Wishing you all a happy and prosperous New Year… may I take this opportunity to thank everyone for their support over the last year and let’s hope that our trading results are at least as good as in 2019.
I have not traded Bitcoin for some time now. I find the lack of price history gives me the jitters. But where next for bitcoin?
looking at the daily chart, the trend to me appears to be down. But that doesn’t mean that the price can break out of the triangle to the up side.
If you use the price history for 2019, then the trend is clearly up.
This is obviously contradictory to the longer term price history.
That’s my issue with trading bitcoin at the moment. I just can’t seem to make an informed decision.
Where Next For Bitcoin
The daily charts seem to offer limited information when you are trying to analyse bitcoin… but you can always look at the different charts to see if you can get an edge.
If you really want to try and trade bitcoin, then don’t be afraid to experiment with 1H, 4H candles. If you can hack the pace, the false signals and the spreads then you could even drop down to the 15 min candles and back test.
Trading bitcoin and indeed anything else is all about what suits you and makes you as a trader successful. Some traders are happy to be in front of the screen for many hours a day. Others will make one trade a day. Some traders only make a few trades a month.
Find what suits and stick to it.
Whilst everyone is obsessed with trying to figure out what way bitcoin is likely to go, many other opportunities are going begging.
Seasonality Trading is always well worth looking at come October.
The good old currency markets still offer regular opportunities too.
The Dogs of the Dow is another great strategy that absolutely anyone can follow each January.
If you want faster profits, then some of the fastest and biggest gains can come from trading individual shares… especially shares from the US markets.
As a trader, it is your job to find winning trades. They don’t just jump out at you spell trade me.
For every chart there is a strategy that will work. It’s down to you to employ the correct one.
If something isn’t doing what you expect it to, then take a step back and look at other opportunities.
I mentioned in my last post about how you can trade the DOW when President Trump hits social media with his doom reports.
In this post I want to elaborate on that by sharing a video that explains on the importance of trading using Support and Resistance levels and how you can trade many other charts by drawing S&R levels that form triangles.
Using support and resistance levels should really form the foundation of all your trading.
These critical price levels can give you a clearer indication of where the price is likely to go.
Often when you are drawing your support and resistance lines, you will notice that channels and ranges become highlighted as well as triangles.
I love trading along triangles in either upward or downward trends.
The DOW Triangle
If you look at the chart of the DOW, you can see that I have drawn in a horizontal resistance line at the top and a diagonal support line at the bottom.
This has formed a triangle.
As I pointed out in my last post, the idea is then to trade at these support and resistance levels.
You will look for reversal candle patterns at these levels.
You will go long when price has reached the support level and a reversal candle pattern has formed.
And you will look to go short when resistance has been met and reversal candle patterns are formed.
Trading Should be Easy
Whilst this may sound too simple to be profitable, trading like this is in fact a very easy and profitable way to trade.
What’s more is that you can find triangles appearing on many charts.
If you build up your personal portfolio of charts that you like to trade that have formed triangles, over time you will find you have a very profitable and solid list of Indices, Currencies and Stocks to trade triangles.
Trading Triangles is a great strategy.
Trading Triangles Video
I want to share a video with you today on how you can use triangles and support and resistance levels in your trading.
This is a great video to give you a clear understanding of how simple it is read a chart, draw support and resistance lines and create trading triangles.
It is obvious that every time that President Trump decides to tweet bad news about relationships with China, the markets take a nose dive.
This has been very irritating. One minute my accounts are at all time highs and the next day they lose chunks of gains because of a tweet.
Whilst I have found myself cursing Trump on more than one occasion; and wondering what self respecting president tweets his business, there is a pattern emerging that you can benefit from trading Social Media and the markets news.
Before I go on though, please be aware that if you can’t take the ups and downs of investing then you can always go and get a job in McDonalds instead of buying the stock.
All trading carries risks. What works one month doesn’t mean it will work the next.
Social Media and the Markets – Trading the tweets
If you look at this daily chart of the DOW, you can see that there have been sharp sell offs [blue arrows] after Trumps tweets about the trade war with China.
You can also see that I have drawn a support line that has been formed from the bottoms of these sell offs.
A simple strategy to profit from Trumps tweets is to wait until support is met again and trade the swing back up.
You will put your stop loss just beneath the support line.
This isn’t rocket science, but thankfully every time that trump has tweeted negatively and the markets have sold off, they [the markets] have then gone onto recovery steadily. Or at least back up to the 26300 level.
He [Trump] has the power to spook the markets sensationally using tweets. And it is his spooking of the markets that gives us that can spread bet the chance to profit from his tweets.
Taking a profit
If you enter your trade at the support level, where do you take profits?
A simple and effective strategy for taking profits is to move your stop loss up to a level of 2/1 in your favour.
For example; if you enter a trade and your stop loss is 100 points, then you wait until your trade is 200 points in profit and move your stop loss up to this level.
That way, you get to lock in profit and if the price continues to rally then you can get extra profit on top of your locked in winnings.
If trading the daily charts gives you larger stop losses than you’d like, then you can drop down to the 4H charts and trade those.
This may seem too simple a strategy to be profitable, but the price doesn’t lie… and nor does the chart.
Often I’m asked what and where, as a new trader should I start trading?
Whilst the answer could be ridiculously long winded… it’s far easier to keep it short and sweet.
So I’ll say, take a look at the the German 30
Why trade the German 30?
I personally like trading the German 30 DAX… but why should you and why do I recommend starting out there?
the German 30 [DAX] is a very fluid market. There are opportunities to trade most days for most traders using anything from 5 minute charts up to 1H.
Obviously the longer time frame chart produce trading action on a day to day basis, but you can still catch plenty of good moves.
For those that want to trade the 4H and daily charts the trades can keep you in from a few days to months at a time.
Basically, the DAX creates good trading opportunities for most trading strategies and styles.
It’s the best of both worlds. By that I mean it moves enough to create ample profit each month in terms of points gained. It moves more than than the FTSE but less than the DOW [on average]
This means that you can trade with a relatively modest bank, can make good gains and also avoid the larger stop losses that you often need to trade the faster moving DOW.
Multiple strategies can be used when trading the German 30.
From simple moving averages to just using the MACD… from price action trading to just trading the first hour, there is more often than not a system or strategy that can be implemented on a regular basis with a greater upside than there is downside over time.
Bank sizes to start trading the DAX can be minimal.
Many of the the spread betting companies lowered their minimum stakes after the clamp down. You can trade from 0.50p a point at reputable companies like CMC.
This means you can start out with a smaller bank to see if trading is going to be for you.
The spread is small. Trading the DAX offers you good value when it comes to the spread.
The spread is what the spread betting companies charge you to open a trade.
This means that you can enter a profitable trade quicker than other markets but also offers you the flexibility to be in and out the markets if that is your trading style without having to keep paying a hefty spread fee.
The margin required to trade the German 30 has been kept modest in most cases. So once you open a trade your whole bank is often not needed to cover the position.
Obviously this all depends on your stake size and bank size. But if you are sensible it is easier to trade responsibly in most cases.
If you compare the margin and spread to trade the DAX against the margin and spread to trade Crypto currencies like Bitcoin you’ll clearly see that the DAX gives you good value overall.
Even if you are using a practice account the DAX can really give you a good feel of how trading and financial spread betting works.
You can test out your strategies in real time with different time frame charts to see what type of trading is going to suit you best.
Because the DAX moves a lot more [in one direction or another] than most currencies, you’ll get a very realistic idea of how and why the markets move as they do.
You can grow your bank trading the German 30 quicker than you can trading other markets.
This last point sort of encapsulates many of the above points.
Because of the fluidity of the DAX, trading it can result in building your bank faster than if you were trying to trade other markets.
When you have found a good trading strategy to use, 30% gains on average in a month can become quite realistic.
Obviously you are not going to make that guaranteed from one month to the next, but if you can double your bank every 6, 8 12 or 24 months then you could be onto a good thing indeed.
My Reasons for trading the German 30
The points above are certainly why I recommend taking a look at trading the German 30 DAX above other markets to new traders.
However, only you know what it is you are looking for when it comes to trading the financial markets.
Of course there are many other trading opportunities in many other markets that become available each and every day.
But certainly when you start out trading, you won’t go far wrong with getting a feel for how the markets work and move when looking at the DAX.
Remember too, you can open a dummy account to learn how to trade without risking a penny.
Whilst this will not be a substitute for the emotions that you will feel when it comes to using real money to trade. It still offers a good insight to trading the German 30 and indeed spread betting overall.
If you want to learn how to trade the German 30 successfully then be sure to check out my free DAX trading strategy HERE.
Bitcoin trading was hot topic for the press again recently.
Bitcoin was about to make a comeback… $20000 to be reached within the next month… blah blah blah. You’ve heard it all before.
What was interesting[ at least for me] was that the price finally broke past the 10000 barrier again. Then the bulls pushed the price up to 14000 and now the bears all the way back down again to 10000.
It’s a prime example of greed [everyone jumping on the bandwagon] and fear [everybody scared of losing too much money] this is what is causing much of the volatility.
This volatility can make it tricky to trade Bitcoin successfully, as the fast price swings make it a heavily emotional experience… especially for new traders.
If you are looking to trade Bitcoin then my free Bitcoin trading strategy is a good place to start.
Also, IG launched their Crypto index last month. This is actually quite a good way to trade Bitcoin/crypto’s without the huge price swings you get with Bitcoin.
Bitcoin basically controls all the other cryptos prices anyway.
Bitcoin Trading – Where Next ?
Well, the honest answer is that no one actually knows. How can we? There is very little price history to tell us anything concrete.
With traditional currencies, Indices and shares it is still far easier to speculate price movement in my opinion. We can’t say that anything is certain, but we can be a lot more confident in our opinions.
We are in such a new era with Crypto’s that anything is possible.
I said in my private members area a couple of weeks ago that you need to tread carefully when trading crypto’s. Anything can send the price steaming one way or another for no apparent reason.
I still think that over time Bitcoin will reach unbelievable highs… £50000 + is seriously possible… and why not? Especially as the currency becomes more stable and also goes mainstream.
Plus, there is only a limited number of Bitcoin that can be mined so I think this will also start to affect price eventually… but that’s going to be around the year 2140 apparently.
Overall I think that Bitcoin and crypto’s are very interesting. But personally for me and a trading angle it is not something I feel is stable enough to get into seriously yet.
Moving averages are the most commonly used of all the technical indicators.
They have the uncanny ability to get you in and out of trades without trying to find tops and bottoms.
Moving Averages can identify long term trend direction.
They can be used to identify stop loss levels too.
However, with all their benefits, is there a time not to use moving averages?
In my opinion, yes.
This is not being detrimental to the moving average, but is actually a way to enhance the moving average signals overall.
Support and Resistance levels.
Support and resistance levels should form the basis of all your trading entry points.
Knowing if the price is approaching key S&R levels can save you many lost points.
If you have opened a trade unknowingly near these vital levels to see the price rebound in the opposite direction, you know what I mean.
When the price of whatever it is you are considering trading is approaching solid support or resistance levels then you need to tread carefully.
And it is at these levels that moving averages can give you false signals.
When Not to use a Moving Average
Have a look at this chart of the DOW. You can see that I am using a 10/20 EMA on the 4H candles.
You can see that I have drawn in what is a solid resistance level.
Now, you can also see that the there were crossover on the 16/05/19 and the 21/05/19 both signalling a long trade.
However, if you had drawn in your resistance levels accurately then you’d never have really considered taking this trade on knowing that there was such a large possibility of the price rebounding back of the level.
If you wanted to use the crossover as a valid signal, then you’d have waited first to see if the price broke through the resistance level and then opened the trade.
You can see that from drawing in support and resistance levels, if a moving average crossover is signalled as the price approaches these levels then it is a clear time when not to use a moving average to enter a trade.
You will notice this occurrence often when trading, and not entering a crossover trade when the price is approaching support and resistance levels will save you many a losing trade.
Range Trading Moving Averages
One other time to ignore moving average signals can be when the price is trading within a range.
Again, you can easily find if a price is trading within a range by drawing support and resistance levels.
Look at this chart of the USDCAD you can see that the trend has been seems to be stuck in a range although moving slightly up.
You can also see that there have been numerous buy and sell signals created by the moving average crossovers.
Some were most certainly winning trades, but many more losses. You could have used a swing trading approach for far better results than the moving average can offer in this instance.
Once again though, if you hadn’t drawn in S&R levels then you could be having a trading nightmare trying to find a winning trade using a moving average.
Drawing in the S&R levels alerts you to not take any action until the price had broken out to either the up or downside.
Moving averages combined with support and resistance lines offer one of the simplest but most effective ways to start trading.
If you can add into that the times when not to use a moving average, then your points profit over time can be improved along with your trading confidence.
Moving averages are an awesome indicator to get you in and out of trades.
However, they can become even more effective by avoiding the signals created when the price is nearing major support or resistance levels.
If you are serious about making your trading pay, then you really should invest the time to make specific trading goals to reach your desired level of income.
Before I had ever read the book Goals by Brian Tracy I had always set specific goals for myself whenever I was trying to achieve a certain outcome.
I actually can’t remember reading about doing this [reaching goals] until much later in life. I was at least in my 30s. However, I had been writing out my goals since my teenage years.
My Trading Goals
When I first started learning about trading, I had a strict agenda. I had written goals. I was going to make an extra £1000 a month from spread betting the markets and I was going to blog about my experience.
The reason I was keen to blog about my trading was to ensure and prove to all that should I get ripped off on my trading journey, my readers will avoid the same mistake. Blogging was also a way to keep myself disciplined.
I achieved all my goals… and more.
Your Trading Goals
Your trading goals will be individual to you and your circumstances. However, here are some tips when writing them out.
Always start your goals with ‘I’ and stay present. So for an example…
I am a successful trader making £1000 a month from trading the financial markets
I am making £1000 a month from trading the financial markets
I am a disciplined and professional trader making £1000 every month from trading.
However you decide to write your goals, always remember that you want to start them with ‘I’
Repetition is Key
I also got into the habit of writing my main goal out 10 times every morning by hand.
This somehow really helped me stay focused. Months later when I was still writing them out, it dawned on me how close I was to actually achieving my goals.
It may sound like some sort of mumbo jumbo to you now, but that one little trick certainly helped my subconscious do the hard work for me. It feels like you are programming your mind directly.
On average it takes 66 days to form a habit. Keep on keeping on. Your goals will materialise but give everything you are trying a chance to work.
Visualise Whilst Meditating
If you have read the blog for any length of time, you’ll know that I’m a keen meditator. I have been meditating for years now.
I can now enter a very deep state of meditation after around 10 minutes.
It is in this state of deep meditation that I can give myself suggestions of my goals and visuals of me achieving my goals.
This is one of the most powerful self improvement tools you will ever use. It can be literally life changing. Plus, you get all the benefits of meditation whilst doing so.
I often meditate in complete stillness, but I also use this app and also some of Kelly Howells MP3s, they are awesome if you are looking for certain improvements like gaining positivity; but the deep meditation is amazing for programming your subconscious mind.
Tools for Living
Learning about how to write goals is an essential life tool for successful living.
Once mastered, you will be able to use the same process to achieve anything that you wish.
Seriously… the sky is not the limit… your mind is.
Here’s a link to the Goals book by Brian Tracey again and beneath you’ll find a video about how you can work towards goals and achieve more from life.
Remember… if you want to make a living from trading, set your trading goals.
Some of you may think goal setting is unnecessary… however, I assure you that most successful traders, entrepreneurs and business people all set goals. Why should you be any different?
What is the best moving average to use?
In answer to that question, there are many. There is not one particular moving average (MA) that anyone could claim is the best.
But here we are going to focus on some of my favourites for long-term, medium-term and short-term trading.
We will be using the daily charts along with the 4H charts and the 5 Minute charts.
What type of Moving Average
I always use the exponential moving average with my trading (EMA). This is my preferred MA over the simple and weighted moving averages.
There is also now the VIDYA moving average that I’m growing quite fond of as it is offering new ways and opportunities to trade.
However here we will only be using and concentrating on the EMA.
200 day EMA Longer Term Trading
The 200 day EMA is probably one of the most commonly used of all the moving averages
It can be used singularly where you trade the price above the EMA or below the EMA.
It can also be used with other short term period EMA’s to create a reliable crossover system.
The 200 day EMA is also commonly used to identify the direction of a trend.
If you look at this chart of the daily DAX you can see that you could have easily traded the price above and below the 200 day EMA and made some healthy profits.
As simple as it may seem that is a reliable trading strategy.
However, you can also add a smaller period moving average to create a very effective crossover strategy using the 200 day moving average.
200/5 Crossover Strategy
In this next chart you can see [although hard to] that I have added the 5 day EMA to the 200 moving average and have dropped down to use the 4H charts.
Each time the 5 EMA crosses the 200 EMA you open a trade and close the other.
Could have you any trading these crossovers? Of course you could have.
As with any strategy, you will have losing trades, but over the long-term using sensible staking and reliable moving averages you will come out on top.
Horses for courses
As mentioned in a previous post, for every chart there is a strategy and for every strategy there is a chart. It is your job as a trader to match this strategy and charts together.
Do not think that one EMA setup will work for each and every chart and timeframe, that is just unrealistic.
Medium-term Moving Averages 20/50
One of my favourite and most reliable EMA setups to trade currency pairs with is the 20/50 using the daily charts.
What’s more is that there 20/50 EMA crossovers can be used on most of the major currency pairs and even a few of the minor repairs.
I will say this again…. it is your job as the trader to find which charts suit the strategies that you are trying to use.
For every chart there is a strategy and for every strategy there is a chart.
As you can see from the charts beneath, using the 20/50 moving average crossovers on the daily charts is wickedly effective.
Trading like this takes the stress out of opening and closing your positions as you just trade along to the signals that the crossovers generate.
Again you’ll find that you will have losing trades, but these will be easily offset against your winning trades over Long-term. Remember trading is a marathon and not a Sprint
Short-term trading strategies using exponential moving averages
When using the shorter period moving averages, it is always better to use the smaller minute charts. Here we will be looking at trading strategies using five-minute charts to trade the DAX and 10/20 Exponential moving average.
The upside to using small time frame charts and the 10/20 EMA is that they can be used on most charts currency pairs and indices.
Your stop loss levels will also be smaller.
The downside is that you will get far more false signals.
However, over time and again with sensible bank management you can create some decent points profits on a daily basis.
The idea of this these short-term type of EMA strategies is that you will be in and out the markets many times in a single day.
This most certainly suits some traders and not others as you will need to be at your PC most of the day.
Take a look at the chart beneath, you can see many crossovers and trading opportunities. You’ll also see lots more false signals.
Moving averages are a great way to smooth out the price on a chart and give you a clear idea of direction of price.
Also you are getting the added benefit of signals [crossovers] telling you when to enter a trade.
If you are unsure about opening a trade and the direction on a chart, leave it. Do nothing. There will always be other, clearer opportunities once you learn to trade effectively.
I recently explained a simple trading rule to remember to my spread betting students.
Sometimes when you are trading, the daily charts may seem flat and untradeable.
There looks like there is nothing going on and opportunities seem scarce.
When this happens, don’t be afraid to drop down to using the 4 hour and 1 hour charts and even the 10 minute candles
You need to be able adapt your trading to make money consistently over time.
Let’s look at the chart beneath as our first example
You can see that the price looks pretty sideways on the daily chart. There appears to be little in the way of trading opportunities.
But if we drop the chart down to 10 minute candles let’s see what happens.
We have now created much more volatility; this in turn gives us more opportunities to trade.
Now this approach won’t work if you are a lazy trader. And that’s fine if you do not want to be at your desk throughout the day. But for those that want to be a more active trader and building their banks quickly, then this approach can be perfect.
If we add an exponential moving average to the chart and trade the crossovers, we can create a trading strategy that gives us our entry and exit points.
Look at the chart now. You can see that over the last couple of days there have been many opportunities available.
In fact if you had traded each crossover signal from 8am – 8pm, you’d have netted some good points profit with very little in the way of risk.
Considering that the daily chart looked untradeable, you can see what happens if you change your trading approach to suit the chart.
You Can Diversify
Don’t get stuck in the rut of trading the same strategy that only works in some scenarios.
Diversify your charts and strategies and you’ll find you have far greater success overall.
Learn the basics well and you’ll find spread betting is rather simple.
Over time you’ll come to know what strategy works best on what time frame and more importantly what works best for your personal style of trading.