Every Trading Strategy Explained in 12 Minutes
https://www.youtube.com/watch?v=YNogJ4YiMOo
Transcript:
There are countless strategies for trading and making a profit, and today we’re going to cover all the strategies used by traders around the world. Welcome to Whiteboard Invest, your number one go-to source for clear and concise investing knowledge explanation.
Here, we break down complex financial concepts using a simple whiteboard format, making learning about investing accessible to everyone. Fibonacci retracements are a tool that shows horizontal lines based on Fibonacci numbers, which can act as key support and resistance levels. To use this tool, first identify a swing low and swing high on a chart.
Then, drag the tool from the swing low to the swing high. Wait for the price to pull back to one of these levels, ideally the 0.382 Fibonacci level, since it’s the most common point for price reversals. If the price touches this level, it could be a good buying opportunity. Remember, price can also reverse from other Fibonacci levels, so combine this tool with other confirmation signals for a better entry.
Breakout patterns occur when the price makes a sudden significant move in one direction, usually after a period of consolidation. For example, if the price is consolidating and then suddenly drops sharply, this is known as a breakout. Traders can use specific patterns to identify potential breakouts before they happen.
Common breakout patterns include wedges, triangles, and rectangles. Reversal patterns, on the other hand, happen when the price moves in the opposite direction of the current trend, creating a counter trend. By identifying specific patterns on a chart, traders can predict reversals before they occur.
Notable reversal patterns include double tops and bottoms, triple tops and bottoms, head and shoulders, and cups and handles. The Elliott Wave theory suggests that markets tend to move in a series of five waves before reversing and forming another set of waves in the opposite direction. By understanding the Elliott Wave sequence, traders can predict where the price is heading by following the pattern on a chart.
Traders can predict where the price is heading by following the pattern on a chart. Each point in the wave is labeled 1, 2, 3, 4, 5, and then ABC for the corrective waves. There are specific rules to ensure a movement is considered a valid Elliott wave. First, wave 2 cannot be longer than wave 1 and usually pulls back to the 0.618 Fibonacci level.
Second, wave 3 must be the longest among waves one, three, and five. Third, wave four must remain above the peak of wave one and typically pulls back to the 0.382 Fibonacci level. A fair value gap occurs when a candle forms a significant gap due to an imbalance of buying or selling. To find a fair value gap, start by identifying a candle with a large body.
Then, draw a rectangle covering the gap between the previous candle’s wick and the next candle’s wick. This level acts as a potential magnet, where the price may revisit before continuing its movement. Candlestick patterns are a technique traders use to analyze future price movements based on specific candlestick patterns are a technique traders use to analyze future price movements based on specific candlestick shapes.
Notable candlestick patterns include engulfing patterns, signal strong momentum in the direction of the engulfing candle, hammer and shooting star patterns, indicate rejection as shown by the long wick on one side, doji patterns, signal neutrality in the market. Heiken Ashi is an indicator that replaces a traditional candlestick chart with a Heiken Ashi chart.
It tends to produce less noise than a traditional candlestick chart. A green Heiken Ashi candle signals an uptrend, while a red Heiken Ashi candle signals a downtrend. The size of the candle’s body indicates the strength of the trend. trend. The size of the candle’s body indicates the strength of the trend. The larger the candle, the stronger the trend.
Remember, Heiken Ashi only acts as an indicator and does not display the real market price. Moon phases are a concept that uses the moon’s cycles to time the market. Moon phase traders believe that these cycles are correlated with human emotions and behavior, which can influence market movements. Specific moon phases are thought to favor certain trends. A new moon is believed to signal a bullish market, while a full moon suggests a bearish market.
Today, this approach is mostly used as a confirmation tool. Renko charts replace traditional candlestick charts with blocks that form based on price changes, not time periods. For example, a Renko block might appear for every 1% change in price. This means each block represents a 1% price change, though you can adjust this parameter in the indicator settings.
Traders use Renko charts to filter out noise and identify trends. A green Renko block signals an uptrend, while a red Renko block signals a downtrend. Remember, Renko charts only act as an indicator and do not display the real market price.
Harmonic patterns are advanced price patterns based on Fibonacci numbers, which traders use to predict future price movements. For instance, a bullish bat pattern forms when the price undergoes four movements resembling the letter M. Each point in this pattern is labeled as X, A, B, C, and D with specific guidelines. X to B should be between 0.382 and 0.5, and A to C should be between 0.382 and 0.886.
These guidelines can be applied to real charts. When a series of four price movements forms, traders can use the Harmonic Pattern tool to see if the pattern matches these guidelines and take a position accordingly. Notable Harmonic Patterns include the Butterfly, Bat and Crab, each with unique values.
Support and Resistance are key horizontal levels where the price has previously bounced and may bounce again in the future. If the level is below the current price, it is called support, and traders might take a buy position when the price approaches it. If the level is above the current price, it is called resistance, and traders might take a sell position when the price approaches it.
Dynamic support and resistance, like traditional support and resistance, serve as key levels where price action can bounce. However, instead of using static horizontal lines, dynamic support and resistance utilize indicators such as moving averages to define these key levels. Trend lines are key levels that form diagonally during a market trend. They help identify the overall direction of the price.
An upward trend line indicates a bullish market, while a downward trend line indicates a bearish market. Similar to support and resistance levels, trend lines can also be used to identify potential entry points. For example, if the price retraces back to a trend line, it may present a good opportunity to take a buy position.
GAN angles are a tool that displays multiple lines at various angles, which can act as key levels and help measure the strength of a trend. When the price moves within the steep angles of the tool, it indicates a strong trend. When it moves within the steep angles of the tool, it indicates a strong trend.
When it moves within the shallow angles, it indicates a weak trend. To apply GAN angles, first, go to Settings and ensure the Lock Price to Bar ratio is checked. Next, identify a market range and mark the swing low and swing highs of that range. Draw a straight vertical line at the start of the range, then select the trend angle tool to measure a 45 degree angle.
Finally, use the GAN fan tool and place it at the 45 degree angle. Momentum indicators measure the direction and strength of a trend and are most effective in trending markets. Some notable momentum indicators include May CD, an upward crossover indicates a bullish trend, while a downward crossover indicates a bearish trend.
Moving averages, when the price is above the moving average, it signals a bullish trend. When the price is below, it signals a bearish trend. Parabolic SAR, a dot below the price indicates a bullish trend, while a dot above the price indicates a bearish trend. Supertrend, a green signal indicates a bullish trend, while a red signal indicates a bearish trend.
Oscillators are indicators that display the relative strength of a price and are most effective in choppy or sideways markets. Notable oscillators include RSI, Relative Strength Index. When the line is in the oversold region, it indicates a possible reversal to the upside. If the line is in the overbought region, it indicates a possible reversal to the downside.
Stochastic Oscillator. When both lines are in the oversold region, it signals a possible reversal to the upside. When both lines are in the overbought region, it signals a possible reversal to the downside. Additionally, the crossover of these two lines can help predict future price movements.
Divergences occur when an indicator shows a signal opposite to the actual price movement, often indicating a potential trend reversal. Divergences can occur in many indicators, such as the MACD, Stochastic, and RSI. For example, using the MSD indicator, if the price is forming higher highs, bullish, while the indicator shows lower highs, bearish, this is a bearish divergence signaling a possible price reversal and suggesting a sell position.
Volume indicators show the strength behind a price movement by tracking trading volume. Notable volume indicators include price volume, displays the volume for each candle with longer bars indicating higher volume. Volume Weighted Average Price shows the ratio of an asset’s price to its total volume. It can be traded like a moving average or used as dynamic support and resistance.
Volume Profiles displays a horizontal volume bar which can be treated as key levels for potential entry positions. Supply and demand zones, also known as order blocks, are areas where significant price movements have occurred. A demand zone is identified when price moves significantly upwards from a level, indicating strong buying interest.
Conversely, a supply zone occurs when price moves significantly downwards from a level, indicating strong selling interest. Similar to support and resistance, these zones can be treated as key levels for potential entry positions. Market structure refers to how traders analyze the behavior, conditions, and flow of the market. An uptrend structure is characterized by the price forming higher highs and higher lows over time.
In contrast, a downtrend structure is characterized by the price forming lower highs and lower lows as the market moves downwards. Understanding market structure helps traders identify trends and make informed decisions about market direction. A break of structure occurs when the price breaks the previous price peak or trough during a trend.
For instance, in an uptrend where the price forms higher highs and higher lows, the break of the previous high is considered a break of structure. This break indicates a potential shift in the market dynamics and is closely watched by traders for signals of trend continuation or reversal. A change of character in the market occurs when the price breaks the previous structure during a trend, often indicating a potential reversal from the current trend direction.
For instance, if the price has been forming higher highs and higher lows in an uptrend, and then breaks below the previous low to form lower lows, this is considered a change of character. This shift in price behavior suggests that the market dynamics may be shifting, potentially signaling the end of the current trend and the beginning of a new trend or a period of consolidation.
