Two Ways to Win in Trading

Two approaches to trading

Forex trading is complex and challenging. Numerous and various market participants constantly contemplate how to be successful in trading, developing a multitude of winning forex strategies and techniques in an attempt to achieve trading success. Despite the diversity, the ultimate goal remains the same for everyone – generating profits from market movements. That’s why all trading approaches can be roughly categorized into two broad methods: trading against the trend and trend trading.

Key takeaways

•     Trends tend to persist rather than reverse.
•     Market trends can last for a very long period of time, sometimes even months and years.
•     Predicting trend reversals is difficult and requires careful analysis, experience, and a deep understanding of market dynamics.
•     Traders use stop loss to minimize risks and potential losses.

Trading against the trend

 

Trading against the trend can be tempting for some traders, especially when they believe that a market is due for a reversal and more trading opportunities. However, trends tend to persist rather than constantly reverse, making it more profitable to follow the trend.

To illustrate this point, let’s consider an example. Imagine a currency pair that has been steadily increasing in value over the past few months. While there may be moments of minor pullbacks, the overall trend is upward. By trading with the trend and buying when the pair is on an upward trajectory, traders can increase their chances of making profitable trades.

The allure of trading against the trend lies in the potential for substantial profits when a reversal occurs. However, predicting trend reversals is very difficult and requires careful analysis, experience, and a deep understanding of market dynamics. This is challenging even for experienced traders. In general, going against the trend is not considered by many as a winning trading strategy and is more likely to result in missed opportunities for profit.

Understanding trend trading

The foundation of trend trading, on the other hand, lies in the belief that existing trends are more likely to continue than to reverse, i.e., markets have a tendency to move in a specific direction for a sustained period. Sometimes, market trends can last even for months and years. For example, the American US500 index has been on an uptrend for over 100 years. Therefore, trying to predict a trend reversal is a bad idea. That’s why trend traders enter positions in the direction of the established trend and ride the momentum for as long as it persists, whether it is upward (bullish) or downward (bearish).

To spot patterns and determine the strength and duration of a trend, forex traders often use technical indicators, chart patterns, and other analytical tools.

Generally, understanding the current trend helps make informed decisions about when to enter and exit trades, and it is suitable for both short-term and long-term trading, as it allows traders to align their trades with the overall market direction.

Additionally, trend trading is generally considered a more straightforward strategy for traders, especially those who are new to the market. It is considered correct to wait for a price correction during an uptrend and then buy. This way, you can follow the trend and not try to predict its reversal. However, it is essential to recognize that no strategy guarantees trading success.

A stop-loss method in trading

Regardless of the chosen trading approach, risk management is a critical aspect of trading success. To mitigate potential losses, traders use a stop-loss method. It is a predetermined level at which a trader will exit a losing trade automatically when a trading instrument reaches a specific price.

Attempting to trade without a stop loss is akin to navigating treacherous waters without a life jacket. Only seasoned professionals with an in-depth understanding of risk and market behavior might consider such a risky approach. For the majority of traders, using a stop loss is not just a recommendation; it’s a necessity.

Stop-loss orders serve three primary purposes. Firstly, they protect traders from catastrophic losses when the market moves against them beyond a predetermined point. Secondly, they free traders from the emotional burden of decision-making during adverse market conditions. Emotions like fear and greed can cloud judgment, leading to impulsive and irrational decisions. Thirdly, a well-placed stop loss removes the need for constant monitoring and allows traders to adhere to their predefined risk tolerance.

Implementation of stop-loss strategy in trading

Implementing an effective stop-loss strategy involves a combination of technical analysis, risk assessment, and discipline. Here is a short guideline on using a stop-loss order:

    Identify support and resistance levels: Use technical analysis on price charts to identify significant support and resistance levels. These levels can act as potential areas for setting stop-loss orders.
    Consider volatility: Adjust the distance of the stop loss from the entry point based on market volatility. A wider stop loss may be necessary in highly volatile markets to account for more significant price fluctuations.
    Set risk-reward ratio: Determine the potential reward for a trade relative to the risk involved. This helps ensure that potential profits outweigh potential losses. For example, if targeting a 2:1 risk-reward ratio, the stop loss would be set at a level where the possible loss is half of the anticipated gain. In this case, a trader only needs to make a profit on 40% of trades to be profitable because the reward is two times greater than the potential loss.
    Use trailing stop loss: Consider using a trailing stop loss, which adjusts dynamically as the price moves in favor of the trade. This allows traders to capture more significant gains and trading opportunities while protecting profits if the market reverses. However, trailing stop loss can sometimes be triggered too early when the volatility is high. Trader stays without a deal and the price moves on without them.

By implementing a stop-loss strategy, traders can effectively manage risk and increase their chances of profitable trades. It provides a structured approach to trading and helps traders stay disciplined in their decision-making process.

Bottom line

Remember, there is no one-size-fits-all strategy and specific ways to win in trading. Each trader must find an approach that aligns with their skills, risk tolerance, financial goals, and level of experience. As with any financial endeavor, continuous learning, adaptability, and disciplined execution are key elements for trading success in the challenging world of 

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Dive into a Financial Rollercoaster with "The Big Short"

"The Big Short"

Looking for some weekend entertainment? Explore the intriguing world of finance through the lens of "The Big Short" (2015). This film takes you on a wild ride through the events leading up to the 2008 financial crisis.

With an all-star cast including Christian Bale, Steve Carell, Ryan Gosling, and Brad Pitt, "The Big Short" offers a gripping portrayal of the financial mavericks who predicted the collapse of the housing market and the ensuing chaos.

Why should you watch it? "The Big Short" is more than a finance flick; it's a darkly comedic, thought-provoking masterpiece that demystifies complex financial concepts. It'll leave you both informed and entertained.

Join us for a cinematic journey that sheds light on the intricacies of the financial world while providing a fresh perspective on a historical event that shaped our times. Enjoy the movie and a weekend filled with enlightenment! 

 

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How to win trading

👋 How to win trading?

💡 In latest article, "The Only Two Ways to Win in Trading", we delve into essential trading approaches that can make or break your success in the financial markets. Understanding these two methods is crucial whether you're a seasoned trader or just starting out.

🎢 Some traders may be tempted to go against the trend, hoping for a reversal and more extensive opportunities. But remember, trends tend to persist, and going against them can be risky.

📈 Trend trading strategy is all about riding the momentum of established trends. Learn how to spot patterns, use technical indicators, and align your trades with the market direction.

🆘 Plus, we explore the importance of implementing a stop-loss strategy to manage risk effectively and protect your investments.

📚 Whether you're a risk-taker or prefer a more cautious approach, this article offers valuable insights into winning strategies for traders of all levels. Dive into it now!👇

 

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What does a trading robot consist of?

In this lesson, we will look at the bones of the trading robot. We promise you that after this lesson your fear of coding in MQL5 will start to disappear!
At first, let’s have a look at the structure of a robot in the Meta Editor.

Looks scary, right? However, in reality, all trading robots have the same core elements you need to know about.

There are four main parts of a trading robot:

•     Setup
•     OnIntIt
•     OnDeinit
•     OnTick

Let’s have a closer look at each element.
 

Setup

This is the part of a robot where all the administrative information is placed. Here, you write notes, declare variables (different types of information with a unique name), track the list of changes, and set the property rights.





On the screenshot above, you can see a sample of the Setup code. It consists of copyright, the main properties of a robot, and the #include command that inserts the content of a certain file to your expert advisor. Also, in this section, we declare the main inputs under the #input command.
 

OnInIt

The second part is called OnInit (OnInitiation). This part launches when you start the EA for the first time.

In this part, you can see the commands that will be executed after the first launch of the program. We will explain these commands in the next articles!
 

OnDeInIt

The next section of the expert advisor is called OnDeinitiation, or shortly OnDeInIt. It runs when the expert advisor is shut down.
 

OnTick

This is the most interesting part of an expert advisor. It consists of three main parts that are updated on every tick (with the new information about a price). They are entries, exits, and sizing. These functions are important for any expert advisor, because they tell you when to buy, how much to sell, and when to close your trades.

This code will start every time a new tick arrives on your MetaTrader 5 platform. That is, if the bid, ask prices, or volume changes, this change affects the OnTick section of your code as well.

 

On the screenshot above, you can see that the robot checks the last trade processing time and other data.
 

So, if you were a computer, how would you read the code structure?

First of all, you would go to the OnInit section and run everything in it. You’d set up variables and parameters that you need for your strategy. This action is executed only once.

After this action is completed, you go to the OnTick section. At first, you check if you have any trades that need to be exited. After that, you look for trades that can be entered. Finally, a sizing algorithm will help you to identify the size of your position.

Once you shut down your EA, you run OnDeInIt. This option removes the graphics from the charts and deletes everything linked to the expert advisor itself.

Bottom line

To sum up, if you want to build a trading robot, you need to know its structure thoroughly. Luckily, all of the robots have a similar structure that allows you to construct it step-by-step.

Credit link:

https://fbs.com/th/analytics/guidebooks/building-a-trading-robot-without-programming-350

What is a robot in Trading?

Trading robots are programs, code written according to a specific trading strategy. It uses technical signals to enter trades while traders are fast asleep. This program can help traders automate market operations or trades.


Is it automatic trading? Like.. you don't have to do anything?

Actually, you can use robots in both partially and fully automated trading. Both options have their advantages. Smart robots analyze market patterns and possible reversals, read signals and indicators - some traders choose to place the entire trading process on the shoulders of computer code with the settings according to need However, some traders still prefer to participate in some trading procedures. and trust robots only for the market operations part Although robots are intelligent But it's still just program code. Some traders want to keep it under control.

Okay, so what are the advantages of using robots?

The obvious advantage of using Forex robots is the "free" time you get as a trader. The robot analyzes the market and opens trade orders 24 hours a day. The robot processes signals to open or close orders in an incredibly short time that cannot even be completed by any professional. It's important that many good robots have risk management built into their code from the beginning. Therefore, when you trade with robots, you are protected from losing your deposit due to emotions. The greatest advantage of robots is that they relieve mental stress: traders do not have to monitor all the charts. But robots will do this job instead.

So.. robots are always right? So what are its disadvantages?

Robots work according to set rules. In terms of what settings it is written in and what indicators it uses. It's always right. However, they cannot adapt to the rapidly changing situation in the market by themselves. Robots are smart, but they're just programs that need to be reset and updated from time to time. Therefore, whenever the market changes beyond the robot's default settings, Traders need to modify the program and sometimes rewrite or modify the default code. The fact that the robot must be updated in accordance with the market situation may turn out to be a serious disadvantage for some.

It looks like robots are useful. But it's so different!

This is true. Trading robots are no different from other software. It may be sold with different configurations. Make sure that when you buy the robot you get a manual or other instructions for installation - otherwise it's nothing but a bunch of code. The more robots come with their own manual and settings, the better - that means you can take a peek inside. And there is an opportunity to set it according to your needs. Moreover, if you intend to go one step further, you may write the robot yourself: it will be fully customized and most probably will suit your trading goals as perfectly as possible.


Got it, so how do I choose a good robot?

To choose the right trading robot First you need to decide on a working strategy and memorize it in your mind. Don't let yourself be fooled by the quick huge profit percentages - this can be the result of the aggressive settings of the robots. And in the future it may make your funds unsafe. Follow your trusted trading strategy. Otherwise, the robot can easily disappoint you. There is a lot of advice out there on how to choose the “right robot” but remember – the only way to see if a robot is working properly is to test it.


Is there anything else you would like to recommend?

Remember, robots aren't magic tricks that will make you rich in an instant. The default settings of most robots are too simple to set up and lack precision in operation until you have customized them with the signals you want for your purposes. In order to be able to do that It is better if you have enough trading experience to teach the robot to trade for you.

Elliott Wave Theory

Elliott Wave theory is one of the most accepted and widely used forms of technical analysis. It describes the natural rhythm of crowd psychology in the market, which manifests itself in waves. The essence of Elliott waves is that prices alternate between impulsive phases that establish the trend and corrective phases that retrace the trend. In their most basic and straightforward form, impulses contain 5 lower degree waves and corrections contain 3 lower degree waves.

Elliott Wave is fractal and the underlying pattern remains constant. The 5 + 3 waves define a complete cycle. They can form different patterns such as ending diagonals, expanded flats, zigzag corrections and triangles. Fifteen different degrees of waves can be identified with each of the 5 smart drawing tools, allowing users to visually identify different degrees of waves on a chart. The key to trading Elliott waves successfully is counting them correctly for which there are rules and guidelines.

Type of Elliott Wave

Trend (5)

• Impulse 
• Motive (Double Zigzag, Leading Diagonal Pattern3-3-3-3-3)

Sideways (3)

• Standard Correction (Flat, Zigzag, Triangle)
• Non Standard Correction Large x wave (Double three)

WHAT IS ELLIOT WAVE?

The Elliott Wave refers to a theory (or principle) that investors and traders may adopt in technical analysis. The principle is based on the idea that financial markets tend to follow specific patterns, regardless of the timeframe.

Essentially, the Elliott Wave Theory (EWT) suggests that market movements follow a natural sequence of crowd psychology cycles. Patterns are created according to current market sentiment, which alternates between bearish and bullish.

The Elliott Wave principle was created in the '30s by Ralph Nelson Elliott – an American accountant and author. However, the theory only rose in popularity in the '70s, thanks to the efforts of Robert R. Prechter and A. J. Frost.

Initially, the EWT was called the Wave Principle, which is a description of human behavior. Elliott's creation was based on his extensive study of market data, with a focus on stock markets. His systematic research included at least 75 years’ worth of information.

As a technical analysis tool, the EWT is now used in an attempt to identify market cycles and trends, and it can be applied across a range of financial markets. However, the Elliott Wave is not an indicator or trading technique. Instead, it is a theory that may help to predict market behavior. As Prechter states in his book:

"the Wave Principle is not primarily a forecasting tool; it is a detailed description of how markets behave."

Prechter, R. R. The Elliott Wave Principle (p.19).

THE BASIC ELLIOT WAVE PATTERN

Typically, the basic Elliott Wave pattern is identifiable by an eight-wave pattern, which contains five Motive Waves (that move in favor of the major trend), and three Corrective Waves (that move in the opposite direction).

So, a complete Elliott Wave cycle in a bullish market would look like this:

Note that, in the first example, we have five Motive Waves: three in the upward move (1, 3, and 5), plus two in the downward move (A and C). Simply put, any move that is in accordance with the major trend may be considered a Motive Wave. This means that 2, 4, and B are the three Corrective Waves.

But according to Elliott, financial markets create patterns of a fractal nature. So, if we zoom out to longer timeframes, the movement from 1 to 5 can also be considered a single Motive Wave (i), while the A-B-C move may represent a single Corrective Wave (ii).

lso, if we zoom in to lower timeframes, a single Motive Wave (such as 3) can be further divided into five smaller waves, as illustrated in the next section.

In contrast, an Elliott Wave cycle in a bearish market would look like this:

MOTIVE WAVES

As defined by Prechter, Motive Waves always move in the same direction as the bigger trend.

As we've just seen, Elliott described two types of wave development: Motive and Corrective Waves. The previous example involved five Motive and three Corrective Waves. But, if we zoom in to a single Motive Wave, it will consist of a smaller five-wave structure. Elliott called it the Five-Wave Pattern, and he created three rules to describe its formation:

-Wave 2 can't retrace more than 100% of the preceding wave 1 move.

-Wave 4 can't retrace more than 100% of the preceding wave 3 move.

-Among waves 1, 3, and 5, wave 3 can't be the shortest, and is often the longest one. Also, Wave 3 always moves past the end of Wave 1.

CORRECTIVE WAVES

Unlike Motive Waves, Corrective Waves are typically made of a three-wave structure. They are often formed by a smaller Corrective Wave occurring between two smaller Motive Waves. The three waves are often named A, B, and C.

When compared to Motive Waves, Corrective Waves tend to be smaller because they move against the bigger trend. In some cases, such a counter-trend struggle can also make Corrective Waves much harder to identify as they can vary significantly in length and complexity.

According to Prechter, the most important rule to keep in mind regarding Corrective Waves is that they are never made of five waves.

DOES ELLIOTT WAVE WORK?

There is an ongoing debate regarding the efficiency of the Elliott waves. Some say that the success rate of the Elliott Wave principle is heavily dependent on the traders' ability to precisely divide the market movements into trends and corrections. 

In practice, the waves may be drawn in several ways, without necessarily breaking Elliot's rules. This means that drawing the waves correctly is far from a simple task. Not only because it requires practice, but also due to the high level of subjectivity involved.

Accordingly, critics argue that the Elliott Wave Theory isn't a legitimate theory due to its highly subjective nature, and relies on a loosely defined set of rules. Still, there are thousands of successful investors and traders that have managed to apply Elliott's principles in a profitable manner.

Interestingly, there is a growing number of traders combining the Elliott Wave Theory with technical indicators to increase their success rate and reduce risks. The Fibonacci Retracement and the Fibonacci Extension indicators are perhaps the most popular examples.

CLOSING THOUGHTS

According to Prechter, Elliott never really speculated on why markets tend to present a 5-3 wave structure. Instead, he simply analyzed the market data and came to this conclusion. Elliott's principle is simply a result of the inevitable market cycles created by human nature and crowd psychology.

As mentioned, however, the Elliott Wave is not a TA indicator, but a theory. As such, there is no right way to use it, and it is inherently subjective. Accurately predicting market moves with the EWT requires practice and skills because traders need to figure out how to draw the wave counts. This means that its use can be risky – especially for beginners.

Elliott Wave Sample

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Example Elliotwave Signal

Simplify Scalping Strategy

There is a clear correlation between the number of trades you make and your gains.

The less you trade, the more you will probably earn on the stock market.

A friend of mine has made a million euros on his stocks over the past few years.

He only bought.

And sold nothing.

The same is basically true with trading and scalping.

The less you scalp, the more money you'll probably make.

That means that the real work is to separate the wheat from the chaff, right?

Namely, to only enter trades that are worth taking.

And to let the others go...

I had to learn the hard way and lost a lot of money with my "overtrading."

I just didn't have the patience to wait for the right opportunities.

I always wanted to "do something."

And that is exactly the trap that the stock market sets for beginners.

And it is very good at it!

Don't get caught in the trap, and don't settle for low-quality trades!

The stock market is full of noise.

That's why the simpler your scalping strategy is, the greater the chance that you will become profitable.

Why?

Because the human brain can process very little information at the same time.

You don't watch 5 crime movies at the same time, do you?

I want to show you a way to drastically simplify your scalping strategy. 

I do it in 5 steps: 

1 simplify charts

2 remove all superfluous indicators

3 leave out overinterpretations

4 scalp less rather than scalping more

5 trade only first-class signals

As you can see, all 5 steps have something to do with "omitting".

Success in the stock market has more to do with omitting than with adding.

But you should watch my advice right now in this video. Here I explain it to you in detail.