Jump to content

Elements and process for a strong trading strategy

Recommended Posts

Find a strong trend, wait for consolidation /contraction, trade the breakout of strong resistance on increasing volume, apply stop under volume.

A strong trend
indicates that there is strong underlying demand for an asset, such as a stock, currency, or commodity. This can be a good sign for traders who are looking to enter the market and take advantage of the trend.

refers to a period of time where an asset's price is range-bound, or moving within a relatively narrow price range. This can be caused by a lack of supply or demand for the asset, or by traders taking a wait-and-see approach. During consolidation, the asset's price may form higher lows or lower highs, indicating a lack of supply or demand, respectively. Lower volume during consolidation can also be a sign of a lack of supply or demand.

A breakout
is a price move that occurs when the asset's price breaks through a level of resistance or support. This can be a sign of increased demand or supply, and is often accompanied by higher volume. When entering a trade on a breakout, it is important to place a stop loss order at a reasonable level to manage risk.

is an important factor to consider when trading, as it can provide information about the level of supply and demand for an asset. Higher volume can indicate increased interest in the asset, while lower volume may suggest a lack of interest. It is important to carefully manage risk when trading, and to have a clear understanding of your risk tolerance and risk management strategies.

Risk management
is an important aspect of trading, as it helps traders to minimize losses and protect their capital. There are several strategies and techniques that traders can use to manage risk, including:
Setting stop-loss orders: A stop-loss order is an order that is placed with a broker to sell a security when it reaches a certain price. This helps to limit potential losses by selling the security before it falls further in value.
Using risk-reward ratios: A risk-reward ratio is a measure of the potential reward of a trade compared to the potential risk. By focusing on trades with a high risk-reward ratio, traders can potentially maximize their profits while minimizing their risks.
Using risk management tools: There are various tools and software that traders can use to help manage risk, such as risk calculators and position sizing tools. These tools can help traders to determine the appropriate level of risk to take on for a given trade and to manage their overall risk exposure.

Keeping a trading journal: Keeping a detailed record of all trades, including the reasoning behind each trade, can help traders to learn from their mistakes and improve their risk management strategies over time.

  • Like 1
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 03/06/23 20:25
  • Posts

    • The inclusion of trading volume as a standard indicator in charting software for the past three decades is not without reason—it offers a vital advantage. Volume analysis grants traders valuable insights into the actions of market participants at different price levels. By focusing on volume, traders can react more effectively to price movements rather than attempting to predict the future direction of prices, as is often the case with many other technical indicators. 📍Key points about volume Here are the key points regarding the volume indicator commonly plotted on the X-axis in trading: 🔹Volume Indicator: The volume indicator calculates the total number of shares or contracts traded during a specified time period. It is usually displayed as a histogram or line chart, with time represented on the X-axis. 🔹Liquidity: Volume is a critical metric as it provides insights into the liquidity of a security. Higher volume generally indicates greater market participation and liquidity, making it easier to buy or sell the asset without significantly impacting its price. 🔹Confirmation: Volume can validate the authenticity of price movements. In an uptrend, increasing volume supports the bullish move, indicating strength and conviction among buyers. Conversely, declining volume during an uptrend may signal weakness or lack of interest. The same principles apply to downtrends. 🔹Breakouts and Reversals: Volume analysis is often employed to identify breakouts and potential trend reversals. A significant increase in volume during a breakout suggests a higher probability of a sustained move, while decreasing volume near a support or resistance level might indicate a potential reversal. 🔹Divergence: Volume can unveil discrepancies between price and market sentiment. For instance, if prices are rising while volume is decreasing, it could suggest that the rally is losing momentum and a reversal may be imminent. Similarly, increasing volume during a price decline might indicate selling pressure and the potential for further downside. 🔹Confirmation of Patterns: Volume can serve to confirm or invalidate chart patterns such as triangles, head and shoulders, or double tops/bottoms. Higher volume during pattern formations enhances their reliability, while low volume can cast doubt on the significance of the pattern. 🔹Watch for High Volume: Unusual spikes in volume can indicate significant market events, such as earnings releases, news announcements, or institutional buying/selling. Abnormal volume levels can lead to increased volatility and potentially present trading opportunities. 🔹Relative Volume: Comparing current volume to historical average volume helps assess the significance of current trading activity. Higher volume relative to the average may imply increased interest, while lower volume might suggest a lack of conviction or reduced market participation.
    • I don't know but it looks like a really awesome service Because I have come across all sorts of mixers in my work  
    • Charting the Markets: 2 June Indices rally as US agrees debt ceiling bill. EUR/USD, GBP/USD rally while EUR/GBP stabilises as US debt ceiling bill is passed. And WTI recoups recent losses while gold, silver on track for first weekly advance. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023               This is here for you to catch up but if you have any ideas on markets or events you want us to relay to the TV team we’re more than happy to.
  • Create New...