Smart traders wait patiently for these high-confidence setups instead of jumping at every signal. To cite an instance, buyers might be taking control when a downtrend suddenly shows a higher high. Buyers show increasing confidence in uptrends by creating a series of higher highs and higher lows. The opposite happens in downtrends where lower highs and lower lows show sellers taking control. Calculate position size by dividing your maximum account risk (usually 2% per trade) by your trade risk from entry to stop-loss. To cite an instance, a $500 risk on a trade with $20 per share risk means buying 25 shares.

They’re either reversal patterns (signaling a change in direction) or continuation patterns (signaling a trend will continue). There are many different ways to trade markets, but price action trading is one that, as they say, is ageless. Price action is a fundamental skill every trader and investor must learn, even if they apply other strategies that don’t necessarily analyze price action. Without objective knowledge of price action, traders can get caught in the trap of trading from hope instead of analyzing the chart’s price action and making decisions accordingly. It is strongly recommended to study price action and thoroughly understand the mechanics involved. Price action trading is one of retail trader’s and investors’ most popular trading techniques.

If the trader looks at the chart at a lower time frame and check the price movement during that bar, it would appear similar to a range. The concept of a trend is one of the primary concepts in technical analysis. A trend is either up or down and for the complete neophyte observing a market, an upwards trend can be described simply as a period of time over which the price has moved up. A bear trend or downwards trend or sell-off (or crash) is where the market moves downwards. The assumption is of serial correlation, i.e. once in a trend, the market is likely to continue in that direction.

Stop Loss And Risk Management

In summary, price action is a cornerstone of market analysis, crucial for understanding current market dynamics and predicting future price actions, thus aiding traders in making informed decisions. Although it demands skill and experience to interpret correctly, mastery of price action can significantly enhance a trader’s ability to navigate the complexities of financial markets. Price action is an invaluable asset in a trader’s toolkit, providing a direct window into the market’s supply and demand dynamics.

How to Spot the Inside Bar?

Instead of using technical indicators to look for overbought, oversold, buy, or sell zones, price action trading typically involves no indicators at all. Traders learn to ‘read’ the chart by analyzing the candlesticks and chart patterns such as triangles, converging patterns, double tops, and more. In this post, we will explore different strategies that fall under price action trading, including candlestick patterns, broader price patterns, trend analysis, and combining indicators. By the end, you will have a better understanding of how to leverage price action to improve your trading results. Candlestick patterns reveal market sentiment and predict potential price direction.

Best Price Action Trading Strategies 2025 – (Backtest And Rules)

The strategy demands a deep understanding of price behavior and the ability to make quick, informed decisions. Volume plays a crucial role in Price Action Trading decisions by providing insights into the strength behind price movements, helping traders to confirm trends and signal potential reversals. Volume serves as an undercurrent in Price Action Trading, providing valuable context for the strength and conviction behind price moves. High trading volume can signal strong buying or selling pressure, offering insights into potential trend continuations or reversals. Analyzing volume patterns can inform buying and selling decisions, with increasing volume on a price move or exhaustion moves providing key signals for traders to consider. Utilizing algorithms to automate Price Action Trading merges the age-old expertise of conventional trading with contemporary technological advancements.

• The real power comes from observing how price reacts when it reaches these zones.
• A priority for active traders will be no commissions and fast order execution for time-sensitive trades.
• Traders must navigate this landscape with a blend of technical analysis and an awareness of the broader market context, ensuring that each retracement is not mistaken for a reversal.
• This technique involves examining raw and unadulterated data – namely, the series of highs, lows, opening and closing prices – which collectively convey crucial information about market trends and sentiments.
• Ultimately, successful price action trading hinges on a trader’s ability to interpret price movements, apply solid risk management, and adapt to changing market scenarios.
• Allocate time to evaluate what worked and what didn’t after every session.

Tips For Mastering Price Action Strategies

Indicators that complement Price Action Trading include volume, moving averages, the Relative Strength Index (RSI), and the Moving Average Convergence Divergence (MACD). Price action trading prioritizes the unprocessed data of the price itself, yet integrating certain technical indicators can refine this technique by offering additional validation for trading choices. Indicators that measure momentum such as RSI and MACD furnish details on market move intensity, and those designed to follow trends like Bollinger Bands and ADX assist in assessing trend continuance. By incorporating methodologies such as the Kelly Criterion or the Maximum Drawdown strategy, traders can fine-tune their position sizing to optimize their risk-reward ratio.

It leaves nobody left to carry on the trend and sets up the price action for a reversal. “Five tick failed breakouts” are a phenomenon that is a great example of price action trading. Five tick failed breakouts are characteristic of the stock index futures markets.

Common mistakes include overloading charts with indicators, neglecting support and resistance levels, overtrading emotionally, misinterpreting patterns, skipping risk management, and lacking consistent practice. how to trade price action Price action refers to analyzing market movement based solely on price data, without relying on external indicators. It focuses on understanding trends, patterns, and key levels to make informed trading decisions. Price action strategies offer traders a clear way to interpret market movements without relying on external indicators. These strategies prioritize simplicity and help you make decisions based on real-time data. When a market respects a trendline, it can act as a guide for potential retracements or breakouts.

First, it’s important to train your eyes to recognize key patterns and levels on the chart. Start by marking out major support and resistance zones on higher timeframes like the daily or 4-hour chart. Then, look for candlestick patterns around these levels that signal potential reversals or continuations. At its core, price action trading is about analyzing historical prices to forecast future movements. It’s based on the idea that all necessary information about a market is reflected in its price. Traders who use this approach believe that price is the ultimate indicator and that by studying price patterns, they can gain insight into market sentiment and potential future moves.

• Consider integrating them into your analysis to align decisions with potential turning points.
• This refers to the overall direction of the market and how it is forming higher highs and higher lows in an uptrend, or lower highs and lower lows in a downtrend.
• A breakout might not lead to the end of the preceding market behaviour, and what starts as a pull-back can develop into a breakout failure, i.e. the market could return into its old pattern.
• Combining candlestick formations with these levels increases confidence in your decisions.
• With this entry type, you are creating a trade entry and waiting for the price to break higher or lower, above or below the pin bars high or low.

Can indicators be used with price action trading?

A price action trader that wants to generate profit in choppy conditions would use a range trading strategy. Trades are executed at the support or resistance lines of the range while profit targets are set before price is set to hit the opposite side. Brooks identifies one particular pattern that betrays chop, called “barb wire”. It consists of a series of bars that overlap heavily containing trading range bars. And so on until the trend resumes, or until the pull-back has become a reversal or trading range. Most price action traders will ignore outside bars, especially in the middle of trading ranges, wherein they are considered meaningless.

This formation, with its trio of peaks, narrates the story of a battle where bulls reach for the zenith only to be repelled, heralding a forthcoming descent. Traders who recognize the completion of this pattern, marked by the breach of the neckline, position themselves to capitalize on the ensuing downtrend. Price action is a method of analysis of the basic price movements to generate trade entry and exit signals that is considered reliable while not requiring the use of indicators. It is a form of technical analysis, as it ignores the fundamental factors of a security and looks primarily at the security’s price history. Professional traders often use this strategy because it has the ability to adapt to changing market conditions. If the volatility is high, you can use a larger stop loss for greater swings and you can shorten it when the market calms down.

Best Timeframes for Price Action Trading

Recognizing the market structure helps traders align their trades with the prevailing trend, which increases the likelihood of success. Many price action traders use simple techniques like trend lines or swing point analysis to keep track of market structure. One of the foundational concepts in price action trading is support and resistance.

The project area, covering approximately 337 acres, will affect about 800 households, most of whom live on privately owned land. To minimize disruption, authorities and Shanta Gold have planned six new resettlement zones across a 1,932-acre area, where families will be offered either monetary compensation or relocation options within the same locality. The hill contains one of Africa’s largest reserves of rare earth minerals, which are used in contemporary electronics, renewable energy systems, and electric cars. The company said in October that it had applied for NEMA approval to start a $137 million (KSh 17.7 billion) mining project in Siaya’s Ramula, East Gem and Mwivona in Vihiga county.

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The company plans to invest $208 million (Sh26.86 billion) to develop the mine and processing plant, a move that could make the Lirhanda project Kenya’s first large-scale underground gold operation. A significant gold discovery has been announced in western Kenya, where the Isulu-Bushiangala Underground Mining Project has uncovered an estimated 1.27 million ounces of gold, making it one of the largest gold reserves ever identified in the country. Mining and mineral https://limefx.club/ processing engineer Brian Mwangi Njoroge, founder of a startup supporting artisanal miners in Migori, Kenya, told Anadolu the newly confirmed gold deposits in Kakamega mark a turning point for the country’s mining industry. Shanta Gold, which already operates the New Luika Gold Mine in Tanzania, said it would move toward final project approvals and construction planning once all environmental and community consultations are completed. The company added that it is committed to local partnerships and sustainable mining practices. The announcement came from Shanta Gold Limited, a British-based mining company, which operates the Western Kenya Project.

We Have Big Plans.

• However, officials have underscored the need for balanced development to prevent social displacement and environmental degradation.
• The company has pledged to follow Kenya’s Land Act and international resettlement standards to mitigate these issues.If approved by NEMA, the Shanta Gold project could position Kakamega as Kenya’s new frontier in industrial-scale gold mining, unlocking a vital new stream of economic growth for western Kenya and the nation at large.
• You can translate text, handwriting, photos, and speech in over 200 languages with the Google Translate app.
• The hill contains one of Africa’s largest reserves of rare earth minerals, which are used in contemporary electronics, renewable energy systems, and electric cars.

According to the company’s feasibility study and Kenyan media reports, the deposit’s estimated value stands at 683 billion Kenyan shillings (equivalent to around 223.4 billion Turkish lira), signaling a major boost for Kenya’s growing mineral industry. “The project is aimed at obtaining the required authorization to mine the Isulu-Bushiangala gold resources for economic purposes,” the company said in a statement. TUKO.co.ke journalist Japhet Ruto has over eight years of experience in financial, business, and technology reporting, offering insights into Kenyan and global economic trends.

What is the price of gold?

In related news, Mrima Hill emerged as the focal point in the international scramble for vital minerals. The discovery comes amid sustained global demand for gold, with prices near record highs due to economic uncertainty. The new reserves are expected to transform Kenya into a key player in East Africa’s gold industry, which has long been dominated by neighboring Tanzania and Sudan. The firm, Shanta Gold Kenya Limited, said the discovery was made within the Lirhanda Corridor, a 1,200-kilometer mineral belt running through Kakamega and Vihiga counties, following years of intensive exploration and drilling.

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The Isulu-Bushiangala project is a part of Shanta’s seven prospecting licenses, which include parts of western Kenyan counties and are referred to as the West Kenya Project.

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Analysts say the timing could make Kenya’s gold sector an attractive alternative for investors seeking new production hubs outside traditional markets. To translate text, speech, and websites in more than 200 languages, go to Google Translate page. You can translate text, handwriting, photos, and speech in over 200 languages with the Google Translate app. Kenya has raised alarms over the involvement of its nationals in the ongoing Russia-Ukraine war, with more than 200 citizens reportedly fighting for Russian forces. Shanta estimates that 1,270,380 ounces of ‘very high-grade gold’ will be extracted from the Isulu and Bushiangala locations in Kakamega’s Ikolomani constituency.

• The firm has submitted an environmental impact assessment (EIA) report to the National Environment Management Authority (NEMA) seeking permission to build an underground gold mine and processing facility in the Isulu-Bushiangala region.
• The company plans to invest $208 million (Sh26.86 billion) to develop the mine and processing plant, a move that could make the Lirhanda project Kenya’s first large-scale underground gold operation.
• The project area, covering approximately 337 acres, will affect about 800 households, most of whom live on privately owned land.
• Mining and mineral processing engineer Brian Mwangi Njoroge, founder of a startup supporting artisanal miners in Migori, Kenya, told Anadolu the newly confirmed gold deposits in Kakamega mark a turning point for the country’s mining industry.

A British mining company on Wednesday announced the discovery of extensive underground gold deposits in western Kenya’s Kakamega County, estimated to be worth more than $5.28 billion (Sh683 billion), in what officials describe as a historic milestone for the country’s mineral sector. The firm has submitted an environmental impact assessment (EIA) report to the National Environment Management Authority (NEMA) seeking permission to build an underground gold mine and processing facility in the Isulu-Bushiangala region. Local leaders and the Kenyan Ministry of Mining have hailed the discovery as a milestone for the national economy, with expectations that it will create jobs, improve infrastructure, and enhance Kenya’s standing in global gold production. However, officials have underscored the need for balanced development to prevent social displacement and environmental degradation.

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Under Kenya’s Mining Act, 3% of gross gold sales will be paid as royalties, of which 20% goes to Kakamega County and 10% to local communities through development projects. Shanta Gold will also contribute 1% of the total gold output value directly to host communities, in line with the Mining (Community Development limefx website Agreement) Regulations.Economists say the discovery could inject new life into Kenya’s economy by diversifying revenue sources beyond agriculture and tourism. It is also expected to create hundreds of jobs during the construction and production phases, stimulate local businesses, and attract foreign direct investment.However, The Star Kenya reports that concerns remain over land acquisition, displacement, and environmental risks, given the site’s proximity to the Kakamega Forest and key river catchments. The company has pledged to follow Kenya’s Land Act and international resettlement standards to mitigate these issues.If approved by NEMA, the Shanta Gold project could position Kakamega as Kenya’s new frontier in industrial-scale gold mining, unlocking a vital new stream of economic growth for western Kenya and the nation at large. “This may lead to the enhancement of local economic development through job and business opportunities and significant contributions to the government of Kenya through taxes, royalties and revenue contributions, which are likely to transfer into the local and regional economic growth,” the company added.

A patient with dual health insurance coverage underwent a major surgery. The case study outlines the coordination of benefits between the primary and secondary insurers, illustrating the negotiation process that determined the contribution of each insurer to the total medical costs. This highlights the margin and helps illustrate where a company’s expenses. Variable expenses can be compared year over year to establish a trend and show how profits are affected. Management uses the contribution margin in several different forms to production and pricing decisions within the business. Contribution margin ratio is one of the most important business terms every manager needs to know but few actually do.

What is the contribution margin ratio for?

This concept is especially helpful to management in calculating the breakeven point for a department or a product line. Management uses this metric to understand what price they are able to charge for a product without losing money as production increases and scale continues. It also helps management understand which products and operations are profitable and which lines or departments need to be discontinued or closed. Let us understand how a unit contribution margin is helpful to a business through the discussion below. Using the provided data above, we can calculate the price per unit by dividing the total product revenue by the number of products sold.

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Unveil intelligence and decide based on the information from your accounting books. The contribution margin calculation is simple as it consists of only three steps. The London Interbank Offered Rate (LIBOR) has been a cornerstone of the global financial system for… One of the most important concepts in economics and business is the cost-function analysis. In the realm of business, understanding the movement of prices over time is not merely about…

Employee’s Contribution towards EPF

Option 3 (not contributing at all) is not considered good (although its not illegal) and not many companies take this route. For eg., in my first job the company was contributing as in option 1 while in the next job the company was contributing as in option 2. Find out what a contribution margin is, why it is important, and how to calculate it. There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under. The government is planning to make amendments in EPF as it has prepared a draft bill that allows employees to switch money from EPF (Employee Provident Fund) to NPS (National Pension Scheme). Another proposal is to replace the existing definition of ‘wage’ (in the EPF Act) with a new one as mentioned in the Code of Wages, 2019.

Both ratios are useful management tools, but reveal different information. Contribution margin analyzes sales less variable costs, such as commissions, supplies, and other contribution is equal to back office expenses (costs listed below the line on the income statement). It is also represented as amounts, ratios or percentages reveal key information regarding the structure of sales, pricing and commission calculating processes. Before making any changes to your pricing or production processes, weigh the potential costs and benefits. Investors often look at contribution margin as part of financial analysis to evaluate the company’s health and velocity. Gross margin helps a company assess profitability after accounting for production costs.

How To Calculate?

Further, let us say that the fixed expenses are 50,000 and the total number of units sold is 8,000. This means that the total contribution is 8000 × 5 or Rs. 40,000 which is not sufficient even to meet the fixed expenses and the result is a loss of Rs. 10,000 (50,000 – 40,000). Contribution margin is the remaining earnings that have not been taken up by variable costs and that can be used to cover fixed costs. Profit is any money left over after all variable and fixed costs have been settled. Now, add up all the variable costs directly involved in producing the cupcakes (flour, butter, eggs, sugar, milk, etc). Leave out the fixed costs (labor, electricity, machinery, utensils, etc).

• In conclusion, we’ll calculate the product’s contribution margin ratio (%) by dividing its contribution margin per unit by its selling price per unit, which returns a ratio of 0.60, or 60%.
• I also bet you’d like to feel more confident and at ease when making those decisions.
• Contribution clauses are a complex yet essential component of insurance policy documents.
• The Provident Fund (PF) is a retirement savings scheme where a portion of your salary is contributed every month.
• Women employees, however, enjoy a benefit—they are required to contribute only 8% of their basic salary for the first three years of employment.
• Employer’ contributions in respect of each employee will get increased in certain cases, results in financial burden.

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The essence of these clauses is to prevent the insured from profiting from a loss and to ensure that the burden of a claim is equitably distributed among the insurers. This concept is rooted in the principle of indemnity, which stipulates that an insured should not be compensated more than the actual loss incurred. The legal aspects of contribution in insurance are intricate and multifaceted, requiring a thorough understanding of policy wordings, legal precedents, and equitable principles. It’s a dynamic area where legal expertise intersects with actuarial science to ensure that the burden of loss is fairly shared. A homeowner with two insurance policies from different insurers suffered a kitchen fire resulting in $50,000 in damages. The homeowner claimed from Insurer A, who paid out the full amount and then sought a 50% contribution from Insurer B, as per the rate of contribution.

Contribution margin (presented as a % or in absolute dollars) can be presented as the total amount, amount for each product line, amount per unit, or as a ratio or percentage of net sales. The difference between fixed and variable costs has to do with their correlation to the production levels of a company. The contribution margin is a key business figure that indicates how much a company contributes to covering fixed costs and making a profit by selling its products or services.

The contribution margin ratio is used by finance professionals to analyze a company’s profitability. It is often used for building a break-even analysis, which helps companies determine at what point a new business project will reach enough sales to cover the costs. The contribution margin ratio represents a company’s revenue minus variable costs, divided by its revenue. In short, it is the proportion of revenue left over after paying for variable costs.

They also use this to forecast the profits of the budgeted production numbers after the prices have been set. The contribution margin is not necessarily a good indication of economic benefit. Companies may have significant fixed costs that need to be factored in. The calculation of the contribution margin ratio is a three-step process.

The concept of contribution margin is applicable at various levels of manufacturing, business segments, and products. A key characteristic of the contribution margin is that it remains fixed on a per-unit basis irrespective of the number of units manufactured or sold. On the other hand, the net profit per unit may increase/decrease non-linearly with the number of units sold, as it includes the fixed costs. The contribution margin shows how much additional revenue is generated by making each additional unit of a product after the company has reached the breakeven point. In other words, it measures how much money each additional sale “contributes” to the company’s total profits. Where C is the contribution margin, R is the total revenue, and V represents variable costs.

For the policyholder, understanding the principle of contribution is crucial as it affects how claims are settled and can influence decisions when purchasing multiple policies. Understanding the principle of contribution is essential for policyholders and insurers alike, as it ensures that claims are settled fairly and efficiently, reflecting the shared nature of risk in the insurance industry. It’s a testament to the intricate balance of interests that insurance seeks to maintain, providing a safety net while preventing misuse of the system. A proper financial data management system can provide valuable, actionable insights and prevent problems, such as skimming fraud.

EPFO assigns you a 12-digit Universal Account Number (UAN), which links all your PF accounts. To use EPF online services, your UAN must be linked with Aadhaar and PAN. A successful ecommerce strategy can allow entrepreneurs to reach a global audience with minimal overhead costs. We help improve your financial strategy, advise on pricing and investment decisions, operationalize go-to-market planning, and offer guidance on systems and hiring to support your company’s sustainable growth. As a busy startup or small business owner, you’ve got a lot on your plate. Sometimes, it doesn’t seem like there’s enough hours in the day to run your company, keep your finances up to date and analyze your margins.

If the contribution margin for an ink pen is higher than that of a ball pen, the former will be given production preference owing to its higher profitability potential. Fixed costs are costs that are incurred independent of how much is sold or produced. Buying items such as machinery is a typical example of a fixed cost, specifically a one-time fixed cost. The court agreed with the wife’s submission that she had contributed to the family by taking care of the household and the children. So we see that there are many cases where employer’s contribution would not be equal to employee’s contribution. In fact, employee can opt to contribute more than 12% and the employer is not required to match that amount.

• Increase revenue by selling more units, raising product prices, shrinking product size while keeping the same cost, or focusing on selling products with high margins.
• In the realm of insurance, the principle of contribution is a cornerstone concept that ensures equitable distribution of liability among insurers in cases where multiple policies cover the same risk.
• Contributions made to the EPF are tax exempt, however, the tax calculations are different.
• It’s a process that requires a deep dive into the terms of each policy involved, the nature of the claim, and the proportionate share of liability that each insurer must bear.
• EPF scheme is a tax-saving instrument that offers relatively higher interest rates on investments.

For instance, with a basic salary of Rs. 14,000, the employer’s total contribution amounts to Rs. 1,680 (Rs. 514 to EPF and Rs. 1,166 to EPS), matching the employee’s contribution in aggregate. These contributions, which accumulate and earn monthly interest—credited annually—form a critical part of your retirement corpus. Understanding and accurately calculating your employer’s contribution to your Employee Provident Fund (EPF) is essential for effective long-term financial planning. Gross Margin indicates the profitability of the company, whereas contribution indicates profit contributed by each of the products of the company. Fixed costs stay the same regardless of the number of units sold, while variable costs change per unit sold.

For a quick example to illustrate the concept, suppose there is an e-commerce retailer selling t-shirts online for $25.00 with variable costs of $10.00 per unit. The greater the contribution margin (CM) of each product, the more profitable the company is going to be, with more cash available to meet other expenses — all else being equal. Companies can use the contribution margin to allocate resources more efficiently by prioritizing those products or services that have a higher contribution margin and thus higher profitability. The contribution margin supports management in strategic decisions, such as the introduction of new products, the discontinuation of unprofitable products or the optimization of the production program.

The selling price of each product plays a crucial role in determining this. This largely depends on which industry you’re in and the costs required to produce your products or services. If you’re an early-stage entrepreneur, I bet your company’s financial health and efficiency are always at the front of your mind. After all, every decision you make, from pricing products to trimming expenses, directly impacts your future growth and profitability. This means that for this business, for every Rs. 1 of revenue it generates, the contribution margin of the product is 40 paise or Rs. 0.40. You need to compute the variable costs which are expenses incurred during the production of the product.