A flat correction differs from a zigzag in that the subwave sequence is 3-3-5, as shown in Figures 1 and 2. Since the first actionary wave,

Fibonacci studies: arcs, fans, retracements, and time

Overview: Leonardo Fibonacci was a mathematician who was born in Italy around the year 1170. It is believed that Mr. Fibonacci discovered..


The Negative Volume Index (“NVI”) focuses on days where the volume decreases from the previous day. The premise being that the “smart money” takes positions on days when volume decreases

Basic Technicals

MACD technical analysis MACD technical analysis stands for moving average convergence/divergence analysis of stocks.

Fundamental Analysis

Doubling Stocks Review: Is this a scam? If you are looking for the truth about doubling stocks this is a necessity. One always thought there was something wrong with a doubling of stocks.

Saturday, July 31, 2010


Bollinger Bands are similar to moving average envelopes. The difference between Bollinger Bands and envelopes is envelopes are plotted at a fixed percentage above and below a moving average, whereas Bollinger Bands are plotted at standard deviation levels above and below a moving average. Since standard deviation is a measure of volatility, the bands are self-adjusting: widening during volatile markets and
contracting during calmer periods.Bollinger Bands were created by John Bollinger.
Bollinger Bands are usually displayed on top of security prices, but they can be displayed on an indicator. These comments refer to bands displayed on prices.As with moving average envelopes, the basic interpretation of Bollinger Bands is that prices tend to stay within the upper- and lower-band. The distinctive characteristic of Bollinger Bands is that the spacing between the bands varies based on the volatility of the prices. During periods of extreme price changes (i.e., high volatility), the bands widen to become more forgiving. During periods of stagnant pricing (i.e., low volatility),the bands narrow to contain prices.Mr. Bollinger notes the following characteristics of Bollinger Bands.
1.Sharp price changes tend to occur after the bands tighten, as volatility lessens.
2.When prices move outside the bands, a continuation of the current trend is implied.
3.Bottoms and tops made outside the bands followed by bottoms and tops made inside the bands call for reversals in the trend.
4.A move that originates at one band tends to go all the way to the other band. This observation is useful when projecting price targets.

The following chart shows Bollinger Bands on Exxon’s prices.
The Bands were calculated using a 20-day exponential moving average and are spaced two deviations apart.The bands were at their widest when prices were volatile during April. They narrowed when prices entered a consolidation period later in the year. The narrowing of the bands increases the probability of a sharp breakout in prices. The longer prices remain within the narrow bands the more likely a price breakout.
Bollinger Bands are displayed as three bands. The middle band is a normal moving average. In the following formula, “n”
is the number of time periods in the moving average (e.g., 20 days).
The upper band is the same as the middle band, but it is shifted up by the number of standard deviations (e.g., two deviations). In this next formula, “D” is the number of standard deviations.
The lower band is the moving average shifted down by the same number of standard deviations (i.e., “D”).

Mr. Bollinger recommends using “20″ for the number of periods in the moving average, calculating the moving average using the “simple” method (as shown in the formula for the middle band), and using 2 standard deviations. He has also found that moving averages of less then 10 periods do not work very well.
Courtesy tradingdomination.This content copyrights protected by tradingdomination.com.

Tuesday, July 27, 2010

Elliottwave_ Basic Tenets

The Wave Principle, every market decision is both produced by meaningful information and produces meaningful information. Each transaction, while at once an effect, enters the fabric of the market and, by communicating transactional data to investors, joins the chain of causes of others’ behavior. This feedback loop is governed by man’s social nature, and since he has such a nature, the process generates forms. As the forms are repetitive, they have predictive value.
Sometimes the market appears to reflect outside conditions and events, but at other times it is entirely detached from what most people assume are causal conditions. The reason is that the market has a law of its own. It is not propelled by the linear causality to which one becomes accustomed in the everyday experiences of life. Nor is the market the cyclically rhythmic machine that some declare it to be. Nevertheless, its movement reflects a structured formal progression.
That progression unfolds in waves. Waves are patterns of directional movement. More specifically, a wave is any one of the patterns that naturally occur under the Wave Principle, as described in Lessons 1-9 of this course.
The Five Wave Pattern
In markets, progress ultimately takes the form of five waves of a specific structure. Three of these waves, which are labeled 1, 3 and 5, actually effect the directional movement. They are separated by two countertrend interruptions, which are labeled 2 and 4, as shown in Figure 1-1. The two interruptions are apparently a requisite for overall directional movement to occur.

Figure 1-1
R.N. Elliott did not specifically state that there is only one overriding form, the “five wave” pattern, but that is undeniably the case. At any time, the market may be identified as being somewhere in the basic five wave pattern at the largest degree of trend. Because the five wave pattern is the overriding form of market progress, all other patterns are subsumed by it.
There are two modes of wave development: motive and corrective. Motive waves have a five wave structure, while corrective waves have a three wave structure or a variation thereof. Motive mode is employed by both the five wave pattern of Figure 1-1 and its same-directional components, i.e., waves 1, 3 and 5. Their structures are called “motive” because they powerfully impel the market. Corrective mode is employed by all countertrend interruptions, which include waves 2 and 4 in Figure 1-1. Their structures are called “corrective” because they can accomplish only a partial retracement, or “correction,” of the progress achieved by any preceding motive wave. Thus, the two modes are fundamentally different, both in their roles and in their construction, as will be detailed throughout this course.
In his 1938 book, The Wave Principle, and again in a series of articles published in 1939 by Financial World magazine, R.N. Elliott pointed out that the stock market unfolds according to a basic rhythm or pattern of five waves up and three waves down to form a complete cycle of eight waves. The pattern of five waves up followed by three waves down is depicted in Figure 1-2.

Figure 1-2
Figure 1-2
One complete cycle consisting of eight waves, then, is made up of two distinct phases, the motive phase (also called a “five”), whose subwaves are denoted by numbers, and the corrective phase (also called a “three”), whose subwaves are denoted by letters. The sequence a, b, c corrects the sequence 1, 2, 3, 4, 5 in Figure 1-2.
At the terminus of the eight-wave cycle shown in Figure 1-2 begins a second similar cycle of five upward waves followed by three downward waves. A third advance then develops, also consisting of five waves up. This third advance completes a five wave movement of one degree larger than the waves of which it is composed. The result is as shown in Figure 1-3 up to the peak labeled (5).

Figure 1-3
At the peak of wave (5) begins a down movement of correspondingly larger degree, composed once again of three waves. These three larger waves down “correct” the entire movement of five larger waves up. The result is another complete, yet larger, cycle, as shown in Figure 1-3. As Figure 1-3 illustrates, then, each same-direction component of a motive wave, and each full-cycle component (i.e., waves 1 + 2, or waves 3 + 4) of a cycle, is a smaller version of itself.
It is crucial to understand an essential point: Figure 1-3 not only illustrates a larger version of Figure 1-2, it also illustrates Figure 1-2 itself, in greater detail. In Figure 1-2, each subwave 1, 3 and 5 is a motive wave that will subdivide into a “five,” and
each subwave 2 and 4 is a corrective wave that will subdivide into an a, b, c. Waves (1) and (2) in Figure 1-3, if examined under a “microscope,” would take the same form as waves [1]* and [2]. All these figures illustrate the phenomenon of constant form within ever-changing degree.
The market’s compound construction is such that two waves of a particular degree subdivide into eight waves of the next lower degree, and those eight waves subdivide in exactly the same manner into thirty-four waves of the next lower degree. The Wave Principle, then, reflects the fact that waves of any degree in any series always subdivide and re-subdivide into waves of lesser degree and simultaneously are components of waves of higher degree. Thus, we can use Figure 1-3 to illustrate two waves, eight waves or thirty-four waves, depending upon the degree to which we are referring.
Now observe that within the corrective pattern illustrated as wave [2] in Figure 1-3, waves (a) and (c), which point downward, are composed of five waves: 1, 2, 3, 4 and 5. Similarly, wave (b), which points upward, is composed of three waves: a, b and c. This construction discloses a crucial point: that motive waves do not always point upward, and corrective waves do not always point downward. The mode of a wave is determined not by its absolute direction but primarily by its relative direction. Aside from four specific exceptions, which will be discussed later in this course, waves divide in motive mode (five waves) when trending in the same direction as the wave of one larger degree of which it is a part, and in corrective mode (three waves or a variation) when trending in the opposite direction. Waves (a) and (c) are motive, trending in the same direction as wave [2]. Wave (b) is corrective because it corrects wave (a) and is countertrend to wave [2]. In summary, the essential underlying tendency of the Wave Principle is that action in the same direction as the one larger trend develops in five waves, while reaction against the one larger trend develops in three waves, at all degrees of trend.
*Note: For this course, all Primary degree numbers and letters normally denoted by circles are shown with brackets.
Figure 1-4
Essential Concepts
The phenomena of form, degree and relative direction are carried one step further in Figure 1-4. This illustration reflects the general principle that in any market cycle, waves will subdivide as shown in the following table.
Number of Waves at Each Degree
Impulse + Correction = Cycle
Largest waves 1+1=2
Largest subdivisions 5+3=8
Next subdivisions 21+13=34
Next subdivisions 89+55=144
As with Figures 1-2 and 1-3 in Lesson 2, neither does Figure 1-4 imply finality. As before, the termination of yet another eight wave movement (five up and three down) completes a cycle that automatically becomes two subdivisions of the wave of next higher degree. As long as progress continues, the process of building to greater degrees continues. The reverse process of subdividing into lesser degrees apparently continues indefinitely as well. As far as we can determine, then, all waves both have and are component waves.
Elliott himself never speculated on why the market’s essential form was five waves to progress and three waves to regress. He simply noted that that was what was happening. Does the essential form have to be five waves and three waves? Think about it and you will realize that this is the minimum requirement for, and therefore the most efficient method of, achieving both fluctuation and progress in linear movement. One wave does not allow fluctuation. The fewest subdivisions to create fluctuation is three waves. Three waves in both directions does not allow progress. To progress in one direction despite periods of regress, movements in the main trend must be at least five waves, simply to cover more ground than the three waves and still contain fluctuation. While there could be more waves than that, the most efficient form of punctuated progress is 5-3, and nature typically follows the most efficient path.
Variations on the Basic Theme
The Wave Principle would be simple to apply if the basic theme described above were the complete description of market behavior. However, the real world, fortunately or unfortunately, is not so simple. From here through Lesson 15, we will fill out the description of how the market behaves in reality. That’s what Elliott set out to describe, and he succeeded in doing so.
All waves may be categorized by relative size, or degree. Elliott discerned nine degrees of waves, from the smallest wiggle on an hourly chart to the largest wave he could assume existed from the data then available. He chose the names listed below to label these degrees, from largest to smallest:
*Grand Supercycle
It is important to understand that these labels refer to specifically identifiable degrees of waves. For instance, whenwe refer to the U.S. stock market’s rise from 1932, we speak of it as a Supercycle with subdivisions as follows:
1932-1937 the first wave of Cycle degree
1937-1942 the second wave of Cycle degree
1942-1966 the third wave of Cycle degree
1966-1974 the fourth wave of Cycle degree
1974-19?? the fifth wave of Cycle degree
Cycle waves subdivide into Primary waves that subdivide into Intermediate waves that in turn subdivide into Minor and sub-Minor waves. By using this nomenclature, the analyst can identify precisely the position of a wave in the overall progression of the market, much as longitude and latitude are used to identify a geographical location. To say, “the Dow Jones Industrial Average is in Minute wave v of Minor wave 1 of Intermediate wave (3) of Primary wave [5] of Cycle wave I of Supercycle wave (V) of the current Grand Supercycle” is to identify a specific point along the progression of market history.
When numbering and lettering waves, the scheme shown below is recommended to differentiate the degrees of waves in the stock market’s progression:

The most desirable form for a scientist is usually something like 11, 12, 13, 14, 15, etc., with subscripts denoting degree, but it’s a nightmare to read such notations on a chart. The above table provides for rapid visual orientation. Charts may also use color as an effective device for differentiating degree.
In Elliott’s suggested terminology, the term “Cycle” is used as a name denoting a specific degree of wave and is not intended to imply a cycle in the typical sense. The same is true of the term “Primary,” which in the past has been used loosely by Dow Theorists in phrases such as “primary swing” or “primary bull market.” The specific terminology is not critical to the identification of relative degrees, and the authors have no argument with amending the terms, although out of habit we have become comfortable with Elliott’s nomenclature.
The precise identification of wave degree in “current time” application is occasionally one of the difficult aspects of the Wave Principle. Particularly at the start of a new wave, it can be difficult to decide what degree the initial smaller subdivisions are. The main reason for the difficulty is that wave degree is not based upon specific price or time lengths. Waves are dependent upon form, which is a function of both price and time. The degree of a form is determined by its size and position relative to component, adjacent and encompassing waves.
This relativity is one of the aspects of the Wave Principle that make real time interpretation an intellectual challenge.
Courtesy R.N. Elliott’s .This content copyrights protected by R.N. Elliott’s Text Book.

Monday, July 26, 2010

Aget Time and Price Squares Tool

Basic Overview
Time and Price Square areas help to identify changes-in-trend, such as those found at the end of an Elliott Wave Three, Four or Five, or in A-B-C corrections as well as intermediate and minor price swings.  Time and Price Squares in Advanced GET are values determined by Fibonacci (Price) and Gann (Time).

Fibonacci Primer
In the 13th century mathematician Leonardo Fibonacci de Pisa discovered a sequence of numbers, where each number in the series is the sum of the two previous numbers.  (For example: 1+2=3, 2+3=5, 3+5=8, 5+8=13, 8+13=21, and so forth.)  Some Fibonacci numbers: 13, 21, 34, 55, 89,144, 233, 377, 610, 987, 1597, 2584, and 4181.  To fully understand the meaning and significance behind this discovery you can read the dozens of books available on the subject, or you can accept on face value the importance of this discovery.  Fibonacci has been identified as a mathematical tool that can be used in technical analysis to help improve predictive abilities.
Gann Primer
W. D. Gann numbers are even harder to explain.  A simple definition– Gann believed that every price at which a stock or commodity stopped in the up or down sequence was some sort of important mathematical point.  These points were determined either by the division of the “circle of 360 degrees” or by the square of 12, the square of 20, or the square or halfway point of some other number.
For the sake of simplicity the following (Time) numbers can be used \[number of Days, Weeks, Months, or Variable data bars]: 45, 90, 180, 270, 360, 450, 720, 1080, 1440, and 1800. Some other numbers that can be applied: 21, 34, 72, 144, 270, and so forth. When you multiple some of these numbers by 10 or 100 to get a sequence that looks like 450, 900, 1800, and so on.  We have also found the following can workwell: 23 (half of 45), 113 (90 + 23), 135 (90 + 45), 225 (180 + 45), and so on.
The entire scheme of multiplying is really market dependent.  For example, 90 (minimum ticks) is a good move from major lows or highs for the Swiss Franc but of course for the S&P it is not. Use appropriate Gann and Fib lines according to your scaling (to change values go into the Time & Price Squares properties box). Markets can also use the price sequence as support and resistance levels.  When the market trades into both a time and price sequence, this is called a Time and Price Square area. (These are marked below with a circle.)
Our tests show trading days to be more consistent than calendar days. This may be different from the normal philosophy, but this is our result. We have added the capability to use either calendar or trading days.
Combining Fibonacci and Gann Numbers
Theory is markets tend to change trends at certain numbers from a major high or low.  Our studies have concluded a combination of both Fibonacci and Gann can increase odds of picking up turning points.   The time sequences have tested out for all markets and time frames.  In addition, our testing shows trading days to be more consistent than calendar days.  This may be a different conclusion from standard belief; nevertheless this is the test result. (We have added the capability to use either calendar or trading days for this reason.)
Unless you have a favorite sequence, we recommend experimenting with the following combination of
Fibonacci numbers 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, and so on.  We have found 72 works well (half of 144 = 72). In addition, you can multiple these numbers by 10 or 100 to get a sequence that looks like 130, 210, 340, 550, 720, 890, 1440, 2330, 3770, 6100, so forth.
Gann numbers 45, 90, 180, 270 and 360.  Other good numbers are 23 (half of 45), 113 (90+23), 135 (90+45), 225 (180+45), and so on.  You can us 720 (360 x 2), 1080 (360 x 3), 1440 (360 x 4), 1800 (360 x 5), so forth. You can also multiple these numbers by 10 or 100 to get a sequence that looks like 450, 900, 1800, 2700, 3600, 7200, 10800, 18000, and so on.
If you are having difficulty with the Time & Price Squares tool, edit the “Price Scale” to see if this helps. This selection is located in the Time & Price Square menu. (Highlight a T&PS line and click your right mouse button to activate this menu.)  By adjusting the price scale often generate correct results.  For example, with the Swiss Franc try changing the Price Scale to 0.0001, and for a normal stock try a 1.0 setting. They experimenting using price scale settings of 1.0, 0.1, 0.01, 0.001, and 0.0001.
Combining Fibonacci and Gann Numbers
Theory is markets tend to change trends at certain numbers from a major high or low.  Our studies have concluded a combination of both Fibonacci and Gann can increase odds of picking up turning points.   The time sequences have tested out for all markets and time frames.  In addition, our testing shows trading days to be more consistent than calendar days.  This may be a different conclusion from standard belief; nevertheless this is the test result. (We have added the capability to use either calendar or trading days for this reason.)
Unless you have a favorite sequence, we recommend experimenting with the following combination of numbers:
Fibonacci numbers 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, and so on.  We have found 72 works well (half of 144 = 72). In addition, you can multiple these numbers by 10 or 100 to get a sequence that looks like 130, 210, 340, 550, 720, 890, 1440, 2330, 3770, 6100, so forth.
Gann numbers 45, 90, 180, 270 and 360.  Other good numbers are 23 (half of 45), 113 (90+23), 135 (90+45), 225 (180+45), and so on.  You can us 720 (360 x 2), 1080 (360 x 3), 1440 (360 x 4), 1800 (360 x 5), so forth. You can also multiple these numbers by 10 or 100 to get a sequence that looks like 450, 900, 1800, 2700, 3600, 7200, 10800, 18000, and so on.
If you are having difficulty with the Time & Price Squares tool, edit the “Price Scale” to see if this helps. This selection is located in the Time & Price Square menu. (Highlight a T&PS line and click your right mouse button to activate this menu.)  By adjusting the price scale often generate correct results.  For example, with the Swiss Franc try changing the Price Scale to 0.0001, and for a normal stock try a 1.0 setting. They experimenting using price scale settings of 1.0, 0.1, 0.01, 0.001, and 0.0001.
As a general rule, use a primary pivot, a significant high or low point, as a starting point for your Time & Price Square calculation. However, take the time to experiment with other pivots to see how this can enhance the use of this tool.
In the next pages are Time & Price examples.

Courtesy Copyright Elliott Wave Rules and Guidelines.This content copyrights protected  Written by  Marc Rinehart.

Tuesday, July 20, 2010


Bar chart analysis is not limited to daily bar charts.Weekly and monthly charts provide a valuable long-term perspective on market history that cannot be obtained by using daily charts alone.The daily bar chart usually shows up to twelve months of price history for each market.Weekly charts show almost five years of data,while the monthly charts go back over 20 years.By studying these charts,the chart list gets a better idea of long-term trends,where historic support and resistance levels are located,and is able to obtain a clearer perspective on the more recent action revealed in the daily charts.These weekly and monthly charts lend themselves quite well to standard chart analysis described in the preceding pages.The view held by some market observers that chart analysis is useful only for short-term analysis and timing is simply not true.The principles of chart analysis can be used in any time dimension.

Intraday Charts:

Daily and weekly charts are useful for intermediate- and long term analysis.For short-term trading,however,intraday charts are extremely valuable.Intraday charts usually show only a few days of trading activity.A 15-minute bar chart,for example,might show only three or four days of trading.A 1-minute or a 5-minute chart usually shows only one or two days of trading respectively,and is generally used for day-trading purposes.Fortunately,all of the chart principles described herein can also be applied to intraday charts.

A demonstration of the importance of long-term perspective achieved by a weekly chartgoing back almost two years. The triple top provides the first clue that a major reversal may have begun. The reversal is later confirmed by a break in the trend begun in early2000, followed by a second break of the longer term up trend.

Going From the Long Term to the Short Term As indispensable as the daily bar charts are to market timing and analysis,a thorough chart analysis should begin with the monthly and weekly charts—and in that order.The purpose of that approach is to provide the analyst with the necessary long-term view as a starting point.Once that is obtained on the 20-year monthly chart,the 5-year weekly chart should be consult-ed.Only then should the daily chart be studied.In other words,the proper order to follow is to begin with a solid overview and then gradually shorten the time horizon.(For even more micro-scopic market analysis,the study of the daily chart can be fol-lowed by the scrutiny of intraday charts.)

Courtesy Copyright charting made easy .This content copyrights protected  Written by John J.Murphy.

Monday, July 19, 2010


Gaps are simply areas on the bar chart where no trading has taken place.An upward gap occurs when the lowest price for one day is higher than the highest price of the preceding day.A downward gap means that the highest price for one day is lower than the lowest price of the preceding day.There are different types of gaps that appear at different stages of the trend.Being able to distinguish among them can provide useful and profitable market insights.Three types of gaps have forecasting value—breakaway,runaway and exhaustion gaps
The breakaway gap usually occurs upon completion of an important price pattern and signals a significant market move.A breakout above the neckline of a head and shoulders bottom,for example,often occurs on a breakaway gap.
The runaway gap usually occurs after the trend is well underway.It often appears about halfway through the move (which is why it is also called a measuring gap since it gives some indication of how much of the move is left.) During uptrends,the breakaway and runaway gaps usually provide sup-port below the market on subsequent market dips;during downtrends,these two gaps act as resistance over the market on bounces.

Examples of price gaps. The two gaps along the bottom formed an island reversal in October 1999 in Lucent. There’s also a measuring gap halfway through the rally an exhaustion gap near the final top.
The exhaustion gap occurs right at the end of the market move and represents a last gasp in the trend.Sometimes an exhaustion gap is followed within a few days by a breakaway gap in the other direction,leaving several days of price action isolated by two gaps.This market phenomenon is called the island reversal and usually signals an important market turn.
Courtesy Copyright charting made easy .This content copyrights protected  Written by John J.Murphy.

Monday, July 12, 2010


Successful participation in the financial markets virtually demands some mastery of chart analysis.Consider the fact that all decisions in various markets are based,in one form or another,on a market forecast.Whether the market participant is a short-term trader or long-term investor,price forecasting is usually the first,most important step in the decision-making process.To accomplish that task,there are two methods of forecasting available to the market analyst—the fundamental and the technical.Fundamental analysis is based on the traditional study of supply and demand factors that cause market prices to rise or fall.In financial markets,the fundamentalist would look at such things as corporate earnings,trade deficits,and changes in the money supply.The intention of this approach is to arrive at an estimate of the intrinsic value of a market in order to deter-mine if the market is over- or under-valued.
Technical or chart analysis,by contrast,is based on the study of the market action itself.While fundamental analysis studies the reasons or causes for prices going up or down,technical analysis studies the effect,the price movement itself.
That’s where the study of price charts comes in.Chart analysis is extremely useful in the price-forecasting process.Charting can be used by itself with no fundamental input,or in con-junction with fundamental information.Price forecasting,how-ever,is only the first step in the decision-making process.Market Timing
The second,and often the more difficult,step is market timing.
For short-term traders,minor price moves can have a dramatic impact on trading performance.Therefore,the precise timing of entry and exit points is an indispensable aspect of any market commitment.To put it bluntly,
timing is every thing in the stock market.
For reasons that will soon become apparent,timing is almost purely technical in nature.This being the case,it can be seen that the application of charting principles becomes absolutely essential at some point in the decision-making process.Having established its value,let’s take a look at charting theory itself.


Chart analysis (also called technical analysis) is the study of market action,using price charts,to forecast
future price direction.The cornerstone of the technical philosophy is the belief that all of the factors that
influence market price—fundamental information,political events,natural disasters,and psychological factors—
are quickly discounted in market activity.In other words,the impact of these external factors will quickly show up in
some form of price movement,either up or down.Chartanalysis,therefore,is simply a short-cut form of funda-
mental analysis.Consider the following:A rising price reflects bullish fundamentals,where demand exceeds supply;falling prices wouldmean that supply exceeds demand,identifying a bearish fun damental situation.These shifts in the fundamental equationcause price changes,which are readily apparent on a price chart.The chartist is quickly able to profit from these price changes without necessarily knowing the specific reasons causing them.The chartist simply reasons that rising prices areindicative of a bullish fundamental situation and that falling prices reflect bearish fundamentals.
Another advantage of chart analysis is that the market priceitself is usually a leading indicator of the known fundamentals.Chart action,therefore,can alert a fundamental analyst to thefact that something important is happening beneath the sur-face and encourage closer market analysis.Charts Reveal Price TrendsMarkets move in trends.The major value of price charts is that they reveal the existence of market trends and greatlyfacilitate the study of those trends.Most of the techniques usedby chartists are for the purpose of identifying significanttrends,to help determine the probable extent of those trends,and to identify as early as possible when they are changing direction
A candlestick chart of Intel covering two months. The narrow wick is the day’s range.
The fatter portion is the area between the open and close. Open candles are positive;
darker ones are negative.
Types of Charts Available .The most popular type of chart used by technical analysts is the daily bar chart.Each bar represents one day of trading.Japanese candlestick charts have become popular in recent years. Candlestick charts are used in the same way as bar charts,but present a more visual representation of the day’s trading.

Line charts can also be employed .The line chart simply connects each successive day’s closing prices and is the simplest form of charting.
Any Time Dimension All of the above chart types can be employed for any time dimension.The daily chart,which is the most popular time period,is used to study price trends for the past year.
A line chart of Intel for an entire year. A single line connecting successive closing prices is the simplest form of charting.
longer range trend analysis going back five or ten years,weekly and monthly charts can be employed.For short-term (or day-trading) purposes,intraday charts are most useful.Intradaycharts can be plotted for periods as short as 1-minute,5-minute or 15-minute time periods.
Courtesy Copyright charting made easy .This content copyrights protected  Written by John J.Murphy.

Tuesday, July 6, 2010

A Little History & Method Of Forex trading

The word FOREX is derived from the term Foreign Exchange and is the largest financial market in the world. Unlike many other markets the FX market is open 24 hoursa day and has an estimated $1.2 Trillion in turnover every day. Thistremendous turnover is more than the combined turnover of the mainworlds’ stock markets on any given day. This tends to create a very liquid market and thus a very desirable market to trade.
Unlike many other securities, (any financial instrument that can be traded) the FX market does not have a fixed exchange. It is primarily traded through banks, brokers, dealers, financial institutions and private individuals.
Trades are executed through telephonic communications and now increasingly through the Internet. It is only in the last few years that the smaller investor has been able to gain access to this market. Previously the large deposits t
hat were required precluded the smaller investors but with the advent of the Internet and growing
competition, it is now easily within reach of most investors.
‘INTER’ meaning between and ‘Bank’meaning any deposit taking institution. The market has moved on to such a degree that now the term interbank means anybody who is prepared to buy or sell a currency.
It could be just two individuals changing currencies or your local travel agent offering to exchange Euros for US Dollars. You will however find that most of the brokers and banks use centralized feeds to insure reliability of quote.
The quotes for Bid (buy) and Offer (sell) will all be from reliable sources. These quotes are normallymade up of the top 300 or so large institutions. This ensures that if they place an order on your behalf, the institutions they have placed the order with will be capable of fulfilling the order.
Now although we have spoken about orders being fulfilled, it is estimated that anywhere from 70%-90% of the FX market is speculative. In other words the person or institution that bought or sold the currency has no intention of
actually taking delivery of the currency. Instead they were solely speculating on the movement of that particular currency.
Market Mechanics
So now we know that the FX marketis the largest inthe world. Your broker or the institution that you aretrading with is collecting quotes from a centralized feed and/or individual quotes comprising of interbank rates.
So how are these quotes made up? Well, as we previously mentioned, currenciesare traded in pairs anare each assigned a symbol. For the Japanese Yen it is JPY, for the Pounds Sterling it is GBP, for Euro it is EUR and for the Swiss Frank it is CHF. So, EUR/USD would be the Euro-Dollar pair. GBP/USD would be the Pounds Sterling-Dollar pair and USD/CHF would be the Dollar-Swiss Franc pair and so on.
You will always see the USD quoted first aside for a few exceptions such as Pounds Sterling, Euro Dollar, Australia Dollar and New Zealand Dollar. The first currency quoted is called the base currency. Have a look below for some examples.
Currency Symbol Currency Pair
Euro / US Dollar
Pounds Sterling/ US Dollar
US Dollar / Japanese Yen
US Dollar / Swiss Franc
US Dollar / Canadian Dollar
Australian Dollar / US Dollar
New Zealand Dollar / US Dollar
When you see FX quotes you will actually see two numbers. The first number is called the bid and the second number is called the offer (sometimes called the ASK).
If we use the EUR/USD as an example you might see 0.9950/0.9955. The first number 0.9950 is the bid pri
ce and is the price traders are prepared to buy Euros against the USD Dollar. The second number 0.9955 is the offer price and is the price traders are prepared to sell the Euro against the US Dollar.
These quotes are sometimes abbreviated to the last two digits of the currency e.g.: 50/55. Each broker has their own convention and some will quote the full number and otherswill show only the last two.
You will also notice that there isa difference between the bid and the offer price which is called the spread. For the four major currencies the spread is normally 5, give or take a pip (I’ll explain pips later)
To carry on from the symbol conventions and using our previous EUR quote of 0.9950 bid, this means that 1 Euro = 0.9950 US Dollars. For another example, if we used the USD/CAD 1.4500, that would mean that 1 US Dollar = 1.4500 Canadian Dollars.
The most common increment of currencies is the PIP. If the EUR/USD moves from 0.9550 to 0.9551 that is one pip. A pip is the last decimal place of a quotation. The pip or POINT as it is sometimes referred to, depending on context, is how we will measure our profit or loss.
As each currency has its own value, it is necessary to calculate the value of a pip for that particular currency. We also want a constant, so we will assume that we want to convert everything to US Dollars. In currencies where the US Dollar is quoted first the calculation would be as follows.
Example: the JPY rate of 116.73 (notice the JPY only goes to two decimal places, most of the other currencies have four decimal places)
In the case of the JPY 1 pip would be .01 therefore
USD/JPY: (.01 divided by exchange rate = pip value) so .01/116.73=0.0000856. It looks like a big number but later we will discuss lot (contract) size later.
USD/CHF: (.0001 divided by exchange rate = pip value) so .0001/1.4840 = 0.0000673
USD/CAD: (.0001 divided by exchange rate = pip value) so .0001/1.5223 = 0.0001522
In the case where the US Dollar is not quoted first and we want to get to the US Dollar value we have to add one more step.
EUR/USD: (0.0001 divided by exchange rate = pip value) so .0001/0.9887 = EUR 0.0001011 but we want to get back to US Dollars so we add
another little calculation which is EUR X Exchange rate so 0.0001011 X 0.9887 = 0.0000999 wh
en rounded up it would be 0.0001.
GBP/USD: (0.0001 divided by exchange rate = pip value) so 0.0001/1.5506 =
GBP 0.0000644 but we want to get back to US Dollars so we add another little calculation which is GBP X Exchange rate so
0.0000644 X 1.5506 = 0.0000998 when rounded up it would be 0.0001.
By this time you might be rolling your eyes back and thinking ‘do I really need to work all this out?’, and the answer is no.
Nearly all the brokers you will deal withwill work all this out for you. They may have slightly differentconventions, but it’s all done automatically. It’s good however for you to know how they work it out. In the next section we will be
discussing how these seemingly insignificant amounts can add up.
Courtesy Copyright www.surefire-forex-trading.com .This content copyrights protected  Written by Mark McRae.

Monday, July 5, 2010

Measured (Bull) Move (Continuation)

The Measured Move is a three-part formation that begins as a reversal pattern and resumes as a continuation pattern. The Measured (Bull) Move consists of a reversal advance, correction/consolidation and continuation advance. Because the Measured (Bull) Move cannot be properly identified until after the correction/consolidation period, I have elected to categorize it as a continuation pattern. The pattern is usually long-term and forms over several months.

Prior Trend: For the first advance to qualify as a reversal, there must be evidence of a prior downtrend to reverse. Because the Measured (Bull) Move can occur as part of a larger advance, the length and severity of the prior decline may vary from a few weeks to many months.
Reversal Advance: The first advance usually begins near the established lows of the previous decline and extends for a few weeks or many months. Sometimes a reversal pattern can mark the initial trend change. Other times the new uptrend is
established by new reaction highs or a break above resistance. Ideally, the advance is fairly orderly and lengthy with a series of rising peaks and troughs that may form a price channel. Less erratic advances are satisfactory, but run the risk
of forming a different pattern.
Courtesy Copyright Stock Charts.com .This content copyrights protected  Written by Arthur Hill.

Saturday, July 3, 2010

Trading Systems for Metastock

Trading systems for Metastock usually use indicators and oscillators known from the technical analysis. Apart form simple systems which are based on one or two indicators, there are also many complex platforms that are able to adapt themselves to the current market conditions. They recognize whether there is a trend or consolidation and choose the most suitable strategy.
Metastock trading systems enable testing your individual trading ideas based on historical data which makes it easier to take decisions on their future use. Although creating and testing the Metastock trading systems is usually time-consuming and requires considerable expertise, it brings profits in the long term. To earn high profits you should combine particular tools of technical analysis into one coherent and logic integrity. While building a Metastock trading system you need to make sure it is logic and coherent, not only thinking of the possible profits it could bring you based on historic data. First of all you should define the operating conditions of the system, when it should be unbeaten and when it might fail. This will let you check if the eventual losses result from the error in the strategy itself or it is due to particular market conditions. When the system is built randomly with accidental indicators and oscillators selection, it often generates profits only in the case of the historical data but in the real market conditions it brings losses. The parameters of trading systems are usually being matched to the historical data by optimization. It consists of choosing such indicators that would bring the highest profit in the testing period. Different values of parameters are checked for each indicator or oscillator and then the possible profit that would have been reported is being calculated. The next step includes combining the outcomes and choosing the most profitable parameters. There is a risk of over-optimizing the system. That means that the values of tested indicators failed to match the historical data without logic and cohesion of the strategy.
After understanding the general idea of the trading system and defining the rules of entering and exiting the market there comes a testing process. Thanks to the programs such as Metastock or TradeStation it is possible to make thousands of tests in order to choose the best parameters of the indicators. It is possible if you follow several rules. In both of them setting the value of indicators lies at the end. They are usually connected with generally accepted value or with the ones selected in the optimization process. Both ways have their own advantages and disadvantages but none of them should be rejected beforehand. The selection of the parameters for indicators should be considered according to the philosophy of the entire system and its tools. At the same time however, taking into account the accepted assumptions, the decision about their precise value shall proceed to a larger extent by optimization.
The second most important issue, apart from optimizing parameters of the metastock trading system, is evaluating its efficiency. In order to do it you can use various statistics such as the proportion of the profitable transactions to the lost ones, comparison of the average transaction profit to the highest loss or average profit of profitable transaction to the transaction at a loss. Safety of the system is also defined by a proportion of total profit from all transactions to total loses from all transactions. The analysis of the capital curve is also a useful tool. It brings a lot of precious advice. Thanks to the capital curve you can easily find out whether the profit, which the system brings you, has risen evenly or it was the result of the one very profitable transaction. You will also know how often and how strong the changes of the capital are etc. By comparing the capital curve with the quotation, you can easily notice the moments when the system fails or define whether the system is better during strong trends or during horizontal movements.
Evaluation of the Metastock trading system efficiency is not a simple task. At the beginning you can get the wrong impression that the best system is the one that brings the highest profit. But the truth is much more complicated. Although in a final reckoning the rate of return from invested capital is always important, you should remember that system is tested based on historical data which usually are matched to the value of parameters. It means that a good result which was achieved in the last year doesn’t necessarily have to be repeated in the next period. That is why first of all we should take into account the safety of the system and as the second thing its profitability.

5 Steps To Researching a Stock Trade Before Investing

Once you determine which business cycle the economy is currently in you can start researching for a trade. It is best to have some sort of a system in place that will be used before EACH trade. Here is a simple 5 Step formula to help get you started.
5 Steps to Investing Online:
1. Find a stock
This is the most obvious and most difficult step in stock trading. With well over 10,000 stocks to trade a good rule of thumb to consider is time of the year.  For example, as I write this, it is the beginning of spring. It would make sense to consider stocks that traditionally make runs, or slide if you are bearish, during this time of year.
2. Fundamental Analysis
Many short term traders may disagree with the need to do ANY Fundamental Analysis, however knowing the chart patterns from the past and the news regarding the stock is relevant. An example would be earnings season.  If you are planning
on playing a stock to the upside that has missed its earnings target the last 3 quarters, caution could be in order.
3. Technical Analysis
This is the part where indicators come in. Stochastics, the MACD, volume, moving averages, RSI, CCI, support levels, resistance levels and all the rest. The batch of indicators you choose, whether lagging or leading, may depend on where you get your education.
Keep it simple when first starting out, using too many indicators in the beginning is a ticket to the land of big losses.  Get very comfortable using one or two indicators first.  Learn their intricacies and you’ll be sure to make better trades.
4.  Follow your picks
Once you have placed a few stock trades you should be managing them properly. If the trade is meant to be a short term trade watch it closely for your exit signal.  If it’s a swing trade, watch for the indicators that tell you the trend is shifting.  If it’s a long term trade remember to set weekly or monthly checkups on the stock.
Use this time to keep abreast of the news, determine your price targets, set stop losses, and keep an eye on other stocks that you may want to own as well.
5. The big picture
As the saying goes, all ships rise and fall with the tide. Knowing which sectors are heating up stacks the chips in your favor.
For example, if you are long (expecting price to go up) on an oil stock and most of the oil sector is rising then more likely than not you are on the right side of the trade.  Several trading platforms will give you access to sector-wide information so that you can get the education you need.

Friday, July 2, 2010


The Weighted Close indicator is simply an average of each day’s price. It gets its name from the fact that extra weight is
given to the closing price. The Median Price and Typical Price are similar indicators.
When plotting and back-testing moving averages, indicators, trendlines, etc, some investors like the simplicity that a line chart offers. However, line charts that only show the closing price can be misleading since they ignore the high and low price. A Weighted Close chart combines the simplicity of the line chart with the scope of a bar chart, by plotting a single point for each day that includes the high, low, and closing price.
The following chart shows the Weighted Close plotted on top of a normal high/low/close bar chart of Peoplesoft.
The Weighted Close indicator is calculated by multiplying the close by two, adding the high and the low to this product, and dividing by four. The result is the average price with extra weight given to the closing price.
Copyright Stock Charts.com .This content copyrights protected  Written by Arthur Hill.

Thursday, July 1, 2010


The Copyright Stock Charts.com .This content copyrights protected  Written by Arthur Hill. (“VHF”) determines whether prices are in a trending phase or a congestion phase.
The VHF was first presented by Adam White in an article published in the August, 1991 issue of Futures Magazine.
Probably the biggest dilemma in technical analysis is determining if prices are trending or are in a trading-range.
Trend-following indicators such as the MACD and moving averages are excellent in trending markets, but they usually
generate multiple conflicting trades during trading-range (or “congestion”) periods. On the other hand, oscillators such as the RSI and Stochastics work well when prices fluctuate within a trading range, but they almost always close positions prematurely during trending markets. The VHF indicator attempts to determine the “trendiness” of prices to help you decide which indicators to use.
There are three ways to interpret the VHF indicator:
1.  You can use the VHF values themselves to determine the degree that prices are trending. The higher the VHF, the higher the degree of trending and the more you should be using trend-following indicators.
2.  You can use the direction of the VHF to determine whether a trending or congestion phase is developing. A
rising VHF indicates a developing trend; a falling VHF indicates that prices may be entering a congestion phase.
3.  You can use the VHF as a contrarian indicator. Expect congestion periods to follow high VHF values; expect prices to trend following low VHF values.
The following chart shows Motorola and the VHF indicator.
The VHF indicator was relatively low from 1989 through most of 1992. These low values showed that prices were in a trading range. From late-1992 through 1993 the VHF was significantly higher. These higher values indicated that prices we trending.The 40-week (i.e., 200-day) moving average on Motorola’s prices demonstrates the value of the VHF indicator. You can see that a classic moving average trading system (buy when prices rise above their moving average and sell when prices fall below their average) worked well in 1992 and 1993, but generated numerous whipsaws when prices were in a trading range.
To calculate the VHF indicator, first determine the highest closing price (“HCP”) and the lowest closing price (“LCP”) over
Next, subtract the lowest closing price from the highest closing price and take the absolute value of this difference. This value will be the numerator.
Copyright Stock Charts.com .This content copyrights protected  Written by Arthur Hill.