Trade The Journey

Trade The Journey

Tools and Indicators?

Top of the Morning. Is it fair to say that the cryptocurrency bubble has popped? Some would say that the ultimate use of cryptocurrency as a potential currency isn’t known for sure, and value in the cryptocurrency space has not been found.

It’s a relatively new asset/currency, and countries are taking steps to ban it from public use. Ban it from use completely; well, it’s not that simple. Instead, governments are forming their own digital currencies with the hopes of transforming their financial structure. For instance, China is developing and testing its central bank digital currency.

I am a fan of cryptocurrency, and I believe that its current volatility is a natural process as space continues to develop and,  transform our increasingly digitalized world. People are unsure of what to make of this technology.

Its value is entirely written within computer code. I won’t get into how it works and why it will transform the way we live because it’s a complex subject. I’m still discovering how cryptocurrency and blockchain technology works.

An article I read stated that over seventy-five percent of the people invested in cryptocurrency have little knowledge of how it works. Don’t be one of these people!

Some cryptocurrencies have real value based on their use and blockchain technology. Other cryptocurrencies have little real value but high speculative value, so be careful.

There’s no shortage of indicators to add to your charts. I use the Thinkorswim platform, and there are hundreds of indicators you can add to your chart. I currently use three moving averages, an average volume indicator, and a historical and implied volatility chart.

Sometimes, I try to new indicators based on the books or articles I’m reading, but none of them have remained on my chart. I have a fear that I will become overreliant on indicators. I also know that to use an indicator properly, you have to understand how it works.

Moving averages help identify trends. For a 200-day moving average to turn up, think of how many days of price advances are needed. I use the 20-day, 50-day, and 200-day moving averages currently. Most people use these indicators.

The volume average signals when there is a high amount of people transacting in the marketplace. Are people rushing in because of a Fear of missing out or hurriedly exiting their positions due to mounting losses?

The volatility indicators work because they show the past and future anticipation of volatility. I understand volatility to be price movement around the mean or average price. A stock progresses from low to high volatility and then reverses the process.

These indicators assist me in identifying the current psychology of the stock and market when I’m trading. I continually adjust my perspective based on what I am seeing.

How do you remain objective? A trader’s dilemma.

I believe an indicators’ purpose is to give you an edge but not in forecasting the ultimate direction of a stock. The advantage lies in identifying situations in which a stock is likely to perform as your pattern or indicator states. Over time, I have naturally drifted towards trading breakout patterns.

I like breakout patterns because the prevailing sentiment is clear. In a sideways range, positions are being undertaken and reduced as the bears and bulls fight for control. In periods of calmness are where the best positions can be opened, especially in swing trading.

The test for a breakout pattern is at resistance or support. Volume helps to identify the strength of the breakout, and volatility is needed to make the actual money.

Your mental edge comes from knowing that nothing is guaranteed. There is no certainty in trading. The only certainty is uncertainty.

With that being said, I would advise anyone beginning in trading to experiment and see what works for you. You don’t need a hundred indicators, just a few that you understand well.

My last series of trades have all been losers. After each of these trades, I began to doubt whether or not I should be trading. My cryptocurrency losses reinforced this doubt. It’s easy to read about proper trading psychology and what you’ll do to remain positive in the face of defeat, but it’s hard to practice.

My natural tendency is to look for another indicator or tool. If I just had this indicator or that new tool, I could transform my trading, so I never experience losses. That’s not only impossible but a bad way to interpret your losses.

Sure, some mechanics of the trading system may need adjusting, but no strategy, tool, or indicator will prevent losses. Losses are a natural part of trading.

The remedy to the losses you’ll experience is risk management. Risk management is the only way to ensure that’ll you will remain in the game.

So, when you’re tempted to add another indicator or tool, ask yourself if you’re trying to avoid losing trades.

Cash-Flow Management:

Most of my expenses are aligned with my goals. I am continually paying off my credit, intending to be debt-free in two years. Although my income fluctuates, I try to base my spending on my lowest income earning month throughout the year. When I have excess income, I save more.

Grade: C
Reason: Continued improvement but some mistakes.

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