spending, literally a third of all economic output would cease.
The holders of dollar debt begin dumping them en masse for assets with real world utility and value- even simple things such as food and gas.
People will be forced to ask themselves- what matters more; the amount of Apple shares they hold or their ability to buy food next month? The option will be clear- and as they sell, massive flows of money will move out of the financial economy and into the real.
This begins the final cascade of money into the marketplace which causes the prices of everything to soar higher. The demand for money grows even larger as prices spike, which causes more Treasury spending, which must be financed by new borrowing, which is printed by the Fed. The final doom loop begins, and money supply explodes exponentially.

German Hyperinflation
Monetary velocity rips higher and eventually pushes inflation into the thousands of percent. Goods begin being re-priced by the day, and then by the hour, as the value of the currency becomes meaningless.
A new money, most likely a cryptocurrency such as Bitcoin, gains widespread adoption- becoming the preferred method and eventually the default payment mechanism. The State continues attempting to force the citizens to use their currency- but by now all trust in the money has broken down. The only thing that works is force, but even the police, military and legal system by now have completely lost confidence.
The Simulacrum breaks down as the masses begin to realize that the entire financial system, and the very currency that underpins it is a lie- an illusion, propped up via complex derivatives, unsustainable debt loads, and easy money financed by the Central Banks.
Similar to Weimar Germany, confidence in the currency finally collapses as the public awakens to a long forgotten truth-
There is no supply cap on fiat currency.

QE Infinity

When asked in 1982 what was the one word that could be used to define the Dollar, Fed Chairman Paul Volcker responded with one word-
All fiat money systems, unmoored from the tethers of hard money, are now adrift in a sea of illusion, of make-believe. The only fundamental props to support it are the trust and network effects of the participants.
These are powerful forces, no doubt- and have made it so no fiat currency dies without severe pain inflicted on the masses, most of which are uneducated about the true nature of economics and money.
But the Ships of State have wandered into a maelstrom from which there is no return. Currently, total worldwide debt stands at a gargantuan $300 Trillion, equivalent to 356% of global GDP.
This means that even at low interest rates, interest expense will be higher than GDP- we can never grow our way out of this trap, as many economists hope.
Fiat systems demand ever increasing debt, and ever increasing money printing, until the illusion breaks and the flood of liquidity is finally released into the real economy. Financial and Real economies merge in one final crescendo that dooms the currency to die, as all fiats must.
Day by day, hour by hour, the interest accrues.
The Debt grows larger.
And the Dollar Endgame Approaches.

Nothing on this Post constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. From reading my Post I cannot assess anything about your personal circumstances, your finances, or your goals and objectives, all of which are unique to you, so any opinions or information contained on this Post are just that – an opinion or information. Please consult a financial professional if you seek advice.
*If you would like to learn more, check out my recommended reading list here. This is a dummy google account, so feel free to share with friends- none of my personal information is attached. You can also check out a Google docs version of my Endgame Series here.
I cleared this message with the mods;
IF YOU WOULD LIKE to support me, you can do so my checking out the e-book version of the Dollar Endgame on my twitter profile: https://twitter.com/peruvian_bull/status/1597279560839868417
The paperback version is a work in progress. It's coming.
THERE IS NO PRESSURE TO DO SO. THIS IS NOT A MONEY GRAB- the entire series is FREE! The reddit posts start HERE: https://www.reddit.com/Superstonk/comments/o4vzau/hyperinflation_is_coming_the_dollar_endgame_part/
and there is a Google Doc version of the ENTIRE SERIES here: https://docs.google.com/document/d/1552Gu7F2cJV5Bgw93ZGgCONXeenPdjKBbhbUs6shg6s/edit?usp=sharing

You can follow my Twitter at Peruvian Bull. This is my only account, and I will not ask for financial or personal information. All others are scammers/impersonators.

submitted by peruvian_bull to Superstonk [link] [comments]

BNB Chain Report: The State of Oracles

BNB Chain Report: The State of Oracles



  • There are a few leading oracles in the space: Chainlink, Binance Oracle, Pyth Network, Band Protocol, and Uniswap (time-weighted average price) TWAP oracle for the special cases.
  • Frequency and latency are important but come with a price.
  • Mixing the best of both worlds and having a multi-oracle setup can help mitigate most of the risks associated with oracles.
  • The most used strategy to mitigate these risks is to use primary and secondary (fallback) oracles.
  • TWAP oracles are a special case and have to be handled with care.
  • The use of a privacy-preserving oracle to bridge the gap between privacy-enabled dApps and third-party data providers may be a new trend.
  • ZK Proofs using oracles may be the next big thing for cross-chain communication.


As Web3 becomes more and more popular, the industry is seeing an increase in interest from both retail users and institutions. The trustless nature of blockchain technology allows multiple parties involved in a transaction to execute with 100% guarantees for each side once conditions are met. That creates enormous opportunities for new business cases to be developed. At the time of writing, decentralized finance’s (DeFi) total value locked (TVL) is $41 billion, according to DefiLlama,
Decentralized finance (DeFi) total value locked (TVL) (Source).
Blockchain oracles have been in the Web3 space since 2015, bridging the gap between deterministic siloed blockchains and probabilistic real-world data, allowing multiple use cases on the blockchain that could not have been possible otherwise. By design dApps are supposed to be trustless, always running in the way they were designed. Oracles are a critical piece of the infrastructure ensuring that data can be trusted before it reaches the blockchain. For the smart contracts that rely on external data, execution oracles have to be fast, reliable, decentralized, and resistant to any type of attack.
The purpose of this report is to dive deeper into oracles’ value, identify bottlenecks, explore innovations in the space, and provide recommendations on designing the best oracle setup to ensure optimal protocol performance with the most accurate data feeds in the shortest time.

What Is a Blockchain Oracle?

First, let’s do a quick recap on blockchain oracles. Oracles are decentralized applications that gather, validate, and deliver off-chain data to smart contracts on the blockchain. Similarly, they can do the same for delivering on-chain data to off-chain systems. Oracles are middleware connecting smart contracts on blockchains to off-chain data providers, sources and systems. Without oracles, smart contract applications would be limited to executing using only on-chain data.
If an oracle is corrupted, the correctness of the result of the execution of the smart contract will be compromised, potentially causing enormous losses. Blockchain oracles are a crucial part of the ecosystem.
Flash loan attacks, orchestrated oracle manipulation, and lengthy latency during extremely volatile times add up to the complexity of the infrastructure a dApp has to monitor when building its protocols.

Latency and Frequency

Latency and frequency are two key parameters that determine the performance of an oracle, and a formula can be more complex taking multiple parameters into consideration.
Latency is the time taken for an off-chain data feed to be available to use for a smart contract on-chain after triggering a condition that requires off-chain data with a transaction. Latency can also be used in the context of data freshness, i.e., how old the last data feed is prior to being published on-chain. The latency formula depends on multiple factors.
  • Block Time, which varies for different networks. ETH’s block time is 10-15 seconds, BNB Chain’s block time is 3 seconds, and SOL’s block time (via a Wormhole bridge) is 3-5 seconds;
  • Deviation Threshold or Heartbeat Threshold, whichever whatever happens first. For the most common cryptocurrency pairs such as BTC, ETH, and BNB the following parameters are set:
  • BTC: 0.1% / 1 min
  • ETH: 0.1% / 1 min
  • BNB: 1% / 1 min
Latency depends on both the underlying blockchain and oracle settings.
Frequency is how often the price is updated on a blockchain. In other words, how often the price update triggers (Deviation Threshold, Heartbeat Threshold or requester contract) publishing a new price. In a highly volatile market, the frequency of updates might be bigger because the triggering parameter such as the Deviation Threshold moves more often. The more frequent, almost real-time updates, especially during times of high volatility might contribute to network congestion if the blockchain throughput is low.

Oracle Relayers

A relayer is a general term for a third party that relays some information from one party to another. In the context of blockchain, a relayer submits a user’s transaction to the blockchain network on their behalf and pays the associated gas fee. Oracles usually operate across multiple blockchains and one option for oracle architecture to achieve cross-chain interoperability is to use a third-party relayer design to transmit data across blockchains.
Relayers in oracle design can be used to bridge reported data to other blockchains (Source).
Some potential drawbacks to using relayer architecture are increased latency (users must wait for data to first be delivered to the primary blockchain, then they must wait for it to be bridged to a secondary blockchain or Layer2 network) and responsiveness, as the the relay model requires a set of highly available and incentivized third-party relayers to bridge oracle data from one chain to another.

Data Sources/Publishers

Data sources are third parties that have access to the information in real-time, and can be divided into various categories
  • CEXs and DEXs
  • OTC desks
  • Derivatives exchanges
  • Liquidity providers
  • Quantitative trading companies
  • Weather data collectors
  • Geolocation data collectors
  • Digital credential data providers


A qualitative data collection approach has been used to further deep dive into the existing oracle landscape. A semi-structured interview for the case study was selected to gather information about oracle use by the ten largest DeFi protocols in the market accounting for hundreds of millions of TVL.
All Chainlink, Binance Oracle, Pyth Network and Band Protocol documentation in service of the above-mentioned protocols has been reviewed and analyzed as a part of the case study.


A semi-structured interview was selected to gather information about oracle use by various DeFi protocols in the market. Participants were selected based on their TVL and trading volume.
The purpose of this paper is to identify and analyze the bottlenecks in the industry, as well as discover new options and provide recommendations on oracle use.
The limitations of the case study: CTOs and lead engineers of the largest subset of DeFi protocols were selected to interview. Smaller DeFi lending and borrowing protocols and small DEXs were not included. The list of questions for the interview is provided below.
  1. What type of project do you have?
  2. Which data feeds do you use?
  3. Do you use data oracles? Which oracle partner have you selected?
  4. How do you use data feeds? How often do you request the data feed? How fast is your data feed? How many API calls do you make per month/per feed?
  5. Why have you selected this oracle / built your own? How long have you been working with them? What do you like the most about working with your oracle? What don’t you like about it? What would you like to improve?
  6. Have you ever experienced any problems with the oracles? How did you deal with it?


The results from the survey using keywords analysis and transcribed data provided insights on how DeFi protocols are using oracles, what the limitations and challenges are, and sheds the light on how DeFi protocols mitigate risks relative to the industry.
Key Findings:
  • Both low frequency and latency are named as main concerns for the oracles use by two thirds of the protocol interviews. Contrary to popular belief, protocols do not need the data available immediately, but they do want it fast. A lot indicated that price deviation and heartbeat were more important than frequent price updates.
  • Frequency has a direct relationship with the price deviation. The more often the price is updated the less deviation there is.
  • Push oracle latency comes with a price: the more frequently the price is updated on a chain the higher the gas fee. Most monetization models divide the price feed fee among dApps using it. Pull oracles also come with a price tag: whichever dApp requests the data update first has to pay the gas fee. The data is free for the rest of the protocols using that update.
  • Oracle reliability is the second most important factor.
  • The majority of protocols rely on multiple oracle setup, having two on average with three being the maximum. We might see more double oracle setups in the future as a risk mitigation strategy.
  • Some protocols have chosen to build their TWAP oracle by adding different modifications and maintaining more control and “having skin in the game.”


The very first blockchain oracle was centralized and served the industry well by supplying the necessary data to the blockchain. But as the industry matured, different oracle designs emerged to solve myriad issues with the centralized model. Analysis of documentation from a variety of oracle providers indicate that their designs vary depending on multiple parameters (eth source):
1. Number of Data Sources. Oracles that are connected to multiple sources and generate the average price from different sources are called aggregated price oracles. For example, Chainlink, Binance Oracle, Pyth Network, Band Protocol are all aggregated price feed oracles as compared to Uniswap which is a single source oracle.
2. Location of Data Source. Data sources for oracles can be on-chain or off-chain. Some of the largest off-chain data providers are the largest CEXsconnected through APIs to oracles nodes where data is pulled, validated, signed, and published on-chain. The largest on-chain data sources are DEXs such as PancakeSwap for BNB chain and Uniswap for Ethereum. DEXs provide prices based on the invariant curve exchange rate for cryptocurrency pairs.
3. Centralized or Decentralized. Oracles are classified as centralized or decentralized depending on their trust model and consensus mechanism. One of the very first oracles in the space on Ethereum called Provable (formerly Oraclize) is a centralized oracle provider but now most are decentralized. .
4. Push or Pull. Oracles that automatically update cryptocurrency prices on chain are called push oracles and oracles that need an active request to update cryptocurrency prices are called pull oracles. Push oracles publish prices on-chain when triggered by one of two indicators:
Deviation Threshold: If the cryptocurrency price is different from the previous price by more than 0.1% -1% (varies for different pairs) then the push oracle is activated to update the price on-chain.
Heartbeat Threshold: If the cryptocurrency price doesn’t change within 1-10 minutes (depending on the parameters set) then the push oracle is activated to update the price on-chain.
5. Type of Data Source. Oracles can specialize in many types of data including cryptocurrency prices, commodities prices, FX prices, trade, weather, sports outcomes and statistics, identity, DNS lookups, and more.


While most of the oracles in the space are off-chain and decentralized, time-weighted average price (TWAP) oracles are different. TWAP oracles give the average price of a token for a determined period of time versus oracles that provide mean or weighted average prices aggregated from multiple data sources at a given moment. TWAP oracles are based on DEX prices and use the exchange rate of token A to token B as the price-determining factor. DEXs are the only source of truth for the price of the tokens that are not listed and traded on larger exchanges and there are no other providers available. For example, Uniswap TWAP V2.
The time-weighted average price (TWAP) calculation methodology supported by the Uniswap V2 automatic market maker (AMM) (Source).
A TWAP oracle has several limitations. It is a lagging indicator, so if a cryptocurrency price is volatile, the TWAP will not accurately reflect the price, which results in a higher risk of under-collateralization. TWAP oracles pull their price data from a single source only, making it more likely that low-cap asset prices off of a particular DEX are not representative of the broader market price. TWAP oracles do not provide data about off-chain trading pairs and they are not a scalable solution that mirrors the design of the underlying protocols that they service.
That said, TWAP oracles do have an unspoken benefit: they are the only source of price feeds for high-risk, low-cap tokens. Protocols that are built around isolated trading low cap tokens benefit from having access to a TWAP oracle but, as mentioned previously, the data in question is subject to natural (or malicious) market manipulation and must be used with caution.
At the time of the writing, Uniswap TWAP oracle team was working on researching on other improvements such as Time Weight Median Price (TWMP), wide-range liquidity, and limit orders to be introduced to Uniswap TWAP v.3.
Uniswap time weighted average price (TWAP) oracle total value secured (TVS) November 2022 (Source).


Currently, there are four major market participants in the oracle space:

Oracle Type Features Key Highlights
Chainlink Decentralized off-chain. Push and pull. Price feeds.200+ real estate, sports, crypto prices, equities, identity, Proof of reserve. VRF RNG 1500 dApps across 15 blockchains with more than 360M price updates per month. A set of features that expands beyond standard price feeds
Binance Oracle Decentralized off-chain. Push. 40+ crypto prices. VRF RNG planned (gas). Ten new projects joined closed beta testnet since launch including a few largest on-chain TVL. Increased security MPC, the private keyshare to sign a transaction. Optimized for speed using white labels off-chain data sources only. Space ID integration, the largest domain name provider on BNB Chain.
Pyth Network Decentralized off-chain. Pull. Over 90 cryptocurrencies, equities, FX, and metal. 70+ projects are using Pyth after a few months from the mainnet. 80+ data publishers are working with Pyth Access to exclusive data feeds.
Band Protocol Decentralized off-chain. Push. 175+ cryptocurrencies.40 FX and commodities. VRF/RNG. Runs on its own network on Cosmos, cross-chain through Cosmos IBC relayers. Has the infrastructure to add a new symbol quickly. Can work with custom requests.


Chainlink total value secured (TVS) (Source).
Chainlink is one of the largest oracle solutions in the market. It was established in 2017 and has been a source of truth for over 1500 dApps across 15 blockchains. At the time of this writing, the Total Value Secured by Chainlink was approximately $9.4 billion.
Chainlink is an off-chain decentralized oracle network that serves over 200 pairs on Ethereum and more than 100 pairs on the BNB chain. Chainlink data expands far outside of crypto pricing offerings and includes weather data, sports data, FX and commodities.
Chainlink has additional features such as data automation, VRF/RNG, Proof of Reserve, NFT price feeds, and Cross-chain interoperability protocol. Also, dApps can access any external data through AnyAPI adaptors.

Pyth Network

Pyth Network total value secured (TVS) (Source).
Pyth Network was launched in 2021 and is the first oracle to popularize the pull mechanism for price feed updates. Currently, more than 70 projects are deployed to use Pyth Network which uses its own network to make sure the underlying blockchain does not affect the reliability of the oracle and that it is always running.
Pyth Network is a decentralized off-chain aggregate price oracle that publishes data off-chain 2-3 times per second for everyone to read it. That data is published on-chain only after the request for a price contract has been made. The gas fee is paid by whoever first called the price update and it is available for the rest to use cost-free once on-chain. End-users of Pyth data can elect to pay data fees to gain protection against a potential oracle failure.
Pyth Network uses a weighted average aggregate price coming from multiple sources, some of them exclusive. Pyth Data Providers are fully transparent and available to read.

Binance Oracle

Binance Oracle was launched in October 2022 after being in design and production for more than nine months. Binance Oracle has implemented a few modifications to create more resilient and faster push oracles. At the time of this writing, Binance Oracle is deployed to the beta testnet and has onboarded its first customers.
A few significant improvements to Binance’s oracle design were added to make the price feeds faster and more secure:
  • Multi-Party Computation Threshold Signature Scheme. Used by institutional custodians Binance Oracle uses the most secure cryptography for data correctness. Multiple distributed nodes participate in the data signing process, ensuring the safety of the private key.
  • Whitelabeled and Hand-Selected Data Providers. By highly curating data providers, Binance oracle aims to ensure the quality and consistency of data, positioning itself somewhere between Chainlink’s on-chain and off-chain providers and Pyth’s 70 off-chain sources.
  • Customized and Open Providers. Based on rapid development efficiency and quick development turnaround, customized data support is available upon request. Binance Oracle aims to enable more projects to use stable oracle services.

Band Protocol

Band Protocol’s total value secured (TVS) (Source).
Band Protocol is a Cosmos-based oracle supporting 20 blockchains through the inter-blockchain protocol (IBC), a scalable oracle that has its own network to process all data. Band Protocol is also a decentralized off-chain aggregator oracle supporting more than 90 crypto symbols and 12 forex trading pairs.
Band Protocol has built its own relayer network and is able to ensure fast cross-chain communication to publish data to the different blockchains using the IBC bridge.

Other Oracle Designs: API3

API3 is moving from the third-party oracle model to the first-party data providers directly on-chain. An off-chain first-party oracle connects data from any API to a smart contract through Airnode. DAO-governed, Airnode is Web3 middleware that connects any web API directly to any blockchain application. Airnodes are a piece of cloud service infrastructure that allow data providers to deploy their existing Web2 API onto the blockchain, creating what API3 calls a dAPI (Decentralized API).
Airnode Web3 middleware connects any web API directly to any blockchain application (Source).
The API3 team manages the endpoints and a multi-sig mechanism is used for extra security signing transactions. API3 can also provide individual data sets for users that require full control over the curation of the data feeds they use.

Other Oracles Designs: Umbrella Network

Umbrella is a Layer2 oracle built on a sidechain. Umbrella solves the scalability problem in oracles by leveraging a Layer2 solution and utilizes Merkle trees for batching transactions to save on gas fees.

Umbrella leverages a Layer2 solution and utilizes Merkle trees for batching transactions (Source).


Blockchain oracles have been live since 2015 – the same year that Ethereum smart contracts were introduced – and have since gone through many iterations and improvements. A few new emerging trends in oracle use have been identified both during analyzing case studies and following emerging technologies.

Privacy, ZK Proofs, and Oracles

Privacy enabling zero-knowledge proofs (ZKP) are hot topics that have emerged over the course of 2021-2022, solving inherent blockchain problems like lack of confidentiality and inability to control private data. Blockchain oracles are no exception to this trend. The industry is seeking a solution to reveal and verify the truth without disclosing private information.
For example, Chainlink is working on a ZKP-based oracle solution called DECO, a privacy-preserving oracle protocol developed at Cornell University and later acquired by Chainlink. Oracle nodes can prove facts about data sourced from trusted servers without revealing the data on-chain, while also proving the source of the data since the TLS chain of custody is maintained.
One of DECO’s applications is a verifiable credential oracle that acts as a source of truth for biometric data and allows selective data disclosure paired with digital identity.

Oracle nodes can prove facts about data sourced from trusted servers without revealing the data on-chain.

ZK Cross Chain Messaging Through Oracle Relayers

For the average Web3 user the closest understanding of oracle is the bridge between Web2 real-world data and Web3 dApps. However, oracles can not only act as price or weather data feed providers but also can be used as a source of truth for inter-blockchain messaging itself.
A few prospective solutions are working on a ZK proof for cross-chain messaging where oracles act as a core part of the middleware to prove and verify that the data transmitted is true and can be trusted. An oracle node generates the ZK proof for the state of the smart contract so that data can be transferred across blockchains.

Latency Is Dead, Long Live Latency

The fastest available data on-chain is necessary and widely used in the DeFi world however, DEX interviews revealed that there is no actual demand for the real-time speed of pushing price feeds – it has to be fast, but it doesn’t have to be ultra-fast. There are two different approaches to data delivery speed with respect to pull oracles:
  • Binance Oracle uses hand-selected decentralized data providers and has made architecture improvements (such as hot servers, master-slave architecture, and geographically proximal servers) to ensure speed when delivering data on-chain.
  • Pyth Network proposed the solution to solve this problem and went live with a pull oracle at the end of 2021. Chainlink followed by launching a low latency pull oracle in November 2022.
It is important to keep in mind that oracle’s minimum latency is still a blockchain’s block time to finality when transactions are finalized, which will probably remain the primary limitation to data delivery speed.

Modifications to TWAP

Some protocols developed their own implementations of TWAP oracles with added features such as using moving averages to smooth abrupt price movements. Others have built custom pools as an oracle on the AMM/DEX. TWAP oracles might see increased demand in the future if markets move towards decentralized exchanges, which may be more likely after recent market volatility in November 2022.


Oracles are critical middleware infrastructure that enable myriad use cases for the blockchain. Competition amongst legacy oracle providers has pushed them to constantly innovate, add resiliency to the oracle ecosystem, and drive adoption for their services in new and better ways. Binance Oracle’s entrance into the space introduces a new player with enhanced speed and security.
While capital continues to flow to DEXs, the collapse of crypto markets in November 2022 may delay the adoption of further advances in oracle development such as verified credentials and ZK cross chain messaging. Nevertheless, oracle innovation continues to unfold, bringing ever more utility to blockchain over time.


  1. https://ethereum.org/en/developers/docs/oracles/
  2. https://medium.com/the-capital/deco-privacy-preserving-oracles-2620b80b3ffd
  3. https://chain.link/developer-resources
  4. https://research.thetie.io/blockchain-oracle-comparison/
  5. https://oracle.binance.com/en
  6. https://docs.pyth.network/how-pyth-works
  7. https://docs.bandchain.org/band-standard-dataset/supported-blockchains.html#
  8. https://api3.org/airnode
  9. https://uniswap.org/blog/uniswap-v3-oracles

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submitted by IIaKeTuK to bnbchainofficial [link] [comments]

Federal Reserve officials concluded that economic uncertainty has only increased since their last meeting. With increased uncertainty, it's clear the international economy is responding by de-risking, sending stocks, and forex pairs dumping, inversely causing the USD & underlying DXY index to pump.

Federal Reserve officials concluded that economic uncertainty has only increased since their last meeting. With increased uncertainty, it's clear the international economy is responding by de-risking, sending stocks, and forex pairs dumping, inversely causing the USD & underlying DXY index to pump. submitted by JuniceLiew to Overbit [link] [comments]

Forex Volatility by Weekday.

Hi I am looking for a resource that provides a dynamic chart on pair volatility by the day of the week.
I remember seeing it and I should have saved the link but for the life of me I cannot seem to find it!
They gave a parameter of 14..(weeks?)
they would list out Monday Tuesday Weds..... EuUsd Monday 140 pips Tuesday 150 pips etc...
Thanks and appreciate it.
submitted by cryocom to Forex [link] [comments]

Bybit Learn Series - Nov 18

Bybit Learn Series - Nov 18


10 Reasons Why You Need to Use a Grid Trading Bot

With the prices of cryptocurrencies swinging widely within minutes and markets opening 24 hours every day, it's hard for traders to keep up.
For starters, crypto traders may not be able to react quickly enough to take advantage of opportunities to profit from rapid price swings. Furthermore, delays in transactions or exchange executions further worsen the problem. Traders cannot monitor all the crypto exchanges and global markets round the clock to achieve optimal trading results.
Fortunately, this is the age of automation. For many investors, bots (short for robots) that run bits of code to trade and execute transactions offer solutions to these problems.
This article will look at the grid trading bot — a bot that adopts the grid trading strategy — how it works, and its benefits to users.

What Is a Grid Trading Strategy?

Grid trading is a trading strategy that involves placing orders above and below a set price using a “price grid” of orders. The price grid consists of orders at incrementally increasing and decreasing prices. For instance, you may set buy orders at every $500 below the current market price of ETH, and sell orders every $500 above ETH’s current price. The grid trading bot automatically buys when the price falls to the predetermined level, and again if the price drops by another $500. The reverse occurs when the price of ETH starts to climb.
The basic premise of this strategy is to repeatedly buy at the pre-specified price, and then sell the position when the price rises above that level. Conversely, you can sell at a predetermined price point and wait for the price to fall to a set level and buy — repeatedly.
A grid trading strategy is easily automated, and valuable for forex currency trading and crypto trading. It’s especially useful when prices move within a specific range or a “sideways market,” where assets fluctuate within a tight range for an extended time without going in a particular direction. Prices oscillate within the borders of price support and resistance.
Grid trading strategies attempt to make money whenever the price of an asset changes. However, there’s a trade-off: The more orders a grid trading system has, the higher the trading frequency and, consequently, the lower the profit from each order.
Bybit has finalized plans to introduce a built-in grid trading bot in its trading mechanics. Users can easily automate buy and sell orders placed at predetermined intervals by customizing the grid limits — upper and lower — and the number of grids. Once the set-up is complete, the system will automatically buy or sell orders at these preset prices.
Crypto trading can be taxing and time-intensive. However, when properly deployed, bots can take away some of the hassles while optimizing your profits. Here are ten reasons you need a grid trading bot so you can profit in both Spot and Futures markets.

1. Low entry point

Using a grid trading bot, you can enter positions at levels you might not be able to achieve by trading manually. Without the need to continuously monitor price fluctuations, you can have orders at several low entry points. Conversely, you’ll also be placing orders to be executed at higher selling levels, or placing the trades at extreme levels.

2. Easy to use and customizable

The grid trading bot is straightforward to use and easily customizable. Once you sign up, you can configure the parameters as you wish. Generally, you can adjust the upper and lower limits of the price range, and set the number of orders the bot can place within this price range, as well as the width between each buy-sell limit order.
Users don't need to know or calculate complex metrics and measurements, or study market indicators. Since it's “plug and play,” anyone without extensive crypto trading experience can set up a grid trading bot in minutes. The underlying grid strategy doesn’t require new traders to understand complex market signals, indicators, and algorithms.

3. High automation level

Grid trading bots lend themselves to a high level of automation. This is because the underlying trading strategy is highly logical. Bots are designed to perform predetermined tasks unrelated to the market sentiments and trends. Grid trading bots efficiently employ the grid trading strategy, which would be too intricate to execute with manual trading.
Since grid trading bots are easy to set up and use, they can be used in virtually any currency market. It’s a great starting point for traders who don’t plan to monitor the market constantly.

4. Turn strategies into profit during a quiet market

Grid trading bots have the unique advantage of turning a profit in a time of market doldrums. Deservedly, cryptocurrencies have earned a reputation for volatility. But now and then, the markets trade within a range, though they might still move wildly within that range. Rather than have your crypto assets hibernate along with the market, you can use grid trading strategies to capitalize on a market where you may not have much conviction.

5. Enhance risk management

A grid trading bot can help you enhance your risk management capabilities. The settings you configure directly impact your profitability. Most importantly, it gives you control over the risk-reward level.
You can earn a small but steady profit with minimal risks when you bet on stablecoin pairs involving USD tether, for example. Conversely, you can choose to whet your risk appetite and go for bigger stakes and chunkier returns, trading coins with low market cap and high volatility.
The ability of trading bots to adjust your risks in line with your appetite is an excellent tool for enhancing your risk management skills.

6. Provide liquidity

Using the grid trading strategy via bots essentially means you provide much-needed liquidity for the exchange. You increase the market liquidity of the exchange by placing buy and sell orders, which makes grid trading an excellent strategy for market making. The bot can provide liquidity on a specific cryptocurrency by placing a bid-and-ask limit order on an exchange.
Grid trading bots ensure you'll pay the maker fee as well because makers provide liquidity to an exchange by "creating or making a market" for other traders. In contrast, takers remove liquidity by “taking” available orders. Maker fees are usually lower to incentivize market makers. Since a grid trading strategy provides liquidity, users pay the lower maker fees.
Illiquid markets with thin order books (order books with fewer offers at different price levels, which increase slippage) tend to benefit from a grid trading strategy. They’re marked by large price spikes, which occur frequently. The grid trading bot eats up these spikes by providing liquidity and converting them into profit for the trader. This also helps anyone trading the illiquid pair try to get a fair price.

7. Versatility

Grid trading bots can be used in any market, and with reasonable potential to make a profit. They’re versatile — because the core underlying strategy proceeds based on the idea of buying low and selling high (and pocketing the difference). Thus, grid trading bots can trade profitably without being affected by market sentiments and trends.
You also have the liberty of configuring the bot and selecting prices ranges and the number of grids, which helps you define the frequency and period. You can tweak the bot for the short term, where it makes small profits by trading frequently in a short interval. Or you can set it up to run for longer periods with less frequency, and earn profit from more significant price shifts.

8. Diversification

Grid trading bots can help you earn some extra profit if you intend to hold on to two exchangeable assets for the long haul. One of the primary tenets of investing is diversification, which is spreading your funds among multiple assets, rather than a single one. Rather than simply holding, you can earn extra profit by using the grid trading strategy to make more money from the fluctuations between the prices of the multiple assets in your portfolio.

9. Suitable for both short- and long-term trading

Grid trading as a strategy has been used in other types of markets, such as forex. All kinds of traders — including scalpers, day traders, swing traders and position traders — can take advantage of grid trading bots for managing risk and maximizing profits.
Traders who prefer quick returns can set up the trading bot to function for the short term, catching hundreds of trades from the small price movements within a short period. Long-term traders can set up a huge grid range in which trades can run for a longer period, ranging from weeks to months.

10. Remove emotions from trading

Naturally, traders are prone to many emotions — including anger, greed, and fear — when money is involved. It’s challenging to keep these unbridled emotions in check when trading manually. Grid trading bots can help implement a rule-based grid strategy, minimizing the involvement of emotions in trading.
Trading bots operate according to a defined set of rules, like fixed profit taking or stop-loss points. If you’re planning to employ a consistent strategy, grid trading bots are useful for carrying out disciplined and controlled trades.

The Bottom Line

Grid trading bots are automated trading tools that adopt the grid trading strategy, a trading system that allows you to profit by placing a series of long or short orders at predetermined intervals around a set price, creating a trading grid. Easy to use and set up, these bots can help you execute trades profitably and efficiently, saving you money, time — and stress. Get started with by creating your own grid trading bot so you can easily invest in both Spot and Futures markets today!
We hope this Bybit trading bot guide has been useful for you in your pursuit of automated investing and trading. Here's all the facts about our trading bots, summarized in one simple infographic.

submitted by 1nceler to Bybit [link] [comments]

Comments on A New Measure of Relative Strength Using ATR – the Power Index Indicator

Apologies for the length on this ahead of time.
I was doing my third dive through the Wiki this weekend and started tearing apart piece by piece the discussions on using Relative Strength and accompanying ATR with it. I understand there are several out there for ToS, TradingView, and TC2000, or you can just flat out join OneOption and have it right at your fingertips. However, there was mention in the Wiki that these (except 1OP) are still not perfect as they require some tweaking to get correct. I also wanted to present methods that may help traders who might not use any of these charting platforms as well. I want to present a method that might fix some of these issues.
For those who are confused on what I am talking about, check out this Wiki Post and discussion thread: https://www.reddit.com/RealDayTrading/comments/rp5rmx/a_new_measure_of_relative_strength/
The Cole’s Notes version is that the % change of a stock vs. $SPY is not enough usually to truly measure RS or RW. One must consider the average movement of $SPY over X number of periods (aka the ATR for simplicity --- I know the ATR is not exactly this but it is close), compare $SPY’s raw % change to that number to get something HSeldon2020 coined as the “Power Index”. Again, layman’s terms are that it measures the force of the move vs. the average movement of $SPY. This Power Index is what we use to create an expectation of the stock’s movement during a normal 1hr trading window. If $SPY’s Power Index rating is +2.0 with an ATR of $0.50, $SPY moved $1.00…for easy numbers, let’s call this 0.5% raw change. Therefore, we would expect AAPL, which may have an ATR of $0.25 to have moved $0.50 in the same timespan to mirror $SPY, also equalling a 0.5% raw change. However, if AAPL moves $1.00 in this same time, it means AAPL has an expected move of +2.0 ($0.50) on the Power Index, but it has moved +4.0 ($1.00), then we have a clear signal of institutional interest. The post signs off with a recommendation for a rolling S that penalizes candle bursts and comments that it might not be possible. I don’t use any of the above platforms, so I apologize if someone has done this before, but here is my version that may be better or worse than others that requires two indicators working together. Please let me know what you think. This is on TrendSpider, fwiw.
Let’s use a picture-perfect example to illustrate, an $AMZN short on Friday November 18th around noon. I have highlighted this day on the chart with a white line. You will notice that $AMZN is below all major simple moving averages (5=blue, 21=pink, 50=yellow, 100=purple, and 200=red). It also has a raw 5-day weakness to $SPY (5-day Rate of Change indicator) of -6.73% (white is stock) while $SPY is -0.57% (orange is $SPY), meaning on a raw percent drop, AMZN is 11X weaker than $SPY. But we know from above this can be misleading.
Since we are day traders, we are usually only focused on immediate price action of the last several days. If we zoom into the hourly chart at around the time of our entry, we can see a 16-period raw ROC (16 1hr candles in a true 4am-8pm trading day) of AMZN is -2.88 and $SPY is +0.51. Again, this can be misleading, but it does give an accurate measurement of the % change of the underlying vs. the market.
Now that we have identified that on a Raw % basis, AMZN is moving down at a faster rate then $SPY, we can look to our “execution chart” where we take our trade based on the price action and confirmation on the 5min chart. Everyone is familiar with the ATR here, however, not many are familiar with Normalized ATR. Normalized ATR turns the ATR into a percentage that can then be used to directly compare across tickers. It also comes with a moving average so you can see what the smoothed movement is to avoid any large candles skewing the data one way. When we apply a 12-period NATR (teal line on indicator) with a 12-period SMA (orange line on indicator) we can use this SMA-smoothed line as a true representation of the average volatility/expected movement of the stock over the past trading hour (12 5min candles in an hour). Let’s pretend we take this descending wedge breakout at the 11:45am candle close. This gives at the time of entry an expected move on $AMZN of 0.362% per hour, but we are seeing 0.67% movement currently.
This is where the “Power Index” (aka Normalized ATR) really helps us. We know the ROC of $SPY is -0.22, but that doesn’t mean much when we compare it to $AMZN of -0.67 when we don’t really know the expected move. The “Power Index” of $SPY shows that we can expect a move of 0.165% within the past 1 hour but have only seen -0.22% change, showing some volatility, with a Power Index of 1.33. $AMZN, however, at this time has moved over 1.8X its expected range for this given period. This confirms its relative weakness using both a raw% movement and an expected “Power Index” rating.
I can hear a lot of you now saying, “so what MADEUPDINOSAURFACTS, what is the practical application to this?” Well, the practical application comes when you apply the Normalized ATR first to $SPY and the sector ETF ($XLY in this case) to make sure the stock is actually weak and not just being dragged down by its own sector. In this example $XLY has a Normalized ATR value of .249 and a ROC of -0.48 on 12 period 5min chart, giving it a Power Index of +1.92. Comparing that to $AMZN, which has a value of +1.85, with $SPY at +1.33 we can then say that $AMZN is roughly equal to its sector baseline and the trade will likely work when $SPY goes down, but it will only go down as much as $$XLY.
Practically thinking, I can find a way to scan for this at least using the ROC indicator and NATR by scanning for stocks that have an NATR > than $SPY and their sector ETF, and then a ROC greater than the NATR. This first filters out those choppy trades that move sideways because they are trading within their expected range, second, gives a way to filter out sectors that are moving less than the market in either direction, and third, gives a way to filter in trades that are both more powerful than the market and sector they are in --- highlighting clear institutional movement within the stock. To round it all out then, $AMZN probably was not a great trade using this criterion since the sector ETF was weaker than $AMZN and was likely dragging it down with it but not because of it. You can see on the chart; the breakout was short lived and required some quick profit taking before it started chugging back towards entry.
Conversely, if we take a quick look at one more trade, $LW, from yesterday, that considers RS vs. $$SPY and RS vs. the current sector. We can see clear 5-day and 1-day RS, with a 5-day at 7.04 and $SPY at -0.15, while the 1hr 16-period ROC at the time of entry 3.11 vs. 0.02 on $SPY. Drilling down to the 5min chart we can see a descending wedge (flag/pennant or whatever I guess) forming with a breakout. However, the breakout was not confirmed around 12:30pm when $LW became stronger than its NATR and the market. At 12:25 close $LW had a positive ROC of 0.25 and an NATR of 0.202, giving it a power rating of 1.23. $SPY at that time was trading within its own range, with a ROC of -0.02 and an NATR of 0.132, giving it a power rating of 0.15. $XLP, the ETF for $LW, was also trading within its range with a ROC of -0.02 and an NATR of 0.121, giving it a power rating of 0.165. Therefore, $LW once the confirmation occurred, was 8.2X stronger than $$SPY and 7.45X stronger than its sector of $XLP. For total trade honesty, after the entry signal and total move higher, $XLP increased 0.358%, $$SPY moved 0.492%, and $LW moved 1.59% at their peaks by the end of the day, clearly illustrating $LW’s strength to the market. See below for entry candle on $LW across the 3 tickers.
LW daily: https://i.postimg.cc/fR0tBNwb/LWDaily.png
LW Hourly: https://i.postimg.cc/MTtvvZY9/LWHourly.png
LW 5min: https://i.postimg.cc/wxf1zvMv/LW5min.png
SPY 5min: https://i.postimg.cc/fLHRM2wF/SPY5min.png
XLY 5min: https://i.postimg.cc/66mpSmb4/XLY5min.png
Please let me know what you think and If this is as close to the “Power Index” as we can get or if you all have found something better? I am going to keep using this to see how it works in real time.
submitted by MADEUPDINOSAURFACTS to RealDayTrading [link] [comments]

Risk Premium - Building a Foundation for Trading

If I were able to go back in time to the beginning of my trading journey with one idea, it would be “risk premia.” It is vital for any trader to understand the idea of risk, and how you are compensated by taking on said risk. Risk premia/premium should be the very foundation upon which you build upon. I consider it the easiest way to make money. All you must do is hold an asset for a certain amount of time to generate returns. This is why buy-and-hold is often the benchmark to see if a more active system is worth the effort. For equities, you see stockholders taking advantage of risk premium to generate higher returns than treasury bonds (risk-“free” rates). As interest rates get higher, so do the risk-free rates, which makes stocks look less attractive.
It's a lot easier to paint a picture using bonds. Bonds are used by companies or governments to raise money from investors. While bond prices have an impact on how investors make decisions, we will use flat numbers to keep things simple. Assuming bond price of $100 per bond and 5% interest rates for both, if you had the choice between buying bonds from Microsoft or from the local grocery store, which one would you choose?
A more risk-savvy investor would always choose the Microsoft bonds, as they are much less at risk of defaulting or failing to pay investors back. Now, if the local grocery store offered 15% interest, investors would then consider the difference in interest rates to decide. Since there’s a 10% spread in interest, the risk premium is 10%. For accepting a higher risk of default, you accrue 10% more interest on your investment. These opportunities appear in Forex, but they aren’t nearly as apparent.
Here is a research paper that explores the idea of how risk premium causes seasonality, or patterns in price that occur at regular intervals. This is a very heavy read for most traders, but the gist of it is this: Holders of USD are exposed to the negative fundamental news that affects the dollar during the New York open. As EUR is naturally a riskier currency (blanket monetary policy over several countries with different levels of economic health is not ideal) than the USD, it must appreciate to compensate investors for holding onto a riskier asset. The holders of the USD know their currency is exposed to more risk during the NY session, so they move to an asset that is less exposed to these events. JPY is where risk-averse investors will flee to. Meaning, the USD value falls during the NY session as investors move to a safer currency. The safer currency is JPY. The increased supply of USD naturally means a stronger EUR. Simple supply and demand mechanics.
If you’ve made it this far, this is why you should care. Here is what we call a market inefficiency. There’s a repeating pattern in that offers active traders a chance to gain abnormal returns on a daily basis. All due to a risk-based assessment of the market. Risk causes uncertainty, which we can take on in exchange for alpha.
So, the strategy. We buy EUR when the NY session opens and sell when it closes. Then short EUR and GBP when the London session starts. We will test from the beginning of 2002 to Oct 2022, so almost a 20-year backtest. The chart and stats. Well, it appears that the author may have been onto something. Now let’s see what happens when we add GBP and JPY into the mix. Here we keep the original strategy but sell JPY on the NY market open and buy when the Tokyo session starts. We also buy and sell GBP in the same manner as EUR. Here is the chart, and stats. While admittedly not as impressive, it still shows the pattern is there. Considering we're exposed to market risk around the clock, I'm honestly surprised this came out so positive. The point of concern here is the flat equity curve in recent years. This may be due to increased intraday volatility plus central bank intervention from both JPY and GBP this year. While volatility can make us money, it is not always our friend. The amount of liquidity and lack of intervention in the EUR may be our saving grace with this strategy, but as the stats show, JPY might be the most profitable asset. So, let’s find out. The chart and stats. Again, not as impressive. Seems like focusing on the more stable EUR is the best way to trade this idea.
Let’s talk about tempering expectations though. There are no trading costs considered, as this is a “perfect world” testing environment. We’re just seeing if the idea holds, and it appears to do so. This strategy may or may not be tradeable depending on your broker’s trading environment, in fact, I suggest you don't trade this until you come up with a risk and money management strategy. The backtest results are extremely optimistic (this is my disclaimer). There are also no stop losses or take profits, so a clever trader may incorporate something like ATR to make it a more profitable idea.
What we have here is a trading strategy based on a real market inefficiency. No fitting stories to price curves, no market myths, and hard evidence that the idea works. The strategy is extremely simple with hard quantifiable rules. While the average profit is very low, remember that we have not set any take-profit rules, stop losses, reinvestment strategies, or risk management rules, meaning it assumes lot sizes do not change as the account grows. There is plenty to build upon and experiment with. While trading is very difficult, all you really need is one discovery and a bit of creativity to be successful. For example, here is a free potential edge you can imply from this research and mess around with.
My intention with this post is to stop the infighting about different trading strategies and encourage users here to dig to find research on trading strategies that follow actual market mechanics. They are out there, but sometimes you need a second pair of eyes and another brain to really understand what the research is saying along with finding the implications of said research. The best thing you can do when it comes to trading is to collaborate with others and share ideas and findings. Having hard evidence that these ideas and findings are real is key though.
Credit: A user named PCZ on the Zorro forums was where I got this idea from. Part of the point I wanted to prove is that finding profitable and statistically proven strategies is possible if you look hard enough. These papers often include a trading strategy as well. I will be the first to admit that none of my trading strategies are original, but modified versions using techniques I’ve picked up over time. My code will be left as an exercise for my fellow programmers (I’m sure any of you can figure it out with some effort), but please note that I use true-to-life market open times rather than what the user found to be the best so results will vary.
submitted by idonthaveanamehelp to Forex [link] [comments]

Some Forex Trading Tips For Beginners

These forex trading tips is a passing of wisdom from one professional forex trader to another. A lot of forex traders have become rich through forex trading while others did not. There are many reasons for this. You see, in Forex trading, there are many things that you have to consider to become a successful trader. You do not just have to rely on your luck or instinct. You have to learn the tips and tricks of the trade. If you will follow these forex trading tips that I will show you, you will then be on your way to become a good forex trader.
1) Always Remember That You Deal in Pairs - When you trade, always think that you are dealing in a pair of currency. Thus, you have to keep your sight on both currencies since a deviation in one can have an impact on the other in your forex trades.
2) Learn the Basics First - You will just be wasting your investments in forex if you start trading without first learning the basics of the trade. Before you learn the many forex trading tips it is a must for you to have already learned the forex basics.
3) Play the News - always keep abreast with global breaking news and play your cards well during major global events that will give volatility to the market. Volatility in the currency market is where traders earn their keeps.
4) Trading For Small Profits - If you will always go for small profits by placing very tight orders to play safe, you will found out later on that you will be put in the losing end because you can not always be lucky even with tight orders thus you cannot be sure if your trading will prove a profit. But you can be sure of one thing - the difference between the bid price and the ask price will be eating away at your investments.
5) Trading with Too Much Caution - This position is akin to trading for small profits as you will be always placing tight orders to be safe. This position is not good for traders because it will only result to undercutting themselves eventually leading to exhausting their trading deposit. If this will always be your position, better not trade in forex so that you will not lose money.
6) Trust Your Forex Broker If You cannot trust Yourself - In forex trading, you can either do the trading yourself or let your broker do the trading for you. In this respect, you have to decide if what the best way is. If you think you can do it, then do it. But if you think your trader is in better position to do it for you, then let your forex broker do the trading for you. But that is it. Once you decide to let your forex dealer trade for you, stick with the decision made by your broker, and do not interfere as they know what they are doing. This is one of many forex trading tips that will enable you to make good in your trading.
Further Reading
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01-01 08:58 - 'Even with Bitcoin’s recent breakouts, 60-day volatility just yawns. Only 6% vs 5.5% for FOREX at peak. BTC is almost ready for mainstream' (twitter.com) by /u/NimbleBodhi removed from /r/Bitcoin within 3452-3457min

Even with Bitcoin’s recent breakouts, 60-day volatility just yawns. Only 6% vs 5.5% for FOREX at peak. BTC is almost ready for mainstream
Go1dfish undelete link
unreddit undelete link
Author: NimbleBodhi
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How to Trade Gold: Top Gold Trading Strategies and Tips

How to Trade Gold: Top Gold Trading Strategies and Tips

Gold trading strategy:

– Trading gold is much like trading forex if you use a spread-betting platform.
– A gold trading strategy can include a mix of fundamental, sentiment, or technical analysis.
– Advanced gold traders recognize that the yellow metal is priced in US Dollars and will account for its trend in their gold analysis.

Why trade gold and what are the main trading strategies?

Once upon a time, trading gold was difficult: you had to buy and sell the metal itself. Then came futures and options, allowing traders to take positions without actually ending up with a safe full of bars, coins or jewelry. Gold exchange-traded funds (ETFs) made it easier still; trading gold was much like trading a stock. Today, trading gold is almost no different from trading foreign exchange.
If a retail investor uses a spread-betting platform it is simply a matter of buying or selling depending on whether you think that the gold price is likely to rise or fall.
For some people, trading gold is attractive simply because the underlying asset is physical rather than a number in a bank account. There are a variety of strategies for trading gold ranging from studying the fundamental factors affecting supply and demand to studying current positioning of gold traders, to technical analysis and studying the gold price chart.
Even for those who rely principally on the fundamentals, many experienced traders would agree that a better gold trading strategy is incorporating some components of fundamental, sentiment and technical analysis. A gold trading tip we offer is that fundamental and sentiment analysis can help you spot trends, but a study of the gold price chart and patterns can help you enter and exit specific trades.
NOTE: can not find the right trading strategy? if you have no time to study all the tools of the trade and you have not funds for errors and losses – trade with the help of our best forex robots developed by our professionals. They are fully automated, you need install files in your Metatrader only.

Trading gold vs trading forex

Gold has traditionally been seen as a store of value, precisely because it is not subject to the whims of governments and central banks as currencies are. Gold prices are not influenced directly by either fiscal policy or monetary policy and will always be worth something – unlike a currency that can end up being almost worthless because, for example, of rampant inflation.
Gold can also be used by traders as a “safe haven”, along with assets like the Japanese Yen, the Swiss Franc and the notes and bonds issued by the US Treasury. That means that when traders are worried about risk trends they will tend to buy haven assets. On the flip side, traders tend generally to sell haven assets when risk appetite grows, opting instead for stocks and other currencies with a higher interest rate. This makes gold an important hedge against inflation and a valuable asset.
Note, though, that while it is possible to trade the Swiss Franc or the Japanese Yen against a variety of other currencies, gold is almost always traded against the US Dollar. Therefore, trading gold means you will need to take into account the movements of the US Dollar. For example, if the value of the US Dollar is increasing, that could drive the price of gold lower. Keep up to date with the US Dollar and key levels for gold in our gold market data page.
An additional factor to take into account when learning how to trade gold includes market liquidity. The World Gold Council estimates that average daily trading volumes in gold are higher than in any currency pairs other than EURUSD, USDJPY and GBPUSD. That makes it higher, for example, than the daily trading volume in EURJPY, so spreads – the differences between buying and selling prices – are narrow, making gold relatively inexpensive to trade.
Lastly, gold trading hours are nearly 24 hours per day. Gold exchanges are open almost all the time, with business moving seamlessly from London and Zurich to New York to Sydney and then to Hong Kong, Shanghai and Tokyo before Europe takes up the baton again. This means liquidity is high around the clock although, as with foreign exchange, it can be relatively quiet after the New York close, with lower volumes and therefore the possibility of volatile price movements.

How to trade gold using technical analysis

Technical traders will notice how the market condition of the gold price chart has changed over the years. Gold prices were in a sizeable trend from 2005 to 2015. Since 2015, gold prices have been trading in a defined range, changing hands between $1,000 and $1,400. We talk about matching your technical gold trading strategy to the market condition. If the market is trending, use a momentum strategy. If the gold chart is range bound, then use a low volatility or range strategy. This is a key ingredient in a gold trading strategy.

Gold Price Chart, Monthly Timeframe (July 2004 – July 2018)

Chart by IG
For those who prefer to use technical analysis, the simplest way to start is by using previous highs and lows, trendlines and chart patterns. When the gold price is rising, a significant previous high above the current level will be an obvious target, as will an important previous low when the price is falling.
Also in an uptrend, a line on the chart connecting previous highs will act as resistance when above the current level, while a line connecting previous higher lows will act as support – with the reverse true in a falling market. As for chart patterns, those like head-and-shoulders tops and double bottoms are relevant just as they are when trading currency pairs.
For the more sophisticated technical trader, using Elliott Wave analysis, Fibonacci retracement levels, momentum indicators and other techniques can all help determine likely future moves
How to trade a symmetrical triangle pattern on the gold chart

Gold trading tips for beginners and advanced gold traders

Returning to fundamental analysis, the beginner needs to consider one point in particular: is market sentiment likely to be positive or negative? If the former, then the gold price is likely to fall and if the latter it is likely to rise. This is therefore the simplest strategy to use when trading gold.
For the more advanced trader, though, it is important to consider too what is likely to happen to the Dollar. In recent years, the Dollar has become increasingly regarded as a safe haven as well, which explains in part why the gold price in Dollars has remained relatively stable. Thus if you think, for example, that the geopolitical situation is going to worsen, you might consider buying gold but at the same time selling, say, the Australian Dollar against its US counterpart.
An advanced trader will also want to keep an eye on the demand for gold jewelry. In India and China in particular, gold jewelry is still seen as an important long-term investment, it has its uses in industry too and central banks’ buying and selling of gold can also be important – all factors that can move the price.
As for supply, advanced traders will want to keep an eye on the output figures from the main producing companies such as Barrick Gold and Newmont Mining.
That said, all the rules of trading forex also apply to trading gold. Retail traders need to be careful not to over-leverage and to think about their risk management, setting targets, and stops in case something goes wrong.
Our principal gold trading tips are therefore:
  • Consider whether the markets are in “risk on” or “risk off” mode;
  • Look at the likely performance of the US Dollar as well as the gold price;
  • Consider a mix of fundamental, sentimental, and technical analysis;
  • Watch out for central bank buying or selling;
  • Consider the demand for gold jewelry;
  • Look at the industrial demand for gold;
  • And take account of the supply position.

Read how to trade Forex profitably and what are trading robots…

submitted by Profinvestments to u/Profinvestments [link] [comments]

The Top Tradable Currencies In The World

Because they allow you to trade currencies, people occasionally refer to the foreign exchange markets, or forex, as a "banker's game." This could be an excellent approach to diversify your investments. If your portfolio has struck a brick wall, this is very crucial. You have several possibilities on the FX markets when other global markets aren't moving. Furthermore, it's increasingly simple to trade FX online, and both novice and seasoned traders are participating in the market.
Before deciding how to invest in stocks or forex, it's important to learn about forex and the basics that make it work. The key to a profitable investment and future success as a trader or investor is to learn as much as you can. So, here is a list of the central banks of the four currencies that all traders need to know about.
  1. The strong US dollar
No one has ever begun online forex trading without familiarizing themselves with the USD, or US dollar. It was established in 1913 by the Federal Reserve Act and is a member of the Federal Reserve System (the Fed). The United States of America, which has the biggest economy in the world, uses the USD, sometimes known as the "greenback," as its "home denomination." The USD is underpinned by economic fundamentals like the GDP (gross domestic product), the number of jobs, and the volume of goods produced, much like other currencies.
However, if you trade currencies online, you should be aware that the US dollar is significantly influenced by the central bank and any remarks it makes regarding interest rate policy. The US dollar's usage as a benchmark for trading against other significant global currencies including the British pound, the euro, and the Japanese yen is its most significant feature.
  1. European Euro
The European Central Bank oversees the EUR, or euro. All 19 of the member nations of the eurozone utilize the Euro. The USD's worst adversary, so the saying goes, is the Euro. In comparison to the British pound or the Australian dollar, the EUR usually moves more slowly. On a typical trading day, the base currency fluctuates by roughly 70 to 80 percentage points (pips), with a daily average volatility of about 100 pips. Time management is crucial when dealing with the euro. Trading procedures for FX (forex) must be properly planned because the forex market is open around-the-clock.
  1. The Japanese Yen Is Easy to Understand
Third-largest economy in the world uses the Japanese yen as its currency. The yen is under the control of the Bank of Japan. Every investor who does forex trading online is aware that the JPY trades as a "carry-trade" component. The JPY competes with currencies that offer higher yields despite having a low interest rate. They are the Australian and New Zealand dollars, as well as the British pound. Forex traders must consider technical aspects over the long run because the underlying has a propensity to behave messily.
  1. The Pound of England
The British pound is governed by Bank of England regulations (GBP). Because you can deposit any profits you make directly into your bank account, you can trade currencies without having a demat account. The currency itself is the asset, and while the British pound is more erratic than the euro, it might still be quite profitable for you. It is frequently referred to as the "cable" or "pound sterling," and it tends to fluctuate more during the day. Additionally, a 20 pip narrow range with 100–150 pip swings is possible for the GBP. Since the British pound/Swiss franc and the British pound/Japanese yen are two popular pairs for international online forex trading, The currency's volatility is likely to be at its highest during US and British trading hours. In Asia, volatility is at its lowest during trading hours.
Open a demat account online with Zebu and begin your currency trading journey right away if you want to trade currencies in India.
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How to Make the Most out of Technical Analysis

What Is Technical Analysis?

Technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity, such as price movement and volume. Unlike fundamental analysis, which attempts to evaluate a security's value based on business results such as sales and earnings, technical analysis focuses on the study of price and volume.

Understanding Technical Analysis

Technical analysis tools are used to scrutinize the ways supply and demand for a security will affect changes in price, volume, and implied volatility. It operates from the assumption that past trading activity and price changes of a security can be valuable indicators of the security's future price movements when paired with appropriate investing or trading rules.
It is often used to generate short-term trading signals from various charting tools, but can also help improve the evaluation of a security's strength or weakness relative to the broader market or one of its sectors. This information helps analysts improve their overall valuation estimate.
Technical analysis as we know it today was first introduced by Charles Dow and the Dow Theory in the late 1800s. Several noteworthy researchers including William P. Hamilton, Robert Rhea, Edson Gould, and John Magee further contributed to Dow Theory concepts helping to form its basis. Nowadays technical analysis has evolved to include hundreds of patterns and signals developed through years of research.

Using Technical Analysis

Professional analysts often use technical analysis in conjunction with other forms of research. Retail traders may make decisions based solely on the price charts of a security and similar statistics, but practicing equity analysts rarely limit their research to fundamental or technical analysis alone.
Technical analysis can be applied to any security with historical trading data. This includes stocks, futures, commodities, fixed-income, currencies, and other securities. In fact, technical analysis is far more prevalent in commodities and forex markets where traders focus on short-term price movements.
Technical analysis attempts to forecast the price movement of virtually any tradable instrument that is generally subject to forces of supply and demand, including stocks, bonds, futures, and currency pairs. In fact, some view technical analysis as simply the study of supply and demand forces as reflected in the market price movements of a security.
Technical analysis most commonly applies to price changes, but some analysts track numbers other than just price, such as trading volume or open interest figures.

Technical Analysis Indicators

Across the industry, there are hundreds of patterns and signals that have been developed by researchers to support technical analysis trading. Technical analysts have also developed numerous types of trading systems to help them forecast and trade on price movements.
Some indicators are focused primarily on identifying the current market trend, including support and resistance areas, while others are focused on determining the strength of a trend and the likelihood of its continuation. Commonly used technical indicators and charting patterns include trendlines, channels, moving averages, and momentum indicators.
In general, technical analysts look at the following broad types of indicators:

Underlying Assumptions of Technical Analysis

There are two primary methods used to analyze securities and make investment decisions: fundamental analysis and technical analysis. Fundamental analysis involves analyzing a company’s financial statements to determine the fair value of the business, while technical analysis assumes that a security's price already reflects all publicly available information and instead focuses on the statistical analysis of price movements.
Technical analysis attempts to understand the market sentiment behind price trends by looking for patterns and trends rather than analyzing a security's fundamental attributes.
Charles Dow released a series of editorials discussing technical analysis theory. His writings included two basic assumptions that have continued to form the framework for technical analysis trading.
  1. Markets are efficient with values representing factors that influence a security's price, but
  2. Even random market price movements appear to move in identifiable patterns and trends that tend to repeat over time.2
Today the field of technical analysis builds on Dow's work. Professional analysts typically accept three general assumptions for the discipline:
  1. The market discounts everything: Technical analysts believe that everything from a company's fundamentals to broad market factors to market psychology is already priced into the stock. This point of view is congruent with the Efficient Markets Hypothesis (EMH) which assumes a similar conclusion about prices. The only thing remaining is the analysis of price movements, which technical analysts view as the product of supply and demand for a particular stock in the market.
  2. Price moves in trends: Technical analysts expect that prices, even in random market movements, will exhibit trends regardless of the time frame being observed. In other words, a stock price is more likely to continue a past trend than move erratically. Most technical trading strategies are based on this assumption.
  3. History tends to repeat itself: Technical analysts believe that history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable based on emotions like fear or excitement. Technical analysis uses chart patterns to analyze these emotions and subsequent market movements to understand trends. While many forms of technical analysis have been used for more than 100 years, they are still believed to be relevant because they illustrate patterns in price movements that often repeat themselves.3

Technical Analysis vs. Fundamental Analysis

Fundamental analysis and technical analysis, the major schools of thought when it comes to approaching the markets, are at opposite ends of the spectrum. Both methods are used for researching and forecasting future trends in stock prices, and like any investment strategy or philosophy, both have their advocates and adversaries.
Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. Fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies. Earnings, expenses, assets, and liabilities are all important characteristics to fundamental analysts.
Technical analysis differs from fundamental analysis in that the stock's price and volume are the only inputs. The core assumption is that all known fundamentals are factored into price; thus, there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value, but instead, use stock charts to identify patterns and trends that suggest what a stock will do in the future.

Limitations of Technical Analysis

Some analysts and academic researchers expect that the EMH demonstrates why they shouldn't expect any actionable information to be contained in historical price and volume data; however, by the same reasoning, neither should business fundamentals provide any actionable information. These points of view are known as the weak form and semi-strong form of the EMH.
Another criticism of technical analysis is that history does not repeat itself exactly, so price pattern study is of dubious importance and can be ignored. Prices seem to be better modeled by assuming a random walk.
A third criticism of technical analysis is that it works in some cases but only because it constitutes a self-fulfilling prophecy. For example, many technical traders will place a stop-loss order below the 200-day moving average of a certain company. If a large number of traders have done so and the stock reaches this price, there will be a large number of sell orders, which will push the stock down, confirming the movement traders anticipated.
Then, other traders will see the price decrease and also sell their positions, reinforcing the strength of the trend. This short-term selling pressure can be considered self-fulfilling, but it will have little bearing on where the asset's price will be weeks or months from now.
In sum, if enough people use the same signals, they could cause the movement foretold by the signal, but over the long run, this sole group of traders cannot drive the price.

Chartered Market Technician (CMT)

Among professional analysts, the CMT Association supports the largest collection of chartered or certified analysts using technical analysis professionally around the world. The association's Chartered Market Technician (CMT) designation can be obtained after three levels of exams that cover both a broad and deep look at technical analysis tools.4
The association now waives Level 1 of the CMT exam for those who are Certified Financial Analyst (CFA) charterholders. This demonstrates how well the two disciplines reinforce each other.5

What Assumptions Do Technical Analysts Make?

Professional technical analysts typically accept three general assumptions for the discipline. The first is that, similar to the efficient market hypothesis, the market discounts everything. Second, they expect that prices, even in random market movements, will exhibit trends regardless of the time frame being observed. Finally, they believe that history tends to repeat itself. The repetitive nature of price movements is often attributed to market psychology, which tends to be very predictable based on emotions like fear or excitement.

What's the Difference Between Fundamental and Technical Analysis?

Fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock. The core assumption of technical analysis, on the other hand, is that all known fundamentals are factored into price; thus, there is no need to pay close attention to them. Technical analysts do not attempt to measure a security's intrinsic value, but instead, use stock charts to identify patterns and trends that might suggest what the security will do in the future.

How Can You Learn Technical Analysis?

There are a variety of ways to learn technical analysis. The first step is to learn the basics of investing, stocks, markets, and financials. This can all be done through books, online courses, online material, and classes. Once the basics are understood, from there you can use the same types of materials but those that focus specifically on technical analysis.
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