Clearly, anyone who trades does so with the expectation of making profits. We take risks to gain rewards. The question each trader must answer, however, is what kind of return he or she expects to make? This is a very important consideration, as it speaks directly to what kind of trading will take place, what market or markets are best suited to the purpose, and the kinds of risks required.
Let s start with a very simple example. Suppose a trader would like to make 10% per year on a very consistent basis with little variance. There are any number of options available. If interest rates are sufficiently high, the trader could simply put the money in a fixed income instrument like a CD or a bond of some kind and take relatively little risk. Should interest rates not be sufficient, the trader could use one or more of any number of other markets (stocks, commodities, currencies, etc.) with varying risk profiles and structures to find one or more (perhaps in combination) which suits the need. The trader may not even have to make many actual transactions each year to accomplish the objective.
A trader looking for 100% returns each year would have a very different situation. This individual will not be looking at the cash fixed income market, but could do so via the leverage offered in the futures market. Similarly, other leverage based markets are more likely candidates than cash ones, perhaps including equities. The trader will almost certainly require greater market exposure to achieve the goal, and most likely will have to execute a larger number of transactions than in the previous scenario.
As you can see, your goal dictates the methods by which you achieve it. The end certainly dictates the means to a great degree.
There is one other consideration in this particular assessment, though, and it is one which harks back to the earlier discussion of willingness to lose. Trading systems have what are commonly referred to as drawdowns. A drawdown is the distance (measured in % or account/portfolio value terms) from an equity peak to the lowest point immediately following it. For example, say a trader’s portfolio rose from $10,000 to $15,000, fell to $12,000, then rose to $20,000. The drop from the $15,000 peak to the $12,000 trough would be considered a drawdown, in this case of $3000 or 20%.
Each trader must determine how large a drawdown (in this case generally thought of in percentage terms) he or she is willing to accept. It is very much a risk/reward decision. On one extreme are trading systems with very, very small drawdowns, but also with low returns (low risk – low reward). On the other extreme are the trading systems with large returns, but similarly large drawdowns (high risk – high reward). Of course, every trader’s dream is a system with high returns and small drawdowns. The reality of trading, however, is often less pleasantly somewhere in between.
The question might be asked what it matters if high returns in the objective. It is quite simple. The more the account value falls, the bigger the return required to make that loss back up. That means time. Large drawdowns tend to mean long periods between equity peaks. The combination of sharp drops in equity value and lengthy time spans making the money back can potentially be emotionally destabilizing, leading to the trader abandoning the system at exactly the wrong time. In short, the trader must be able to accept, without concern, the draw-downs expected to occur in the system being used.
It is also important to match one's expectations up with one's trading timeframe. It was noted earlier that in some cases more frequent trading can be required to achieve the risk/return profile sought. If the expectations and timeframe conflict, a resolution must be found, and it must be the questions from this expectations assesment which have to be reconsidered, since the time frames determined in the previous one are probably not very flexible (especially going from longer-term trading to shorter-term participation).
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By John Forman
Source: www.articlecube.com
John Forman is author of The Essentials of Trading (www.TheEssentialsofTrading.com) and a near 20-year veteran of the markets. John is Managing Analyst & Chief Trader for Anduril Analytics, which offers free trading reports at www.andurilonline.com/free-stuff.asp
Thursday, July 26, 2007
Sunday, July 15, 2007
Forex Trading - 2 Simple Tip to Increase Profits Dramatically
Here we are going to give you 2 simple tips that will instantly improve your overall forex trading results. There simple to learn, easy to apply and could help you achieve big profits consistently of 100% or more annualized.
Consider this point:
Forex trading is all about being right with your forex trading signals and making money - You don't get rewarded for the effort you put in to forex trading strategy the only thing that matters is profit.
Here we are going to focus on working smart not hard to make more money from trading.
Before we discuss our forex tips in greater detail, lets look at two key points in regard to currency trading.
1 The Big Trades Only Happen a Few Times a Year
If you look at any currency chart the really big strong trends only occur a few times a year and these are the trends that offer the best risk reward. The rest of the time the markets are either trending sideways with no clear trend, or showing high volatility which is hard to trade.
2. Trading The Odds
If you want to make money you need to trade the odds and get them on your side. The best way of doing this is to focus on set ups that give you a clear trading edge which is easy to see on any forex chart.
You need to look for valid support or resistance which has been tested numerous times over several months - you know if these levels are broken the likelihood of a new trend developing are high.
The two tips to make more from your forex trading system are:
1. Cut back the amount of trading you do
And only focus on high odds trades - look for valid breakouts of support and resistance and trade them.
Keep in mind, most big trends develop from new market highs NOT market lows so you need to focus on the breaks and go with them.
Use a breakout methodology and ONLY trade these high odds trades. You won't trade often but each trade you go into will have the potential for triple digit gains.
If you like the excitement and buzz of trading this method is not for you, but if you want to make money from your forex trading strategy it is!
This now leads onto the second point:
2. Risk More Per trade and DON'T Diversify
You will hear a lot about diversification and cutting risk but all it does is dilute profit potential.
You will also read a lot of investment wisdom that says risk only 2% per trade, well if you are a small forex trader with a $5,000 account, that's just that's $250.00!
Forex markets involves taking risks and with risk goes reward - the more you risk the more you make pure and simple. If you are trading a currency move that is a high odds one risk more - 10 - 20% is a good figure to aim at.
The above forex trading strategy focuses on making money nothing else and will cut the time you spend forex trading. Furthermore it's based on a breakout methodology which is simple to learn, easy to apply and is discussed in the next article in this series.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Monica Hendrix
http://www.freeforex
Source : goarticles.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Consider this point:
Forex trading is all about being right with your forex trading signals and making money - You don't get rewarded for the effort you put in to forex trading strategy the only thing that matters is profit.
Here we are going to focus on working smart not hard to make more money from trading.
Before we discuss our forex tips in greater detail, lets look at two key points in regard to currency trading.
1 The Big Trades Only Happen a Few Times a Year
If you look at any currency chart the really big strong trends only occur a few times a year and these are the trends that offer the best risk reward. The rest of the time the markets are either trending sideways with no clear trend, or showing high volatility which is hard to trade.
2. Trading The Odds
If you want to make money you need to trade the odds and get them on your side. The best way of doing this is to focus on set ups that give you a clear trading edge which is easy to see on any forex chart.
You need to look for valid support or resistance which has been tested numerous times over several months - you know if these levels are broken the likelihood of a new trend developing are high.
The two tips to make more from your forex trading system are:
1. Cut back the amount of trading you do
And only focus on high odds trades - look for valid breakouts of support and resistance and trade them.
Keep in mind, most big trends develop from new market highs NOT market lows so you need to focus on the breaks and go with them.
Use a breakout methodology and ONLY trade these high odds trades. You won't trade often but each trade you go into will have the potential for triple digit gains.
If you like the excitement and buzz of trading this method is not for you, but if you want to make money from your forex trading strategy it is!
This now leads onto the second point:
2. Risk More Per trade and DON'T Diversify
You will hear a lot about diversification and cutting risk but all it does is dilute profit potential.
You will also read a lot of investment wisdom that says risk only 2% per trade, well if you are a small forex trader with a $5,000 account, that's just that's $250.00!
Forex markets involves taking risks and with risk goes reward - the more you risk the more you make pure and simple. If you are trading a currency move that is a high odds one risk more - 10 - 20% is a good figure to aim at.
The above forex trading strategy focuses on making money nothing else and will cut the time you spend forex trading. Furthermore it's based on a breakout methodology which is simple to learn, easy to apply and is discussed in the next article in this series.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Monica Hendrix
http://www.freeforex
Source : goarticles.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Friday, July 13, 2007
Psychology Of The Winning Trader
It is said that nine out of every ten traders loose money. It is also said that day trading is seventy five percent psychology and the other twenty five percent divided up between your trading system and proper money management. Now I do not know if those facts are true or false. I have never seen a survey published on the topic, maybe someone can help me with that information, but let us assume that if it’s not absolutely true then it is nearly true. This would mean that most traders are lacking the proper psychology for trading.
Therefore we need to look very carefully at this business of our thought patterns, what we are thinking while we are trading. All our actions are governed by either pleasure or pain. Whatever we do, we do it to either to experience pleasure or escape pain. We have a need to avoid pain and a desire to gain pleasure. We need to do some introspection and decide what is it that drives us while we are trading, pleasure or pain. Do you jump into every trade even when the setups are not quite right because you just cannot stand missing the next big move, not having the pleasure of the winning trade. Fear will probably cause you to not enter trades when everything looks perfect because the chance of loosing money is just too much for you. So you sit there paralyzed, or you enter the trade but your stops are so tight you hardly ever make any money. Most traders I believe associate trading with pain. They are ruled by fear. The fact is that every trader looses money. It is part of the game. It’s how you deal with it that matters.
If we associate pleasure with every winning trade and pain with every loosing trade then our trading career will be an emotion roller coaster ride of up and down feelings. This is the very heart of the problem. Most of us are emotional traders. Our psychology has associated winning with pleasure and loosing with pain. The problem with this is that in day trading we will experience a number of winners and losers everyday. If you start the day with a couple of losers you will begin to hurt, which causes fear and when the next setup comes along your fear level is too high and prevents you from entering the trade, That trade just happened to be a winner and you missed it. Now you are really going to pieces. What can we do to overcome our emotions?
We have to change or psychology, change the associations we have formed of pleasure equals winners and pain equals losers. The first thing is to set goals for our trading and our goal should be consistent profitability. What are our monthly and our yearly goals? Use points or pips instead of money. Secondly, we need to know what is preventing us from achieving our goals. Is it fear of loses, incorrect position sizing etc. Look at what you are doing and why it is not working. We now need to break that pattern of behavior and install a new pattern. How do we do that?
Every trader needs to choose a few setups that they are comfortable with. Investigate the numerous different types of trades and choose a couple that you really like. Then you have to gather your historical data and you will need to advance the data bar by bar and test each setup. Take your number one setup, the one that you are most comfortable with and back test it with your data. You will need fifty to one hundred setups. With each one write down exactly what happens. Develop a set of written rules for entry and exit for the trade. Do this for all your setups. When you are finished testing each setup you will have data on the profitability of the trade. Now you must own the trade in your mind. You have tested it, now believe in it.
The next step is to paper trade the setups for a period of time. One month should be sufficient. Log every trade. Practice until you are automatically entering the trades as you see the setups almost without thinking. Your associations have now changed. Your thoughts are now focused on identifying a set of conditions that when they present themselves you act. You can now trade without emotion. Yours trades are proven winners historically and though you will have losses you know you are profitable. The psychology of trading has now changed from pleasure and pain to one of identifying setups and acting upon them without emotion. This process will guarantee a long and successful trading career.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Robert Williams
www.allstarforex.com
Source www.articlecube.com
Therefore we need to look very carefully at this business of our thought patterns, what we are thinking while we are trading. All our actions are governed by either pleasure or pain. Whatever we do, we do it to either to experience pleasure or escape pain. We have a need to avoid pain and a desire to gain pleasure. We need to do some introspection and decide what is it that drives us while we are trading, pleasure or pain. Do you jump into every trade even when the setups are not quite right because you just cannot stand missing the next big move, not having the pleasure of the winning trade. Fear will probably cause you to not enter trades when everything looks perfect because the chance of loosing money is just too much for you. So you sit there paralyzed, or you enter the trade but your stops are so tight you hardly ever make any money. Most traders I believe associate trading with pain. They are ruled by fear. The fact is that every trader looses money. It is part of the game. It’s how you deal with it that matters.
If we associate pleasure with every winning trade and pain with every loosing trade then our trading career will be an emotion roller coaster ride of up and down feelings. This is the very heart of the problem. Most of us are emotional traders. Our psychology has associated winning with pleasure and loosing with pain. The problem with this is that in day trading we will experience a number of winners and losers everyday. If you start the day with a couple of losers you will begin to hurt, which causes fear and when the next setup comes along your fear level is too high and prevents you from entering the trade, That trade just happened to be a winner and you missed it. Now you are really going to pieces. What can we do to overcome our emotions?
We have to change or psychology, change the associations we have formed of pleasure equals winners and pain equals losers. The first thing is to set goals for our trading and our goal should be consistent profitability. What are our monthly and our yearly goals? Use points or pips instead of money. Secondly, we need to know what is preventing us from achieving our goals. Is it fear of loses, incorrect position sizing etc. Look at what you are doing and why it is not working. We now need to break that pattern of behavior and install a new pattern. How do we do that?
Every trader needs to choose a few setups that they are comfortable with. Investigate the numerous different types of trades and choose a couple that you really like. Then you have to gather your historical data and you will need to advance the data bar by bar and test each setup. Take your number one setup, the one that you are most comfortable with and back test it with your data. You will need fifty to one hundred setups. With each one write down exactly what happens. Develop a set of written rules for entry and exit for the trade. Do this for all your setups. When you are finished testing each setup you will have data on the profitability of the trade. Now you must own the trade in your mind. You have tested it, now believe in it.
The next step is to paper trade the setups for a period of time. One month should be sufficient. Log every trade. Practice until you are automatically entering the trades as you see the setups almost without thinking. Your associations have now changed. Your thoughts are now focused on identifying a set of conditions that when they present themselves you act. You can now trade without emotion. Yours trades are proven winners historically and though you will have losses you know you are profitable. The psychology of trading has now changed from pleasure and pain to one of identifying setups and acting upon them without emotion. This process will guarantee a long and successful trading career.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Robert Williams
www.allstarforex.com
Source www.articlecube.com
Wednesday, July 11, 2007
Avoid Making Predictions in the Market
Most people make a big deal out of market prediction. They think they need to be right 70% or better in order to "pass" the exam that the market gives them. They also believe that they might get an "A" if they could be right 95% of the time. The need to predict the market steps from this desire to be right. People believe that they cannot be right unless they can predict what the market is doing.
Among our best clients, I have traders who continually make 50% or more each year with very few losing months. Surely, they must be able to predict the market very well to have that kind of track record. Well, I recently sent out a request for predictions and here is what I got back from some of the better traders.
Trader A; "I don't predict the market, and I think this is a dangerous exercise."
Trader B: "…these are just scenarios, the market is going to do what the market is going to do."
Ironically, I got these comments from them despite the fact that I was not interested in any of their specific opinions, just the consensus opinion.
So how do they make money if they have no opinions about what they market is going to do? Well, there are five critical ingredients involved:
* They follow the signals generated by the system.
* They get out when the market proves them wrong.
* They allow their profits to run as much as possible—meaning they have a high positive expectancy system.
* They have enough opportunity so that there is a great chance of realizing the positive expectancy any given month and little chance of having a losing month.
* They understand position sizing well enough so that they will continue to be in the game if they are wrong and make big money when they are right.
Most traders, including most professionals, do not understand these four points. As a result, they are very much into prediction. The average Wall Street Analyst usually makes a large six-figure income analyzing companies. Yet very few of these individuals, in my opinion, could make money trading the companies they analyze. Nevertheless, people believe that if analysts tell you the fundamentals of the marketplace, someone can use that information to make money.
Others have decided that fundamental analysis doesn't work. Instead, they have chosen to draw lines on the computer or in their chart book to analyze the market technically. These people believe that if you draw enough lines, and interpret enough patterns, you can predict the market. Again, it doesn't work. Instead, cutting losses short, really riding profits hard and managing your risk so that you continue to survive is what really makes you money. When you finally understand this at a gut level, you will know one of the key secrets to trading success. In the meantime, we will continue to make predictions in our column, so that you will begin to understand that they are entertaining, but nothing more!
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Van K. Tharp, Ph.D.
TradingEducation.com
Peak Performance Course for Investors and Traders
This home study course is Dr. Tharp's masterpiece. It's designed for all levels of investors and traders—beginners, advanced, unsuccessful traders seeking to improve their performance, and successful traders who want to be more successful
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Among our best clients, I have traders who continually make 50% or more each year with very few losing months. Surely, they must be able to predict the market very well to have that kind of track record. Well, I recently sent out a request for predictions and here is what I got back from some of the better traders.
Trader A; "I don't predict the market, and I think this is a dangerous exercise."
Trader B: "…these are just scenarios, the market is going to do what the market is going to do."
Ironically, I got these comments from them despite the fact that I was not interested in any of their specific opinions, just the consensus opinion.
So how do they make money if they have no opinions about what they market is going to do? Well, there are five critical ingredients involved:
* They follow the signals generated by the system.
* They get out when the market proves them wrong.
* They allow their profits to run as much as possible—meaning they have a high positive expectancy system.
* They have enough opportunity so that there is a great chance of realizing the positive expectancy any given month and little chance of having a losing month.
* They understand position sizing well enough so that they will continue to be in the game if they are wrong and make big money when they are right.
Most traders, including most professionals, do not understand these four points. As a result, they are very much into prediction. The average Wall Street Analyst usually makes a large six-figure income analyzing companies. Yet very few of these individuals, in my opinion, could make money trading the companies they analyze. Nevertheless, people believe that if analysts tell you the fundamentals of the marketplace, someone can use that information to make money.
Others have decided that fundamental analysis doesn't work. Instead, they have chosen to draw lines on the computer or in their chart book to analyze the market technically. These people believe that if you draw enough lines, and interpret enough patterns, you can predict the market. Again, it doesn't work. Instead, cutting losses short, really riding profits hard and managing your risk so that you continue to survive is what really makes you money. When you finally understand this at a gut level, you will know one of the key secrets to trading success. In the meantime, we will continue to make predictions in our column, so that you will begin to understand that they are entertaining, but nothing more!
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Van K. Tharp, Ph.D.
TradingEducation.com
Peak Performance Course for Investors and Traders
This home study course is Dr. Tharp's masterpiece. It's designed for all levels of investors and traders—beginners, advanced, unsuccessful traders seeking to improve their performance, and successful traders who want to be more successful
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Forex Trading - Instantly Increase Your Profits With The 80 - 20 Rule
The 80 - 20 rule was not devised for Forex trading - however if you apply it in your trading, you'll instantly increase your profit potential. The rule is simple to understand and apply - and all Forex traders should use it.
So, what is the 80 - 20 rule, and why is it so powerful in terms of making Forex profits?
The Logic of the 80 - 20 Rule
In the nineteenth century, Vilfredo Pareto, an Italian philosopher, observed that a small section of the population held most of the money and power. He postulated that in most countries, 80% of the money and power was controlled by around 20% of the people. Therefore, 20% of the participants accounted for 80% of the results.
The 80 - 20 rule applies to many other areas of life - including Forex trading, and in simple terms, the key point to consider is this:
80% of your results will be generated by 20% of your efforts.
This also means that:
20% of your results will be generated by 80% of your efforts.
In Forex trading, it's a fact that most traders make this critical error - they trade too much - and try to force results by working too hard.
Here's what you need to do, to apply the 80 - 20 rule in Forex trading, and increase your results:
1. Cut out short term trading - like Forex day trading. In day trading, you trade frequently - but it simply doesn't work. This is because all short-term volatility is random - and you can never get the odds in your favor.
2. Only trade significant technical patterns - such as critical breaks of support and resistance, with your Forex trading system.
3. Risk more per trade on the "good trades" - up to 20% is OK. Remember, risk goes with reward - and you need to take meaningful calculated risks, when the odds are in your favor.
4. Don't diversify! Forex traders think this spreads risk, but all it does, is simply dilute profit.
In terms of your Forex trading strategy: Focusing on the above will make you more money - but you'll also reduce the effort you put in.
Shift your emphasis to long term trading - and only trade the best signals. By doing this, your workload - and the amount of time you need to spend on your Forex analysis will be reduced.
If you apply the 80 - 20 rule to your Forex trading in the above way, you'll cut the effort you put in. You'll also increase the profits you make - and that's what all Forex traders want!
Cutting the Effort You Put In and Getting Bigger Rewards
Many people think that the more effort you put in, the better the results you obtain. This is true in many areas of life - but not Forex trading! Here you are paid for being right with your Forex trading signals - that's all.
Also, don't fall for the myth that the more you trade, the better your chance is of having Forex trading success. This is simply not true - because the big trades, with the best ratio of risk to reward don't come around that often.
Incorporate the 80 - 20 rule in your Forex trading strategy, and watch your profits soar.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Steve Todd
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
NEW! 5 X Critical Trader PDF's & Much More
Claim your FREE PDF's and demo account and learn Forex Trading and also get: Breaking financial news, tight pip spreads, guaranteed stops $100.00 minimum investment and 400:1 leverage at http://www.freeforexguidesonline.com
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
So, what is the 80 - 20 rule, and why is it so powerful in terms of making Forex profits?
The Logic of the 80 - 20 Rule
In the nineteenth century, Vilfredo Pareto, an Italian philosopher, observed that a small section of the population held most of the money and power. He postulated that in most countries, 80% of the money and power was controlled by around 20% of the people. Therefore, 20% of the participants accounted for 80% of the results.
The 80 - 20 rule applies to many other areas of life - including Forex trading, and in simple terms, the key point to consider is this:
80% of your results will be generated by 20% of your efforts.
This also means that:
20% of your results will be generated by 80% of your efforts.
In Forex trading, it's a fact that most traders make this critical error - they trade too much - and try to force results by working too hard.
Here's what you need to do, to apply the 80 - 20 rule in Forex trading, and increase your results:
1. Cut out short term trading - like Forex day trading. In day trading, you trade frequently - but it simply doesn't work. This is because all short-term volatility is random - and you can never get the odds in your favor.
2. Only trade significant technical patterns - such as critical breaks of support and resistance, with your Forex trading system.
3. Risk more per trade on the "good trades" - up to 20% is OK. Remember, risk goes with reward - and you need to take meaningful calculated risks, when the odds are in your favor.
4. Don't diversify! Forex traders think this spreads risk, but all it does, is simply dilute profit.
In terms of your Forex trading strategy: Focusing on the above will make you more money - but you'll also reduce the effort you put in.
Shift your emphasis to long term trading - and only trade the best signals. By doing this, your workload - and the amount of time you need to spend on your Forex analysis will be reduced.
If you apply the 80 - 20 rule to your Forex trading in the above way, you'll cut the effort you put in. You'll also increase the profits you make - and that's what all Forex traders want!
Cutting the Effort You Put In and Getting Bigger Rewards
Many people think that the more effort you put in, the better the results you obtain. This is true in many areas of life - but not Forex trading! Here you are paid for being right with your Forex trading signals - that's all.
Also, don't fall for the myth that the more you trade, the better your chance is of having Forex trading success. This is simply not true - because the big trades, with the best ratio of risk to reward don't come around that often.
Incorporate the 80 - 20 rule in your Forex trading strategy, and watch your profits soar.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Steve Todd
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
NEW! 5 X Critical Trader PDF's & Much More
Claim your FREE PDF's and demo account and learn Forex Trading and also get: Breaking financial news, tight pip spreads, guaranteed stops $100.00 minimum investment and 400:1 leverage at http://www.freeforexguidesonline.com
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Tuesday, July 10, 2007
Dollar in Tight Range ahead of Bernanke, BoC Rate Hike Expected
Dollar remains mixed in quiet trading today. With wholesale inventories as the only economic data scheduled to release from US today, market's focus will likely be on Bernanke's speech on inflation. However, Bernanke is indeed not expected to deliver any surprise today. In particular, with oil prices staying above $70 a barrel, Fed would likely remain highly alerted about inflation risk. Recent growth data support moderate expansion in the economy in the second half of the year. Meanwhile, Bernanke has warned the risk of spillover of the housing market slowdown recently already. More consolidation will likely be seen until Trade Balance and Retail Sales later this week. Though, May trade balance in UK could trigger some volatility in the Sterling.
The biggest mover today could be the Canadian dollar which recovers mildly from a fresh multi-decade high against dollar at 1.0442 made yesterday. BoC is widely expected to raise rates by 25bps to 4.50% today, after being on hold 8 times after last hike in May 06. The CAD has been supported firmly since BoC's warning of another rate hike in the 'near term' and recent strong readings in core CPI that stayed above 2%. Recent growth data were strong too with Q1 GDP growth reaching 3.7% yoy rate and Jun's job growth beating expectation by a double. Further strength in the CAD will likely be seen if BoC indicates the possibility that the expected rate hike today is not enough to bring inflation down yet.
The biggest mover today could be the Canadian dollar which recovers mildly from a fresh multi-decade high against dollar at 1.0442 made yesterday. BoC is widely expected to raise rates by 25bps to 4.50% today, after being on hold 8 times after last hike in May 06. The CAD has been supported firmly since BoC's warning of another rate hike in the 'near term' and recent strong readings in core CPI that stayed above 2%. Recent growth data were strong too with Q1 GDP growth reaching 3.7% yoy rate and Jun's job growth beating expectation by a double. Further strength in the CAD will likely be seen if BoC indicates the possibility that the expected rate hike today is not enough to bring inflation down yet.
Sunday, July 8, 2007
How to Read a Chart & Act Effectively
Introduction
This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.
Recommendation
There are several good charting packages available free. Netdania is what I use.
Using charts effectively
The default number of periods on these charts is 300. This is a good starting point;
* Hourly chart that's about 12 days of data.
* 15 minute chart its 3 days of data.
* 5-minute chart it's slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it?s easy to quickly switch between charts or sets of charts.
What to look at first
1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today?s opening rate.
2. Study the 15 minute chart in great detail noting the following:
* Prevailing trend
* Current price in relation to the 60 period simple moving average.
* High and low since GMT 00:00
* Tops and bottoms during full 3 day time period.
How to use the information gathered so far
1. Determine the big picture (for intraday trading).
Glancing at the hourly chart will give you the big picture ? up or down. If it?s not clear immediately then you?re in a trading range. Lets assume the trend is down.
2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:
Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be down.
There are always two trends ? a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.
3. Determine the current trend (major or minor) from the 5 minute chart:
Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward ? major trend.
Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward ? minor trend.
How to trade the information gathered so far
At this point you know the following:
* Direction of the prevailing trend.
* Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).
Possible trade scenarios:
1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.
2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too ?mature? at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today?s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.
3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day?s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today?s low was a bit higher than yesterday?s low and the price action indicated a very short-term trading range (1 minute chart) just above today?s low. The thinking here is that buyers are not waiting for a break of today?s or yesterday?s low to buy cheaper; they are concerned they may not see the level.
4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined ? a low lower than the last low.
5) The reverse is true in major up-trends.
Other chart ideas
* There are always two trends to consider ? a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time.
* Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely.
* When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops.
* Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceeds the prior reaction you can assume the trend has changed, at least temporarily.
* Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops?
* You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.
* Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets.
* Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it?s way through at top before a decline. Smaller loses and sideways trading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend.
* Fourth time at bottom or top is crucial; next phase of move will soon become clear? be ready.
* Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play the break on the ?rebound?. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. The move back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.
* After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell.
* The third lower top is also a great place to sell.
* The same is true in reverse for down moves.
* Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range.
* Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.
Limitations of charts
Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That?s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day?s opening were still meaningful because they represented resistance to a big up move on a given day.
Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Jimmy Young - EURUSDTrader
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
This is a guide that tells you, in simple understandable language, how to choose the right charts, read them correctly, and act effectively in the market from what you see on them. Probably most of you have taken a course or studied the use of charts in the past. This should add to that knowledge.
Recommendation
There are several good charting packages available free. Netdania is what I use.
Using charts effectively
The default number of periods on these charts is 300. This is a good starting point;
* Hourly chart that's about 12 days of data.
* 15 minute chart its 3 days of data.
* 5-minute chart it's slightly more than 24 hours of data.
You can create multiple "tabs" or "layouts" so that it?s easy to quickly switch between charts or sets of charts.
What to look at first
1. Glance at hourly chart to see the big picture. Note significant support and resistance levels within 2% of today?s opening rate.
2. Study the 15 minute chart in great detail noting the following:
* Prevailing trend
* Current price in relation to the 60 period simple moving average.
* High and low since GMT 00:00
* Tops and bottoms during full 3 day time period.
How to use the information gathered so far
1. Determine the big picture (for intraday trading).
Glancing at the hourly chart will give you the big picture ? up or down. If it?s not clear immediately then you?re in a trading range. Lets assume the trend is down.
2. Determine if the 15 minute chart confirms the downtrend indicated by big picture:
Current price on 15-minute chart should be below 60 period moving average and the moving average line should be sloping down. If this is so then you have established the direction of the prevailing trend to be down.
There are always two trends ? a prevailing (major) trend and a minor trend. The minor trend is a reversal of the main trend, which lasts for a short period of time. Minor trends are clearly spotted on 5-minute charts.
3. Determine the current trend (major or minor) from the 5 minute chart:
Current price on 5-minute chart is below 60 period moving average and the moving average line is sloping downward ? major trend.
Current price on 5-minute chart is above 60 period moving average and the moving average line is sloping upward ? minor trend.
How to trade the information gathered so far
At this point you know the following:
* Direction of the prevailing trend.
* Whether we are currently trading in the direction of the prevailing (major) trend or experiencing a minor trend (reaction to major trend).
Possible trade scenarios:
1) Lets assume prevailing (major) trend is down and we are in a minor up-trend. Strategy would be to sell when the current price on 5-minute chart falls below the 60 period moving average and the 60 period moving average line is sloping downward. Why? Because the prevailing trend is reasserting itself and the next move is likely to be down. Is there more we can do? Yes. Look for further confirmation. For example, if the minor trend had stalled for a while and the lows of the past half hour or hour are very close to the 5 minute moving average then selling just below the lows of the past half hour is a better place to enter the market then just below the moving average line.
2) Lets assume prevailing (major) trend is down and 5-minute chart confirms downtrend. Strategy would be to wait for a minor (up trend) trend to appear and reverse before entering the market. The reason for this is that the move is too ?mature? at this point and a correction is likely. Since you trade with tight stops you will be stopped out on a reaction. Exception: If market trades through today?s low and/ or low of past three days (these levels will be apparent on the 15 minute chart) further quick downward price action is likely and a short position would be correct.
3) A better strategy assuming prevailing trend down, 5-minute chart down, and just above days lows is to BUY with a tight stop below the day?s low. Your risk is limited and defined and the technical condition (overdone?) is in your favor. Confirmation would be if today?s low was a bit higher than yesterday?s low and the price action indicated a very short-term trading range (1 minute chart) just above today?s low. The thinking here is that buyers are not waiting for a break of today?s or yesterday?s low to buy cheaper; they are concerned they may not see the level.
4) Generally speaking, the safest place to buy is after a sustained significant decline when the bottoms are getting higher. Preferably these bottoms will be hours apart. By the third or forth higher bottom it is clear a bottom is in place and an up-move is coming. As in the example above your risk is limited and defined ? a low lower than the last low.
5) The reverse is true in major up-trends.
Other chart ideas
* There are always two trends to consider ? a major trend and a minor trend. The minor trend is a reversal of the major trend, which generally lasts for a short period of time.
* Buying above old tops and selling below old bottoms can be excellent entry levels; assuming the move is not overly mature and a nearby reaction unlikely.
* When a strong up move is occurring the market should make both higher tops and higher bottoms. The reverse is true for down moves- lower bottoms and lower tops.
* Reactions (minor reversals) are smaller when a strong move is occurring. As the reactions begin to increase that is a clear warning signal that the move is losing momentum. When the last reaction exceeds the prior reaction you can assume the trend has changed, at least temporarily.
* Higher bottoms always indicate strength, and an up move usually starts from the third or fourth higher bottom. Reverse this rule in a rising market; lower tops?
* You will always make the most money by following the major trend although to say you will never trade against the trend means that you will miss a lot of opportunities to make big profits. The rule is: When you are trading against the trend wait until you have a definite indication of a selling or buying point near the top or bottom, where you can place a close stop loss order (risk small amount of capital). The profit target can be a short-term gain to nearby resistance or more.
* Consider the normal or average daily range, average price change from open to high and average price change from open to low, in determining your intra-day price targets.
* Do not overlook the fact that it requires time for a market to get ready at the bottom before it advances and for selling pressure to work it?s way through at top before a decline. Smaller loses and sideways trading are a sign the trend may be waning in a downtrend. Smaller gains and sideways trading in an up trend.
* Fourth time at bottom or top is crucial; next phase of move will soon become clear? be ready.
* Oftentimes, when an important support or resistance level is broken a quick move occurs followed by a reaction back to or slightly above support or below resistance. This is a great opportunity to play the break on the ?rebound?. Your stop can be super tight. For example, EURUSD important resistance 1.0840 is broken and a quick move to 1.0860, followed by a decline to 1.0835. Buy with a 1.0820 stop. The move back down is natural and takes nothing away from the importance of the breakout. However, EURUSD should not decline significantly below the breakout (breakout 1.0840; EURUSD should not go below 1.0825.
* After a prolonged up move when a top has been made there is usually a trading range, followed by a sharp decline. After that, a secondary reaction back near the old highs often occurs. This is because the market gets ahead of itself and a short squeeze occurs. Selling near the old top with a stop above the old top is the safest place to sell.
* The third lower top is also a great place to sell.
* The same is true in reverse for down moves.
* Be careful not to buy near top or sell near bottom within trading ranges. Wait for breakaway (huge profit potential) or play the range.
* Whether the market is very active or in a trading range, all indications are more accurate and trustworthier when the market is actively trading.
Limitations of charts
Scheduled economic announcements that are complete surprises render nearby short-term support and resistance levels meaningless because the basis (all available information) has changed significantly, requiring a price adjustment to reflect the new information. Other support and resistance levels within the normal daily trading range remain valid. For example, on Friday the unemployment number missed the mark by roughly 120,000 jobs. That?s a huge disparity and rendered all nearby resistance levels in the EURUSD meaningless. However, resistance level 200 points or more from the day?s opening were still meaningful because they represented resistance to a big up move on a given day.
Unscheduled or unexpected statements by government officials may render all charts points on a short-term chart meaningless, depending upon the severity of what was said or implied. For example, when Treasury Secretary John Snow hinted that the U.S. had abandoned its strong U.S. dollar policy.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Jimmy Young - EURUSDTrader
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Thursday, July 5, 2007
Trading Forex with a Strategy
Trading successfully is by no means a simple matter. It requires time, market knowledge and market understanding and a large amount of self restraint. ACM does not manage accounts, nor does it give market advice, that is the job of money managers and introducing brokers. As market professionals, we can however point the novice in the right direction and indicate what are correct trading tactics and considerations and what is total nonsense.
Anyone who says you can consistently make money in foreign exchange markets is being untruthful. Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very 'fast market' which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders' timing will be off. Don't expect to generate returns on every trade.
Let's enumerate what a trader needs to do in order to put the best chances for profitable trades on his side:
Trade with money you can afford to lose:
Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are 'involved with your money' the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.
Identify the state of the market:
What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that's forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.
Determine what time frame you're trading on:
Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind's eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you'll be 'scalping' (trying to get a few points off the market) trading intra-day, or going longer term. This will also determine what chart period you're looking at. If you trade many times a day, there's no point basing your technical analysis on a daily graph, you'll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.
Time your trade:
You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that's already underway. Timing your move means knowing what's expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.
If in doubt, stay out:
If you're unsure about a trade and find you're hesitating, stay on the sidelines.
Trade logical transaction sizes:
Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM's case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don't trade amounts that can potentially wipe you out and don't put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.
Gauge market sentiment:
Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term 'the trend is your friend', this basically means that if you're in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.
Market expectation:
Market expection relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been 'discounted' by the market, alternatively if the adverse happens, markets will usually react violently.
Use what other traders use:
In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Written by AC-Markets
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Anyone who says you can consistently make money in foreign exchange markets is being untruthful. Foreign exchange by nature, is a volatile market. The practice of trading it by way of margin increases that volatility exponentially. We are therefore talking about a very 'fast market' which is naturally inconsistent. Following that precept, it is logical to say that in order to make a successful trade, a trader has to take into account technical and fundamental data and make an informed decision based on his perception of market sentiment and market expectation. Timing a trade correctly is probably the most important variable in trading successfully but invariably there will be times where a traders' timing will be off. Don't expect to generate returns on every trade.
Let's enumerate what a trader needs to do in order to put the best chances for profitable trades on his side:
Trade with money you can afford to lose:
Trading fx markets is speculative and can result in loss, it is also exciting, exhilarating and can be addictive. The more you are 'involved with your money' the harder it is to make a clear-headed decision. Money you have earned is precious, but money you need to survive should never be traded.
Identify the state of the market:
What is the market doing? Is it trending upwards, downwards, is it in a trading range. Is the trend strong or weak, did it begin long ago or does it look like a new trend that's forming. Getting a clear picture of the market situation is laying the groundwork for a successful trade.
Determine what time frame you're trading on:
Many traders get in the market without thinking when they would like to get out, after all the goal is to make money. This is true but when trading, one must extrapolate in his mind's eye the movement that one expects to happen. Within this extrapolation, resides a price evolution during a certain period of time. Attached to this is the idea of exit price. The importance of this is to mentally put your trade in perspective and although it is clearly impossible to know exactly when you will exit the market, it is important to define from the outset if you'll be 'scalping' (trying to get a few points off the market) trading intra-day, or going longer term. This will also determine what chart period you're looking at. If you trade many times a day, there's no point basing your technical analysis on a daily graph, you'll probably want to analyse 30 minute or hour graphs. Additionally it is important to know the different time periods when various financial centers enter and exit the market as this creates more or less volatility and liquidity and can influence market movements.
Time your trade:
You can be right about a potential market movement but be too early or too late when you enter the trade. Timing considerations are twofold, an expected market figure like CPI, retail sales or a federal reserve decision can consolidate a movement that's already underway. Timing your move means knowing what's expected and taking into account all considerations before trading. Technical analysis can help you identify when and at what price a move may occur. We will look at technical analysis in more detail later.
If in doubt, stay out:
If you're unsure about a trade and find you're hesitating, stay on the sidelines.
Trade logical transaction sizes:
Margin trading allows the fx trader a very large amount of leverage, trading at full margin capacity (in ACM's case 1% or 0.5%) can make for some very large profits or losses on an account. Scaling your trades so that you may re-enter the market or make transactions on other currencies is generally wiser. In short, don't trade amounts that can potentially wipe you out and don't put all your eggs in one basket. ACM offers the same rates regardless of transaction sizes so a customer has nothing to lose by starting small.
Gauge market sentiment:
Market sentiment is what most of the market is perceived to be feeling about the market and therefore what it is doing or will do. This is basically about trend. You may have heard the term 'the trend is your friend', this basically means that if you're in the right direction with a strong trend you will make successful trades. This of course is very simplistic, a trend is capable of reversal at any time. Technical and fundamental data can indicate however if the trend has begun long ago and if it is strong or weak.
Market expectation:
Market expection relates to what most people are expecting as far as upcoming news is concerned. If people are expecting an interest rate to rise and it does, then there usually will not be much of a movement because the information will already have been 'discounted' by the market, alternatively if the adverse happens, markets will usually react violently.
Use what other traders use:
In a perfect world, every trader would be looking at a 14 day RSI and making trading decisions based on that. If that was the case, when RSI would go under the 30 level, everyone would buy and by consequence the price would rise. Needless to say, the world is not perfect and not all market participants follow the same technical indicators, draw the same trendlines and identify the same support & resistance levels. The great diversity of opinions and techniques used translates directly into price diversity. Traders however have a tendency to use a limited variety of technical tools. The most common are 9 and 14 day RSI, obvious trendlines and support levels, fibonnacci retracement, MACD and 9, 20 & 40 day exponential moving averages. The closer you get to what most traders are looking at, the more precise your estimations will be. The reason for this is simple arithmetic, larger numbers of buyers than sellers at a certain price will move the market up from that price and vice-versa.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Written by AC-Markets
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The Market is always Technical
Are there times when the market trades technically and others from fundamentals?
The easy way out when the market doesn't move as forecast…
This is a comment I often hear or read… "In the absence of economic information the market traded technically".
You should see my face glow red with frustration when it is repeated again… and again. What a lot of absolute bunkum. Whoever says that has NO idea what technical analysis is about.
The market is always technical.
The biggest issue is whether the analyst is reading the signs correctly and that is down to the skill of the individual analyst.
Let's get this straight. Technical analysis is a wide ranging group of techniques which obtain information from price action or derivatives of price action and provide indications to the analyst on the expected direction of price. The basic concept that is often said is that it is based on the assumption that market participants will react in the same way to certain events in the market and since these form patterns, once a pattern is recognized it can be projected forward to predict the next move. In a way this is correct but apart from simple pattern recognition it doesn't really explain the concept sufficiently well enough to make it believable.
Consider one of the market's maxims, "price reflects all known information about the market that is known by the participants and price will move when a new input has been provided."
Basically that is correct. Who are the market participants? Well, it's you, it's me, it's all the bank traders in the world, all the corporate treasurers with Forex exposures to cover, our families who are off on holiday, market traders in good and commodities from which a Forex exposure arises, fund managers, central banks and even politicians who see their policies being affected.
What is common to all of them? They react emotionally to movements in price. Traders, whether private or institutional, fear making losses as do corporate treasurers, market traders and fund managers. Central bankers and politicians react to exchange rate movements since it affects official reserves, interest rate policies, trade balances and possibly the equity indices. They all fear losing money. They react emotionally as price moves.
I view technical analysis as a study of emotion and more importantly the sequence of emotions that all market participants go through. There isn't any moment of time as price is moving that emotions are not in play. I know from what I do every day that the flow of price movement comes in sequences that can often be measured and projected to obtain an idea of the high risk areas for targets.
Let us consider the whole basis of the ridiculous comment that sometimes the market trades technically a little more.
I've just been told by a client that he tried subscribing to two analytical services, mine and another good analyst but he says he gets confused because we often issue opposite forecasts. That's interesting. To be honest it happens all the time. I use a group of techniques that I like, Elliott Wave, time cycles, Fibonacci (in conjunction with Elliott Wave) and also momentum. Another analyst will use different momentum indicators, Bollinger bands and standard patterns. Another analyst may use Gann, Market Profile and momentum. Probably we'll come out with different conclusions.
So when the market is trading technically, which "technical" is being referred to?
Some of us will be right and some wrong. However, we are all trading technically…
I have even attended conferences where economists will make forecasts that are so widely divergent that the same thing is obviously true of fundamentals.
None of us is right 100% of the time. How I wish I was! What is important to traders listening to what we say can be summed up with four factors:
1. How consistently correct are we?
2. Are the support and resistance levels we produce consistent?
3. Can we provide alternatives for the occasions when we are wrong?
4. If we are wrong, how quickly can we adjust our view?
The problem technical analysis has is the fact that it is a concept that it difficult to envisage unlike being able to talk about trade balances, GDP and monetary policies. Like any other skill it has its good practitioners and bad ones. Most good traders are bad analysts – and vice versa. The two mind sets are different. But if a good trader attempts to apply technical analysis and fails because he hasn't spent enough time to learn (and more likely doesn't have the basic aptitude) then he will dismiss technical analysis as lacking credibility.
The other day I had a client write to me:
"I don't believe anybody can predict market moves, but it is often uncanny how accurate your Pro Commentary is with regards to moves in the FX market. With a sound money management strategy, my FX trading has improved considerably. Keep up the excellent work."
The fact is that with the right mind set, the right techniques and the current emotional sequence is recognized an analyst can be very accurate in forecasting and certainly within 5-20 points in forecasting accuracy.
It is for this reason that technical analysis can provide an element of accuracy and anticipate market reversals far better than economic forecasting. I have predicted target ranges 10 months ahead of the actual occurrence. I have identified the timing of every major low in USDJPY this year ahead of time. On every occasion the fundamentals have been bearish.
Keep an open mind. The market does trade technically 100% of the time.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Ian Copsey
Global Forex Trading
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
The easy way out when the market doesn't move as forecast…
This is a comment I often hear or read… "In the absence of economic information the market traded technically".
You should see my face glow red with frustration when it is repeated again… and again. What a lot of absolute bunkum. Whoever says that has NO idea what technical analysis is about.
The market is always technical.
The biggest issue is whether the analyst is reading the signs correctly and that is down to the skill of the individual analyst.
Let's get this straight. Technical analysis is a wide ranging group of techniques which obtain information from price action or derivatives of price action and provide indications to the analyst on the expected direction of price. The basic concept that is often said is that it is based on the assumption that market participants will react in the same way to certain events in the market and since these form patterns, once a pattern is recognized it can be projected forward to predict the next move. In a way this is correct but apart from simple pattern recognition it doesn't really explain the concept sufficiently well enough to make it believable.
Consider one of the market's maxims, "price reflects all known information about the market that is known by the participants and price will move when a new input has been provided."
Basically that is correct. Who are the market participants? Well, it's you, it's me, it's all the bank traders in the world, all the corporate treasurers with Forex exposures to cover, our families who are off on holiday, market traders in good and commodities from which a Forex exposure arises, fund managers, central banks and even politicians who see their policies being affected.
What is common to all of them? They react emotionally to movements in price. Traders, whether private or institutional, fear making losses as do corporate treasurers, market traders and fund managers. Central bankers and politicians react to exchange rate movements since it affects official reserves, interest rate policies, trade balances and possibly the equity indices. They all fear losing money. They react emotionally as price moves.
I view technical analysis as a study of emotion and more importantly the sequence of emotions that all market participants go through. There isn't any moment of time as price is moving that emotions are not in play. I know from what I do every day that the flow of price movement comes in sequences that can often be measured and projected to obtain an idea of the high risk areas for targets.
Let us consider the whole basis of the ridiculous comment that sometimes the market trades technically a little more.
I've just been told by a client that he tried subscribing to two analytical services, mine and another good analyst but he says he gets confused because we often issue opposite forecasts. That's interesting. To be honest it happens all the time. I use a group of techniques that I like, Elliott Wave, time cycles, Fibonacci (in conjunction with Elliott Wave) and also momentum. Another analyst will use different momentum indicators, Bollinger bands and standard patterns. Another analyst may use Gann, Market Profile and momentum. Probably we'll come out with different conclusions.
So when the market is trading technically, which "technical" is being referred to?
Some of us will be right and some wrong. However, we are all trading technically…
I have even attended conferences where economists will make forecasts that are so widely divergent that the same thing is obviously true of fundamentals.
None of us is right 100% of the time. How I wish I was! What is important to traders listening to what we say can be summed up with four factors:
1. How consistently correct are we?
2. Are the support and resistance levels we produce consistent?
3. Can we provide alternatives for the occasions when we are wrong?
4. If we are wrong, how quickly can we adjust our view?
The problem technical analysis has is the fact that it is a concept that it difficult to envisage unlike being able to talk about trade balances, GDP and monetary policies. Like any other skill it has its good practitioners and bad ones. Most good traders are bad analysts – and vice versa. The two mind sets are different. But if a good trader attempts to apply technical analysis and fails because he hasn't spent enough time to learn (and more likely doesn't have the basic aptitude) then he will dismiss technical analysis as lacking credibility.
The other day I had a client write to me:
"I don't believe anybody can predict market moves, but it is often uncanny how accurate your Pro Commentary is with regards to moves in the FX market. With a sound money management strategy, my FX trading has improved considerably. Keep up the excellent work."
The fact is that with the right mind set, the right techniques and the current emotional sequence is recognized an analyst can be very accurate in forecasting and certainly within 5-20 points in forecasting accuracy.
It is for this reason that technical analysis can provide an element of accuracy and anticipate market reversals far better than economic forecasting. I have predicted target ranges 10 months ahead of the actual occurrence. I have identified the timing of every major low in USDJPY this year ahead of time. On every occasion the fundamentals have been bearish.
Keep an open mind. The market does trade technically 100% of the time.
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Ian Copsey
Global Forex Trading
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Wednesday, July 4, 2007
First Of All, Know Thyself
One of the most important elements of success in trading (and life in general) is knowing yourself. If you do not understand how you tick, you will never be truly prepared for the demands of trading, and likely your performance will suffer as a result.
Let me use myself as an example.
I am what might be considered project oriented. By that I mean I like to move from one thing to the next – always have something upon which to focus my attention. As my friends and colleagues can attest, once I complete a project - and sometimes even before I do - my thoughts shift to the next one. I actually get antsy if I have nothing lined-up. Predictably, this is reflected in my trading.
We can actually think of trading as a series of projects. Each position one takes on is a new project which incorporates analysis of some sort (automated or otherwise) and trade decision-making. When a position is closed out, it is like wrapping up a project. It’s over and done - time to move on to the next thing.
There’s a little problem with that, though. This kind of “project” approach, in the case of someone like me, can lead to overtrading. This isn’t the kind of overtrading which is referred to when one speaks of taking on positions which are too large, though. Rather, I am speaking of trading too frequently. In my case, when I close a trade I find myself immediately eager to open a new one. It doesn’t matter whether I made or lost money on that first trade. Because of my “need” to have a project going, my psychological pull is toward finding a new trade to make. (Note: I do not consider this in my case to be like the “fix” trading provides as an intermittent feedback mechanism, like gambling.)
This little personality trait of mine is something I figured out a while back when I realized that I am most comfortable when I have an active position in the market.. It doesn’t matter how large or small that trade is as long as I can check on it periodically and feel like I’m involved. Knowing this, I take two approaches to avoid the overtrading problem.
The first thing I do is trade longer-term. By doing so, I give myself the opportunity to take on long “projects”. I often have trades with durations of weeks or even months. These aren’t all my trades, mind you. I do trade short-term at times, but my schedule is such that longer-term position trading tends to fit best most of the year.
When trading shorter-term, I use a second approach to combat the “project” itch. Specifically, I try to step away from the market for a while following the completion of a trade. It lets me clear out the emotional residue of finishing a project and come back at it fresh. That can quite often make the difference between taking impulsive trades and being properly selective based on my analytic methods.
Of course, this is just one example of the sort of psychological hurdles which come up in trading. We all have patterns of behavior which are based in our personal lives that can quite easily carry in to trading, positively or negatively. Brett Steenbarger’s outstanding book The Psychology of Trading provides an excellent discussion of how this can happen, and ways we can overcome the problematic ones. The primary point is that we need to be able to look at ourselves like an outside observer. In that way we can get to know ourselves, and that’s at least half the battle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: John Forman
John Forman is author of The Essentials of Trading (www.TheEssentialsofTrading.com) and a near 20-year veteran of the markets. John is Managing Analyst & Chief Trader for Anduril Analytics, which offers free trading reports at www.andurilonline.com/free-stuff.asp
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Let me use myself as an example.
I am what might be considered project oriented. By that I mean I like to move from one thing to the next – always have something upon which to focus my attention. As my friends and colleagues can attest, once I complete a project - and sometimes even before I do - my thoughts shift to the next one. I actually get antsy if I have nothing lined-up. Predictably, this is reflected in my trading.
We can actually think of trading as a series of projects. Each position one takes on is a new project which incorporates analysis of some sort (automated or otherwise) and trade decision-making. When a position is closed out, it is like wrapping up a project. It’s over and done - time to move on to the next thing.
There’s a little problem with that, though. This kind of “project” approach, in the case of someone like me, can lead to overtrading. This isn’t the kind of overtrading which is referred to when one speaks of taking on positions which are too large, though. Rather, I am speaking of trading too frequently. In my case, when I close a trade I find myself immediately eager to open a new one. It doesn’t matter whether I made or lost money on that first trade. Because of my “need” to have a project going, my psychological pull is toward finding a new trade to make. (Note: I do not consider this in my case to be like the “fix” trading provides as an intermittent feedback mechanism, like gambling.)
This little personality trait of mine is something I figured out a while back when I realized that I am most comfortable when I have an active position in the market.. It doesn’t matter how large or small that trade is as long as I can check on it periodically and feel like I’m involved. Knowing this, I take two approaches to avoid the overtrading problem.
The first thing I do is trade longer-term. By doing so, I give myself the opportunity to take on long “projects”. I often have trades with durations of weeks or even months. These aren’t all my trades, mind you. I do trade short-term at times, but my schedule is such that longer-term position trading tends to fit best most of the year.
When trading shorter-term, I use a second approach to combat the “project” itch. Specifically, I try to step away from the market for a while following the completion of a trade. It lets me clear out the emotional residue of finishing a project and come back at it fresh. That can quite often make the difference between taking impulsive trades and being properly selective based on my analytic methods.
Of course, this is just one example of the sort of psychological hurdles which come up in trading. We all have patterns of behavior which are based in our personal lives that can quite easily carry in to trading, positively or negatively. Brett Steenbarger’s outstanding book The Psychology of Trading provides an excellent discussion of how this can happen, and ways we can overcome the problematic ones. The primary point is that we need to be able to look at ourselves like an outside observer. In that way we can get to know ourselves, and that’s at least half the battle.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: John Forman
John Forman is author of The Essentials of Trading (www.TheEssentialsofTrading.com) and a near 20-year veteran of the markets. John is Managing Analyst & Chief Trader for Anduril Analytics, which offers free trading reports at www.andurilonline.com/free-stuff.asp
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Tuesday, July 3, 2007
Making the Momentum Indicator Work for You
When analyzing markets I often use the term "momentum" when referring to the amount of strength the bulls or bears have at a given point in time. This market "momentum" is a key indicator regarding the strength of a trend, or whether a trend is about to end or begin.
When I worked as a market reporter on the trading floors of the Chicago Board of Trade and the Chicago Mercantile Exchange, I (as well the floor traders) had a very keen sense of which camp (bulls or bears) had momentum on their side. This was especially true in the grain pits at the Board of Trade. One obtained this keen awareness by being right on the trading floor, talking with all the market-makers who helped determine prices.
By examining charts, cycles, seasonality and other technical indicators-and near-term fundamentals--one can also get a good reading on whether the bulls or the bears have the edge in any given market. However, I must admit that when trying to gauge market momentum there is no substitute for working right on the trading floor and talking face-to-face with the market-makers. But very few get that opportunity, so other tools have to be employed. One such technical tool is the Momentum indicator.
The Momentum indicator is a popular technical study. It is easy to calculate and can be applied in various ways. Momentum can be calculated by dividing the day’s closing price by the closing price "X" amount of days ago and then multiplying the quotient by 100.
The Momentum study is an oscillator-type that is used to interpret overbought/oversold markets. It assists in determining the pace at which price is rising or falling. This indicates whether a current trend is gaining or losing momentum, whether or not a market is overbought or oversold, and whether the trend is slowing down.
Momentum is calculated by computing the continuous difference between prices at fixed intervals. That difference is either a positive or negative value, which is plotted around a zero line. When momentum is above the zero line and rising, prices are increasing at an increasing rate. If momentum is above the zero line but is declining, prices are still increasing but at a decreasing rate.
The opposite is true when momentum falls below the zero line. If momentum is falling and is below the zero line, prices are decreasing at an increasing rate. With momentum below the zero line and rising, prices are still declining but at a decreasing rate.
The normal trading rule is: Buy when the momentum line crosses from below the zero line to above. Sell when the momentum line crosses from above the zero line to below. Another possibility is to establish bands at each extreme of the momentum line. Initiate or change positions when the indicator enters either of those zones. You could modify that rule to enter a position only when the indicator reaches the overbought or oversold zone and then exits that zone.
You specify the length of the momentum indicator. You must determine a value suitable to your trading needs and methods. Some technicians argue the length of the momentum indicator should equal the normal price cycle. The best method is to experiment with different lengths until you find the length that works best for that particular commodity you are trading.
Like most other "secondary" trading tools in my trading toolbox, I do not use the Momentum indicator, solely, to generate buy and sell signals, or to gauge the overall technical situation in a market. I use the Momentum indicator to help confirm or refute general ideas I have developed by using my "primary" trading tools, such as trend lines, chart patterns and fundamental analysis.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Jim Wyckoff
TradingEducation.com
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
When I worked as a market reporter on the trading floors of the Chicago Board of Trade and the Chicago Mercantile Exchange, I (as well the floor traders) had a very keen sense of which camp (bulls or bears) had momentum on their side. This was especially true in the grain pits at the Board of Trade. One obtained this keen awareness by being right on the trading floor, talking with all the market-makers who helped determine prices.
By examining charts, cycles, seasonality and other technical indicators-and near-term fundamentals--one can also get a good reading on whether the bulls or the bears have the edge in any given market. However, I must admit that when trying to gauge market momentum there is no substitute for working right on the trading floor and talking face-to-face with the market-makers. But very few get that opportunity, so other tools have to be employed. One such technical tool is the Momentum indicator.
The Momentum indicator is a popular technical study. It is easy to calculate and can be applied in various ways. Momentum can be calculated by dividing the day’s closing price by the closing price "X" amount of days ago and then multiplying the quotient by 100.
The Momentum study is an oscillator-type that is used to interpret overbought/oversold markets. It assists in determining the pace at which price is rising or falling. This indicates whether a current trend is gaining or losing momentum, whether or not a market is overbought or oversold, and whether the trend is slowing down.
Momentum is calculated by computing the continuous difference between prices at fixed intervals. That difference is either a positive or negative value, which is plotted around a zero line. When momentum is above the zero line and rising, prices are increasing at an increasing rate. If momentum is above the zero line but is declining, prices are still increasing but at a decreasing rate.
The opposite is true when momentum falls below the zero line. If momentum is falling and is below the zero line, prices are decreasing at an increasing rate. With momentum below the zero line and rising, prices are still declining but at a decreasing rate.
The normal trading rule is: Buy when the momentum line crosses from below the zero line to above. Sell when the momentum line crosses from above the zero line to below. Another possibility is to establish bands at each extreme of the momentum line. Initiate or change positions when the indicator enters either of those zones. You could modify that rule to enter a position only when the indicator reaches the overbought or oversold zone and then exits that zone.
You specify the length of the momentum indicator. You must determine a value suitable to your trading needs and methods. Some technicians argue the length of the momentum indicator should equal the normal price cycle. The best method is to experiment with different lengths until you find the length that works best for that particular commodity you are trading.
Like most other "secondary" trading tools in my trading toolbox, I do not use the Momentum indicator, solely, to generate buy and sell signals, or to gauge the overall technical situation in a market. I use the Momentum indicator to help confirm or refute general ideas I have developed by using my "primary" trading tools, such as trend lines, chart patterns and fundamental analysis.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
by Jim Wyckoff
TradingEducation.com
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Monday, July 2, 2007
Day Trading: Great Fun - If You Are Ahead…
Imagine with me the dream, you have just woken up at 8:00 to the whistling of song birds in the trees outside your South Carolina beach home and you are beginning to smell the gourmet coffee that brews when you wake up. You look outside to see another beautiful day ahead and instead of being depressed because you will have to waste it inside an office with fluorescent lights blaring down on you inside your cubicle you are welcoming it with the enthusiasm of a little child on the first day of summer break. You see you are a day trading guru, who from the privacy of your own home and with the convenience of a high speed internet hook up, and are therefore free to do as you please.
This is true because you actually enjoy the thrill of the market and the challenge of fast paced decisions and strategies that go with the life of trading stocks on a daily basis. You are in this not for the retirement that is slowly and steadily becoming enough to support you in your “golden years,” you are in this for your income. In order to survive you have to buy low and sell high enough today to turn a profit and get a paycheck. This is the challenge, the fun of day trading.
So you grab a cup of coffee and head over to your desk and computer to get a brief look at the events on the market this morning. You see that things are well according to the buy plan that you made the night before and that you don’t have to make any changes. You then grab the paper on the front walk (the Wall Street Journal of course) and amble out onto your back deck sipping on the dark Sumatra. This is just the morning of your typical work day of day trading and you are loving every minute of it.
Later that day you go and play a round of golf with your day trading buddies and discuss the events of the morning on the market. You get together with these guys, kind of like a focus group, to bounce strategies off one another and to give and receive advice. You return home for the afternoon and get a bite to eat and a shower before settling down in front of your computer for research and planning for the next days buying and selling. But first you have to make the sales from the buys you made yesterday AM and you are pleased to see that you have returned a little bit higher than average profit – $1500.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Abrahem Mittell
Abrahem Mittell has been dabbling in day trading since it was first available some time in the early 90’s. He frequently writes about the lessons he has learned from 20 years of experience. To learn more please visit www.begindaytrading.info
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This is true because you actually enjoy the thrill of the market and the challenge of fast paced decisions and strategies that go with the life of trading stocks on a daily basis. You are in this not for the retirement that is slowly and steadily becoming enough to support you in your “golden years,” you are in this for your income. In order to survive you have to buy low and sell high enough today to turn a profit and get a paycheck. This is the challenge, the fun of day trading.
So you grab a cup of coffee and head over to your desk and computer to get a brief look at the events on the market this morning. You see that things are well according to the buy plan that you made the night before and that you don’t have to make any changes. You then grab the paper on the front walk (the Wall Street Journal of course) and amble out onto your back deck sipping on the dark Sumatra. This is just the morning of your typical work day of day trading and you are loving every minute of it.
Later that day you go and play a round of golf with your day trading buddies and discuss the events of the morning on the market. You get together with these guys, kind of like a focus group, to bounce strategies off one another and to give and receive advice. You return home for the afternoon and get a bite to eat and a shower before settling down in front of your computer for research and planning for the next days buying and selling. But first you have to make the sales from the buys you made yesterday AM and you are pleased to see that you have returned a little bit higher than average profit – $1500.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Abrahem Mittell
Abrahem Mittell has been dabbling in day trading since it was first available some time in the early 90’s. He frequently writes about the lessons he has learned from 20 years of experience. To learn more please visit www.begindaytrading.info
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Sunday, July 1, 2007
Day Trading Your Way To Success
If you are interested in day trading you first need to know what it is all about and to understand the basics of day trading. For starters, a day trader is a person who is very active in the stock market and makes several trades a day in an attempt to make quick gains by buying and selling stocks in a short time span.
As the market is never the same day to day, no one particular day trading strategy will work each time. To be successful, you first need to understand how the market works and get a feel for the market.
This includes recognizing the stocks' basic trend, the long and short setups, when to enter a trade, and where to place stops. Another very important basic is how to protect your profits and minimize losses.
Once you have learned the basics and are ready to try your first day trade, here are some tips and guidelines you should keep in mind that is essential to your success as a day trader.
Being a day trader requires a lot of time and practice before you get used to the everyday volatility in the market. Do not expect to become an expert day trader overnight. No matter how many books you have read or day traders you have watched, that will not make you an immediate expert.
There are day trading websites that simulate trading. Practice with their trading platform first before trying out the real thing. It could save you a lot of money and you will learn the ropes faster this way.
If you are ready for real live trading, do not be scared by the thought of losing money. There are ways to minimize your loss such as with stop orders.
If you lose money, do not worry, as some loss is to be expected. Just remember, with increased experience and sensitivity to the market, you will start turning a profit soon.
If you profit large sums of money, stop trading. Do not gamble it away by trying to gain even larger profits. You can always trade another day.
Sometimes the market will not perform as you expected. When you encounter this situation, it is best that you do not trade at all.
Once you gain more experience in day trading, you may be able to predict the direction of a stock price. However, try not to pick top stocks or bottom stocks. This is one of the most common mistakes of a beginner.
If you cannot predict where the market is heading, it is best if you stand aside and wait, or you can always go home and trade again another day.
It is a good idea to record all of your day trading results. This way you can learn what works and what does not, and be more effective in trading.
Observe good traders. Look at how and when they sell or buy. Generally, good day traders often buy on bad news and sell on good news.
Beginners often get emotional in their trades. Avoid this at all cost, stay emotionally detached and professional.
Learn to trust your instincts. Relying too much on analysis may mean letting a few good trades slip away from you.
As you gain experience, you will see that different day trading strategies are required on different days and required on different stocks. Be flexible.
Bad day traders often focus on too many stocks that are not manageable and often lose track on where each stock is heading. It is wise to limit your stocks in manageable numbers.
With patience and practice, you can be successful in day trading, and as your experience grows so do your profits. Everyday you can learn new day trading strategies in the market, which you can use to your advantage.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Susan Chiang
Source : articlecube.com
---------------------------------------------
As the market is never the same day to day, no one particular day trading strategy will work each time. To be successful, you first need to understand how the market works and get a feel for the market.
This includes recognizing the stocks' basic trend, the long and short setups, when to enter a trade, and where to place stops. Another very important basic is how to protect your profits and minimize losses.
Once you have learned the basics and are ready to try your first day trade, here are some tips and guidelines you should keep in mind that is essential to your success as a day trader.
Being a day trader requires a lot of time and practice before you get used to the everyday volatility in the market. Do not expect to become an expert day trader overnight. No matter how many books you have read or day traders you have watched, that will not make you an immediate expert.
There are day trading websites that simulate trading. Practice with their trading platform first before trying out the real thing. It could save you a lot of money and you will learn the ropes faster this way.
If you are ready for real live trading, do not be scared by the thought of losing money. There are ways to minimize your loss such as with stop orders.
If you lose money, do not worry, as some loss is to be expected. Just remember, with increased experience and sensitivity to the market, you will start turning a profit soon.
If you profit large sums of money, stop trading. Do not gamble it away by trying to gain even larger profits. You can always trade another day.
Sometimes the market will not perform as you expected. When you encounter this situation, it is best that you do not trade at all.
Once you gain more experience in day trading, you may be able to predict the direction of a stock price. However, try not to pick top stocks or bottom stocks. This is one of the most common mistakes of a beginner.
If you cannot predict where the market is heading, it is best if you stand aside and wait, or you can always go home and trade again another day.
It is a good idea to record all of your day trading results. This way you can learn what works and what does not, and be more effective in trading.
Observe good traders. Look at how and when they sell or buy. Generally, good day traders often buy on bad news and sell on good news.
Beginners often get emotional in their trades. Avoid this at all cost, stay emotionally detached and professional.
Learn to trust your instincts. Relying too much on analysis may mean letting a few good trades slip away from you.
As you gain experience, you will see that different day trading strategies are required on different days and required on different stocks. Be flexible.
Bad day traders often focus on too many stocks that are not manageable and often lose track on where each stock is heading. It is wise to limit your stocks in manageable numbers.
With patience and practice, you can be successful in day trading, and as your experience grows so do your profits. Everyday you can learn new day trading strategies in the market, which you can use to your advantage.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
By: Susan Chiang
Source : articlecube.com
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