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Methods of trading called “Golden Bottom”
As you know, the assets of currency pairs, which are the most frequently used assets in the market of binary options in the private trading segment, have one characteristic feature. We are talking about the so-called correlation of currency pairs. If you skillfully use this unique property when conducting binary trades, then you can achieve excellent profitability, namely – 100% of income in just 1 week of trading in the middle mode during the working day. That’s why the strategy and got its name – “The Golden Bottom.” In addition, the technology will be absolutely accessible to execution even by inexperienced beginners, you just need to gather your spirit and be very careful when opening sales positions, observing all the necessary requirements, which will be described in detail below. There will not be any special knowledge or acquired skills of trading binary options here. Trading itself in this method is characterized by a low percentage of market risks.
But, of course, like any trading strategy, the technique of binary trading on the assets of currency pairs “The Golden Bottom” requires a private investor to fulfill a number of certain input conditions.
To begin with, since we are read and beginners, let’s look at the general outline of what is the property of correlation in the stock exchange of option trading. Correlation is the existing relationship between certain types of currency pairs. That is, it is obvious that if the pairs of currencies themselves exert a certain influence on each other, then on the charts of their assets we will have some similarity in the moments of fluctuations in their quotations. And in some cases – on the contrary – quotations of related assets will show us a cardinal divergence from each other. But, of course, it is better to imagine this process, after analyzing a living example. Let’s take for quotation the quotation chart of the asset of the currency pair, which is the most popular among private investors of the binary-option market – EURUSD:
On this chart, we can clearly see the parcel on the quotations, on which the euro falls against the US dollar.
And now we will take the diametrically opposite situation and consider the asset of a currency pair in which the US dollar takes a distinct leading position in a pair of currencies, for example – USDJPY (we will study exactly the same time interval):
On the chart of quotations of this asset, there is a rapid growth of the US dollar against the Japanese yen. That is, the US dollar is capable of strengthening as a currency relative to other leading currencies of the world stock exchange of finance. And this property (this is the correlation, which we talked about above) – it will be very convenient to use binary options for highly profitable stock trading.
And to make this possible, and the “Gold Bottom” strategy gave us the biggest “exhaust”, we will need to choose a brokerage terminal, which has a number of certain conditions and functions in the interface. So, for successful implementation of the strategy, you will need: high accuracy of quotes from a reliable supplier of stock liquidity, a large number of assets for trading, a low threshold for the size of the minimum option contract, the function of opening several transactions simultaneously without directly limiting their number.
In the course of testing this strategy, among the three most popular among the stock traders of the binary market of trading terminals, the optimal trading platform was selected for several indicators. The highest accuracy of quotations, the speed of opening contracts and, accordingly, the high profitability at the output, along with the comfort of carrying out work on the trading platform – were demonstrated by the terminals of our best brokers. By the way, on these trading platforms, private investors are provided with a list of assets for work, represented by a wide range of trading instruments – over 80 units, an exchange contract can be opened starting at US $ 1, and this facilitates the simplicity of capital management), and in addition, open contracts are not installed at all.
But how to apply the notorious property of correlation of currency pairs in practice? So, we are considering the principles of work on the strategy called “Golden Bottom”.
In order not to go into detail without the need for a detailed technical analysis of the quoted charts of tradable assets, we will use the system in its simplest version, one that will suit both sharks of the stock exchange and inexperienced beginners. The main asset of our trading asset is EURUSD, but as for the USDJPY (dollar-Japanese yen) asset, we will use it as a security. For example, let’s open a deal on the asset EURUSD with the direction DOWN:
If we see that the forecast is likely to be justified, and the value of the asset begins to fall (the quotes on the chart decrease), then we need to make a transition to the insurable currency pair and on the asset chart to open the deal UP, since we already have confidence in the fact , that the value of this currency pair on the exchange will increase, and we, accordingly, will be able to earn additional income on this.
But, of course, there is the possibility of developing the opposite version of the situation. Similarly, we open an option trading position, directing it UP, on the same main asset of the EURUSD currency pair, but its quotes start to fall, that is, it turns out that the trade contract opened by me should bring me a loss:
After observing the trend of the asset market and identifying the most probable error in the trade forecast that we have generated regarding the further movement of its price, we again switch to a pair of currencies intended for insurance of the main pair – and we open the contract with a binary option UP. That is, the result will be that the loss received by us on the main asset of the EURUSD currency pair will overlap entirely with the profit that will be received from the insured series of binary-option transactions, that is, our deposit capital will again acquire strictly positive profitable statistics.
Establishing for themselves the required number of trade contracts in the insurance series, it is necessary to take into account a number of factors in order to prevent overloading of the deposit. You insure yourself by trading with minimum contracts, which amount to 1 USD. Do not deny the fact that the considered system of the “Golden Bottom”, despite its high profitability and recoverability – is very simple to understand and execute, even novice private investors of the binary-option market who, for the first time in their lives saw the stock exchange terminal.
The trading system of binary-option contracts “Gold Bottom” is intended for profitable trading with deals with mostly short expiration periods. And the most optimal expiratory period in this respect, set by the trader for the time of “life” of the opened exchange contract – in this case will be a time interval of five minutes. This period is enough to analyze the correctness of the forecast of the leading financial asset for a private investor and for the subsequent rapid opening of trade contracts on the insuring asset in order to secure final profit results.
For additional personal testing of the above approach to trading with binary options and for further training and testing of your own skills, you can use a demo terminal with a revolving unlimited virtual deposit account, working on trading platforms. By the way, this broker conducts interesting tournaments on demo deposits, in which you can win without investing at all, having won your entrance capital, start trading on the stock exchange and earn fully real financial means.
вЂњGeneral Risk Warning: Binary options trading carry a high level of risk and can result in the loss of all your funds.вЂќ
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Method of trading called “Golden Bottom
Patterns are one of the oldest and most widely used methods for forecasting price movement. The idea behind patterns is that people react in similar ways in certain well defined circumstances. Patterns have specific entry points and sometimes specific exit points.
There are a number of patterns and types of patterns available to use. At the right are two common chart patterns that traders rely on. There are also patterns based on one or two (or more) candlestick patterns, such as the Doji patterns (below). There are also more obscure patterns like those used on point-and-figure charts (not my cup of tea).
Trading support and resistance is a core method for me. If a stock, futures contract, or currency pair does not show good adherence to principles of support (doesn’t want to go below a certain price without a fight) and resistance (price levels that are somewhat hard to get through) then I am not interested in trading it.
Support and Resistance (S/R) can be calculated for different time frames. For intra-day trading of stocks or stock indexes (including futures on stock indexes) I find the Floor Trader Pivot calculations to work best. On daily charts you can usually see the zones of support and resistance by looking back several months. Fibonacci ratios are often used by traders to forecast S/R levels and evaluate the likelihood that a pullback will be buyable.
Horizontal lines are used for S/R. Sloped lines are called trend lines and channels, which are different (see below). We will discuss this more in a later segment.
Momentum trading is when an instrument (stock, futures contract, bond, currency pair) is moving at a steady pace and in a clear direction, often cutting through the S/R levels with relative ease. Time of day is often critical in that mornings and afternoons are best for momentum but midday is usually a bad time to trade momentum. Abnormally high volume is a sign that momentum is strong. Declining volume is a sign that the momentum is fading. We have a proprietary tool for trading stock indexes that looks at a bunch of underlying stocks from that index to see when momentum is strong or fading (you can get a free trial at TradingComputers.com, it is the Falcon Reversal Indicator).
Reversion to mean is a method that appeals to engineers and scientific traders a lot. It uses some fancy scientific math like standard deviation. The concept is the assumption that both a stock’s high and low prices are temporary and the stock’s price will tend to move back to the average price over time. Bollinger bands, trend lines, channels & the McClellan Oscillator follow this assumption in one way or another. Mean reversion works well in markets that have low momentum. If the market has too much momentum then you will lose every trade until the momentum slows.
Tells are a small group of stocks that you watch to discover early warning signs that momentum is fading, building, or reversing. The method of picking tells is the key to making them work but it is too long a discussion for this segment. Capital Management Institute (of which I have an interest) uses Tells a lot and they can teach you how to use them. The idea is that you can discern the mood of the market through the Tells. Let’s say Microsoft has just reported earnings and the top and bottom line numbers were good. However, on the earnings call they only beat on the bottom line because of a one-time tax credit loophole. I would watch that stock the next day as a Tell: is the market a glass half full market or a glass half empty market? If Microsoft gets whacked the next day then long trades that day would be much more risky because the market is in an unforgiving mood.
Fundamentals are the classic Wall Street fund manager’s tool for deciding when to buy or sell. Jim Cramer uses it along with most of the people on the CNBC show Fast Money. Fundamentals are hard to fully understand as a professional fund manager, much less a private trader. I prefer technical analysis with a some fundamentals thrown in. It is better to be long fine companies and short bad ones than the other way around. Most fund managers pay for highly educated analysts opinions and they still get it wrong far too often, so don’t spend too much time on it but don’t be totally ignorant of it either.
The problem with fundamentals can be compared to buying a classic car. Most car guys in their 50’s or older know that the Olds 442 was a hot muscle car in its time and should be valuable and collectable. However, an Old’s 442 is only valuable to collectors if it has a manual transmission (no matter how good the rest of the car is). Most amateur muscle car buyers don’t know this and might overpay for a 442 with an automatic transmission. The same is true for for fundamentals. For example, in the semiconductor business the book-to-bill ratio is the most important thing to know when earnings are released. For telecom stocks you need to know the “churn rate” (how many customer are lost to competitors) and if the churn is a little high then you need to look at the CAC (customer acquisition cost) to replace the churn losses.
It is hard to reasonably know everything about fundamentals in sufficient detail for all the stocks you want to trade. It is a fine approach to improve your results for long term retirement investing, but for trading you should use technical analysis (the other stuff in this list of methods).
Sentiment is a gauge of the overall attitude of market participants. If everyone is bullish then they are probably all fully invested and there are no buyers left. It is contrarian logic in that if everyone is on the same side of the trade then it will reverse the other way. Market bottoms are made when everyone is so bearish that there are no sellers left. Sentiment does not give a precise entry point but can help you manage risk or embolden you to stay long even though the market seems overbought or the fundamentals seem weak.
Golden Cross Definition
What is a Golden Cross?
The golden cross is a candlestick pattern that is a bullish signal in which a relatively short-term moving average crosses above a long-term moving average. The golden cross is a bullish breakout pattern formed from a crossover involving a security’s short-term moving average (such as the 15-day moving average) breaking above its long-term moving average (such as the 50-day moving average) or resistance level. As long-term indicators carry more weight, the golden cross indicates a bull market on the horizon and is reinforced by high trading volumes.
- The golden cross is a technical chart pattern indicating the potential for a major rally.
- The golden cross appears on a chart when a stock’s short-term moving average crosses above its long-term moving average.
- The golden cross can be contrasted with a death cross indicating a bearish price movement.
What’s a Golden Cross?
What Does a Golden Cross Tell You?
There are three stages to a golden cross. The first stage requires that a downtrend eventually bottoms out as selling is depleted. In the second stage, the shorter moving average forms a crossover up through the larger moving average to trigger a breakout and confirmation of trend reversal. The last stage is the continuing uptrend for the follow through to higher prices. The moving averages act as support levels on pullbacks, until they crossover back down at which point a death cross may form. The death cross is the opposite of the golden cross as the shorter moving average forms a crossover down through the longer moving average.
The most commonly used moving averages are the 50-period and the 200-period moving average. The period represents a specific time increment. Generally, larger time periods tend to form stronger lasting breakouts. For example, the daily 50-day moving average crossover up through the 200-day moving average on an index like the S&P 500 is one of the most popular bullish market signals. With a bellwether index, the motto “A rising tide lifts all boats” applies when a golden cross forms as the buying resonates throughout the index components and sectors.
Day traders commonly use smaller time periods like the 5-period and 15-period moving averages to trade intra-day golden cross breakouts. The time interval of the charts can also be adjusted from 1 minute to weeks or months. Just as larger periods make for stronger signals, the same applies to chart time periods as well. The larger the chart time frame, the stronger and lasting the golden cross breakout tends to be.
Example of a Golden Cross
As a hypothetical example, a monthly 50-period and 200-period moving average golden cross is significantly stronger and longer lasting than the same 50, 200-period moving average crossover on a 15-minute chart. Golden cross breakout signals can be utilized with various momentum oscillators like stochastic, moving average convergence divergence (MACD) and relative strength index (RSI) to track when the uptrend is overbought and oversold. This helps to spot ideal entries and exits.
The Difference Between a Golden Cross and a Death Cross
A golden cross and a death cross are exact opposites. A golden cross indicates a long-term bull market going forward, while death cross signals a long-term bear market. Both refer to the solid confirmation of a long-term trend by the occurrence of a short-term moving average crossing over a major long-term moving average.
The golden cross occurs when a short-term moving average crosses over a major long-term moving average to the upside and is interpreted by analysts and traders as signaling a definitive upward turn in a market. Conversely, a similar downside moving average crossover constitutes the death cross and is understood to signal a decisive downturn in a market. Either crossover is considered more significant when accompanied by high trading volume. Once the crossover occurs, the long-term moving average is considered a major support level (in the case of the golden cross) or resistance level (in the instance of the death cross) for the market from that point forward. Either cross may occur as a signal of a trend change, but they more frequently occur as a strong confirmation of a change in trend that has already taken place.
Limitations Of Using The Golden Cross
All indicators are “lagging,” and no indicator can truly predict the future. Many times, an observed golden cross produces a false signal, and a trader placing a long at that time could subsequently find himself in some near-term trouble. Despite its apparent predictive power in forecasting prior large bull markets, golden crosses also do regularly fail to manifest. Therefore, a golden cross should always be confirmed with other signals and indicators before putting on a trade. The key to using the golden cross correctly – with additional filters and indicators – is to always use proper risk parameters and ratios. Remembering to always keep to a favorable risk-to-reward ratio and to time your trade properly can lead to better results than just following the cross blindly.
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