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  1. In the early days of online trading, traders were forced to manually adjust their stop loss levels in order to protect any profits made in the market, while following the market to maximize profits. With the advent of the trailing stop tool, a trader can wait for the market to become profitable, then activate the trailing stop tool, setting it to a pre-determined trailing distance. This protects the profits in the trade by staying still when the market moves against the trader, and continuing to trail the market when it moves in the trader’s favour. If the market moves against the trader to get to the trailing stop, the trailing stop now functions as a stop loss to close the trade but this time, in profit.
  2. Support is probably one of the most used terms that a trader MUST encounter every trading day. In reality, support levels are not just one fixed price level, but rather a zone. The more times a support level is tested without being broken, the stronger the support. If a support is tested repeatedly several times, at some point the price will either reverse totally or break through the support level if the downward trigger is strong).
  3. Market speculation is a risky venture. Speculators do not hold positions for the long term. They aim to enter and exit positions as fast as possible. Speculators aim to make the maximum gain from the smallest of price movements. They do this by leveraging positions so as to maximize the profits they can make from price fluctuations. To explain this better, rather than wait for 20 trading days to gain $1000 from 100 pips in the market, a speculator will aim to make the same amount of money, using a lower number of pips but with a high leverage in a shorter time frame.
  4. Slippage occurs in al financial markets when there is increased volatility or when there are so many orders that a broker/dealer can handle at a time. This is a phenomenon associated with dealing desks. Slippage is associated with a change in spread. For instance, a trader may want to BUY the EURUSD at 1.3209/1.3212, with an expected spread of 3 pips. Slippage may cause him to be filled at 11.3252, in which case, the trader’s position opens at a spread of – 40 pips. As seen in this example, slippage is associated with increased transaction costs. Slippage is an undesirable phenomenon and the only way to avoid it is by using brokers who offer direct market access.
  5. Short selling is a practice that is carried out in all financial markets, but carries a significant amount of risk when it is done outside the forex market. Indeed, short selling outside forex is a controversial practice. In forex, short selling simply means selling one currency against another in order to profit from the anticipated fall in value. Outside forex, short selling involves borrowing an asset from a broker and offering it for sale, and if the price falls, the trader can buy that security back and return to the broker, profiting from the price differential. The controversy in this practice was typified in 2008 as the collapse of Lehman Brothers hit stock markets. Unscrupulous traders circulated rumours of further collapses, triggering massive sell-offs. Many of these traders, who already had short-sale positions on these assets, profited from the steep price falls, forcing the Securities and Exchange Commission to place a ban on naked short-selling As such, short-selling is only allowed when the market is on an uptick or is in a neutral mode.
  6. Sometimes, a forex trader may see that his position in the forex market has the potential to make more money if allowed to run. This may warrant leaving the position overnight, or even for several days or weeks at a stretch. This is a forex rollover, as the position is allowed to remain open and be “rolled over” to the next trading day. Normally, a rollover incurs a charge. The interest rates of the countries whose currencies are represented in that trade are used to calculate the charge. So if a trader has a “Buy” position in a currency such as the AUDJPY (where the interest rate differential is 4.25 – 0.1 = 4.15%), the trader’s position will be credited with the corresponding interest calculation. If he held a “Sell” position, he would instead be debited based on the interest rate differential of 4.15%.
  7. Re-quotes usually occur when prices have moved away from the levels displayed on the trader’s platform screen. Re-quotes can occur for a number of reasons. Sometimes, there may be a delay in data transmission as a result of poor internet network. At other times, fast-paced market action can be so rapid that even when data transmission is ok, the price of the asset would have moved at the time of execution. The only way to avoid re-quotes is by using a broker with direct market access, such as ECN brokers. These offer prices from several liquidity providers with greater market depth so you can be sure your orders are always executed.
  8. Range trading is based on the fact that prices form channels independent of whether prices are trending upwards or downwards or sideways. It assumes that 80% of the time, the candlesticks will bounce up from lower channel trendlines and retreat from upper channel trend lines. By selling at resistance and buying at support levels, a trader may be able to profit from these moves in the market. Pivot points also form a basis of horizontal range trading, as opposed to use of ascending channels for uptrend range trading and descending channels for downtrend range trading.
  9. The PIP is the smallest movement of a financial asset to the last decimal point of the price quote. For example, if the price of the EURUSD moves from 1.3290 to 1.3297, we say the currency pair has moved 0.0007 points or 7 pips (1.3297 – 1.3290 = 0.0007). The value of the pip depends on the lot size used to execute the trade. The value of a pip for a Standard Lot is $10, while the value for a mini-lot is $1.
  10. Pending orders are used when appropriate conditions for a favourable trade do not exist at present market levels, but are likely to do so at a future time. In these conditions, a trader can decide to set a pending order which will be automatically executed if the market gets to that level. For instance, a trader may be looking to sell a currency at a resistance level, but the price of the asset is still some distance away from his preferred point, and presently heading upwards. If he uses a market order, the trade may keep advancing against his position and leave his account in jeopardy of a large draw-down or being stopped out entirely. But by using a pending order such as a Sell Limit order set to the resistance level, his trade is executed at a point where the trade is more likely to succeed.
  11. The Non-Farm Payrolls (NFP) report is a part of the employment data released by the US Bureau of Labour Statistics on the first Friday of every month. It is a highly-watched economic indicator as it provides very strong information about the state of a nation’s economy. If more people are employed in the private sector, it shows that the economy of the nation is strong. Bad employment figures are a direct consequence of a weak economy. When the global financial crisis hit as a result of the collapse of the US sub-prime mortgage market in the US, the multiplier effect hit home and caused many businesses to lay off workers and reduce wages, resulting in poor NFP figures for many months at a stretch. The NFP represents about 80% of workers whose output brings about the total GDP of the US, and it helps policy makers evaluate the state of the nation’s economy and decide on economic policy.
  12. Traders can only trade when the markets are open for business. These times are referred to as market hours. Market hours differ from market to market. The stock market is only open for about 6 hours a day, 5 days a week. The forex market is a 24 hour market, with the market hours divided into 3 main zones; Tokyo, London and New York time zones.
  13. Hedging is used if the outcome of a trade is not assured, or if a transaction becomes too costly as a result of exchange rate differentials. In such an instance, a trader may decide to take a contrary position in another market or employ another kind of trade in reverse of the original one in order to cover up any losses incurred on the first trade. Hedge trades are done in such a way that if the original trade is a winner, the payout is higher than the second trade used as the hedge, and if the first trade is a loser, the hedge trade will cover the losses.
  14. Fundamental analysis is the primary driver of the forex markets. This is because the figures released for the economic indicators will affect the investment climate and appetite of traders for the affected country’s currency. Millions of individual and institutional traders watch these economic indicators and when the figures are released, they produce an immediate market bias for the affected nation’s currency. This bias can be positive, (sending the currency value upwards) or negative, crashing the value of the currency. Traders usually develop a bias because fundamental analysis answers the following questions: is the economy of the country in question expanding or contracting? What parts will the country’s policy makers be looking at, and what actions will they possibly take? What parts of the economy is doing well or in bad shape? These questions help traders determine if that country’s currency is worth holding, and they respond accordingly after conducting the fundamental analysis.
  15. Certain economic parameters are used by economics and politicians alike to determine the state of a nation’s economy. Some of these parameters include employment reports, retail sales, consumer and producer inflation figures, the Gross Domestic Product (GDP), interest rate decisions and manufacturing data. Economists look at the economic indicators and make prediction of what the figures will be every month. The extent of conformity or deviation of the actual figures from the consensus reached by economists in their predictions, affects the sentiment that traders have for the currency of the affected country, leading to either an increased demand for the currency or reduced demand. The extent of demand will ultimately affect the value of the currency vis-à-vis other currencies. A calendar of these indicators is released every month for the benefit of everyone concerned, including forex traders. Economic indicators are known colloquially as forex news.
  16. In the financial markets, traders can buy or sell securities in two ways: directly from the liquidity providers (banks) through the dealing desk of brokers When buying directly from the liquidity providers, traders get access to pricing and deals directly. When buying through the dealing desks, traders buy indirectly, as the brokers operating dealing desks buy from the liquidity providers and resell to the traders. In this instance, the dealing desk broker is not operating as a broker but as a dealer. Dealing desks have implications for traders as traders are offered pricing at slightly marked up rates. Dealing desks have also been implicated in some pricing abnormalities such as stop hunting, slippages and re-quotes.
  17. Day trading is often seen in the light of normal employment hours, where workers clock-in in the morning and clock-out at the end of the trading day. Day trading is the hallmark of speculators, who use leverage in order to maximize the relatively small market price fluctuations that occur during the trading day. The volatility of markets such as the forex markets allows traders to open and close positions in a matter of hours. Day trading is done by the majority of individual traders in the market, hence contributing to the great market liquidity that the forex market boasts of.
  18. Channels can be used in technical analysis to predict the range at which prices will peak before retreating, and the range at which prices will fall before bouncing up. Channels can form in an uptrend (ascending channels), in a downtrend (descending channels) or in a consolidation (horizontal channels). The pivot points of S1, S2, S3, central pivot, R1, R2, R3 all form horizontal channels which can be used to range trade at various price levels. A break of a channel on the upside is a buy signal, and a break of a channel to the downside is a sell signal. A channel tool exists as a technical indicator: the Donchian Channel.
  19. You've probably heard the saying “the trend is your friend until the end.” In this post I outline techniques for identifying the trend, getting in, and staying in until it fails. How do we Define a Trend? An uptrend can be defined as higher highs and higher lows, while a downtrend can be defined as lower highs and lower lows. As an exercise, each night print out a 5 or 15-min chart of the market you are trading and identify the key highs and lows of the day. After a few weeks you will become better able to define the trend during the day. Methods for Identifying the Trend 1. Moving Averages Regardless of the time frame you’re trading, moving averages are a great way to quickly identify the general trend of the market. I place more weight on larger time frames such as the daily and weekly and then look to trade with that trend on the smaller intraday time frames. A 20-period Exponential Moving Average is a great tool for intraday trading. 2. Candlestick Patterns As talked about in the book Japanese Candlestick Charting Techniques, candlestick charting is a great way to identify market sentiment and trends. The candlestick pattern is made up of an open, close, high, and low price. These candlestick patterns have a lot more to say as compared to a bar chart. To get an even clearer picture of the trend try switching to a Heikin Ashi chart. Methods for Entering the Trend 1. Fibonacci Retracements Buying on a retracement as opposed to chasing the market is a great way to enter a trend. This reduces the likelihood that your stop will take you out. Once you have identified a new trend try drawing from lows to highs (in an uptrend) and waiting for a pullback to the 50% of a Fibonacci retracement before going long. I outline specific rules for using Fibonacci retracements in my trading rules. Entering a trade at a 50% Fibonacci retracement is a low risk method of getting into the trend. This allows you to enter on a pullback rather than chasing the market. 2. The NYSE Tick This is by far my favorite tool for intraday trading. To learn more I will refer you to my prior post on the NYSE Tick. 3. Reversal Patterns Buying over the high of a low bar (in an uptrend) or shorting the low of a high bar in a down trend is a great way to get in the new trend close to a reversal. These patterns accompanied with a moving average or other momentum indicator can be a sound strategy with very good risk/reward ratio. Whether you’re an intraday trader or use a weekly chart, being able to identify the trend, get in, and stay in will yield the greatest return over time. If you'd like to read about my setups and how I trade the ES & 6E you can do so here. Do you have other methods for identifying the trend?
  20. I actually attended an Options Animal Seminar last week (Dont hit the back button yet - LOL) and the presenter made an interesting point. Most of the training that's out there, especially paid training) focuses on ways to get into a trade.: Technical Indicators Chart Patterns Price Action Trading Setups/Strategies Yet, they tend to not address what to do while in a trade. We all know that emotions can cause us to do things that destroy our trades. Exiting trades too soon or Holding on to losers way to long. So, I wanted to ask the forum what strategies you use to manage a trade For me, I control emotions by clearly identifying my risk / reward before entering the trade. I manage my expectations. I know we are supposed to be unbiased, but when you put on a trade, you do have an expectation. In addition, I ask the following question to try and identify why the criteria that I set and followed to enter the trade may have changed: What has changed about the trade? Is it fundamental? - The company has been cooking the books Is it Technical? We broke a key price level Is it Sentimental - typically fast move in one direction and then returns Is it Macro Economics - Economic Calendar Events
  21. Hi fellow traders, I am a newbie to trading by technical indicators. I want help from you for identifying useful indicators which can be use for short term trading. There are many of them but please let me know significance of them and based on your experience which are very useful and reliable.
  22. Inserted into all of my daily charts are 4 basic moving averages; The 10, 30, 50 and 200. We use these as guides for finding trends. If the 10 is above the 30, and the 30 above the 50, and the 50 above the 200 day moving average, we call this “stacked”. If the direction of the moving averages is turned upward, we call that “sloped.” The optimum setup is when the price of any financial instrument is above the “stacked and sloped “4 moving averages. We have back tested this to find that it has great predictability in finding trades that are the most ready to make parabolic moves up. Our Nuggets List specifically scans for that scenario. But what if the market is in a negative phase and there are very few setups where the moving averages are perfectly stacked and sloped? In the last month, I have found several amazing trades that were under the 200 day moving average or in a negative phase, yet first found a level of support, and then gathered some momentum when the 10 day moving average crossed over the 50 day moving average. The slope on the 10 day was positive; the slope on the 50 was neutral to positive. Today, we will look at CSIQ and BTU, which absolutely fit that scenario. Then, we will analyze WY, which is currently trading above the 200 day moving average yet the 10 and the 50 day moving averages are still below the 200. Of interest is the potential follow through once the 10 (sloped up) crosses over the 50 (currently sloped down). CSIQ, after finding support at recent lows (8.99), proceeded to base for a couple of weeks with a $3 range from $9.00 to $12.00. Then, on July 19th, the 10 crossed the 50 day moving average. The 10 had a positive slope, while the 50 remained slightly negative to neutral. On the same day, CSIQ tested 12.00, which turned out to be a low risk point for a long entry. We recommended a buy over the prior day high 12.75, once we saw the moving averages cross. At time of writing this article, CSIQ rallied to over 14.00, we had locked in 1.5 ATRs for miniswing traders. Swing traders would still be long. Target is a run to the 200 day moving average or around $19.00 200 day moving average or $19.00 On July 6th, the 10 day crossed the 50 day moving average in BTU. The slope of the 10 was neutral, the 50 negative. But, since it had established a base under 36, rallied and consolidated in a price range from 38-40, the risk was clear once the moving averages crossed. The high that day was 41.64. On July 7th, we entered a long position over the high of the day prior. Our risk was for a swing trade was under the July 6th low or 39.75, which also corresponded with the 30 day moving average. The risk for a miniswing trade would be under the point where the moving averages converged on July 7th or at around 41.10-less than ½ ATR from entry. On July 22nd, BTU crossed the 200 day moving average. At this point, miniswing traders might have exited, but had a new opportunity to go long. Swing traders with an already $2.50 profit, had an opportunity to add to the position. Next real point of resistance is at $50.00 This setup is also extremely interesting. Notice that on July 12th; it gapped up higher, thereby establishing that the 2 weeks prior were an unbelievable bottom. Unbelievable because it had gapped down on June 28th leaving both a “V “and “Island Bottom” when it gapped up on July 12th-extremely rare and powerful! If anybody reading this caught that-please email me because you’re my hero! Then, on July 22nd, the 10 crossed the 50 day moving average-upward slope on the 10-downward on the 50, and WY traded over the 200 day moving average. A long was established at 15.85 based on an opening range breakout. Risk was to under the 200 day moving average. Again, regardless of your trading timeframe, you have profits. Only caveat for position/swing traders is the earnings report due July 30th. But, we are carefully watching to see what happens when the 10 converges with the 200 day moving average as an indication of how much more this stock can run. The technical term for the type of signal written about here is called “Crossover.” The Crossover is a classic way to identify shifts in momentum and for managing risk. The Nuggets List, The ETF Monitor and the MMM Premium Service are all meant to find trading opportunities with these dynamic setups. Happy Trading! Michele Schneider
  23. This is my first post on TL and I hope it will be start of something refreshing. I've been a member of T2W, having learnt a lot over there, but recent turnoil and lack of interesting discussion made me leave that site. I won't be posting as much as I did over there :missy:, I'll focus on developing my own blog instead and will hope to learn something more along the way. I would like to continue one thread, which I started two weeks ago, but unfortunately got derailed so many times that ultimately there was no point in doing so. From what I've seen, the odds of this happening here are next to zero, thankfully.
  24. I will be sharing my EasyLanguage Indicators here. Some of the codes are of my own creation. Others are public license open source stuff that I have modified.
  25. [VSA] Volume Spread Analysis Part II I would like to start a fresh VSA thread due to the increasing length of the original thread. Please use this as a continuation of the first thread located here. PP has also removed the charts from his original thread (EDIT: they have since been re-posted). However, those that have been following the VSA thread should have gained knowledge tremendously. Hopefully we can make this thread as successful as the first one. Here we go. The brilliant game of psychology:
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