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Let's Know Top 10 Chart Patterns With Most Success RatesBefore it, let's learn about types of chart patterns because it's important to know that the pattern is a reversal or continuation because it will help us decide whether the market is making a reversal or a continuation pattern.
1. Continuation patterns : A Pattern which gives you an indication of continuation meaning continuing the trend.
For example :- flag patterns, wedges patterns or a pennant pattern can be classified into this.
2. Reversal Patterns : Patterns which give you an indication of reversal meaning if the market is going up and then a reversal pattern forms then it should go down.
For Example : Head and Shoulders Pattern, Double Top and Bottom Pattern can be classified into this.
Now Let's Learn about the Top 10 Chart Patterns With the most Success rates
1. Head and shoulders
2. Double top or bottom
3. J Pattern
4. Rounding bottom or Top
5. Cup and handle
6. Wedges
7. Pennant
8. Descending Triangle or Ascending Triangle
9. Bullish Flags or Bearish Flags
10. Symmetrical triangle or A Symmetrical Triangle
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1. Head and Shoulders :-
Traders use the head and shoulders pattern in technical analysis chart to anticipate likely changes in a price trend. After a bullish trend, it is common to see a bearish pattern emerge that is renowned for its accuracy in predicting a trend reversal.
There are three peaks in the pattern where the middle one is the highest and the remaining two are known as "shoulders" with similar and lower heights. Once the price passes over the "neckline," which is a trendline tying the lowest points between the peaks of the two troughs, the design is finished. The head and shoulders pattern indicates the end of an uptrend, causing traders to use it as a sell signal.
There is a possibility that a decline will occur afterwards. The pattern is utilized by certain traders as an indication to engage in short positions, while keeping a stop loss above the neckline. It should be kept in mind that the occurrence of a head and shoulders pattern does not necessarily guarantee a reversal, therefore traders should rely on supplementary technical analysis and implement risk management strategies before trading.
2. Double top or bottom :-
A double top pattern occurs when the price of a stock reaches its peak, declines, then surges back up to the peak level but is unable to surpass it before falling once more. A resistance level formed by two peaks is encountered by the price, which is unable to break through it. When the price drops below the valley level that existed in between the two peaks, the pattern is over. The double top pattern is thought to be a bearish sign, indicating a possible price decline. A double bottom pattern, on the other hand, is the polar opposite of a double top pattern and resembles a mirror image. The price decreases to a certain level, rebounds, drops back down to the same level, but does not surpass it, and subsequently recovers again. The support level created by the two valleys is a point that cannot be breached by the price. The pattern is only finished when the price surpasses the peak level that was established between the two valleys.
It is crucial to remember that depending solely on these patterns for trading decisions is not recommended, as they are only among several instruments applied in technical analysis. It is advisable for traders to take into account additional elements aside from technical analysis, such as fundamental analysis.
When making investment decisions, take into consideration both market trends and the management of risk.
3. J Pattern :-
The term "J pattern" denotes a distinct chart pattern that may manifest over a duration of time in the movement of a particular stock's price. The J-shaped trend seen in a company's stocks entails an abrupt decline in value that is succeeded by a more protracted rehabilitation.
The name of the pattern originates from its formation on a price chart, which bears a similarity to the letter "J". Frequently, this trend can be observed in shares that encounter adverse circumstances or updates leading to the first decline in value, and later, garner support as investors regain trust in the potential profitability of the stocks.
4. Rounding bottom or Top :-
In technical analysis of financial markets, there are two patterns referred to as rounding top and bottom.
The pattern on a chart known as a rounding top signifies a gradual transition in the market from an upward pattern to a downward one. A gentle decrease in pricing is followed by a gentle increase, resulting in a curved contour. The pattern reveals that the market seems to be losing its force, implying that there could be a potential drop in prices.
Conversely, a chart pattern known as a rounding bottom indicates a change in the market direction, from a downtrend to an uptrend. The observed trend exhibits a gentle decrease in values accompanied by a gentle growth, creating a curvilinear appearance. The indication is that the market is growing based on this trend.
5. Cup and Handle The cup and handle pattern serves as a tool in technical analysis utilized in the stock market for detecting potential chances to purchase. This formation signifies the continuation of a bull market; it is observed after a stock has undergone a notable increase and then encountered a phase of stabilization.
The shape of the design, which resembles a container with a grip, is what the pattern is named for. A cup-shaped pattern forms when, following a strong upward trend in stock prices, there is a significant decrease that creates a rounded bottom resembling a U. The handle section on the chart emerges once the stock price remains within a tight range for several weeks or months without any significant rise, before finally breaking out and reaching new highs.
I Think That's too much we will continue the remaining 5 in the next one
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Protecting Your Mental Health by Prioritizing Risk ManagementIn the world of trading and investing, it's common to hear the phrase "risk management" thrown around. But what exactly does it mean, and why is it so important?
At its core, risk management is about protecting yourself from potential losses. This can include setting stop-loss orders, diversifying your portfolio, and carefully analyzing market trends before making trades. And while these practices are certainly crucial for preserving your capital, they're not the only benefits of prioritizing risk management.
In fact, one of the most important reasons to focus on risk management is for the sake of your mental and emotional well-being. Trading can be an incredibly stressful and emotional experience, and without a solid risk management plan in place, it's easy to fall prey to anxiety, fear, and even panic.
But when you take the time to establish a sound risk management strategy, you're not only protecting your investments - you're also safeguarding your mental health. By having a plan in place, you can make trades with confidence, knowing that you've taken steps to mitigate potential losses. And even if a trade doesn't go as planned, you can take comfort in the fact that you've prepared for the worst-case scenario.
Perhaps most importantly, prioritizing risk management can help you achieve long-term success and sustainability in your trading career. By minimizing losses and avoiding rash decisions, you'll be able to build a portfolio that's resilient and capable of weathering the ups and downs of the market.
So if you're looking to become a successful trader, don't overlook the importance of risk management. By taking steps to protect your capital and your mental well-being, you'll be setting yourself up for a lifetime of sustainable and profitable trading.
Automatically identify chart patterns using built-in indicatorsHey everyone! 👋
This chart showcases a few of the Automatic Chart Patterns indicators recently announced in this blog post . If you are a technical trader who relies on chart patterns to make trading decisions and hold a paid TradingView plan, check them out. They automatically identify these popular technical setups:
Bearish and Bullish Flags
Double Bottom
Double Top
Elliot Wave
Head and Shoulders
Inverse Head and Shoulders
Bearish and Bullish Pennants
Rectangles
Triangles
Triple Bottom
Triple Top
Falling and Rising Wedges
You can add the indicators to your chart from the "Indicators, Metrics & Strategies" search window by selecting "Patterns" from the "Technicals" tab in the left pane and choosing an indicator from the list:
Once you have selected a chart pattern, the indicator will automatically draw it on the chart for you when it detects the pattern.
The chart pattern indicators are easy to use and customize. You can alter the pattern detection criteria and visible attributes like colour, line thickness, and style of the lines.
We hope you enjoy these new indicators.
— Team TradingView ❤️
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Financial ratios: digesting them togetherI hope that after studying the series of posts about company financial statements, you stopped being afraid of them. I suggest we build on that success and dive into the fascinating world of financial ratios. What is it?
Let's look at the following example. Let's say you open up a company's balance sheet and see that the amount of debt is $100 million. Do you think this is a lot or a little? To me, it's definitely a big deal. But can we say the company has a huge debt based only on how we feel about it? I don't think so.
However, if you find that a company that generates $10 billion in annual revenue has $100 million in debt (i.e. only 1% of revenue), what would you say then? That's objectively small, isn't it?
It turns out that without correlating one indicator with another, we cannot draw any objective conclusion. This correlation is called the Financial Ratio .
The recipe for a normal financial ratio is simple: we take one or two indicators from the financial statements, add some market data, put it all into a formula that includes a division operation - we obtain the financial ratio.
In TradingView you can find a lot of financial ratios in the section Financials -> Statistics .
However, I only use a few financial ratios which give me an idea about the financial situation of the company and its value:
What can you notice when looking at this table?
- Profit and revenue are frequent components of financial ratios because they are universal units of measurement for other reporting components. Just as length can be measured in feet and weight in pounds, a company's debts can be measured in revenues.
- Some financial ratios are ratios, some are percentages, and some are days.
- There are no financial ratios in the table whose data source is the Cash Flow Statement. The fact is that cash flows are rarely used in financial ratios because they can change drastically from quarter to quarter. This is especially true for financial and investment cash flow. That's why I recommend analyzing cash flows separately.
In my next post, I'll break down each financial ratio from this table in detail and explain why I use them specifically. See you soon!
Major and Minor InducementsMajor and Minor Inducements
Smart Money Concepts
Inducements are trap to the retail traders.
Types of Alerts on TradingViewHey Everyone! 👋
While alerts have a ton of potential applications when it comes to trading, they are often underutilized because it can take some time and ingenuity to build a system where they can work well.
Alerts can turn the experience of trading from a constant search for ideas - and always feeling behind - into a relaxing job of waiting for your own pre-approved conditions to trigger before taking action. In short, alerts can make you much more well-prepared for the market’s ups and downs. 🔍
In this post, we will look at the two distinct types of alerts available on our platform.
Our alerts are categorized into two types based on resource requirements:
➡ Price alerts
➡ Technical alerts
Each alert type has a separate limit on the number of active alerts based on the subscription. We are happy to announce that we have recently doubled the combined limit for both alert types. 🎉
The current limits for active alerts are as follows:
As shown in the table, the Basic plan includes one price alert and one technical alert, while the Premium plan provides access to a much higher number of alerts. Specifically, users on the Premium plan can enjoy up to 400 price alerts and 400 technical alerts.
Now, you might be wondering about the distinction between price and technical alerts. What sets these two apart? Let's dive into the specifics of each type to gain a better understanding of their unique features and benefits.
💸 Price Alerts
An alert is considered a price alert when the following two conditions are met:
1. Only a symbol is used in the alert (for any type of chart: Bars, Renko, PnF, etc) and a price value
2. One of the following is selected as the trigger condition:
• Crossing
• Crossing Up
• Crossing Down
• Greater Than
• Less Than
For example , the following alert on a candlestick chart would be considered a price alert:
👨💻 Technical alerts
An alert is considered a technical alert if any of the following conditions are met:
1. The alert uses an overlay symbol, indicator, drawing or strategy
2. One of the following is selected as the trigger condition:
• Entering Channel
• Exiting Channel
• Inside Channel
• Outside Channel
• Moving Up
• Moving Down
• Moving Up %
• Moving Down %
For example , the following alert will be considered a technical alert since the trigger condition is set as “Moving up %”.
We hope that this post has provided you with a clearer understanding of the distinct types of alerts available on TradingView. However, if you require further assistance with setting up or managing your alerts, we recommend visiting our Help Center .
Thanks for reading! Hope this was helpful.
See you all next week. 🙂
– Team TradingView
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TRAPPED ON TOPSThis chart is giving a perfect example of how Retail participants always stucked on the Tops because they buy in FOMO (fear of missing out) or some one always behind there to make a setup for them for this buying instead of this they should thought about the fair valuations and some more key ratios which can help out for getting good valuations while on the contrary smart money or visionary investors they studied before entering in stock because they always believe that they are going to buy a Business and valuations not only a stock in the mean time we saw that breakout traders come and do trades but actually they are very disciplined and always follow a good risk management concept with strict stop losses but ultimately these traders are working for Big investors indirectly for creating more FOMO by price spikes and retail get trapped because that thing he saw yesterday for example at 100 not it is trading at price of 120 with the gains of 20% and this move make them think to get some awesome returns overnight and got stucked, whereas from here big investors will start selling (distributions) because the value become high and they got some other good value options too because apart of investing they never stops studies.
💡Conclusion-: Always do your complete study on any of company in which you are going to invest for right valuations and always keep tracking the news and promoter holdings and star investors holdings always keep in mind Study more than trade or investing with proper decided risk management.
💡I am not saying that even after doing this we will not get trapped but at least we will not get trapped on exactly high values.
𝐑𝐞𝐠𝐚𝐫𝐝𝐬-: 𝐀𝐦𝐢𝐭 𝐑𝐚𝐣𝐚𝐧
What is Bump and Run and How to trade it Hi everyone, today we are going to look at the bump and run pattern and find out what the bump and run pattern is and how to trade it
So let us get started
The bump-and-run pattern is a technical analysis pattern commonly used in financial markets, especially in stock trading. The pattern is well known for its high success rates as you can see on the chat above also it is used to predict potential changes in the trend of a stock. The pattern three phases: the initiation phase, the breakout phase, and the run phase. Each of the phases plays a critical role in identifying the pattern and predicting future market movements.
Traders can use the bump-and-run pattern to identify potential entry and exit points for their trades. If a trader sees that a stock exhibits the bump-and-run pattern, he can enter a long position during the entry phase or sell his position during the bump phase. Conversely, if a trader sees a stock exhibiting the run phase, he can sell his position or enter a short position.
The introduction phase of the bump-and-run pattern occurs when the stock moves in a narrow channel with a steady uptrend. This phase usually lasts for an extended period of time and is characterized by low volatility and low trading volume. Traders usually monitor this phase to identify potential trends and support levels for the stock.
The bump phase of the bump-and-run pattern is the critical phase when traders look for signals of a trend reversal in the stock. This phase is characterized by a rapid rise in price, often triggered by a sudden increase in trading volume. The bump phase usually forms a steep rise in the stock price that resembles a parabolic curve. This phase is often the result of speculation, which can lead to an overvaluation of the share.
The run phase of the bump-and-run pattern occurs after the bump phase and is characterized by a decline in the stock price. In this phase, traders observe the behavior of the stock and look for potential support levels where the stock's price decline can be stopped. The Run phase is usually the result of the overvaluation that occurred during the Bump phase and represents a correction in the stock price.
One of the main characteristics of the bump-and-run pattern is the "bump" itself. The "bump" is a significant increase in the stock price that usually occurs quickly and unexpectedly. This sudden rise in price is often the result of speculation and can lead to overvaluation.
The bump-and-run pattern can occur in a variety of financial markets, including stock, commodity, and currency markets. Traders familiar with this pattern can apply it to a wide range of financial instruments to identify potential trading opportunities.
One of the challenges of trading the bump-and-run pattern is that it requires precise timing. Traders must be able to accurately identify the different phases of the pattern and determine the appropriate entry and exit points. This can be difficult because the pattern can change quickly and unexpectedly.
Overall, the bump-and-run pattern is a useful tool for traders who want to identify potential changes in a stock's trend. When traders understand the different phases of the pattern and their implications, they can make informed trading decisions and potentially profit from changes in the market.
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Sadhna Broadcast - How Price Action & Dow Theory shows the scamThis is why it is important for Price Action traders to exercise caution and not rely solely on historical price movements. While price action analysis can still be effective in predicting market movements, it may be less reliable in scenarios where unexpected news or events can impact the market.
The third tenet of Dow Theory states that trends have three phases – accumulation, public participation, and distribution.
In the accumulation phase, smart money enters the market and begins buying shares.
In the public participation phase, the general public begins to participate in the trend, driving prices higher.
In the distribution phase, smart money begins to sell shares to the public, leading to a decline in prices.
Nickel and Illiquidity Here is a special case of a snapshot of Nickel Futures. It is entirely illiquid but from our naked eye, We can see a pattern here.
A range of machine learning algorithms and statistical models are employed to detect such underlying patterns.
From our naked eye, We can spot tradeable opportunities as shown in the dotted lines in the above chart.
How to trade the Diamond PatternHey Everyone, as we all have at least traded a Diamond pattern and if not at least we have heard a lot about it but what does this pattern refers to bullish or bearish and in this post we will also learn how to trade it, where to take stoploss, where to take position in it and where and how to identify the target so pls do like and follow.
Some common questions that arise in everyone's mind :-
What is a Diamond Pattern ?
Technical chart patterns such as diamond patterns indicate a possible trend reversal or continuation. Diamond-like patterns are formed by two converging trend lines between which prices oscillate.
Below is a trading strategy for trading diamond patterns:
Identify the pattern: the first step in diamond pattern trading is to identify the pattern on the price chart. Look for a pattern that has two converging trend lines between which prices oscillate.
Determine the direction of the trend: once you have identified the pattern, you need to determine the direction of the trend. If the diamond pattern forms during an uptrend, it is considered a bearish pattern. If it forms during a downtrend, it is a bullish reversal pattern.
Open the trade: Once you have determined the direction of the trend, wait for a breakout from the diamond pattern to confirm the direction of the trade. If the pattern is a bearish reversal pattern, open a short trade as soon as the price breaks below the lower trend line. If the pattern is a bullish reversal pattern, open a long trade when the price breaks above the upper trend line.
Set a stop loss: To limit possible losses, place a stop loss order just below the low of the breakout candle for a long trade and just above the high of the breakout candle for a short trade.
Set the target: The target for the diamond pattern trade should be the height of the diamond pattern, measured from the highest point to the lowest point added to the breakout point. This target can be adjusted according to the trader's risk tolerance and trading style.
Manage the trade: As the trade progresses, monitor the price action and adjust the stop loss and take profit orders accordingly. If the trade moves in your favor, you can take partial profits or tighten your stop loss to lock in profits.
Avoid false breakouts: diamond patterns are prone to false breakouts, where the price breaks out of the pattern but then quickly retraces. To avoid false breakouts, wait until price closes outside the pattern before entering the trade.
Trade with proper risk management: As with any trading strategy, it is important to trade with proper risk management. Risk only a small percentage of your trading account on each individual trade, and do not risk more than you can afford to lose. Always use stop loss orders to limit possible losses.
Here are some additional tips for trading the diamond pattern:
Confirm it with other indicators: although the diamond pattern can be a reliable trading signal, it is always advisable to confirm the signal with other technical indicators such as moving averages, momentum indicators or volume indicators. Look for additional signals that support the direction of the breakout.
Pay attention to multiple time frames: To increase the probability of a successful trade, it is helpful to look for the diamond pattern in multiple time frames. Look for the pattern on daily, weekly and monthly charts and trade only if it is consistent with the larger trend.
Be patient: it may take some time for a diamond pattern to form. So be patient and wait for the pattern to fully develop before entering the trade. Rushing to enter a trade before the pattern has fully formed can lead to false breakouts and unnecessary losses.
Practice with a demo account: Before risking real money, it is always a good idea to practice trading the diamond pattern with a demo account. This way you can test your strategy, refine your entry and exit points and gain confidence in your trading plan before risking real money.
Trading the diamond pattern requires a combination of technical analysis skills and patience. The diamond pattern is a reversal pattern that forms after a long uptrend or downtrend. The pattern looks like a diamond or a kite and indicates a consolidation phase before a possible trend reversal. Traders can use the diamond pattern to identify potential entry and exit points for trading.
In order to trade the diamond pattern, you must first correctly identify the pattern. Once you have identified the pattern, you should look for confirmation of the pattern. This can be done by waiting for a breakout above or below the support or resistance levels of the pattern. Traders can take long positions if the breakout is above the resistance level, or they can take short positions if the breakout is below the support level.
The stop loss should be placed just below the support level of the pattern for long positions and just above the resistance level for short positions. The stop loss should be placed at a level where the trade will be invalidated if the price moves against the expected direction. The target for the trade can be calculated by measuring the distance between the highest and the lowest point of the pattern and projecting this distance from the breakout point. Traders can also use other technical indicators to determine potential price targets.
It is important to note that trading the diamond pattern can be risky, and traders should manage their risks effectively. One way to do this is to use proper risk management techniques, such as position sizing and limiting risk capital. In addition, traders should be patient and wait for confirmation of the pattern before entering a trade. Rushing into a trade without proper analysis and confirmation can result in losses.
pause candle on the hourly chart, nifty formed a pause candle.
1. there is wide gap between the nifty value and the moving average .
2. pause bar indicates the resting of bulls and bears until a clear signal is obtained to trade.
EBITDA VS NET INCOME DETAILED Hello Everyone,🙂
Hope you are fine and doing great today i am again with an idea to give you some knowledge about EBITDA :- Earnings Before Interest, Taxes, Depreciation, and Amortization, So lets Start
What is EBITDA ?
EBITDA is a financial metric that is used to evaluate the financial performance of a company, especially if it is used in the context of mergers and takeover.
How to Calculate EBITDA ?
EBITDA can be calculated by taking a company's revenue and subtracting its operating expenses without including ( interest, taxes, depreciation, and amortization). The resulting number represents the company's earnings before expenses are deducted.
Why Should We Use EBITDA? What is the importance ?
It is frequently used as a measure of any company's cash flow and profitability because it provides us with an indication of how much money the company is generating before non-operating expenses are deducted. However, it's important to note that EBITDA doesn't account for all expenses, such as capital expenditures or changes in working capital, and therefore it should not be used as a sole metric for evaluating a company's financial health.
What is Net Income?
Net income is a financial metric that is reported on a company's income statement, which provides us a summary of the company revenues, expenses, and net income for a specific period. It is an important metric that helps the investors and analysts to evaluate a company's profitability.
How to Calculate Net Income?
It is calculated by subtracting all expenses and deductions from the total revenue earned by the company.
Why Should We Use Net Income? What is the importance ?
It can be used to provide us an indication of a company's profitability, net income is also used to calculate other important financial ratios, such as the earnings per share
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The Silicon Valley Bank (SVB) issue is not the same as the 2008 The Silicon Valley Bank (SVB) issue is not the same as the 2008 financial crisis.
The 2008 financial crisis was a global economic downturn caused by a range of factors, including the housing market bubble, the failure of large financial institutions, and the widespread use of risky financial instruments. It had a severe impact on the global economy, leading to job losses, bankruptcies, and a recession that lasted for years.
On the other hand, the Silicon Valley Bank (SVB) issue is a specific problem faced by a single bank, which is a relatively small player in the financial industry. The SVB specializes in providing financial services to technology start-ups, and its issues are related to its exposure to certain high-risk sectors such as cryptocurrency and non-bank lenders. These issues are unlikely to have the same widespread impact as the 2008 crisis.
While both situations involve financial risk and potential losses, they are distinct from each other in terms of scale, scope, and causes.
If you find my analysis helpful, I'd appreciate it if you could like it and follow me on TradingView for more analysis like this.
How to select the Stocks for INTRADAY Trading #tradingstratergyHow to select stocks for Intraday or short term.
We can do this in two ways.
First one, using manual method and the second one is using screeners
For day trading, we need to complete the trading in the first 1:15hours or last 1:15 hours i.e at 2:15 pm as the volume tends to be more by this time, in between, the market will be in the consolidation oe else, it will be setting for a new trend.
PNB HOUSING - a perfect structure to learn pivot cup shaped recovery of PNB Housing
one can learn how to identify pivot levles which is acting as support and resistance at different scenario .
i will include ema and volume indicators for PNB - in coming days.
analysing all together will give excat point of entry and exits
FAKE STRENGTH (RSI DIVERGENCES)Hello to all mates so here am sharing about something that two important things in trading are contradicting each other and that is price and strength so I am trying to explain this by daily chart of Nifty and that I mentioned previous top to new top price is up by almost 900 points but the relative strength index it is down by 10 major points and this is an indication that price is going up without strength so we can say that no one will be there to hold it there on top without strength.
Conclusion- So what we can get by this study is that we should be alerted when the price is increasing but the strength is decreasing so at this point we can consider this as a profit booking spot or we can consider the previous Top price as a Trailing stop loss and leave it free for go up without strengths.
HAPPY TRADING WITH TRADING VIEW ✌🏽✌🏽
The Ultimate Rules for Options Day Trading SuccessNSE:BANKNIFTY
Introduction
If you want to be a successful options day trader, it's not just about having a good strategy. You also need to develop your expertise, seek guidance when needed, and be dedicated to your goals. To do this, you need to be disciplined and follow some options day trading rules. These rules can help you avoid common mistakes and take away the guesswork. Here are some rules that every options day trader should know and if you use them in a disciplined manner then they have been proven to help beginners become winning options day traders.
Some important rules are :-
Rule 1 Setting Realistic Goals for Options Day Trading
One of the most important rules for success in options day trading is to have realistic expectations. Options trading is not a way to get rich quickly, but it can be a profitable career if you put in the time and effort to learn and master the craft. You need to be prepared for a learning curve and be willing to stick with it even when it gets tough. You should also expect losses, as no strategy can guarantee gains all the time. Good money and risk management can help minimize losses.
Rule 2 Start Small to Grow Big
When you're new to day trading options, it's important to be cautious. You're still learning about options trading and the financial market, so take your time. Don't rush into things, even if you're excited. Start by practicing with paper trading and then move on to smaller options positions. Gradually increase your positions as you become more familiar with day trading options. This approach helps you minimize your losses and develop a systematic method for entering positions.
Rule 3 Know your limits
You may be tempted to trade as much as possible to develop a winning monthly average but that strategy will have the opposite effect and land you with a losing average. Remember that every options trader needs careful consideration before that contract is set up. Never overtrade and tie up your Capital.
Overtrading will make money for your broker not you.
Rule 4 Get Prepared Mentally, Physically, and Emotionally for Options Trading
To succeed in options day trading, you need to take care of your mental, physical, and emotional health. This means getting enough sleep, eating a healthy diet, exercising regularly, avoiding excessive alcohol and smoking, and reducing stress in your environment. These habits will help you stay alert and focused throughout the day. So, take the time to care for yourself and perform at your best every day.
Rule 5 Do Your Homework Daily – Plan your day
Before the market opens, study the financial environment and news to develop a daily trading plan. This is called pre-market preparation and it's essential to stay competitive and align your strategy with the day's conditions. Develop a pre-market checklist that includes evaluating support and resistance, checking the news, assessing volume and competition, determining safe exits for losing positions, and considering market seasonality.
Rule 6 Analyse Your Daily Performance
Track your options day trading performance daily to notice patterns in your profits and losses. This will help you understand why you're gaining or losing money and fine-tune your processes for maximum returns. Reviewing your daily performance will also help you make long-term decisions for your options day trading career.
Rule 7 Pay Attention to Volatility
Volatility is how likely the price will change over time in the financial market. It can be good or bad for an options day trader, depending on their goals and position. Many factors affect volatility, like the economy, world events, and news reports. Straddle and strangle strategies are helpful in volatile markets. There are three types of volatility: price, historical, and implied. Price is based on supply and demand, historical looks at past performance, and implied predicts future performance.
Rule 8 Use Option Greeks
Greeks are measures that help to determine an option's price sensitivity in relation to other factors. They are represented by letters from the Greek alphabet and are used in complex formulas to determine option pricing. Despite their complexity, Greeks can be calculated quickly and efficiently, allowing options day traders to use them to improve their trades for maximum profit.
Delta, Gamma, Vega, Theta, Rho
Learn about option greeks from here
I hope you found this helpful.
Please like and comment.
Keep Learning,
Happy Trading!
5 Books that changed my life In this video, I discuss 5 books which made me the trader I'm today.
Here , I discuss priceless books for traders who want to learn in depth technical analysis .
I also talk about a very good book for traders who want to learn pre defined strategies without knowing much about technical analysis.
And, lastly I discuss about a must have book for options traders.
Let me know which book changed your life?
Cheers .
5 Tips For Managing Losing Trades (It Happens To Everyone)Losing trades happen. They are a part of the journey. There is simply no such thing as a trader or investor who wins all the time. All the famous investors or traders you know have LOST many times in their careers. It is perfectly normal. Did you know the famed hedge fund manager Ray Dalio lost everything in his 30s? He went broke. He had to start over from scratch.
This post will address what losing trades really mean and how to deal with it.
Before we begin, let us state the obvious:
- Be careful of people who claim they don't lose.
- Avoid people who flaunt win rates or success rates that are simply not possible.
- Losing trades happen to everyone! You are not alone.
Now, let's talk about what bad trades mean and 5 tips for managing them:
Number 1: A losing trade is different from a bad trade
The most experienced traders are well aware of their risk before they ever place a trade. Each losing trade is a small component of a bigger process that relates to a system, plan or strategy that has been thoroughly tested and studied. A losing trade is a calculated event for experienced traders. They defined their risk, position size, stop loss, and profit target. 🎯
A bad trade is very different. A bad trade implies someone risked their hard-earned money with no plan or process. A bad trade is reckless and indiscriminate trading. This often happens to new investors or traders who do not yet understand the time, studying, and research that goes into making a rock-solid plan. Be sure to remember the difference between a calculated losing trade and a bad trade with no plan or process.
TradingView Tip: there are several ways to get started with a plan, system or process. Paper trading, backtesting and/or working with proficient traders who give valuable feedback are all ways to get started. Don't risk your money without first doing research.
Number 2: Every losing trade provides data to get better
As we've mentioned several times now, losing trades happen to everyone. But remember, losing trades are also filled with insightful information and data. You can learn a lot from analyzing losing trades. 🔍
At the end of each trading day, week or month, experienced traders will analyze their losing trades in detail. What patterns are appearing? What do they share in common? Why did they happen? With this information, a trader or investor can adjust their strategy based on what they've uncovered.
Number 3: Do not let losing trades impact your health
Your mental and physical health are just as important as your financial health. Do not let losing trades impact either of those.
If your system is breaking down or several losing trades are starting to impact your emotions, step away from the computer or phone. Turn everything off and walk away. The markets have been open for hundreds of years and are not going away. When you're ready to come back, they'll be there.
Get up, get some fresh air, and get back in the arena when you're ready.
Number 4: Share your experiences with others
Traders and investors across the globe want to learn from your stories and losing trades. These are invaluable experiences that we all share in common. Social networks allow you to chat, share, and meet people who are going through similar things. We can all learn from each other.
Sure, the temptation to share your winners or act like the best trader who ever existed is tempting 😜 - but it's clear we learn together and get better when we share lessons from the loses. This is where the deepest insights are found, and together, it's where we can grow as a community of traders all trying to outperform the market.
Share and ask for constructive feedback!
Number 5: Keep Going
Markets are a game of learning, relearning, and progressing forward. New themes, trends, and stories appear and disappear daily. The journey is long and it never stops. When implementing your trading plan or investing plan, it's important to do it with the long-term in mind. One or two losing trades in a single day or week is a small fraction of what's to come many months and years down the road. 🌎
Keep going. Keep building. Keep refining your plan. Study the data.
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Cash flow vibrationsIn the previous post we started to analyze the Cash flow statement. From it, we learned about the existence of three cash flows - operating cash flow, financial cash flow, and investment cash flow. Like three rivers, they fill the company's "lake of cash" (that is, they go with a "+" sign).
However, there are three other rivers that flow out of our lake, preventing it from expanding indefinitely. What are their names? They have absolutely identical names: operating cash flow, financial cash flow, and investment cash flow (and they go with a "-" sign). Why so? Because all of the company's outgoing payments can also be divided into these three rivers:
Operating payments include the purchase of raw materials, the payment of wages - everything related to the production and support of the product.
Financial payments include repayment of debt and interest on it, payment of dividends, or buyback of shares from shareholders.
Investment payments include the purchase of non-current assets (say, the purchase of additional buildings or shares in another company).
If the inflows from the three rivers on the left are greater than the outflows into the rivers on the right, then our lake will increase in volume, meaning that the company's cash balances will grow.
If the outflows into the three rivers on the right are greater than the inflows from the rivers on the left, the lake will become shallow and eventually dry up.
So, the cash flow statement shows how much our lake has increased or decreased over the period (quarter or year). This report can be presented as four entries:
Each value of A, B, and C is the difference between what came into our lake from the river and what flowed out of the lake by the river of the same name. That is, the value can be either positive or negative.
How can we interpret the meanings of the different flows? Let's break down each of them.
Operating cash flow . In a fundamentally strong company, it is the most stable and powerful river. The implication is that it should be the main source of "water" for our lake. Negative operating cash flow is an indicator of serious problems with the business because it means it is not generating money.
Investment cash flow . This is the most unpredictable river, as sometimes it can be very powerful and sometimes it can flow like a thin trickle. This is due to the fact that the purchase or sale of non-current assets (recall that these may be buildings, equipment, shares in other companies) does not occur as regularly as operational activities. A sudden negative investment flow tells us about some big purchase. Shareholders do not always view such events positively, as they may consider it an unwise expenditure or a threat to dividend payments. Therefore, they may start to sell their shares, which causes their price to drop. If a big purchase is perceived as an opportunity to reach the next level and capture more market share, then we may see exactly the opposite effect - an increase in share price.
Financial cash flow . A negative value of this cash flow can be seen as a very positive signal because it means that the company is either actively reducing its debt to creditors, or using the money to pay dividends, or spending the money to buy its own stock (*), or maybe all of these together.
(*) Here you may ask, why would a company buy its own stock? Management sometimes does this when they are confident in the success of their business and want to support the growth of their stock. The company becomes a major buyer of its own stock for some time so that it begins to grow. The process itself is called share buyback .
Positive financial cash flow, on the other hand, signals either an increase in debt or the sale of its own stock. As far as debt is concerned, you can't say that loans are bad for business. But there has to be a measure. But the sale by a company of its own shares is already an alarming signal to the current shareholders. It means that the company doesn't have enough money coming out of operating cash flow.
There is another type of cash flow that is not a separate "river," but is used as information about how much cash the company has left to meet its obligations to creditors and shareholders. This is Free cash flow .
It is simple to calculate: just subtract one of the components of the investment cash flow from the operating cash flow. This component is called Capital expenditures (often abbreviated as CAPEX). Capital expenditures include outgoing payments that go toward the purchase of non-current assets , such as land, buildings, equipment, etc.
(Free cash flow = Operating cash flow - Capital expenditures)
Free cash flow can be characterized as the "living" money that a company has created over a period, which can be used to repay loans, pay dividends, and buyback stocks from shareholders. If free cash flow is very weak or even negative, it is a reason for creditors, shareholders and investors to think about how the company is doing business.
This concludes my discussion of the cash flow statement topic. Next time, let's talk about the magic ratios that you can get from a company's financial statements. They greatly facilitate the process of fundamental analysis and are widely used by investors around the world. We will talk about the so-called Financial Ratios . See you soon!
