Football and trading aren’t dissimilar – plenty of lessons to learn from the pros

We’ve all seen the news, football season is here. The excitement is building up as this year’s UEFA Champions League draws closer.

Happening at London’s Wembley Stadium, this year’s event marks the 69th season of Europe’s top club competition and the 32nd as the UEFA Champions League. Big teams like Manchester City, Real Madrid, and Bayern Munich are the ones to watch this year.

Top athletes are always inspiring, and often in ways that aren’t directly in the sport itself. Take for instance the story of someone like Manny Pacquiao – a man who overcame the odds stacked against him to become the only eight-division world champion in the history of boxing. 

There is much to learn from Pacquiao about discipline, about familial bonds, and about the importance of being grateful. 

So what can football teach us? How can Nicolae Stanciu’s superb strike in Romania’s stunning win against Ukraine help us understand how the world works just a little better? 

Identifying opportunity

Learning when to act is an art form. It’s true—there is an almost artistic quality to identifying the perfect time to get things done. This applies to all things, from business, to racing, to even cooking. 

For the uninitiated, market behaviour can seem erratic and meaningless. For masters of identifying opportunity, market behaviour manifests as signals; signals that tell them how they should act in any given circumstance. 

Like a star player in front of a penalty shootout, it’s about reading the often subtle signals given by the goalkeeper before striking the ball into the net.

For such master readers, swing trading is perfect. Contrary to day trading, it’s not about making rapid trades that make small differentials, but rather good, decisive trades that make a significant difference in your portfolio.

Swing trading comes with some pretty cool advantages:

• You can trade without having to stare at your screen for hours on end, especially if your trades last for days or even weeks.
• It’s great for people with full-time jobs (and for those who want to touch grass on a semi-regular basis)
• Plus, it’s way less stressful than day trading.
  

Just like in football, think of swing trading as knowing when to make your move to score a goal.

To create a winning game plan, swing traders look to different tactics and setups to win. They use Trend Catching strategies and mix patterns, indicators, and strategies.

It’s kind of like how football teams have their plays and strategies. There isn’t one sure-fire winning strategy—anything can happen in the markets (or in this case, the field). 

How to find the best swing trading opportunities

Tip 1: Understanding support and resistance in trading

Let me indulge the football fan in me. Consider the 4-4-2 formation that consists of 3 lines: one back four, one midfield four and two strikers. 

In this formation, the combination is quick, followed by a striker making a precise pass and taking a shot on goal. It’s all about timing and making sure the attackers don’t go offside.

Swing trading works the same way. When looking at the trading charts, there are 2 lines to keep an eye on.

Support: A spot on your chart where buyers are likely to jump in.

Resistance: A spot on your chart where sellers are likely to step in.

Stick close to the support and resistance levels on the candlesticks, and aim to exit at a good position, ideally after taking some profits.

Tip 2: What is a moving average and how to calculate it?

In a fast-paced 90-minute football match, scoring opportunities often arise, much like the role of the Moving Average (MA) in swing trading.

While prices can be volatile and challenging to interpret, the 50 MA acts as a reliable guide for swing traders, offering a balance between short-term and long-term trends and making it a favoured tool for trend riding.

How do you choose the perfect moment to enter a swing trade?

Tip 3: 15 most popular candlestick patterns you should know

It’s important to first recognise these candlestick patterns:

·         Bullish reversal candlestick patterns : Eg. Hammer

·         Bearish reversal candlestick patterns: Eg. Shooting Star

And let the markets show signs of reversal.

Use trendlines, support and resistance levels, and the chart patterns to identify potential breakouts.

Tip 4: A guide to using moving average in predicting market turning points

Mastering this skill is essential for making the most of these momentum shifts in asset prices. 

Using a parallel in football–while many may think Christiano Ronaldo was goal-shy between the 11th to 20th minutes in his match with Portugal, some believe that this time was used by him to strategise on how to score international goals.

Tip 5: Understanding the moving average break pattern

The breakout swing strategy is all about having the keen eye to spot breakouts that go beyond the usual support and resistance levels.

Let’s talk about a swing trading entry strategy that targets breakout traders who get “trapped.” These breakout traders go long when the market breaks above its highs.

But what if the market breaks out and then reverses downward? Now, these traders are “trapped” with their long positions losing value. As the market keeps dropping, it hits their stop losses, pushing prices down even more.

And this is how the False Breakout can serve as an entry trigger into a trade.

How to set your stop loss so you don’t get stopped out prematurely

Tip 6: How to set a correct stop loss and avoid stop hunting

In terms of positioning to make effective plays, players must create space, often passing and spreading the ball across pitch; cue Paul Scholes, master of the long pass.

Similarly, a stop loss needs a bit of “buffer” to allow the market to move in your favour. Otherwise, even if your analysis is correct, you might exit early without giving your trade enough room to breathe.

Take profits before the market reverse against you

Tip 7: Understanding Fibonacci

This could be your personal great saves of the season—a superb stop in this collection featuring Thibaut Courtois.

Place your Stop Loss just below the next Fibonacci level when buying or just above when selling. This way, if the trend reverses, your losses are minimised.

·         If you’re long, take profits at potential selling points like swing highs or resistance.

·         If you’re short, take profits at potential buying points like swing lows or support.

But remember, past wins don’t necessarily guarantee future success. It’s up to you to assess the risk/reward ratio and choose the strategies that work best for you, keeping in mind that most trades, like plays, might not always lead to a touchdown. Stay agile, learn from each trade, and keep pushing for your goals.

Guess the 2024 Euro Cup Champion and win a prize pool of USD 1,000 this football season

Got football fever? It has its upside—VT Markets is kicking off a limited-time campaign and your football fantasy could reward you big time! 

Guess the winning team, join the lucky draw, and you could walk away with a share of the prize pool. It’s just like playing the EURO Match Predictor.

Dear Client,

As part of our commitment to provide the most reliable service to our clients, there will be server maintenance this weekend.

Maintenance Hours:
29th of June 2024 (Saturday) 00:00 – 12:00 (GMT+3)

Please note that the following aspects might be affected during the maintenance:
1. During the maintenance hours, the Client Portal and VT Markets App will be unavailable, including managing trades, Deposit/Withdrawal, registration and all the other functions will be limited.
2. During the maintenance hours, price quotes and trading management will be temporarily disabled. You will not be able to open new positions, close existing positions, or make any adjustments to your trades.
3. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.

Please refer to MT4 / MT5 / VT Markets APP and Client Portal for the latest update on the maintenance completion and market opening time.

Thank you for your patience and understanding about this important initiative.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Affected by international holidays, the trading hours of some VT Markets products will be adjusted. Please check the following link for the affected products:

Notification of Trading Adjustment in Holiday

Note: The dash sign (-) indicates normal trading hours.

Friendly Reminder:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Shares product NKLA is about to conduct a share reverse split after the market closes on June 24, 2024. Starting from the market opening on June 25, 2024, NKLA expects to provide investor trading in divided contracts.

After the share reverse split, please be aware of the following:

1. The trading volume of NKLA open positions will become 1/30 of the original lot size.

2. The “opening price” and “take-profit/stop-loss setting price” of NKLA’s positions will become 30 times the original price.

3. NKLA’s price at the opening of the market on June 25 is expected to be approximately 30 times the closing price.

The above data is for reference only; please refer to the MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Making thousands of dollars within a few clicks? Yes please! 

That is the social appeal of forex trading. The instant gratification and the adrenalin rush can often blur the line between strategically trading the markets and gambling.  

To sustain as a profitable forex trader long term, however, is beyond clicking the “trade” button in seeking the jackpot trade to financial freedom. The reality is successful traders maintain the discipline in risk management every single trade they take.  

Only trade when the odds are in your favour 

As a start, it is important to understand the dynamics of the market being traded. Every asset class has its own patterns and psychological price trigger points. But in general, most traders analyse the market with two common approaches: Technical analysis and fundamental analysis. 

Technical analysis 

Primarily, technical analysis is chart reading. By relying on past data in the form of indicators and price actions, one can plan a trade with the belief that the buying and selling actions of the market reflect the sentiment tied to a particular financial instrument. Indicators such as chart patterns, support and resistance levels, price trends, moving averages as well as volume and momentum indicators all fall under technical analysis. 

Read more about technical analysis. 

Fundamental analysis 

Another aspect of analysing a market is by looking at the intrinsic value of an underlying asset via related economic and financial factors. These include macroeconomic factors, such as the state of the economy and industry conditions; to microeconomic factors, like the effectiveness of the management of a company.  

Fundamental analysis tends to point to the long-term direction of an asset class. However, majority of CFD trading are short term in nature, and as such fundamental analysis tends to receive less attention. 

Developing your own trading plan, and sticking to it 

A trader can decide based on technical and/or fundamental analysis whether the odds favour opening a trade position in the market. However, a trading strategy must entail the level of risk exposure undertaken, and the trader must psychologically accept the risk level as planned.  

Without a proper risk management strategy, opening any position in the financial markets is no different from gambling. This is how most traders have their accounts wiped out and never trade again in their lives. 

The 2% rule 

A good way to start is by looking at the trading capital of any given account. The common practice among traders is to risk no more than 2% of trading capital per transaction. This is also known as “the 2% rule”. 

For example, in a $500 account, the maximum loss should be limited to: 

2% x $500 = $10 per trade 

The rationale behind this rule is founded in the possibility that a trader can be wrong fifty (50) times in a row before the account is wiped out. This greatly improves the chances of survival for a trader in the long run. 

To make the execution of a trading strategy more effective, a trader can use the Stop Loss and Take Profit feature to ensure that the risk level initially planned will be adhered to. By setting a stop loss or take profit order, not only a trader can relax without staring at the screen all the time, but also remove the possibility of making an emotional decision.  

Is the risk worth the reward? 

The risk to reward ratio marks the potential profit a trader can earn for every dollar risked on a trade. This is used to justify if the risk is worth taking for the reward one can potential. A trade with a risk to reward ratio of 1:7 would mean that that a trader is risking $1 for the chance of earning $7.  

Obviously, the higher the reward makes a trade more attractive to take, and this is how traders often plan which trades to take. The more experienced a trader is, the more he knows being selective in opening trade positions would help in surviving the markets. 

Leverage: The double-edge sword 

Put simply, leverage is the use of money of the broker rather than the strict use of your own, which is very common in the CFD trading industry. A trader could put down a deposit of just $500 to open trade positions up to $250,000 with 500:1 leverage.  

What does that mean?  

With every $1 profit you make using your own money, you can make up to 500 times of that. However, the reverse also holds true.

With every $1 profit paper loss you are holding, you will also be holding 500 times of that if your position has not been closed yet.  

This is why it is important to balance the use of leverage against the 2% rule. While maxing out on leverage can lead you to the Lambo dream, it often wipes trading account out fast. 

Staying cool and calm is the trick 

Of all the risks, the hardest risk to manage is the emotion of the trader himself. Learning the details of how to plan a trade is nowhere as challenging as executing the trade without emotion. Often, traders stray away when the market move in a certain direction, not taking profits or stopping losses as planned.  

All traders must take responsibility for their own decisions, whether this is a result of failure to plan, unexpected event or just because the trader got emotional himself.

While automation can help to negate emotional decision making, the best way to objectify this is to maintain a trading journal, jotting down the details leading to the success or failure of each trade. 

Copy how others manage trading risk 

If you are unsure how to manage your trading risk, consider using the Copy trading feature for a start. Copy trading is a form of social trading where new traders can replicate the trades from the seasoned traders. By doing so, you can benefit from the expertise of others as you keep learning about the financial markets. 

Profits will follow if risk is managed well 

Risk management is one of the most overlooked areas in trading. With a disciplined approach and good trading habits, losses can stay under control and any trader will have a chance of being profitable. Explore 1000+ assets being offered by VT Markets and tart your financial trading journey today! 

Open a live account 

Imagine you are at the grocery store, and you notice that the prices of many items have increased compared to your last visit. While this might be a frustrating experience for you as a consumer, it’s also a valuable data point for traders and investors who closely monitor inflation trends.

One of the key indicators they rely on is the Personal Consumption Expenditures (PCE) Price Index, a measure of the prices paid by consumers for goods and services in the United States.

As a forex trader, you are constantly on the lookout for economic indicators that can influence market movements and provide trading opportunities. One such indicator is the PCE Price Index, closely watched by the Federal Reserve as a gauge of inflation.

Grasping the nuances of this index can give you valuable insights into the central bank’s monetary policy decisions and their potential impact on currency and commodity markets.

What is the PCE Price Index?

The PCE Price Index is a measure of the prices paid by consumers for goods and services. It is calculated and published by the Bureau of Economic Analysis (BEA), and it serves as one of the key inflation indicators closely monitored by the Federal Reserve.

Unlike the more widely known Consumer Price Index (CPI), the PCE Price Index includes a broader range of consumer spending, including healthcare and housing services.

The PCE Price Index is used to calculate inflation by tracking the percentage change in the prices of the basket of goods and services over time.

Specifically, the BEA compares the cost of this basket in the current period to the cost of the same basket in a base period. The percentage change in the cost represents the rate of inflation or deflation.

For example, if the basket costs USD 100 in the base period and USD 102 in the current period, the PCE Price Index would show a 2% increase, indicating an annual inflation rate of 2%.

This inflation rate is then used by policymakers and investors to gauge the overall price level changes in the economy.

The PCE Price Index is also divided into headline and core measures. The headline index includes all goods and services, while the core index excludes volatile food and energy prices.

The core PCE is often considered a better measure of underlying inflation trends, as it filters out temporary price fluctuations caused by factors such as changes in energy prices.

PCE vs CPI: Key differences and advantages

There are several important indices used to measure inflation in the United States, each with its own methodology and focus.

Some of the commonly cited inflation measures include the Producer Price Index (PPI), which tracks prices at the wholesale level, the Import Price Index, monitoring inflation for imported goods, and the Employment Cost Index, focusing on changes in labour costs.

However, the two most widely followed and influential inflation gauges are the Personal Consumption Expenditures Price Index and the Consumer Price Index. While both the PCE and CPI indices measure inflation, there are several key differences between the two.

The CPI is based on a different basket of goods and services, uses different weightings, and does not account for substitution effects, where consumers switch to cheaper alternatives when prices rise.

In contrast, the PCE Price Index is preferred by the Federal Reserve as its primary inflation gauge due to its broader coverage of consumer spending, including services like healthcare and housing. Additionally, the PCE Price Index captures substitution effects, reflecting how consumers adapt their spending patterns as prices change.

Furthermore, the PCE Price Index’s methodology is designed to account for changes in consumer preferences over time. The index is adjusted to reflect shifts in consumer behaviour, ensuring that it remains an accurate measure of inflation as spending patterns evolve.

This dynamic approach enhances the index’s relevance and reliability in capturing the true cost of living.

Using the PCE Price Index for trading

As a forex trader, you can use the PCE Price Index to anticipate potential changes in monetary policy by the Federal Reserve.

The Fed closely monitors the PCE Price Index as part of its dual mandate of maintaining price stability and maximising employment.

If the PCE Price Index shows that inflation is rising above the Fed’s target rate (typically around 2%), it may signal that the central bank will tighten monetary policy by raising interest rates. Conversely, if inflation remains persistently low, the Fed may consider lowering interest rates or implementing other stimulative measures.

Changes in interest rates can have a significant impact on currency and commodity markets. Higher interest rates tend to strengthen a currency, making it more attractive for foreign investors, while lower rates can weaken a currency’s value.

Similarly, changes in interest rates can influence the demand for commodities, as they affect the cost of carrying inventories and the overall level of economic activity.

By closely monitoring the PCE Price Index and its implications for monetary policy, traders can position themselves to take advantage of potential market movements. For example, if the PCE Price Index data suggests that the Fed is likely to raise interest rates, traders may consider going long on the U.S. dollar or shorting commodity positions.

Conclusion

The PCE Price Index is a crucial inflation indicator that provides valuable insights into the Federal Reserve’s monetary policy decisions. By understanding how the index is calculated, its advantages over other measures, and its impact on interest rates and market movements, forex and CFD traders can incorporate this information into their trading strategies.

Staying up-to-date with PCE Price Index data releases and analysing the potential implications for monetary policy can help traders identify potential trading opportunities and manage their risk more effectively. As with any economic indicator, it’s essential to combine the PCE Price Index analysis with other technical and fundamental factors to make informed trading decisions.