DEMONS OF TRADING | Don't Think Like This
Have you ever wondered what helped all those professionals of Wall Street become successful? You will be surprised, but the key to their reached heights is hidden in their mistakes. Yes, that is right. Most professional and successful traders made many mistakes before they got to the top.
Making mistakes is ordinary and sometimes even necessary because you learn when you make them. The crucial point of this idea is never to repeat those mistakes because some errors may cost us a fortune. That is why we gathered 10 most common trading mistakes to prevent you from faults and losses.
Little preparation
Entry to the Forex market is relatively easy, so people have a light-minded attitude towards trading knowledge. Beginner traders, especially, think that theory is not a big deal, and they will be able to build it up without a peep. However, it does not work this way.
Miscalculating the risk/reward ratio
For some reason, many traders believe that higher win trades are more profitable than lower ones. Sometimes, this idea even gets paid off, and due to blind luck, trades, where the potential risk exceeds the reward, benefit. However, in most cases, such trades are a sure way to lose money in the longer term.
Avoiding risk management
Risk management should be the core of your trading because it helps cut down losses. Trading without risk management is like skydiving without a parachute.
Neglecting market events
Relevant market news is essential as economic events influence the direction of trading during the day. So, if you are not aware of the financial reports or earnings, you might skip the volatility.
To win the game, you need to develop your thinking and how you participate in the game. You are in a market trading against professional traders. Your goal is to think like a professional. That is the only way to survive in this game.
Dear followers, let me know, what topic interests you for new educational posts?
Trading Plan
Technical Analysis !!!👨🏫Hello, my trader friends🙋🏻.
I want to tell you the story of Technical Analysis, its advantages & disadvantages.
We're even gonna learn about its branches.
Like any other science, Technical Analysis has come a long way, and it's still evolving. But why should we learn it and know it well?🤷🏻
When you're trading, you may be afraid or greedy. But how do professional traders control these two?🤔
Let me start with a simple example.
If someone turns off the lights & challenges you in a new room, you will feel scared or lack confidence because you don't know that place. But if the challenge happens in your bedroom or home🏡, you'll feel more powerful 💪🏻 and confident because this environment is familiar & you can act better.✅
Fear is caused by the unknown. When you don't know this market, you can't get good results (or at least permanent good results).
So follow this page to conquer all the peaks⛰️ of Technical Analysis together🙌🏻 and learn from A to Z of it.
Also, I'm a fellow traveler on this route🛤️, not your tour guide.
So, if you have any questions, ask me in the comments💬.
My trader fellas, let's take one step👣 at a time because taking long and hurried steps will only hit you harder. I'm with you in all these steps🪜 & get started with the first type of market analysis.
Technical Analysis is old. I mean, it's almost 300 years old📜, but it doesn't like to talk about its age, so we couldn't find the exact information about its birth date🗓️😑.
Maybe it’s from Japan⛩️🎌 and was born in the 18th century, or perhaps its date of birth is in the Middle Ages.
But there is some more information that I'm sure about. For example, in 1879, the Technical Analysis found a friend by the name of Chart📈, and they have not separated until today.
Let's skip this story and be serious☺️. Technical analyzers believe that everything is in the Chart.
In Technical Analysis, there is all the necessary information for trading, such as entry points, exit points, market volume, stock prices in the past and present, etc. (The Chart is a complete encyclopedia for Technical analyzers!!🤦🏻😶 )
There is another type of analysis that examines the available information about a stock (from the founder of a stock or company to the cost and income and even the company manager's records), called Fundamental. But the Technicalists say that even some of the Fundamental information is in the Chart! 😐
Overall, Technical and Fundamental are both complementary to each other and opposite to each other. But both are related to the Chart. (These three have a complicated relationship; I mean, there is a love triangle, so we should stay out of it !!🤫😂 )
Let's skip the joke. All these things are just like the gears⚙️ of a car, but it's not enough. You need to follow more rules in the market to pass the finish line🏁 with your trading car🏎️ . Don't worry cause I'm gonna tell you everything you need to know to win🏆 this trade racing with your strategy car.
Now that we have learned a little about the history of Technical Analysis, it is better to learn about its contents.
The price chart, our most important resource and tool in Technical Analysis, consist of the price-time, Charts, and Candles.
But these candles🕯️ existed 100 years before bar and dot charts.📊📉
In 1700, a Japanese man named Huma realized that the price of rice depended on the emotions of traders in addition to supply and demand.
Candles show these feelings with their colors.
For example, the green candles🟢 show trust and good feelings among people who invested in a stock.🤑
But red candles🔴 indicate doubts or hopelessness of people about a stock, and they sell it.😞
I don't know why I remembered Moody's octopus doll🐙 :)
But candles tell you the feelings of other traders just like these dolls. But only its color is not essential.
Can you guess the other important factors about candles? I will tell you the rest of them soon.😉.
Have you heard that history repeats itself?
By looking carefully🧐 at the old charts, some creative people found that the prices behaved similarly to their past.
They realized that the candles make interesting shapes next to each other, and they made these shapes repeatedly in different periods.🔁
They formed different geometric shapes and patterns & continued to make these shapes until today :)
Let's accept that the Chart is creative and artistic! 🎨🖌️😊
For example, they found a shape called a Head & Shoulders Pattern. This type of pattern will cause a downward trend⤵️ in the Chart.
I tried to find it & place it on someone's Head & Shoulders to remember it better. 😁
Many patterns can be found in any chart, and I have already taught the reversal patterns in my previous posts, But I want to go over all the patterns in detail again in the future, so let's dive into the other contents of Technical Analysis.👇
Using formulas, mathematical🧮 ratios, and advanced calculations, indicators were created that can generally show the market's present and past and give a relative opinion about the future (Please don't get the indicators wrong with magic 8 ball🎱 or Professor Dumbledore's wand✨. )
Let's be serious about it. Maybe you know that indicators depend on the two factors of time and place of price.
In terms of time🕦, they are divided into two categories: leading and lagging.
In terms of price movement💹, they are divided into three categories: trend indicators, oscillators, and volume indicators.
The indicator that I made the above meme for is a leading oscillator.
Now it’s time to go for the other various tools that are made by using numbers🔢 and people’s actions in the market.
A person named Nelson Elliott made a useful tool, although, after his death, many people worked on this tool and improved it until today it reached us, but we are going to discuss it better in the following posts like the rest of the contents of Technical Analysis.😉
But I have to say Elliot believed that the market is not disordered and always repeats a repetitive cycle, and Eliot called these repeated movements waves.
According to him, if you can perfectly identify the repeating patterns in the price, you can predict how the price will change (or not change) in the next phase.
Eliot published his experiences and theories in a book called the waves principle, which I recommend if you want to get good information in this field; it's better to start from the origin of this theory.
I think there is no better definition for the word "Wave" than sea waves🌊, and I tried to draw Elliot waves like sea waves reaching the shore. 🏖️
In the end, I want to say that whatever style of analysis you have or whatever type of Chart you use, in the future, this machine will not go the right way without following a series of principles.
Suppose you have the best car in the world, but you neither know how to drive nor the rules. It can be guessed that you will either crash with someone or break the car💥.
You should have risk management along with your trading system, and don't forget that no trading system is perfect.🙅🏻
It is better to try each method on demo accounts before making real trades.
Of course, you can count on me and ask any questions you may have.🙂💭
In the following posts, I’ll talk more about the things that have been said and introduce you to good trading systems that can be obtained from any method.
I'm by your side so that if you are a beginner, you can find your own way, and if you know the market, we can learn the basics of this market better & together🤝🏻.
Wish you happiness, health & success guys🙋🏻.
Trading Psychology 101 | FEAR (1/2)A bit of a different video for you..
Thought i should talk about a sensitive subject here..
Psychology in trading and the key factors that you may need to finally BECOME a better trader..
In this part, I talk about FEAR and FOMO. Also, I added a more sensitive part, which is feeling burnt out and ways to overcome that.
Hope you find this helpful!
Heads or Tails?What does TRADE have in common with heads and tails?
Well, many use simple randomness to define whether they should buy or sell and this is directly linked to heads or tails, but the point I want to address is the following: a coin with two sides has a 50% chance of falling either on one side or on the other, either heads or tails, but if you decide to toss the coin 10 times up, it could land 10 times heads or even 7 times, and at that moment you might wonder, but the probability is not 50%, shouldn't we have 5 times heads and 5 times tails? Yes, but the short-term randomness makes the low probability happen! Now if you toss that coin 10,000 times, the law of large numbers is likely to make the 50% probability dominate the outcome!
But where does this fit into TRADE?
Basically in all operating models, if you operate you have a hit rate allied with a ratio between risk and return, these two things are directly linked, many seek a higher hit rate, others seek more PayOff, but regardless of your profile, from your approach you have to know that a model in the short term does not become a winner or a loser, you need a historical basis of how your approach behaves and then, yes, decide to operate using this strategy.
Many say that with a strategy with 2x your risk and a hit of 50% you will be profitable, statistically this is true, but are you willing to faithfully follow this model even taking CONSECUTIVE STOPS?
We should be, but those who trade know that a sequence of Stops does not generate a pleasant feeling! And it's precisely that feeling that can leave you in the middle of the way!
See below the SHARP index many do not know, but I will present here, what is the SHARP index? The Sharpe Ratio is used to show to what extent the return on an investment compensates the investor for taking risks on his investment. (I recommend using it in your models or in your performance reports).
When using the formula you find a result called SQN
See the example of heads or tails in practice, with a positive risk/return ratio
See that only with time you will be able to validate a winning strategy, and in the middle of the way it is possible that you will have some Stops, and this should refine your way of operating, in order to find points to be adjusted, many books define that time takes you are the excellence, but the biggest illusion that the market generates is that of getting rich fast, contradictory isn't it, this makes the journey of a trader with frustrations and disbelief difficult.
But few are willing to go through this journey, as if that were not enough, you will find that there are no facilities, many preach that you must choose between Access Fee or PayOff most of the time, these they are opposite characteristics in objective models, but the secret is simple!
You need to find balance
See this great example, most people who operate the market have already learned about the EMA 9 or MA 9 anyway, it's an easy model to learn that promises good profits, but when it hits, but what few told you is that it rarely hits ! Even so, it can be a profitable model in several assets.
In my tests, the model has an average success rate of 31%, unfortunately few people have the emotional energy to use this, since they give up even before the model reverses the capital curve to the positive side.
See this model in the same example of the difference between few trades vs many trades
Here it is clear the importance of time and consistency in defining a model and faithfully executing it!
So what do we learn from this?
First: The law of large numbers rules the market.
Second: As much as the PayOff is high, you may not have your emotions trained enough to withstand a losing streak, many will say "But in this model I'm losing with a spoon and winning with a bucket", that seems to make sense, but in reality practice, it's more painful than it looks.
Third: Be willing to operate your way, know that your emotional profile is unique, so use techniques and refine your market reading, beware of false simplicity or the highest degree of complexity to operate the market, be willing to see the that makes sense to you and metric it to use with confidence.
Fourth: Trading the market is like learning to walk, you need help at first, but then you need to fall over your falls and gain balance, it's the same here, you'll make mistakes, but that's the only way you'll learn.
I hope I helped you with this topic, if you liked it, leave your BOOST to support this idea, and also leave it here in the comments if you are from the PayOff team or the Hit Rate.
How To: Find Good Traders To Follow & Who Picked the BTC Crash !Just thought I would show you an interesting way to see who is making the right calls before a stock or (crypto)currency makes a significant bullish or bearish move.
With so many people posting on TradingView it can sometimes be hard to know who to follow.
This is a way to see very simply who is making more accurate calls and best of all it IS NOT influenced by their number of posts or followers or reputation points etc.
It is a great way to discover new users brand new to the site - or more established ones who have been on here for years. You can have one post or 100 and still stand out.
If you find the same person consistently making the "right" calls and you like their analysis and how they trade then you can very easily follow them.
(PS not really a crash, more of some profit taking and a pullback to support. Be interesting to see what happens over the next few days though.)
Trading Strategy. Basic principlesThe following clearly outlines my trading strategy, every day I seek out deals based solely on this strategy.
Without regular backtesting (trade by trade), the results of trading are random and uncertain. The cumulative outcome of the R-multipliers should be positive, but, if a routine backtest is conducted (after executing numerous trades based on sequential trading processes that offer us an edge) The primary focus of our trading strategy is the risk-to-reward ratio (RR), where a large number of losses can be offset by a single profitable trade.
- Entry requirements are sufficient to prevent market noise.
- Position sizing ensures we have a consistent (fixed) risk every transaction, and we adhere to this algorithm on each and every trade.
- Maintaining the advantage afforded by our trading method requires mental preparation for the fluctuations that will effect our account balance. Short-term losses should have no psychological impact!
Entry Standards:
We join the market based on key supply and demand sectors that play a significant impact in the structure of the market. We identify them by emphasizing the M15, H4 points of interest responsible for the structure's collapse.
Once the price reaches our point of interest, we will watch for a reaction in this area, which will indicate if the price intends to move higher or lower. The objective is to identify where a substantial position was taken and wait for the price to return to that point in order to reduce the repercussions and ensure the price follows its actual intentions.
Countertrend:
- Monitor price action and reaction points closely.
- Do not be greedy; if required, close such deals sooner, but not before 3R; bring the trade to the following supply/demand zone.
- Keep a close eye on price movement and response points when entering a trend.
- Enter a trade based on the candle that triggered the CHoCh, move it to the next high/low level, and partially close if momentum appears to be waning.
- There is no need to move the SL aggressively; instead, let the price to fluctuate and move the entry to break even only after the initial LH/HL is created.
4H Definition of Market structure
Determine the price's response to important zones on a daily/weekly basis.
How should I mark the chart?
4H
- swing highs and lows
- B.O.S
- Supply and Demand zones
- Liquidity H/L, EQH/EQL, internal liquidity trend
- Orderflow structure HL - HH or LH - LL
15M
How should I mark the chart?
- fluctuate between highs and lows
- ChoCh/BOS
- Demand/supply zones
- Liquidity, liquidity zones/points, strong/weak H/L, liquidity before poi
- Premium/Discount - short discount and long premium.
- Order flow
1-5M
How should I mark the chart?
- Liquidity grab (sweep)
- Mitigation/RTO
- S/D flip
How to become a trader? (Part 1)How to become a trader? (Part 1)
1. What is trading?
We all know what trading is. Almost all of us had someone around us who was trading, or maybe we heard the names of people like Warren Buffett or Elon Musk. But what we don't know is that trading is not just opening a chart and drawing a line and finally buying a stock or something. Trust me, It is more complicated than that.
In this market, for 95% of people, there will be nothing but financial loss. But those 5% are the ones who get the secret of trading. You probably won't recognize those 5%, and they won't want to introduce themselves either. But if you persevere and put in enough effort and a lot of time, and then you go through more persistence and difficulty and loss of capital and disappointment, it is possible, just possible, that you will become one of those 5%.
Come with me to find out what we should do.
2. Where do we start?
An important question will arise for all people who are new to trading. "Where to start?"
In the first few days, you will see a lot of stuff. And for sure, you will be confused like me. There are many things to learn. YouTube, books, even private training. But what do you get in the end? Well, you find a trading method and trade with it for some time. Then you start losing money. Then you go to another method and you lose again. And this cycle continues like this (this is the first hard part that I mentioned above). Later, you will learn about capital management and the psychology of trading. And by combining these three things and, of course, enough time, you will move towards becoming a trader. Therefore, becoming a trader is not something that can be achieved overnight and more importantly, it is not something that can be given to you. You have to achive it.
3. Strategy
The first place you should start is formulating a strategy. Some people think that everything boils down to strategy. So when they can't make money, they try to find a more sophisticated strategy. But this is wrong. Strategy is just the beginning. I will talk more about this later. But before that, let's talk about the components of strategy.
We can divide each strategy into 5 parts: Trend, Area of Value (AOV), Trigger, Stop loss (SL) and Target point (TP).
A. Trend: The first and most important part. Trend means the next move will be up or down. Your tool to find the trend can be your eyes, trend line and different indicators. The most important thing to learn here is that no one knows which way the price will move. All we know and get through our tools is which direction the price is "more probable". The second point is that the trend is not about the past movement, but it's representative of the next movement! So don't mix them up.
B. Area of Value (AOV): Let's assume that the price of a stock is going to increase, and in other words, it wants to find an up trend. Where will your entry area be? There are useful tools such as trend line, moving, Fibonacci, candlestick, support and resistance areas and etc. for this.
C. Trigger: You will need a confirmation to enter when the price is in the value zone. I recommend you to use multi-time frame and look for entry in lower time-frames. The tools are the same as before.
D. Stop loss: Your entire strategy depends on this component. Most people do not use the limit because they do not know how to use it. And they are also afraid of losing. The best traders also make mistakes and control their mistakes by limiting their losses. The limit of loss is your friend. Learn how to make the most of it.
E. Target point: We humans have a good tolerance in the face of difficulties. But can we stop ourselves from seeing profit? The second stage is difficulty, patience and tolerance to achieve your desired profit. At the same time, knowing that the conditions may change, and you may not even get the profit you have now.
There are more complex strategies that combine all of the above. Like Elliot, Ichimoku and etc.
The important thing about the strategy is that a super complex strategy is not necessarily better than a simple strategy. Sometimes a simple trend line can give you a profit that dozens of complicated indicators cannot give you. I am not saying that complexity is worse. In fact, the more complicated it is, the more accurate your position and understanding of the subject will be. But the problem is that our mind does not have the ability to analyze all the possibilities. That's why, don't look for a super-complicated method produced by company X. Choose the simplest method that works for you, and you can communicate with it more easily.
Each of those 5% people choose a method and become a master in it. So it doesn't matter what the method is. It is important that it is profitable. It matters how you implement it.
In the next part, I will talk about capital management and market psychology.
Good luck.
How to double your small ($250) trading account trading Bitcoin How to Double your Small ($250) Trading Account Trading Bitcoin
I started a degen account with $250 and almost doubled it in 4 days making about 6 trades. This strategy is not Financial advice and I'm only illustrating what I have learnt trading this way. This is the first video in the series and I'll be continuing the series , updating you on progress, winners, losses, my trading journal and some live trading, so make sure to Sub, like comment and share.
I show you how I entered my current trade, where I am looking to take profits and show you my pnl on Bybit.
Not Financial Advice. DYOR. Papertrade before trading with real money.
Hope you have a profitable trading day!
Shawn
How to auto-execute TradingView alerts on exchangeIf you have your own strategy in TradingView, you can set up opening trades on the exchange in a couple of clicks.
Next, you’ll see an example of how we set up alerts in 5 minutes, and how orders were opened and closed on the exchange. To do this, we will create alerts and a bot for alerts on our platform.
Step 1. Set the alert parameters.
Go to our terminal, select the Algotrading section → Trading Robots → Add strategy button.
You will see an interface for creating and customizing your bot, where you need to perform the Basic settings and proceed to setting the parameters for sending signals to the system.
To do this, go to the Sending signals block.
The TradingView signal source is already selected.
Copy the Request URL.
On the right side of the window, we see the code with the request parameters. You can add other parameters with checkboxes, we have added Stop Loss and Take Profit. Copy and save the code.
Step 2. Launch the bot.
Next, find the created bot in the All robots section and launch it in Work trading mode according to the manuals in the terminal.
Step 3. Set up an alert in TradingView.
Go to TradingView, open the Alerts section and set up an alert, for example, for opening an order (Buy) based on a simple indicator - in our case, Crossing.
Paste the code that we got in Step 1 in the Message field.
Paste the request URL we got in Step 1 in the Webhook URL field and Save.
The alert has been successfully created and is active on TradingView in the Alerts section.
Step 4. Monitor the orders.
The alert triggers and ... Go to the Alerts log, where we see a notification about executed alerts from TradingView.
We can check in the bot on our platform, open the Trades tab - we see open orders.
And we see that alert orders are open on the exchange.
Since we set Stop Loss and Take Profit, the orders were not only opened, but also closed. In the platform we can find deals, on the exchange we can find orders with the Sell parameter.
We hope that now trading with TradingView will become even easier. We will release new and more detailed articles for you on using webhooks so that the strategy created here works 24/7 without your participation.
Learn Why Most of the Traders Fail
The evidence suggests that only a very small proportion of day traders makes money year over year.
There are certain patterns which may separate profitable traders from those who ultimately lose money. And indeed, there is one particular mistake that in our experience gets repeated time and time again. What is the single most important mistake that led to traders losing money?
Here is a hint – it has to do with how we as humans relate to winning and losing.
Our own human psychology makes it difficult to navigate financial markets, which are filled with uncertainty and risk, and as a result the most common mistakes traders make have to do with poor risk management strategies.
Traders are often correct on the direction of a market, but where the problem lies is in how much profit is made when they are right versus how much they lose when wrong.
Bottom line, traders tend to make less on winning trades than they lose on losing trades.
Humans aren’t machines, and working against our natural biases requires effort. Once you have a trading plan that uses a proper reward/risk ratio, the next challenge is to stick to the plan. Remember, it is natural for humans to want to hold on to losses and take profits early, but it makes for bad trading. We must overcome this natural tendency and remove our emotions from trading.
That will help you to be a consistently profitable trader.
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Do That BEFORE You Start REAL ACCOUNT Trading
Here is the list of thing that you should learn in advance before you start trading on a real account.
1) Open a demo (practice) account and learn to execute trades without making errors
2) Study the methods of great traders and financial minds throughout history - Jesse Livermore, W D Gann, Charles Dow/Dow theory, Paul Tudor Jones,Richard Wyckoff.
Learn their methods and employ them. Learn their mistakes and avoid them.
3) Focus on learning, not winning. Forget about money and profits. Think about developing a winning strategy and a winning trading mindset. Always be open-minded. Observe. Be flexible.
4) I recommend reading the following books. These books will help you to start to think like a trader and realize what you are getting yourself into:
a) "Reminiscences of a Stock Operator" by Edwin Lefevre
b) "Art of War" by Sun Tzu (Not a trading book but an old book on rules of war and how to protect yourself from being outsmarted and defeated by your enemies)
c) "The Trading Methodologies of W.D. Gann" by Hima Reddy
d) "Time Compression Trading: Exploiting Multiple Time Frames in Zero Sum Markets" by Jason Alan Jankovsky
e) "Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude" by Mark Douglas
5) Watch YouTube videos. Absorb all the info you can as the more you know, the more the pieces of the puzzle fit together later on. You can learn the basics of trading on your own and then when you are ready to take your trading to the next level.
To win the game, you need to develop your thinking and how you participate in the game. You are in a market trading against professional traders. The beginning traders in the market are not your competition-they are incidental. You need to trade with the professional traders who run the market.
I wish you luck on a battle field!
Dear followers, let me know, what topic interests you for new educational posts?
Learn The Only Proven Way to Become Rich
1. Money mindset is everything
You need to have a positive money mindset when it comes to creating wealth. Everyone carries a money story and it’s your job to understand what yours is and if it’s holding you back. Reframing your story to a millionaire’s mindset is essential for success because rich people think differently. How to get rich can’t be a passing phase in your life; it takes work and commitment.
2. Millionaires still budget
Hard to believe, but it’s true. Even millionaires follow a budget. The biggest secret on how to get rich and stay rich is spending less than you bring in. There will always be wants that exceed budget limits, even for millionaires, because there is not an unlimited supply of money.
3. Money management is key
Good money management is so important to get rich and stay rich. Money management is a behavior and habit. You need to be mindful of where you are investing and spending your money. There is a specific strategy to growing your wealth and maintaining it and you must follow it like you do a workout regime.
4. Invest your money for growth
Investing in assets that will appreciate over time and provide you with a return on your investment such as dividend or interest payments is smart. The goal is to build your asset portfolio and make it so strong that you can live off the passive income in your retirement.
5. Build your business around your personal financial goals
As a business owner you have more control over the money you make versus being an employee with a set salary. If you want more money in your pockets, you can increase your revenue and your profit margins to ensure you are taking home more money. The more profits you have in your business the more you can pay yourself a dividend or bonus, depending on the legal structure of your business.
6. Create multiple income streams
Smart business owners create more than one income streamas it protects them from fluctuations in the market. That means if one source of revenue dries up due to market conditions, other sources of income can protect you from a loss.
7. CONCLUSION:
The bottom line is that knowing how to get rich is something that is learned. There are no guarantees that if you start a business that you will get rich because even the best business ideas fail due to poor execution. But if you educate yourself and get help in making your business a success, you will increase your chances of success.
What do you want to learn in the next post?
Learn The HIDDEN Costs of Trading
In this educational article, we will discuss the hidden costs of trading.
1 - Brokers' Commissions
Trading commission is the brokers' fee for opening a trading position.
Usually, it is calculated based on the size of the trade.
Even though most of the traders believe that trading commissions are too low to even count them, the fact is that trading on consistent basis and opening a couple of trading positions weekly, the composite value of commissions may cut a substantial part of our profits.
2 - Education
Of course, most of the trading basics can be found on the Internet absolutely for free.
However, the more experienced you become, the harder it is to find the materials. So you usually should pay for the advanced training.
Moreover, there is no guarantee that the course/coaching that you purchase will improve your trading, quite often traders go through multiple courses/coaching programs before they become consistently profitable.
3 - Spreads
Spread is the difference between the sellers' and buyers' prices.
That difference must be compensated by a trader if one wished to open a trading position.
In highly liquid markets, the spreads are usually low and most of the traders ignore them.
However, being similar to commissions, spreads may cut the substantial part of the overall profits.
4 - Time
When you begin your trading journey, it is not possible to predict how much it will take to become a consistently profitable trader.
Moreover, there is no guarantee that you will become one.
One fact is true, you should spend a couple of years before you find a way to trade profitably, and as we know, the time is money. More time you sacrifice on trading, less time you have on something else.
5 - Swaps
Swap is the fee you pay for transferring a position overnight.
Swap is based on a difference between the interests rates of the currencies that are in a pair that you trade.
Occasionally, swaps can even be positive, and you can earn on holding such positions.
However, most of the time the swaps are negative and the longer you hold your trades, the more costly your trading becomes.
The brokers' commissions, spreads and swaps compose a substantial cost of our trading positions. Adding into the equation the expensive learning materials and time spent on practicing, trading becomes a very expensive game to play.
However, knowing in advance these hidden costs, the one can better prepare himself for a trading journey.
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
Leverage in Forex Trading | Your Main Tool
“Leverage” means using a small amount of your own money in order to control a much larger amount of money. Typically, you borrow the remaining amount through your broker.
For example, say you want to control a $50,000 position. Your broker might put aside $500 of your own money and borrow the remainder. You now have control over the $50,000 with just $500 from your own account, so your leverage ratio is 100:1.
Now, let’s say the $50,000 investment rises by $500, so the full position is now worth $50,500. If you were liable for the full $50,000 (representing a 1:1 ratio), this is only a 1% return on your investment. However, since you only put in $500 of your own capital, the $500 increase represents a 100% return on your investment – that’s way more exciting!
Now, it’s important to understand that this cuts both ways. If you lost $500 instead of gaining $500, you would see a -100% return on your investment. Yikes! If you had a 1:1 ratio and put in the full $50,000 you would only see a -1% return.
How Much Can You Leverage in Forex?
Before you open an account with a broker, you’ll want to check the maximum leverage ratio that you’ll be able to use. The higher the ratio, the bigger your potential gains or losses. Brokers will usually offer 50:1, 100:1, 200:1, or 400:1 ratios.
A typical ratio on a standard lot account is 100:1, and a mini lot account will often offer a 200:1 ratio. If you start trading at 400:1, be wary of using small deposits to control large capital, as these can disappear quickly with the volatility of large sums. Lower leverage keeps you safer from mistakes, while higher leverage could bring in higher rewards.
How Leverage Affects Your Trading ✅
As we’ve seen, leverage is a powerful tool that can help you win big in the forex market. You can use less capital to control greater positions, giving you flexibility and amplifying your profits. However, it can just as easily amplify your losses.
At very high levels, leverage starts to damage your odds of success. Transaction costs represent a higher percentage of your margin the greater your position is. This means that transaction costs already put you at a disadvantage with excessively high leverage.
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Hey traders, let me know what subject do you want to dive in in the next post?
Are you prepared to lose? (and what to do if you are not)A new trader, let's call her Sarah, has just started trading in the crypto market. She has been reading articles and watching videos about trading, but hasn't taken the time to develop a solid trading plan, or to gain a good understanding of the markets and underlying assets she is trading.
Sarah sees bitcoin's value is going up, she doesn't do any further research or analysis, she doesn't set a stop loss or take profit level, she just buys bitcoin, with the expectation that she will make a quick profit.
Unfortunately, the value of bitcoin doesn't perform as well as Sarah had hoped, and instead of going up, it starts to go down. Sarah gets anxious and starts checking the bitcoin's value frequently, and since she didn't set a stop loss, she watches as her position continues to lose value. Eventually, the bitcoin loses so much value that Sarah is forced to sell it at a large loss.
Feeling disheartened, Sarah starts to second-guess herself and her abilities as a trader. She didn't have a plan or a strategy, didn't manage her risk properly, and didn't have a clear understanding of the markets and the underlying asset. She didn't prepare for the possibility of losses and didn't have a plan for exiting losing positions.
😭😖😞Unfortunately, the story above is very common in trading, so how can we prepare for losing trades?
☝🏽 Preparing for the possibility of losses is an important part of risk management and can help traders to minimize the impact of losses on their trading capital. Some ways to prepare for the possibility of losses include:
1️⃣ Setting realistic trading goals: Traders should set realistic goals that take into account the inherent risks of trading and the potential for losses. By setting realistic goals, traders will be better prepared to handle losses when they do occur.
2️⃣ Establishing a risk management plan: This includes determining the appropriate size of each trade, placing stop-loss orders, and evaluating the potential reward relative to the potential risk. This can help to limit potential losses and protect trading capital.
3️⃣ Maintaining a proper risk-reward ratio: This means that the potential reward of a trade should be greater than the potential loss. This helps ensure that the potential reward justifies the potential risk.
4️⃣ Diversifying the portfolio: By spreading capital across a variety of different markets and instruments, traders can reduce overall portfolio risk and minimize the impact of losses in any one market or instrument.
5️⃣ Building a trading cushion: This means keeping a reserve of capital that can be used to absorb losses and maintain the trader's ability to continue trading. This cushion should be large enough to withstand a series of losses, but not so large that it affects the trader's ability to trade effectively.
6️⃣ Emotionally preparing for losses: It's important to remember that losses are a normal part of trading and to not let them affect you emotionally. By preparing emotionally for the possibility of losses, traders will be better able to handle them when they occur.
7️⃣ Have a plan for exiting losing positions: Having a plan for exiting losing positions will help to minimize the impact of losses on the portfolio. This could include setting a stop loss or taking profits at predetermined targets.
⚠️ Remember, it's important to accept that losses are a normal part of trading and that they are not a reflection of the trader's ability. By preparing for the possibility of losses and implementing a solid risk management plan, traders can minimize the impact of losses and increase the chances of long-term success.
I hope this has been informative to you, and if it was, please leave a like or a comment below.
👇🏽👇🏽👇🏽
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Learn Why Do You Need a Stop Loss 🟥
Hey traders,
Talking to many struggling traders from different parts of the world, I realized that the majority constantly makes the same mistake: they do not set a stop loss.
Asking for the reason why they do that, the common answer is that
these traders consider the manual position closing to be safer, implying that if the market goes in the opposite direction, they will be able to much better track the exact moment to cut loss.
In this article, we will discuss why it is crucially important to set a stop loss and why it is the number one element of your trading position.
First of all, let's discuss what is a stop loss. By a stop loss, we mean a certain price level where we close our trading position in loss. In comparison to a manual closing, the stop loss should be set at the exact moment when the order is executed.
Stop loss allows us limiting the risks in case of unfavorable movements.
On the chart above, I have illustrated 2 similar negative scenarios: 1 with a stop loss being placed and one without.
In the example on the left, stop loss helped to prevent the excessive risk, cutting the loss at the beginning of a bearish wave.
With the manual closing, however, traders usually hold the negative positions much longer, praying for a reversal.
Holding a losing trade, emotions intervene. Greed and fear usually spoil the reasoning, causing irrational decisions.
Following such a strategy, the total loss of the second scenario is 5 times bigger than the total loss with a placed stop loss order.
Stop loss defines the point where you become wrong in your predictions. Planning your trade, you should know in advance such a point and cut your loss once it is reached.
Never trade without a stop loss.
❤️If you have any questions, please, ask me in the comment section.
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Trading Journals to Bring Your Trading Skills to the Next LevelHello, traders.
In this post, I am sharing tips for trading journals to bring your trading skills to the next level.
This post would help you if;
✅You are not sure what to write in a trading journal
✅You are not motivated to create your trading journal
✅You do not last in recording your trades
■ Importance of trading journals
Trading journal is important in order to;
1. Analyze your trades
Trading journals help traders identify problems and points to improve in your trades, by reviewing how you analyze the market and make decisions before taking positions.
Have you ever asked yourself after trades?
”Why did I take this trade??”
Even if you think you were calm and analyzed the market very carefully but you acted differently. This really happens.
With trading journals, you can review if your trades are rule-based, you have made wrong decisions and/or made any mistakes during trades.
2. Evaluate your strategies
Especially when traders are in the process of developing their own strategies, this evaluation is vital to make decisions on whether you need to improve something in your strategies or it is even worth using the strategies.
■ 3 Things to Remember When Creating a Trading Journal
1.PDCA Cycle
2.Design what kind of data you want to collect from your trading
3.Screenshots are musts
1.PDCA cycle is a well-known improvement method so I do not need to detail here, however, we, traders should always keep in mind that we have to keep improving ourselves and/or our strategies by conducting PDCA cycles for a single trade and for a group of trades during a certain period of time.
2.Another purpose of recording your trades is to collect data. Trading is a statistic business where data is very important for you to make decisions as there is no 100% in financial markets.
3.Humans’ memory is much weaker than we think. No matter how strongly we try to memorize what the markets look like, we forget. Because our memory is vulnerable.
This is why taking screenshots is important so that you can analyze your trades with the same conditions as when you took positions.
■ Sample criteria for creating a trading journal
Here’s is sample criteria(questions to yourself) when you make a journal.
✅ Why did you take this trade?
Is this trade as per your strategy or just one of FOMO entries?
Clarifying the reason to take this trade gives you a chance to review your thought process before the trading.
✅ What is your plan in this trade?
In my opinion, traders always should have what they aim in a trade that they are about to take.
Without this, traders are easily affected by emotions which ends up with cutting profit too early or even leads to out-of-rule trading.
✅ Result
Win/Lost/Even
✅ Plan TP/SL
Record planned TP/SL before you take trades in pips or currency(USD etc.) depending on the instruments you trade.
✅ Actual TP/SL
Record actual TP/SL in pips or currency(USD etc.) depending on the instruments you trade.
You can perform variance analysis comparing between plan and actual.
✅ Risk & Reward(RR)
RR is the breakeven point in trading business.
Whether your strategy can be profitable or not is all about balance between win rate and RR. It is vital to track and monitor RR.
✅ What is good about this trade?
Here is what I recommend to implement in your trading journals.
Trading including learning process is a completely solitary process.
When you are at school or at work, teachers and supervisors guide you in the right direction and praise us for good grades and good jobs. This experience of being praised will give you confidence in your studies and/or work, but this process normally does not happen in trading.
Therefore, when you are just starting out trading or when things do not go well, some traders might get lost asking themselves what they are doing is right or wrong.
That is why it is important to pat yourself on the back when you behave correctly in trading.
It is said that when people are praised, Dopamine is released in our brains which bring us to the feeling of well-being. Dopamine is also called “Happy hormone”, so the brain tries to work harder to reproduce that feeling of pleasure. In other words, you feel more positive and motivated, which leads to confidence along with the small successes of behaving correctly in trading.
This can only be a good thing, as it gives you confidence in your trading strategies.
Why don’t you give you a clap when you have done correctly?
✅ What improvement do you need from this trade?(Action for next trades)
To complete the last step of your trading PDCA cycle, consider what improvement/measures you have to implement against your mistakes and/or problems.
These action items will help you avoid making same mistakes in the future.
✅ Emotion
It is often said that recording your emotion during a trade is effective because emotion makes us make wrong decisions, break rules and chase the market like a horse chasing a carrot.
Did I get scared when executing trade? Why? Was I afraid all the time? Why? Reviewing your emotion would give you a hint on why you felt like that.
✅ Conviction
Conviction is how confident you are in a trade you took.(High/medium/low)
This is one of the ways to measure whether your confidence is statistically linked to your performance or just your imagination.
For example, you took 10 consecutive trades with high conviction rate and 7 out of 10 was successful trades. In this case, your view/analysis on the market is quite accurate and this makes you convinced that you should take a trade only when you feel highly convinced.
■ Trading Journal Tools
What tools do you use to record your trades?
Excel? Apps? Or even by hand writing? Let me know in the comment section below.
I am using a web service.(not sure if I can name the service here due to the house rules...)
It allows me to record all necessary info along with screenshots as well as creating monthly reports which definitely increase productivity and efficiency of trading journal.
January EffectHello guys! Have you ever heard of the "January effect"? It's a pattern that has been observed in financial markets where the prices of small cap stocks tend to go up in the month of January. Some people think this happens because of tax-loss selling (when investors sell stocks that aren't doing well in order to reduce their tax burden) or because more people are interested in buying small cap stocks at the start of a new year. It's important to remember that the January effect isn't a sure thing and shouldn't be the only reason you make investment decisions.
What do you think about this effect?
What is the U.S. Dollar Index?
The U.S. Dollar Index is a measure of the value of the U.S. dollar against six other foreign currencies. Just as a stock index measures the value of a basket of securities relative to one another, the U.S. Dollar Index expresses the value of the dollar in relation to a “basket” of currencies. As the dollar gains strength, the index goes up and vice versa.
The strength of the dollar can be considered a temperature read of U.S. economic performance, especially regarding exports. The greater the number of exports, the higher the demand for U.S. dollars to purchase American goods.
The index is a geometric weighted average of six foreign currencies. Since the economy of each country (or group of countries) is of different size, each weighting is different. The countries included and their weights are as follows:
Euro (EUR): 57.6 percent
Japanese Yen (JPY): 13.6 percent
British Pound (GBP): 11.9 percent
Canadian Dollar (CAD): 9.1 percent
Swedish Krona (SEK): 4.2 percent
Swiss Franc (CHF): 3.6 percent
The index is calculated using the following formula:
USDX = 50.14348112 × EURUSD^-0.576 × USDJPY^0.136 × GBPUSD^-0.119 × USDCAD^0.091 × USDSEK^0.042 × USDCHF^0.036
When the U.S. dollar is used as the base currency, as in the example above, the value is positive. When the U.S. dollar is the quoted currency, the value will be negative.
We constantly monitor the performance of DXY because very often it gives us great trading opportunities.
What do you want to learn in the next post?
Is it your strategy or you???What is your strategy? If asked, could you explain it to one of your friends or family members? More importantly, does it make sense? Is it clear?
Teaching or Sharing your thoughts & methods leads to a deeper understanding of the content. If nothing else, speak aloud and hear your reasoning out of your own mouth before taking a trade.
My current strategy is to take a defined structure from Swing High to Swing Low or Swing Low to Swing High and use it as the basis for my analysis. Naturally, the structure will indicate a trend, and I would need to decide if that trend is in alignment with or contrary to the broader market. Either is fine, but this distinction is essential when assessing targets and risk.
I have to constantly remind myself that I don't know what the market will do. Since I don't know what the market will do, it follows that I should be open to changing my mind and also safeguarding against my ignorance. With this being said and firmly in mind, there are three levels that I like to pay attention to. They are:
Breakouts of previously established key levels.
The .618 Retracement & 1.618 Extension (current and previous structures)
Between the .786 & .886
Simple enough. I'm sure that your strategy for entry can be explained in layman's terms as well. The issue typically doesn't lie in the analysis it lies in the trader's ability to follow said analysis and follow it consistently.
Does this sound relatable?
You spend hours or maybe even days conducting your analysis, waiting for the market to make its move and give you some indication of what might happen in the near future. As time passes, things seem to become more clear, and you see your opportunity coming. Sure there are a few unexpected movements that happen along the way but that's just how markets move. Price approaches your entry but not yet. Hell, it may not actually reach the level at which you established as a good entry. So you enter early and let the candles fall where they may. If you have fixed stops, now your levels are thrown off. If you don't, then any concept of risk that you had in your mind has been altered and you now bear the task of making mental adjustments to compensate for a completely different trade. Because that's exactly what it is, a completely different trade, with new numbers, figures, distances, R&R ratios, and new implications of risk. The market moves in your favor, possibly even nearing your predetermined target. If it's a fixed number of pips, then that number has changed. If it was a fixed target then your projected profits have changed. This may not seem like a big deal but for beginning traders who are establishing their system, this means everything. Every decision you make against yourself has future implications on your equity curve, but also on your confidence and understanding of what you are doing in the market. In order to be consistent and profitable in the market we must learn to trade in a consistent manner with a strategy that will prove to be profitable over time. The market continues to move but it has taken a sudden turn against you, whatever profits you had are quickly erased and price action now edges toward your stop loss. You've been stopped out only to learn that if you had been patient at entry and kept your original strategy in place, you wouldn't have been stopped out, and price action would have ultimately gone in your favor reaching your target.
The point of all this is to illustrate that we unconsciously make changes to our strategies as we are deploying them. These changes have a compounding effect on the outcome of our trades. Even if you are made a winner by these changes you've made, you will have reinforced a bad habit that will undoubtedly lead to many losses in the future. There is power in understanding the unique set of tendencies and preferences that make you the type of trader you are. If you continue to ignore this, you will rightfully take your place amongst the other 90% of failing traders. When you start to pay attention to your own uniqueness and figure out what concepts, ideas, strategies, tools, and methods resonate with you, then you will be on your way to developing a system that you can trade consistently.
Losing is a part of the game. You may as well lose in a manner that produces feedback that can be learned from. Are you losing because your strategy needs adjusting or are you losing because your psychology needs adjusting?
It should be stated that any given trade, from start to finish, can be, and typically is, more nuanced than what I've just described. Its simplicity should not overshadow its intent. The chart attached to this post shows that there are multiple opportunities for entry for mine and, quite possibly, your strategy. All a trader needs to do is be patient and allow the market to tell you what it is doing. Along with entries are maintenance and exits. Targets are just as important as entries if not more so. Your unique perspective as a trader will heavily impact the decisions you make in all three phases of trading.
Levels of Development LLC is providing this material for this site and any other related sources (including newsletters, blog post, videos, social media and other communications) for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and may not represent specific trades or transactions that we have conducted. In fact, we may use examples that are different or the opposite of transactions we have conducted or positions we hold.
All investing and trading in the securities market involves risk. Any decisions to place trades in the financial markets, including trading in stock or options or other financial instruments, is a personal decision that should only be made after thorough research, including a personal risk and financial assessment, and the engagement of professional assistance to the extend you believe necessary.
Selection & how to operateThe obvious part if you've understood all the previous posts.
It's easier to start with how Not to trade .
Wrong - cherry picking "strong" levels. Every level is a level, not better & not worse than another one. Choosing the supposedly strong levels is a subjective thing that reduces expected value & consistency.
Right - operating at each level on a given resolution, you either expect a level to repel prices or to be consumed, you operate accordingly at every level. The more you operate, better for the market, higher your revenues. If there too many levels for you, instead of cherry picking you just move to a lower resolution. Some levels can be effectively skipped because of risk & sizing consideration, but skipping levels an cherry picking levels are 2 completely different mindsets.
Wrong - stopping operation after N loosing trades.
Right - controlling equity as explained in "Sizing & how to manage risk". If you're making loosing trades in a row, you don't stop, you just hit zero size, then you imagine trades or execute on simulator, when your size comes back to a non-zero value you come back to the real account. More you operate - better for the business.
Wrong - waiting for a "confirmation". If you don't have a firm expectation whether a level will repel prices or will be consumed, you don't know what you're doing, read all the posts and understand how it all works.
Right - knowing in advance what you gonna do at each level & keep reevaluating it in real time.
Wrong - making reentries. The activity around levels, especially how levels get cleared, is very well defined. After the scaling in is complete, you either exit at loss/at breakeven when a level gets cleared / positioned in the unexpected side. Or, you scale out while being in the money.
Right - unless there was a mistake caused by a misclick or smth like dat, reentries is an irrelevant concept.
Wrong - working out insurance after the entry.
Right - a hedge should be bought BEFORE scaling in, same goes about placing the stop-losses.
How to operate
Asset selection
Not many people think about it, but it makes sense not only to provide liquidity when & where there's not much of it, but also to consume excessive liquidity when & where there's too much of it, because both cases are unhealthy for the markets. So, we have 2 types of trading instruments then:
1) overquoted ones, such as GE, ZN, or ES many years ago;
2) underquoted ones, such as CL, NQ;
How to distinguish dem?
One way is to take a look at volumes on highest resolution cluster/footprint chart, and compare em with the actual number of bid/asks in the DOM. ZN for example is hugely overquoted, you'll notice that: it has aprox 1000 contract at every bid/ask price, but when these limit orders start to get consumed at one price, the rest orders at the same price just gets cancelled, and you see lesser values on your footprint/cluster chart. The opposite happens on underquoted instruments, they need liquidity.
Why it matters?
You operate the same way on both under and overquoted vehicles, but:
1) on underquoted vehicles you mainly use limit orders, you provide liquidity;
2) on overquoted vehicles you mainly use market orders, you remove liquidity;
Exits at loss vs attempting to get out around breakeven
Both are legit, the latter gives more freedom, but implies not using stop-losses so you have to know 4 sure what's happening and what you're doing.
That's how you trade with stoplosses.
1) In case of trading pops from positioned levels, you simply exit when the support/resistance gets cleared, in case of clearing by price it means you'll have an L, no big deal tho;
2) In case of trading pushes through positioned levels (aka trading clearings aka trading consumptions), same, you're getting an L if you hit the invalidation point. The invalidation point for these trades is the opposite border of the positioning sequence. This border is found the same ways as the front level, just at the opposite side;
3) Trading during a positioning itself. Makes least sense to trade with stop-losses, but in theory: taking an L at the next level past the level you expect to be positioned this or that way. If there is no level past you current level, you try to make a projection, smth like its shown on ZN chart of this post, imagine you were trading positioning of 112'19.
Without stops it's almost the same, it's just instead of taking an immediate loss after an invalidation event, you exit at breakeven when price comes back to the entry zone (in most cases it does). If prices don't go back and hit another level, you simply continue trading there, if that new level you're working with now is supposed to act in the opposite direction from the previous one, you simply reverse your position. If that new level is supposed to work in the same direction as the previous one, you're holding your position further.
This kind of operation assumes very high win rate, low RR ratio and very rare but significant losses. However, if the unexpected happens 2 times in row, chances are the problem is on your side xD
Finally
1) Monitor non-market data in order not to be caught against the momentum surges (eg unless you're a DMM, trading at Jobless Claims release is a BAD IDEA);
2) Pick your main resolution that way you'll be satisfied with the frequency of your operations;
3) Work with all the levels there;
4) Never approach the next level while having a full position, always offload risk on the way, unless you expect the next level to be cleared/positioned in the same direction;
5) Always control risks;
6) Understand that it's all about doing the right thing, and it's totally possible to understand what is right by gaining all the info from all the data.
You should end up trading 100% of positioned levels, trading 50% of positioning processes demselves, and rofl never try to trade smth that looks like "a new level is forming now".
DON'T TRADE ON HOLIDAYS | 4 Crucial Reasons Explained
In this educational article, we will discuss why is it recommendable not to trade during the holidays season.
🏦 The main source of problems comes from the fact that the big market players like banks, hedge funds and investing firms are absent. Similarly to ordinary people, bankers and investors prefer to spend the holidays with their relatives and friends instead of staring at charts on Christmas Eve.
But how does it affect the market? Big players are the main source of the market liquidity. The liquidity itself is the measure to which an asset can be quickly bought or sold in the market at a price of its quotes. Therefore, when the big players are missing, the market liquidity drops.
1️⃣ That fact instantly reflects in the market spreads. They become substantially bigger, directly increasing the costs of each trade and making it problematic to open a position at a desired price.
2️⃣ Secondly, low liquidity leads to a decrease in volatility. The market becomes weak and indecisive.
As traders, we make the money on market moves. Our goal is to catch a bullish or a bearish wave. Their absence deprives us of profits or, at least, dramatically decreases them.
3️⃣ Thirdly, when the liquidity is low, even small market participants can move the market. It dramatically increases the probabilities of false signals. Relatively low trading volumes may manipulate the market, substantially decreasing the efficiency of technical and fundamental analysis.
4️⃣ The increased costs of trading, low volatility and manipulations should have convinced you to stay from charts during the holidays season. However, the main reason to not trade on holidays is much simpler. Holidays give you an opportunity to stay with your family, to take a break, to recharge and relax. Even a part-time trading is very exhausting and requires a constant attention. Let yourself be distracted and return after holidays.
I wish you a great holidays season, traders!
❤️If you have any questions, please, ask me in the comment section.
Please, support my work with like, thank you!❤️
How to Adjust Your Stock Chart for Inflation, Dividends, and TaxUsing a pretty simple formula involving CPI , we can adjust the stock chart to show real returns instead of nominal returns. Real returns represent a more accurate picture of the return of the stock over time. In addition, we can easily adjust returns for dividends and estimated taxes.